Iridium Communications Inc

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 reject a question, please press star then two. Please note, today's event is being recorded. I'd now like to turn the conference over to Kenneth Levy, Vice President of Investment Relations. Please go ahead, sir.

Thanks, Rocco. Good morning, and welcome to Iridium's first quarter 2024 earnings call. Joining me on the call this morning are our CEO, Matt Desch, and our CFO, Tom Fitzpatrick. Today's call will begin with a discussion of our first 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 conversions. These non-GAAP financial measures are not prepared in accordance with 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 a reconciliation to the most directly comparable GAAP measures. With that, let me turn things over to Matt.

Thanks, Ken, and good morning, everyone. So the first quarter often sets the tone for the rest of the year, and activity to date has been upbeat and quite strong. Service revenue continues to expand on our growing subscriber base, and our partner ecosystem remains quite dynamic, whether it be in IoT, maritime, aviation, or defense. We've remained busy as well since the beginning of the year with a lot of new product development and the completion of our first-ever company acquisition on April 1st. We met with a number of you during the many investor conferences in March and have been active in the debt market with our TACON financing to upsize our term loan to complete the Satellis acquisitions. We're really excited about this transaction and the business opportunities that bringing Satellis in-house provides Iridium and our partners. With this acquisition, we'll go from just a wholesaler of Satellis' secure signals to an end-to-end solution provider of PNT services for customers globally. For those who are not yet familiar with this new business area, this acquisition makes us the leader in satellite-based time synchronization and location services, that complement and protect GPS and other GNSS systems. As the world increasingly has come to realize, the prevalence of GPS jamming and location spoofing during conflicts and for general mischief is on the rise and is impacting critical infrastructure, military operations, aircraft and shipping navigation, and other important functions for governments and enterprises around the world. Iridium's expanding P&T solutions can cost-effectively reduce these vulnerabilities and provide an alternative to GPS reliance, particularly for critical infrastructure that we all depend upon. Going forward, this new business offering will be referred to as Iridium Satellite Time and Location, or STL for short, and be reported within our hosted payload and other revenue line. The entire 70-person Satellis team is being integrated into Iridium as the P&T business unit, and Mike O'Connor, who is the CEO of Satellis, will report to me as the leader of that business. We anticipate that STL will generate over $100 million in service revenue per year by 2030, with additional revenue on top of that from equipment and engineering services. These P&T solutions ride on Iridium's LEO constellation and utilize small, very low-cost hardware. With a secure signal that is 1,000 times stronger than GPS, Iridium STL can even be used indoors to add redundancy and protection to data centers, in-building wireless networks, and other critical infrastructure. Best of all, STL is sold as a wide-area broadcast service that can support an unlimited number of users while using minimal capacity on our network. These applications are already proving their worth in the market today, and we think we enjoy at least a 5- to 10-year head start on other viable solutions that are global and have the resiliency of a space-based approach like ours. With Iridium's broad and growing ecosystem of partners, we expect that STL will be able to address many additional customer challenges in maritime, aviation, the UAV market, protecting energy grids, as well as some innovative new applications in areas like cybersecurity. I hope you can sense my excitement for this transaction. It's strategically in line with Iridium's priorities and vision, doing things that are unique, special and important from our LEO L-band network and better than anyone else can do. We're ready now to step on the gas and expand the availability of Iridium STL to new markets and customers. You will recall from our September Investor Day that I laid out a number of vectors that would support Iridium generating $1 billion in service revenue by 2030 and supporting our capacity to return $3 billion of capital to shareholders over this same eight-year period. Let me be clear. There have been no competitive developments since last year's Investor Day that change our view on our long-term financial outlook. STL is one of the financial drivers that supports this plan and is a great tuck-in acquisition that will create synergies across our other market vectors. For those who had the opportunity to tune into our conference presentations during the first quarter, you've heard us reiterate many of these long-term growth drivers. It should come as no surprise that the largest opportunities we see for revenue growth through the end of the decade come from services we already know very well and are already working on. To achieve our long-term growth objectives, we don't have to change our strategy or wholesale business model. Instead, it will be more of the same. We will stay in our lane, grow our network of business partners, execute on product launches and innovation, and deliver on our unique strengths. This is our objective, and we have a pretty good track record of deliverings. Beyond Satellis and other potential tuck-in acquisitions, we highlighted four other drivers during our September Investor Day that are key to Iridium's revenue growth in the coming years. First, IoT. We are the leader in personal satellite communications as well as industrial IoT, and we continue to believe that double-digit revenue and subscriber growth we have produced in these commercial applications will continue for the foreseeable future. You can see that really demonstrated again in our first quarter results. Second, mid-band. Leveraging our leadership in IoT, we will continue to move forward with partners to roll out new applications and devices that take full advantage of our very unique Iridium Certus platform that is optimized for size, speed, mobility, and takes full advantage of our L-band spectrum position. Highly mobile, power-efficient devices using Iridium's mid-band services, which support speeds up to about 100 kilobits per second in a small form factor, will drive IoT ARPUs and open Iridium services up to new industries. Some of these devices have already entered the marketplace, and we envision Iridium's mid-band services will offer added functionality and connected solutions to industries like security and surveillance, autonomous vehicle, and other remote applications that demand higher bandwidth but still need mobility or operate on batteries and are often small and need to be lightweight. Third, Directed device. You previously heard me speak of our investment in Project Stardust. This is a multi-year investment that will make Iridium technology available to chipset manufacturers, adopting new satellite-oriented 3GPP standards for IoT devices and consumer devices like smartphones. This is a very large market, and our work will expand our IoT opportunities into a broader set of cost-sensitive industries. Lastly, telephony. We strongly believe that satellite-based personal communication devices have a bright future, even as we and others develop directed device capabilities. I want to underscore that telephony is an important revenue source for us with more than 400,000 users of purpose-built voice devices of all types on our network, and we expect that number to continue to grow into the future. These devices are mainstays for first responders, governments, and loan workers, and they've become so completely integrated in their operations because of their reliability, global reach, and the challenging environments in which they are used. They allow organizations to plan and execute without interruption and ensure that communications facilitate the accomplishment of goal rather than hindering it. The advent of high-quality push-to-talk services over the last five years is a proof point of these purpose-built devices and remains a driver of expanding subscriber base and revenue Iridium continues to see in this area. Historically, Iridium has served the needs of niche and specialized communities of users. And while we are proud to have grown this niche to more than 2.3 million subscribers globally, I assure you we are far from finished. My team constantly questions the status quo and, given our history, has a healthy humility and even an appropriate level of paranoia about the continued leadership position we have attained in the satellite industry. Some investors seem to be skeptical about our future right now, but we think they underestimate the utility of our global services, misunderstand the needs of the particular customers we serve, and are discounting the capabilities of our network relative to others in the satellite sector. We are highly confident in our long-term revenue drivers and capital generation through 2030, and we have a lot of visibility into the fundamentals of our business. The vast majority of our revenue is recurring, what we refer to as service revenue. While we do not require our service to be sold with long-term contracts, our customers often opt to purchase Iridium solutions for years at a time. In fact, they've often tried other LBN offerings prior to settling on Iridium's network, and they choose our service because it provides a level of reliability, coverage, and customer support that they cannot get elsewhere. I'm proud of this fact and encourage investors to validate this with their own due diligence. We continue to show our commitment to return capital to shareholders. In the first quarter, we were active with our repurchase program and continued with our quarterly dividend. As we noted in February, our board will increase Iridium's dividend starting with our June payment. This will result in a dividend increase that is equivalent to about 6% in 2024. These programs underscore our confidence in Iridium's continued business growth and the strength of our enterprise to generate free cash flow. I would be remiss not to touch on Iridium's stock price and the market's current assessment of our equity valuation. While Iridium is a satellite service provider, we don't operate or look like anyone else in the satellite industry. I would go so far to say that this group is not who we should be compared to for valuation purposes. Other satellite operators have continued to see competition grow and seen their fundamentals deteriorate. With perhaps one or two exceptions, they don't generate free cash flow like we do, don't have growing service revenue and subscribers like we do, and surely none can claim to have the unique network and business profile that we do. We continue to believe that Iridium is more comparable to other companies generating both growth and free cash flow. We encourage investors to look at Iridium's levered free cash flow to evaluate the strength of our business and assess the relative value of our common shares. When considering measures like free cash flow yield and conversion, we believe that Iridium continues to stack up quite well against the tower sector and data centers, some of which trade at twice our enterprise value to OEBITDA multiple. We believe our competitive dynamics are also similar to these infrastructure companies in that we occupy a unique business space and have strong visibility to future growth. As such, we believe that the underlying strength and growth of our business should be rewarded with a higher valuation. Perhaps some of the decrease in our valuation comes from the market's overall concerns for the space industry in general and disruption impacting VSAT players. I would remind you that Iridium faces a very different competitive environment and set of business opportunities than the commodity broadband players in the VSAT industry. In fact, We have been deliberate in avoiding commodity services like VSAT broadband and are focusing on being the L-band safety complement to VSAT and other K-band broadband services. Our L-band ensures that mariners can operate globally and reliably in the face of weather, where service is unavailable, or in ports where VSAT services are restricted. And later this year, our companion Iridium Certus broadband terminal will be able to provide the mandated GMDSS function as well. We continue to believe our shares offer a compelling value today based on our fundamentals. We are converting on business opportunities, adding subscribers, growing revenue, and adding new avenues of growth. We remain an active buyer of our shares and continue to believe our equity is an attractive investment for investors looking to outperform the broader industry. As we have previously said, we don't expect to spend any capex on a next-generation satellite constellation through 2030. We expect that when we do commence spending post-2030, it will ramp slowly, as we shouldn't need to launch satellites until the latter half of the 2030s. As we contrast the amount and profile of spending with our anticipated OEBDA during the construction period, We expect to generate meaningful levered free cash flow throughout a next generation Constellation build. This will support continued share repurchases and a growing dividend throughout the future construction period. So, Iridium has a healthy balance sheet, strong business fundamentals, and is positioned well for growth. We see no new competitive developments impacting our outlook or long-term guidance. As we have said during last year's Investor Day, Iridium expects to have the capacity to return approximately $3 billion to shareholders through 2030. This represents just about 100% of the company's equity market value as of this morning. You must admit that's an extraordinary fact at this time. Everything we see supports our outlook for continued growth and achieving our long-term vision. While the market may not appreciate this at the moment, we expect it to eventually correct as we continue to execute expand on our unique opportunities of our network, and return capital to our shareholders along the way. With that, I'll turn it over to Tom for a review of our financials. Tom?