Iridium Communications Inc

Good morning, and welcome to the Iridium Communications Second Quarter Earnings Conference Call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Ken Levy. VP of Investor Relations. Please go ahead.

Thank you, Anthony. Good morning and welcome to Iridium's second quarter 2022 earnings call. Joining me on this morning's call are our CEO, Matt Desch, and our CFO, Tom Fitzpatrick. Today's call will begin with a discussion of our second quarter results, followed by Q&A. I trust you've had an opportunity to review this morning's earnings release, which is available on the Investor Relations section of Iridium's website. Before I turn things over to Matt, I'd like to caution all participants that our call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical fact and include statements about our future expectations, plans, and prospects. Such forward-looking statements are based upon our current beliefs and expectations and are subject to risks which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in our filings with the Securities and Exchange Commission. Our remarks today should be considered in light of such risks. Any forward-looking statements represent our views only as of today, and while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views or expectations change. During the call, we'll also be referring to certain non-GAAP financial measures, including operational EBITDA, pro forma free cash flow, free cash flow yield, and free cash flow conversion. These non-GAAP financial measures are not prepared in accordance with the generally accepted accounting principles. Please refer to today's earnings release and the investor relations section of our website for further explanation of these non-GAAP financial measures and reconciliation to the most directly comparable GAAP measures. With that, let me turn things over to Matt.

Thanks, Ken, and good morning, everyone. As you all saw, Iridium's business outperformed nicely in the quarter, recording record revenue and operational EBITDA. This momentum gives us confidence to raise our top and bottom line guidance for the year. We're seeing sustained strength from our partner channel in signing up new customers and purchasing equipment, which is the result of Iridium's strong competitive position and unique offerings. This underlying strength helps to shield us against changes in the global financial environment. We believe we're positioned well to grow, just as we have through past cycles, even if recent concerns of an economic downturn come to fruition. Our business remains vibrant and resilient. This is owed to the unique business Iridium is focused on, characterized by safety services and mission-critical applications, as well as the durability of our business model. While no business is recession-proof, we've grown nicely through past downturns, in large part due to the diversity of our customer base and the industries that we serve. Iridium continues to occupy a unique lane, even among satellite companies And today that lane is characterized by its strong demand, growth opportunities, and some pronounced areas of upside, which I like to call accelerators. Let me speak to each of these three areas. First, demand for Iridium equipment and services has never been stronger. This has been driving hardware sales over the last 12 months and kept net subscriber additions near all times highs in our commercial business. In the second quarter, we added 95,000 net subscribers, which means over the last year we've grown our subscriber base by 16% to almost 1.9 million users. I can't think of another satellite communications company that makes more connections to things from space than Iridium. We've continued to see momentum in our core handset business, in part due to ongoing demand in Ukraine, continued strong growth in Iridium push-to-talk services for global workgroups and governments, and general acceptance by the market that our satellite phones and Iridium Go smartphone hotspots are the gold standards for remote communications. We also believe that our successful management of supply chain obstacles over the past year or so has allowed us to ship devices when others could not. Further, Iridium enjoys a global reputation for service reliability. This is particularly relevant to the recent demand we've seen in Ukraine. Partners and subscribers tell us that Iridium's handsets work much better in battle zones where GPS is now being jammed because our devices do not rely on this location technology to connect like others do. All these things are combining to create a very strong year of growth for these core product lines. And as Tom will go into further, we believe commercial voice and data is a resurgent area of growth for us into the future. Moving on to IoT, our industrial partners continue to prosper and grow their subscriber counts, but it is the personal user that remains the real story lately. We've continued to ride a wave of demand for Iridium-connected personal satellite communication devices as partners like Garmin, Zolio, Bivi, and others have developed new solutions. These small, lightweight consumer devices are great for mobility and offer users reliable two-way connectivity, which they often pair with their smartphones, even when they're off the grid. Our personal satellite communication services have gained in popularity, especially as the prices of these devices have fallen in recent years, and retail consumer awareness of them has grown. In maritime, we're pleased to see the growing adoption of Iridium Certus reach quarterly installation levels that we long have been expecting. Ship owners are realizing that Iridium Certus provides highly capable and reliable L-band service at a price point that makes it accessible and attractive to both small boat owners and large fleet operators. Net activation of these terminals continue to expand, Quarter 2 was another strong quarter with subs up 12% from the same quarter last year. Overall, broadband revenue growth also remained strong, up 14% from a year ago. This is even before we have started to see widespread use of the new, lower-cost Iridium Certus 200 terminals that are just now getting into the channel. I think it's quite clear that demand for our commercial satellite services is healthy and growing across the board. Now, in terms of opportunities, let me highlight three that I think you should keep a close eye on. First, within IoT, I discussed the momentum we're seeing for personal satellite communications. We already have more than 670,000 active users on our network, and that number appears to be accelerating with the introduction of new products and features from our partners. We expect that these consumer-oriented devices will continue to be a long-term driver of IoT revenue and subscriber growth. Our next big opportunity is being fueled by Iridium Certus 100 service, which we call mid-band. It delivers a higher speed data connection than our legacy narrowband offerings in a very small form factor, perfect for applications where size, weight, and power are considerations, like in segments of aviation where our partners are introducing new terminals for the growing unmanned aerial vehicle market. Our opportunity has only expanded in the last year, now that our technology partners have enabled efficient video transmission over the Iridium Certus platform. The intersection of these applications with new Iridium Certus 100 devices should unleash a new wave of users and applications that have high ARPUs. Some of the early technical applications are now available to Iridium customers, and we expect these solutions to only grow in the quarters and years ahead. Lastly, I want to highlight our emerging opportunity in aviation broadband. We're expecting to finally see Iridium Certus aviation terminals start activating on our network this year and next. The timeline for aviation services have been necessarily long due to the regulatory testing and rigorous certifications required for each piece of equipment that enters the cockpit. As a pilot, this is one business opportunity that I remain very excited about and I can't wait to see come to market. Iridium has been working with a handful of partners who will be launching their respective products using Iridium Certus in the second half of this year. These partners are closing critical certification milestones, performing successful flight tests, and some will be entering service with first installations in the coming months in both rotary and fixed-wing applications. In terms of my third theme on future upside accelerators, Iridium is always active in looking to expand beyond our traditional markets to grow even faster. I'd like to highlight three accelerators that hold great promise for us. One of these new business opportunities was awarded in late May when the Space Development Agency chose General Dynamics Mission Systems and Iridium to build and operate their ground operation system for their new LEO satellite network. This $324 million prime contract leverages Iridium's expertise in flying satellites and managing ground system operations to provide us entry into a new type of business with the U.S. government. We're proud of our capabilities and know that this contract with the Space Development Agency We'll enhance knowledge of the advanced technology around an important network like this. The $133 million in revenue that we expect to receive over seven years from this award will be seen in our top-line results, but the strategic impact of a closer alignment with the SDA is what is most important. We're excited to begin work and are honored to see our capabilities recognized and explore what else might become of this expanding relationship with the Department of Defense. Another accelerator for us is Aerion and their continued product evolution and adoption. In late June, Iridium augmented its position in this 10-year-old joint venture. Our new $50 million preferred equity investment will help accelerate Aerion's development of their commercial data service business, which will allow Aerion to monetize their high-quality ADS-B dataset with customers beyond its core use in air traffic surveillance. Aerion's data has value to commercial enterprises that assess, manage, and interface with the commercial aviation industry. In fact, Boeing just signed up Aerion to use their data for its own safety toolkit and advanced data analytics capabilities. As Aerion grows, the benefit to Iridium will be an increase in the value of our substantial equity stake in this enterprise, as well as dividends down the line. In another area of long-term promise to us today, You'll also see from the 8K filing accompanying our press release that we furthered our vision of connecting millions of consumer devices to our network by entering into a development agreement with a strategic partner to enable Iridium's technology in smartphones. We likely won't have much more to say about this arrangement until products are ready for market. but obviously it's a demonstration that we're making good progress on the execution of our vision and something that can provide some significant upside in the future. In total, all three of these partnership opportunities are additive to Iridium's business. Rest assured that we will provide additional details about each as the time is right. However, it is safe to say that they serve as accelerators to our story, which should further excite our shareholders. So to summarize, we are continuing to experience strong demand this year, We are excited about the areas of growth we're developing, and we are actively working on some accelerators to our business, which we believe will be material in the future. We feel very good about where we are and look forward to continued strong growth in 2022 and beyond. I think you'll have to agree, whether you're a longtime Iridium shareholder or you've only recently come to our story, we're a particularly interesting company to watch in the space industry, or any industry for that matter, given our unique potential. With that, I'll turn the call over to Tom for a review of our financials. Tom?