Iridium Communications Inc

Good day, and welcome to the Iridium Communications 2024 Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. Should 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.

Thanks, Debbie. Good morning, and welcome to Iridium's fourth quarter 2024 earnings call. Joining me on this morning's call are CEO Matt Dash and our CFO, Vince O'Neill. Today's call will begin with a discussion of our fourth 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. 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 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. Good morning, everyone. As you saw from our release this morning, we finished out 2024 on a strong note and are forecasting a return to more normal growth trends for 2025. Service revenue came in on target for 24, and operational EBITDA exceeded our full-year projection, all while Iridium generated more than $300 million in pro forma free cash flow for the year. Robust free cash flow continues to be a point of differentiation as investors compare Iridium to other satellite companies. Not only does our strong cash flow support ongoing business investment, but it also allows us to make good on our commitment to return capital to shareholders. In the fourth quarter alone, Iridium returned approximately $140 million to shareholders through dividends and an expanded share repurchase program. Our buyback program retired more than 4 million shares, bringing the total shares retired in 2024 to almost 14 million shares. Since we initiated these shareholder-friendly activities in 2021, Iridium has retired close to 30 million shares of stock and returned over $1.2 billion of capital in dividends and share repurchases. We continue to feel very good about Iridium's market position and potential, as well as our ability to achieve the long-term guidance we shared during Investor Day in 2023 to deliver $1 billion in service revenue in 2030 and generate approximately $3 billion in free cash flow over that period. Overall, 2024 was a transition year for our company. The modest EBITDA and 5% service revenue growth we put up this year was a bit off of our normal trend, in part due to the comp from the voice and data price action taken in 2023, our need to rework our D2D offering, and the RevRec accounting impact of extending the estimated useful life of our satellites. We also had tough comps and equipment as we came back to normal ordering from partners after their stock up with supply chain concerns during the pandemic. But, having now cleared these headwinds, you should expect Iridium Zoibita to start returning back to historical growth trends. On today's call, I'm happy to be accompanied by our new CFO, Vince O'Neill. Many of you have gotten to know Vince during his 10-plus years at Iridium, leading our FP&A team, and it's been a seamless transition, and I know he'll continue the strong financial leadership that Tom instilled during his tenure. Iridium enters 2025 with momentum, a strong capital position, and strength relative to our LBank competitors. We have good visibility through our extensive partner ecosystem, that gives us confidence in our near and long-term growth projections. I note there's been a recent rise in short interest in our shares. This appears to be part of a bearish bet on the broader satellite sector in the face of Starlink's aggressive pricing and adoption, particularly as it relates to their disruption of the VSAT market and entrance into the directed device market. As I've highlighted before, Iridium is complementary to Starlink's effort in both of these areas. We are focused on safety and mission-critical applications and operating completely different spectrum than Starlink, which provides our users with an important utility that Starlink cannot fulfill. In our opinion, bets against our growth seem misplaced, and while it's difficult to disprove a negative, continued good execution and delivering on growth will eventually win the day and differentiate Iridium even more from other satellite operators. Today, we initiate a full-year guidance for OEBITDA and service revenue for 25, which continue to underscore our growth and business opportunities. While Vince will discuss the driver supporting this outlook as well as our 2024 results, I'd like to touch upon the unusual-looking decline in net subscribers in our IoT business from the third quarter. As we mentioned last quarter, a large commercial IoT customer on a fixed-price contract announced a change in their retail plans late in the third quarter. While these changes will not impact our revenue, we expect they will have the effect of reducing active subscriber numbers during 2025 and creating more seasonality in our IoT subscriber base each year. The customer continues to develop and introduce new products that rely on our network, which we expect to continue to contribute meaningfully to Iridium's commercial IoT growth. Vince will cover this topic in greater detail. A key reason for Iridium's success has been our truly global network, our L-band spectrum position, and probably most important, the reliability of our network. These characteristics have come to define our brand and have set the standard for organizations involved in safety services and mission-critical applications. In broadband, we've positioned Iridium Certus as a reliable companion to VSAT offerings, including Starlink. We're currently in a transition to being what we believe is the preferred L-band companion to VSAT on maritime ships. We've continued to differentiate our maritime offerings by doubling down on safety services. There's a near-term headwind as we address the transition from primary to backup service, but we're confident in our product positioning going forward. In late 2024, We introduced Iridium Service GMDSS for mariners, which combines our L-band broadband technology with important and mandated maritime safety and security services. The combination of these capabilities into one terminal sets a new standard for cost, efficiency, and performance and helps to ensure that Iridium is the preferred choice on ships to complement KA and KU broadband connections. We've also enhanced functionality for land mobile and IoT users with the introduction of Iridium Certus Midband over the past year or so. This functionality has already been leveraged by our industrial partners in their products. We've had close to 30 new Iridium Certus 100 products come through our certification process so far across a variety of IoT and voice market applications. We've also introduced our next generation IoT technology in 24, which we call Iridium Certus IoT, which provides faster speeds, direct connection to the Amazon cloud, and faster partner development. Iridium Certus IoT technology is being integrated into personal satellite communications devices, like the inReach Messenger Plus, which launched in September, to facilitate the transmission of photos and voice messages for recreational users. All these applications expand Iridium's utility and support higher ARPU. Beyond these traditional uses for our network, we continue to invest in partnerships, new technologies, and use cases. In 2024, we onboarded more than 30 new partners to our global ecosystem and certified more than 60 new partner applications on Iridium's network. These numbers are impressive. We do not invite partners into our ecosystem by chance, and their selection is a process that reflects their ability to bring new capabilities and customers onto our network. We're also excited about our work on 3GPP standards. While the satellite industry remains in the early stages of development on D2D, we're making fast progress on our development of Iridium NTN Direct, supporting standards-based narrowband IoT connections that can be used in consumer and terrestrial IoT devices. We expect to be in live testing with pre-standards-based chips from at least one supplier as early as this summer. This timeline will allow customers and partners to experience Iridium's D2D capabilities and support commercial launches in 2026. In our opinion, service coverage will remain the biggest challenge for early adopters of D2D services. Iridium is unique among other D2D players that we remain the only L-band satellite company with a LEO constellation in orbit today, a global allocation of spectrum, and a path to offer reliable, standards-based connectivity to end-user markets around the world. MNOs have told us that they expect to deliver multiple D2D and standards-based satellite IoT solutions to their customers, and we expect Iridium NTN Direct to be a key one on a global basis. As I said before, we don't have to be first to market. We just have to be one of the best, which we will be. Before I turn things over to Vince, I wanted to take a minute to touch upon the progress and strong market position that Aerion now occupies. Most of you know that Iridium helped create and owns a significant equity stake in this space-based aircraft surveillance company. The analyst community has been valuing our stake at about $2 per share going as far back as 2018. Since that time, Arian has continued to expand its leadership in aviation surveillance, signing new ANSP customers, and now has relationships representing over 40 countries that cover more than half the world's airspace. More importantly, however, Arian has broadened its market position to monetize its rich data set of global in-flight data movements, aircraft movements. The company has invested in cloud-based data analytics and services, to establish a strong position in the aviation analytics market. Arian has signed commercial data service agreements with companies like Airbus, Boeing, ForeFlight, GE Airspace, and others that integrate Arian's ADS-B data into airspace analytics platforms. This allows them to streamline workflows between flight planners and pilots and optimize flight paths and maintenance services to inform and enhance flight operations. In fact, commercial data analytics services represent a meaningful component of Arian's business and has grown at a faster rate than the company's traditional surveillance business since 2019. Arian has been investing in some exciting new big data analytics capabilities that help to solve some of the biggest safety issues that are facing the aviation industry. For example, there have been significant increases in the frequency of GPS signal jamming and aircraft position spoofing, and the Arian system can identify global hotspots, real-time jamming events, and provide aircraft tracking independent of GPS. This will enhance safety for both ANSPs and airlines. Arian also continues to explore ways to leverage their unique global data set to help solve some other operational and safety issues for the industry. One such problem is is turbulence encounters that create significant safety and economic impacts to the aviation industry and flying public. Arian is currently working with the research community and commercial airlines to introduce a capability later this year that will identify and monitor turbulence events. Arian has fully rebounded from the headwinds associated with the pandemic, remains EBITDA positive, and continues to expand its service offerings. Most recently, the company announced its plans to explore bringing space-based VHF services to the aviation marketplace. We're supporting them on that effort. I'm proud of Iridium's longtime involvement in Ariane and the leadership and forward thinking that Ariane's team has shown in the aviation market. It's another example of where Iridium's one-of-a-kind network has delivered value and is helping to foster global changes. So, as I look forward, 2025 will be a year of growth for Iridium. We will continue to invest in new products and services, return capital to our shareholders, and grow our partnerships and business. Perhaps most important to long-term investors, you will see Iridium invest in longer-term growth opportunities like Iridium NTN Direct and continue to generate strong free cash flow. So with that, let me turn it over to Vince for a review of our financial performance.