2025 Leverage Finance Conference. I'm Anna Goshko. I cover telecom and technology on the credit side, and we're thrilled to have Iridium Communications with us today and Vincent O'Neill, the company's Chief Financial Officer. I think you go by Vince. Vince, yeah. Yeah, Vince. Yeah, yeah. Yeah, yeah. Yeah, yeah. Thank you so much for being with us and making the journey here. So, without further ado, I thought maybe you could start by, just in case we have anyone in the audience that's new to the Iridium story, just start with a few-minute kind of brief summary of the company's history, the nature and scale of your network, and then where you participate in the market. Sure, so I assumed the CFO role at Iridium on the 1st of January. I've been at Iridium for 11 years, so I've obviously seen a lot of things during my time there. I spent a lot of time in the corporate planning and development group. But for those of you who are not familiar with Iridium, Iridium is a company today that throws off over $300 million in free cash flow, and we have a network of satellites that operate in LEO, in Low Earth Orbit, and so we have a constellation of 66 satellites that constantly circumference the globe in six planes of 11 satellites each. Our network is global in nature. We're the only truly global satellite provider out there, and we operate in the L-band spectrum. The L-band is important because, as a spectrum, it's more resilient and it lends itself to certain types of use cases. We provide a lot of services: critical, mission-critical, safety communications, especially in aviation and maritime, but across the board. With the 66 satellites in orbit, we also have 14 spares. That's really important because there is inbuilt redundancy and resiliency into the network. If you think about our network and those 66 satellites, it's a mesh architecture. The satellites are connected to each other. A satellite is connected to, you think of it this way, it's connected to the satellite in front of it, the satellite behind it, and the satellites to the left and the right. I'm sure if an engineer was here, they might cringe at that description. That's basically what it does. And the importance of that is when you originate a call on our network, it goes up and it terminates either in our gateway or the U.S. government, who are 20% of our service revenue. It terminates in a proprietary U.S. government gateway. So nobody else can see that traffic. Between the L-band and the network, as I said, it lends itself to safety type of communications or communications where you have to get through. So if you think about our use cases, we have different use cases across land mobile, across maritime, across aviation. As I just mentioned, work with U.S. DoD. But the one consistent theme across all of those different lines of business is that it's communication that has to get through. And it's critical communication that you have to have the confidence that your signal, your voice call, your data is going to go through. A great example of that is the, again, using the U.S. government as an example, is they'll send a call up, they'll terminate it in their proprietary gateway, and that traffic is encrypted as it travels across our network. So that's the nature of our network. Typically, what differentiates us from other satellite providers like Starlink and all the VSAT providers is they typically operate in spectrum bands or certainly have to this point where they're bigger pipes. They carry more data. So, for example, you would find those kinds of providers in the cabin of an airplane. And I'm sure you've seen some of the recent announcements around Starlink where they've won some of that business from some of the other geos. But where you'll find us is in the cockpit providing those critical communications. So it's short sips of voice and data with communication that's absolutely critical to get through. Okay, great. That's a great introduction. So the company's roots are from way back now, are in voice, but you've really been leaning into IoT. So can you talk about the dynamic in the commercial voice and data business, which I think is still the largest product subsegment, and then the commercial IoT data segment, which I think is catching up? Yeah, so our oldest product, Anna, is the handset, and when you say Iridium, to most people, that's what traditionally they would think. They would think of the traditional handset. And today, I'm not sure I should know, but I don't know how many products we have, but obviously way beyond what the initial handset was. But that telephony business, that handset business, we have over 2.5 million subscribers. Of those, 450,000 are those handset type subscribers. And again, they don't use the phone that much, but when, again, it's this always on, always available. So you think of NGOs, you think of first responders, you think of reactions to disaster recovery type situations, hurricanes, et cetera. That's typically where you'll find the Iridium handset. That business with 450,000 subscribers, it's been relatively slow growing over the last, call it, 10 years, roughly, in terms of subscribers. It's been a very lucrative business for us. We've introduced price increases there. I think we've introduced three, call it, over the last 10 or 11 years with very little impact from a churn perspective. We have pricing power in that area. Again, it goes back to the characteristics of the network. IoT is lower RPU type subs, but certainly faster growing. The fastest growing business segment for us has been IoT over the last five years. You think about our IoT business, you should roughly think of it in two parts. One, there's the personal communications aspect to it, which is Garmin have an inReach device, for example, and that runs on our technology. So you compare that with your smartphone. You can be off the grid. You compare it with your smartphone. And so with this inReach device, you've got great form factor, great antenna, and you've got a two- to three-day battery life, and you've got two-way text and messaging capability. So obviously, if you have to get a message through to somebody, or you can now send pictures on the inReach Messenger Plus, where if you've climbed some mountain, you can send a picture home to your spouse and say, "Hey, look, I'm here." So that's been half of the IoT story, and that's certainly been the fastest growing. But then the other aspect to it is industrial IoT. And these are a lot of the things that you think about typically: transportation, fleet management, oil and gas pipeline monitoring. There's a heavy equipment. So all the top 10 heavy equipment manufacturers, Caterpillar, John Deere, et cetera, they're all customers of ours. So again, you think of devices, you think of people, or you think even more of devices and machines that are off the grid where you need to get messages or you want to get information to and from, our network is ideal for that. Okay, and then so I had my numbers correct. I hope you have about two million IoT devices currently. That's about right. And so, what's the growth outlook for that? We've seen very strong growth across IoT for the last five years. We think that that will continue as we go forward. Again, as I said, it splits in two halves, the personal comms and the industrial. The personal comms has certainly been the main fuel for growth there, but certainly not the only one. Going forward, I just mentioned it with Garmin have new products coming out that we think will help generate more revenue and drive RPU. I just referenced the inReach Messenger Plus. The other area that the new TAM really for us in IoT is the standards-based narrowband IoT area. This is where so the solutions we offer today are proprietary solutions, and they're proprietary to the Iridium network and proprietary to our technology. We sell through a wholesaler partner network of over 500 partners. Those partners vary greatly in terms of size and degree and the markets that they reach. And so that's how we go to market with those proprietary solutions. But recently, we've also launched an initiative where we'll provide standards-based solutions. And that's basically we were accepted into Release 19 of 3GPP, which for us was a big deal. That happened this time last year. Those standards will be codified this quarter, early next quarter. And so we would expect chips with our technology to be in the marketplace, call it, in the second half of 2026. And so what that does is today you've got cellular IoT chips that once they wander out of cellular coverage and terrestrial coverage, they're of no use. You lose the signal. Well, because it will be part of the standard, it will allow for our technology to be incorporated into that chip. And effectively, that chip will now effectively roam onto our network in much the same way you roam between networks today when you travel to Europe or wherever you travel in the world on terrestrial networks. And the big part about the standard or the importance of the standard is it makes it easier for chip manufacturers to integrate that technology onto the chip. It makes it easier for the MNOs to then purchase that, buy that through the device and sell. And it kind of takes the cost friction out of the equation because a big barrier to entry for us in the Narrowband IoT space historically has been cost. A chip or a device might cost $25 or $30. So we're effectively removing that cost friction by going down this path. And we think in the process, opening up a big new TAM to us going forward. So what are the most impactful applications that you foresee for this? For narrowband IoT, I think it's some of the things we already talked about. It has application across transportation. We talked about fleet management. It has application in agricultural products, which historically have been incredibly price sensitive, but it removes that barrier. So again, anything where you think you're off the grid and you might want to track an asset or track something. We laugh about this example, Anna, at work sometimes where we talk about tracking cows or tracking sheep, which in one instance is humorous, but it's also true. You can do that. And all of a sudden, it becomes cost-effective on a mass scale. Okay. What is this going to do to RPU, like sort of RPU per device? I think RPU, for us, RPU is very different across our lines of business. Our highest generating RPU is in our broadband maritime business, but that's also the smallest part of our business. We have very steady RPUs in voice and data. Our voice and data RPUs are $47-$48 a month. And you can track that over the last 10 or 15 years, how that has increased when we've taken pricing actions. IoT tends to be lower RPUs. On the industrial side, it depends. There can be a big variation in terms of solutions there that are provided, but on average, call it maybe $10-$15. There are outliers to that, but just as an average, call it $10-$15. And then on the personal comm side, where we're talking about Garmins and the other providers, there is as low as $4-$5, but they're subs I love. They pay $4-$5 every month, and they don't use any resources on our network. So they're incredibly efficient from a network perspective. In terms of IoT RPUs, I think there are areas where it will increase, like the Garmin inReach Messenger that I just referenced. I think we've added functionality to that product that will potentially drive incremental RPUs with things like pictures and other types of functionality. But in the MB IoT space, I would expect the RPUs to be lower, but just that scale on a much bigger scale. Okay. So on your most recent earnings call, the company addressed the question of Starlink competition, and this was after the announcement of the planned EchoStar spectrum acquisition or the agreement there. So an indirect device, right? And I think the company acknowledged that there's going to be likely increased competitive intensity, both in smartphones and in IoT, but cited the impact is several years out. So could you just overall recap your view on this? And I know it's early days, and it was only maybe about a month ago, but have there been any kind of subsequent refinements to how you're thinking about the impact? No, I would say that what we outlined on the call is pretty consistent with how we're still thinking about it. And so what Starlink did was they purchased S-band spectrum from EchoStar, which does give them the opportunity for increased functionality around the services they offer. And direct-to-device is talked about a lot in relation to that. And Starlink themselves have said that they will offer broadband services around D2D. They haven't really expanded on what that means, but they have said that they will offer broadband services around D2D. I think for us, what we see is that it's definitely a changing competitive environment, and Starlink's purchase of that S-band spectrum is going to be disruptive to the whole industry. We do think that there are certain parts of our revenue base that will come under increased competition as we move towards the end of the decade. So I would say you think of our telephony business that I just talked about. But again, we look at most of that, and the use cases for that base today are mostly industrial use cases where it's the ruggedized nature of the handset. It's the battery life of the handset that is really valued. And so we don't really see that changing. Are there some subs in the base that are more leisure-based from a smaller subset of the base? Yes. And could there be some pressure there? Yeah, potentially. Potentially. Similar story in IoT, where people who use our personal communications devices, typically it's a lifestyle choice. They know they're going to be off the grid. And that's a choice they've made in terms of how they live their life versus occasional users. So where we have more occasional users in that subset, could we see some increased pressure there? Again, we acknowledged on the call that's possible. But if you look across both of those areas, there's a lot of industrial use cases where we don't think that impacts or impacts in a very minor way. I would say in general about direct-to-device, two things. One, there's a lot of speculation about how big the market size is out there and how big the TAM is, and there's a wide variation on the TAMs. I will hold my hand up and say I'm still skeptical that the TAM is as big as some people are claiming, but obviously that will play out. But what I will say about direct-to-device, I think it's going to be more occasional type usage. I think it's going to be where you find yourself off the grid unexpectedly, or maybe you know you're going off the grid, but you're not going off the grid that often, and your iPhone or your Android, it's okay. But for guys who are hiking and it's a lifestyle, and they want the breadcrumb trails and they want the maps, Anna, I don't think that's going to change. So I think there will be some impact there, but nothing like what some people are projecting. Okay. So you have a government services business. If you can talk about the scale of that business and the outlook. And then I think it's come up in some of your meetings. There's a contract up for renewal with the DoD in 2026, about $110 million annual contract. Any color you can provide on what that process will be? Yeah. So we currently have a seven-year fixed-price contract with the government for $738 million. And as Anna said, I think it's about $110 million. There's step function increases in that, but I think it's $110 million for, I think, for 2025 going through 2026. The contract runs through September of 2026. The U.S. DoD have the option, or the government have the option to extend that for six months, which they have taken up on the last two renewals. So our expectation is that they would extend that through March of 2027. Definitely the last three renewals. I want to say the last four, but I wasn't there for that. But the last four renewals have been sole-sourced awards because, and it goes back to what I talked about at the start of the conversation, because of the nature of our network and the way it carries traffic, and the government can terminate that traffic in their own gateway. Nobody else can do for the DoD what we do for them. We, this morning, announced that we had signed the renewal of the gateway evolution contract. So for that gateway, there were two contracts tied to that government gateway. One is the gateway evolution contract, which we extended for five years this morning, which just makes sure that the evolution of the gateway continues that from a technological perspective. It's keeping up to date with everything that's going on. It's in line with our commercial gateway, so it can still carry traffic. Last year, they renewed for five years through 2029 the gateway maintenance contract, which is just a maintenance contract for that same gateway. We look at those two data points as clear indication of how the government are thinking about that renewal between September 2026 and March 2027. Okay. That's good. So I'm going to switch over to some of the financial questions now, and we can double back on a few other topics if we have time. But so for 2025, the service revenue growth guidance is 3%-5%, but I think you said you're now expecting towards the lower end of that. But the higher end of the original EBITDA guidance, it's $490 million-$500 million. So what's the dynamic where you're still able to hit the high end of the margin? Sure. So just very quickly on the service revenue, we tightened the service revenue guide from 3%-5% to 3% on the Q3 call. And that was primarily tied back to our PNT business. So that's our position navigation timing business. And just very quickly, we bought a company called Satelles in Q2 of 2024. We were already a 20% owner in it. We purchased it whole last year. And that technology runs on our network. And basically, what that technology does is it's a thousand times stronger than GPS, the signal. And there's much more increased awareness around GPS and vulnerabilities around GPS, I would say, in the last three or four years than there has been at any time prior. And Satelles or our PNT solution is basically a backup for GPS because it's harder to spoof or jam the signal. As you can imagine, that technology has a lot of application with both the government and commercial enterprises. And obviously, we're working with all of those players today. But we ended up taking our guide down in Q3 because revenues that we thought would accrue to PNT in 2025 with a customer have pushed out to a future period. So we just reflected that in our service revenue guide. At the same time, to Anna's point, we took the OEBITDA guide up from, we tightened that to the higher end of the range, $495-$500 million. And really, that was a combination of two things. It was a combination of our engineering business has really been performing exceptionally well. We're working on the Space Development Agency contracts with the government. That's provided a big uptick in revenues for us. And so across our engineering programs as a whole, which are lower margin and tend to be more strategic in nature for us, but margins there have really helped OEBITDA in 2025. And then the other aspect that played into it was just from an operating expense and scale perspective. We got some scale in our expense lines. And so those two things combined together meant we could hold the higher end of the OEBITDA guide while tightening the service revenue guide. Okay. Company has very solid EBITDA margins, close to 60% within telecom industry, very strong. Maybe second only to towers. A little more complicated than tower, but so how should we think about incremental margins and future revenue growth? Traditionally, we've been in and around 60% margins. Certainly, from a service revenue perspective, higher incremental margin generated from service revenue. If you think about the network, we launched the second-generation network, started launching it in 2017, completed in January of 2019. And that cost us approximately $3 billion. We have what I would call fixed costs tied to obviously running the satellites, maintaining the satellites. I don't want to say that we have no variable costs in the business, but we have low variable costs in our business. Every incremental dollar of service revenue we generate flows to the bottom line at a higher incremental level. But we also have engineering and equipment revenue. Engineering revenue tends to be lower margin, and that tends to be around about 20%. As I said, those programs tend to be more strategic in nature and support the airtime contracts with the DoD. And then we also have equipment revenue. We sell equipment, and we actually generate 40% margins on our equipment. So sometimes the OEBITDA margin can fluctuate a little bit just depending on if you've got faster growth in engineering. While you're generating more dollars, it will dilute the margin. But in terms of thinking margin going forward, 60% I think is a 60% and up is probably a good number. Okay. And then on free cash flows, so the 2025 free cash flow outlook is $300 million, and then you've got 2026 to 2030 cumulative free cash flow outlook of $15 billion-$18 billion. So given this, why did you recently pause the share repurchases? So we paused the share buybacks for a couple of reasons. One was we've been pretty aggressive on our buybacks over the last two or three years. So the first thing I would say is I don't know that we've been rewarded in the marketplace, at least not yet, for those buybacks. But more specifically, once Starlink purchased the S-band spectrum, we decided that it was probably better to pause the buybacks and focus on two things. And the first one is just more from an M&A perspective, like build cash and build financial flexibility on our balance sheet. And with that, as we have potential opportunities to acquire businesses that would maybe be more adjacent to Starlink or maybe extend our reach in areas where we have a competitive moat or a competitive advantage, we would look to do that. That's certainly going to be part of our strategy here over the next 12 to 24 months. The second aspect to that, Anna, was we're also looking at our leverage. Our current net leverage is three and a half times. You're going to see us naturally delever here over the next two to four quarters, basically. We do have a long-term leverage guide out there of at or less than two times net leverage by 2030. Certainly, with the cash we expect to throw off, we're throwing off $300 million of pro forma free cash flow right now. If we just replicate that for the next five years, that's your $1.5 billion. We think we very naturally and very comfortably deleverage to that aspect over the next five years. Are you planning to pay down debt or just to build the cash balance so that the net improves, but you still have the cash on the balance sheet? I think in the short. Just flexibility. Yeah. I think in the short term, it's very much build the cash for the flexibility. I certainly wouldn't rule out at some point that we might look at buying down debt, especially if it's economical. But for right now, priority number one is to build cash and financial flexibility on the balance sheet. Okay. Great. So just a little bit of time left. So welcome you to any closing comments or anything important that we didn't touch on or. What I would say and what I leave people with is that we throw off $300 million of free cash flow per year. We have an extremely resilient business. We've been doing this for a long time. We also think that despite all the noise around Starlink, we have unique opportunities as we look out over the next, call it, two to five years to really grow and expand our revenue base into areas that we're not in today. Like I talked about, standards-based direct-to-device, especially the narrowband IoT opportunity. You think about position navigation and timing with the Satelles technology, and especially with how important GPS is to all our network infrastructure and aspects of that nature. So what I would leave people with is we're still going to throw off plenty of cash, and we still think as we look out over the next two to five years that we have significant runway to grow revenue. Okay. Hey, Vince, thanks so much for being with us. We really appreciate it. Cheers. Thank you. Cheers. Thank you.