Feels like we've been on a marathon already, but thanks, thanks for being here for the 46th Annual Raymond James Institutional Investor Conference. My 29th Institutional Investor Conference here at Raymond James. I'm Ric Prentiss, head of TMT Research, and as Brett and I like to say, that's, that's T for Towers and for Media and T for Telecom and Satellite Services. So we're pleased that Iridium is here today from the Satellite Services side, and, and giving the shout out, and do appreciate we got word that we got ranked in II in the TMT Comm Infrastructure category. And as you know, as you maybe don't know, we don't ask, beg, plead, or steal any of those votes. We just don't even do anything with it. It just shows up. So kind of a write-in victory for us.
And we appreciate the sincere message that sends to us that you appreciate what we're doing. But yeah, we're on the Satellite Services side. So we got Vince O’Neill here from Iridium, CFO, first time sitting up here on the stage as CFO at our conference. Yeah. We'll start off with the, I think Vince is gonna throw you to the safe harbor one here in a second, but we'll start with a fireside chat, take some Q and A, and then go into the breakout session. But Vince, welcome. Your first time in the hot seat.
Thanks, Ric. Good to be here.
Then Ken's gonna make sure you say there's a safe harbor statement somewhere.
Yes, there's a safe harbor statement up here, just for reference. I gotta mention that to keep our lawyers happy. So there'll be some questions at the end of the session on the page.
Great. Well, Vince, the elephant in the room is Elon Musk, right?
Yeah.
I mean, anybody that's got satellite associated in their title of their company and description of their company, the question we get from investors is Musk going to, with his influence, his funding, his companies, why can't he just launch tens of thousands of satellites and change your life forever?
Yeah, well, I think he, you know, for sure. I mean, Starlink have been a major disruptor in the satellite space. You've, I think we've seen that over the last, two or three years. And certainly when you look at the, the GEOs and the maritime space, for example, he's had a big impact there. I think one of the things that gets lost sometimes is, is Starlink is so big. Elon himself is so public and has such a big public persona. It tends to, to, to overshadow everything else. But when you look at us and, and you go back and think more specifically about Iridium and you, and you start to get into the satellite industry and the, the different pockets and the different aspects of the satellite industry, there are a couple of characteristics.
And one very important characteristic is spectrum, which is hugely important to any telecom company. And Iridium operates in the L-band spectrum. We have dedicated. We've got about eight and a half megahertz of dedicated L-band spectrum that's got global rights and global landing rights. And that means that we can provide global coverage anywhere in the world, which you know no other satellite company does. And certainly for somebody like Elon to replicate that is extremely difficult and has huge regulatory hurdles to it. So it would take a huge amount of time, investment, money, and that's if it's even possible. The second thing I would say is apart from the spectrum. We have a network of 66 satellites up there that in LEO orbit the earth basically.
And if you think of them as six planes of 11 satellites in each plane, they're all connected to each other. So it's a mesh architecture. We have 14 in orbit spares. And the value of all of that is, first of all, there's a huge amount of redundancy in the network. So, you know, if you've seen in the news recently, challenges that Thuraya and Inmarsat and Viasat have had with satellites, we're in a slightly different space. We have huge inbuilt redundancy and resiliency in the network. And we also have a mesh architecture where the satellites are connected to each other.
The context and the so what of that is it means that if you send a signal up to the satellite, so you go outside, send a signal up to the satellite, that traffic gets carried across our network and terminated close to the point of termination. That has real applicability for, you know, people like the U.S. DoD, for example, who wanna carry traffic on our network and wanna terminate it at their own proprietary gateway. So long-winded way of saying that, you know, Elon's had a, he casts a big shadow, but there are things we do that are not easily replicated and it comes back to spectrum and it comes back to the uniqueness of our network.
Great. When we think about one of the other hot topics that we get from investors, whether it's about satellites or wireless or tower companies, aren't satellites gonna replace terrestrial wireless? Are towers going away? Is wireless going away? Is traditional legacy satellite phones going away? Talk a little bit about what this direct-to-device or non-terrestrial network aspect is of connecting satellites with phones. And what's the reality and what's your opportunity?
Yeah. So, direct to device is obviously the easiest way to think about it, obviously, is that you would have capability on your smartphone so that when you went outside the terrestrial grid or you went off the terrestrial network, you would still have connectivity and you would still have, for example, messaging capability from your phone. There's a number of different ways to potentially do that, but just more in terms of the marketplace itself. There's been a lot of hype around this over the last couple of years. We've always said we believe this is an opportunity for us going forward. We're a bit skeptical in terms of how fast it will happen and what the ultimate size of the market will be. Like there's a lot of things out there today that are unknown.
Things as basic as how much is a customer willing to pay? So in terms of supporting the investment that's going into some of those networks, I think that's very much TBD. For us, we have a network that's already built, that's up there today. We're generating $500 million of OEBITDA and we have the capability or we'll have the capability to deliver this service in the near future. The path we are going down is a standards-based solution. So basically what that means is we were just accepted into Release 19 of 3GPP.
Basically what it means is in Q4 of this year and into early next year, chip manufacturers will have the Iridium waveform, will have the capability to embed the Iridium waveform on a chip, which means for a smartphone, for a laptop, for a device, you'll have the capability to connect to the Iridium network when you're off the grid. We think that will be an incremental, that will generate incremental service revenue opportunity for us going forward.
What's the difference between that and what you were trying to do with Qualcomm?
With Qualcomm, we were going down the path of offering what would've been called a proprietary standard. So if you think about what Apple are doing with Globalstar, Apple have invested in Globalstar and they basically bought rights to 85% of their network, but that's a proprietary solution between Globalstar and Apple. So Apple are, you know, working with Globalstar to embed Globalstar technology on their chips. We were going down a similar path with Qualcomm where on their Snapdragon chips, which is their high-end chips that they sell into device manufacturers, they would put the Iridium waveform and they did put the Iridium waveform on the Snapdragon chip. The technology worked fine. We actually previewed the technology at CES. I think it was in January of 2023. Financial media were there.
We did demonstrations, and everybody was very happy with the quality of the solution. The challenge became when Qualcomm were trying to sell it into the Android universe and the Android MNOs, and they were, I think, sensitive to two things. They're very sensitive to anything that increased the price of their BOM, which this would've done on the Snapdragon chip. But they're also sensitive to the fact that I think it was Qualcomm and it was a proprietary device and they didn't wanna be, you know, they didn't wanna be tied in that way, and they wanted a bit more flexibility than that. So the agreement with Qualcomm terminated, and that's when we went down the standards-based solution. We've had tremendous support from some of the MNOs as we've gone down that path.
And we've had great support from Qualcomm as well, ironically enough, as we have gone down that path. They've been a big advocate for us. So that's the solution we're gonna roll out here in the next year or so.
Okay. You've got your guidance for 25's out.
Mm-hmm.
You've got targets to grow that service revenue to be $1 billion by 2030.
Yeah.
Remind us of what the 25 range is and kind of where.
Mm-hmm.
What gets you down the path that by 2030 we're sitting in here and the $1 billion is in hand?
Yeah. So there's three or four stools to the billion. First of all, if you know, if you take our, we recently issued guidance for 2025. So I think if you take the midpoint of our 2025 guidance, service revenue is $650 million and change, you know? So.
A ballpark up 50% by 2030.
Yeah, exactly. And so as you think about the building blocks there, one, there's the IoT space. IoT has been a, you know, an exponential growth for us over the last four or five years. Revenue, you know, revenue on the personal comm side of the IoT business. And this is where, you know, probably the best known product in that space is the Garmin inReach. So you can have a Garmin inReach, you can go off the terrestrial grid and, you know, you have two-way messaging capability back and forth with some of the recent product launches, new product launches that Garmin did, you know, have the capability to push pictures as well. But that business has been a, you know, over 30% CAGR for us over the last five years.
We still see a long tail on that business as we go through the rest of this decade, so that's one block. I think another stool to the growth profile is we recently invested in a PNT business called Satelles. So position navigation timing. And we've said that we believe that business will be a $100 million business by 2030, and just to give you a sense, you know, some analysts have sized that, or when you look at analyst reports, they roughly approximately sized that at $10 million, you know, in 2024. Basically what Satelles does is it runs on a separate burst channel on our network. And because we're in Leo and because it's a separate channel, its signal is 1000 times stronger than GPS.
There's much more public awareness and public consciousness around GPS today than I think there's ever been before. I think there's an awareness that it's not that hard to jam or spoof GPS. GPS is everywhere. Like there's a stat that there's more GPS receivers in the world than there are toothbrushes. GPS is in this room everywhere. So, you know, it's not hard to see and you've seen it, you've seen it. I think you've seen some of it in Ukraine in the recent conflict there. It's becoming a big issue in commercial aviation. It's becoming more and will become more and more of an issue for us as a society moving forward.
Satelles Connects has as a replacement to GPS, but more realistically and more practically it's. It connects as a backup to GPS so that when GPS goes down, you can use Satelles as the fail-safe. And because its signal is a thousand times stronger, you can't spoof and jam it in the same way that you can with GPS. And so we think that has huge both government and commercial applications. Obviously we're already working with government today. But there's huge commercial applications for that going forward. You think about wireless infrastructure, you think about data centers, just think about the critical infrastructure that we have and how dependent that is on GPS.
We're currently working on a ASIC chip, commercial, commercial ASIC chip, which should be ready, I think, towards the end of this year, early next year. And that will help proliferation of commercial type applications, in the, you know, in the Satelles GPS world. So, we're very excited about that business and we think we've got a really big tailwind there as we look through the rest of the decade. A couple other things I would highlight is telephony has been a steady business for us. We have, you know, of, of our 2.4-2.5 million subscribers, about just over 400,000 are telephony subscribers. We think that, that business has been a good grower for us over the last, you know, five to 10 years. And we think that continues to be the case going forward. We have pricing power, in that, in that area.
We have a cadence of doing price increases every five years there. We did them in 2013, 2018, and 2023. There's nothing set in stone that says we have to follow that cadence going forward. And when we have implemented those price increases, we've seen little to no churn on the network. So, so I think that just highlights the point.
When you did those every kind of five-year boost, was it like 10% growth in ARPU?
Yeah.
And then step up, and then five years, and then 10%.
Yeah. Some like that, like 8%-10% is good ballpark, Ric. And as I said, you know, little to no impact on the customer base.
I think that gets at something some people think of casual users versus real users.
Mm-hmm.
It feels like your network is more for people that rely on it as opposed to that are just casually using it.
Yeah. I mean, the way I think about our network is because of the L band and because of what I talked about with the network architecture, you know, very resilient, high level of redundancy. It's very important for critical applications. So, you know, think about maritime, you think about aviation, we're safety certified in both of those verticals. So, you know, you will find us in the cockpit of an aircraft, for example, because we're safety certified because of that L band spectrum. You know, when you're in the cabin, you're streaming via Viasat or you may be streaming Starlink, and you certainly won't find us there. It's our, you know, our use case is typically, you know, small sips of data. You know, I mentioned the recent inReach device where you got the two-way text messaging capability.
Small sips of data, but high reliability because it's gotta get through and it's gotta work when you need it. You know, you take our handset business, our handset business, like we don't have high usage on our handsets, but we do see spikes in usage, during hurricanes, for example. You know, people like government entities, NGOs, disaster response, that's, you know, that's kind of a perfect use case for our network. As you think about our handset being used, say, in a hurricane, we're the ones being used during the hurricane. Like it's our handset that's been used during the hurricane. People can talk about Starlink and other companies in terms of what they're doing, but they're coming in afterwards. Very important, but they're coming in afterwards and they're part of the response to what's just happened.
So, you know, think of Starlink and they come in, they need to plug their terminal into something. They're not doing that in the teeth of the hurricane while it's ongoing and maybe you don't have power and maybe you don't have different things. So that's very much the use case and the characteristics of how our network is used.
So, a large part of the Iridium story is you've got the constellation up there, you've got the capital holiday that you don't need to build Constellation Three. Built Constellation One a couple decades ago. Constellation Two went in service about six years ago or so, five years ago.
Right.
Talk a little bit about your comfort that both technically and commercially you don't need another satellite constellation built until when?
Well, so first of all, if you look at it technically, the last launch I think went up in early 2019. The initial design life of the network was 12 and a half years. And design lives by their very nature tend to be conservative. So to give you a sense, our first generation network had a design life of seven years and it lasted for well over 20 years. We've been very happy with the performance of the second generation network. It's on virtually all or most of the metrics; it's outperformed our expectations. And so in Q4 of 2023, we felt comfortable taking up the useful life five years to 17 and a half years. And if you do the math, that would take you out through 2035, 2036. It's not inconceivable that that could go up again.
I mean, we, you know, we monitor this every year. We sit down with the technical staff and Suzi's technical team and, we go through the analysis of that. But we're certainly very comfortable saying that the constellation will comfortably work through the middle of the next decade. When you think about it commercially, I mean, we view ourselves as having enough capacity to support the commercial applications that are out there today and what's coming in the future, Rick. You know, one of the beauties of it for us is that if, you know, if you go back to the growth tools that I was talking about, you know, IoT is very low capacity on our network. Our network is very efficient with IoT SBD traffic.
You're talking about direct to device on narrowband IoT, again, very, very efficient, highly capacity efficient on our network. You know, you think about Satelles that's got its own dedicated channel. So it doesn't take anything away from capacity of the other services or products. So we feel like we have enough capacity on the network and enough room to grow and support what's happening commercially out there in the marketplace through the life cycle of the constellation.
When you think about that service revenue growing 50% ballpark from 2025 guidance to the target of 2030, fairly high margins.
Yep.
60%-70% kind of margins, produces a lot of free cash flow.
Yes.
The plans, as you've illuminated, have been. We're gonna do a lot of shareholder returns.
Yep.
$3 billion from 2023 to 2030. Update us, remind us of where did you end last year towards that $3 billion number? And how do you look at that? Like, why not accelerate stock buybacks if the market's concerned about the boogeyman and you're not?
What I would say is, first of all, on the three, but we've said we'd be a $1 billion service revenue company approximately by 2030. With that, we'll throw off $3 billion of free cash. And that, to Rick's point, obviously gives us a lot of flexibility with share repurchases and dividends. In 2024, we returned close to $500 million to shareholders, mostly via repurchases but also via dividends. We bought down our outstanding share count, if I can say it that way, by about 11%, which is pretty significant. And you know, if you think about the $500 million number for a second, you know, I don't know where we're trading today. We're, I think we're over $30, over $31. Like we're, we have a market cap of about $3.2-$3.3 billion.
Half a billion dollars on that is a pretty significant number. We did accelerate repurchases in 2024. We did a $200 million tack-on to the term loan. We executed accelerated share repurchases against that. We took our leverage up in the short term. We finished last year with net leverage of 3.6 times. I think our plan going forward, Rick, is you know we still continue and still plan to continue to return cash to shareholders. We had a recent $500 million share repurchase authorization announced and approved by our board back in September. That brings our authorization to $1.5 billion since we started this program in early 2021. We got $430 million left on that authorization. We will continue to execute repurchases.
We just announced an over 5% increase in the dividend for 2024, which will kick in starting in Q3, so that will be very much our path going forward. In terms of doing something to take the leverage up again in the short term, I think for now, you know, we feel pretty comfortable with what we did in 2024. We're gonna throw off over $300 million of cash in 2025. We're gonna return a big chunk of that to shareholders, so we feel like we've got a pretty good plan going forward.
Okay. See if there's any questions in the audience. I'll throw one more in our remaining couple of minutes, one or two minutes. The short interest continues to go up on the stock.
Yep.
The stock buyback obviously helps mitigate some of that, but use this forum, this stage, to say, what do you think the shorts are getting wrong? Help those in the audience figure out why the shorts are right or why the shorts are wrong and why, you know, help the investors sitting in the room and on the webcast understand your view.
I think it goes back to what we talked at the start, which is I think there's a big Starlink overhang on the industry. And, you know, Starlink are obviously big, Elon's big, and it just sits over everything. And I think some people are looking at that. And as I said earlier, they're not getting into all the nuances of, you know, there are different satellite solutions out there and there are different problems we're all solving. And I think with the uniqueness of our L-band spectrum and the uniqueness of our network, I think we have a very strong, robust business. I think we proved some of that during COVID. Like we were very resilient during COVID and we actually grew during COVID.
I do think investors are a bit spooked, if I can say it that way, by the fact that Starlink has been a major disruptor in the industry, has had a major impact on some of the GEOs. But what I would say to you is go look at our performance over the same period over the last two or three years. We've continued to grow revenue, we've continued to grow our EBITDA, and we've continued to return cash to shareholders. And that's based on the uniqueness of our network, the L band spectrum. And I don't see that changing going forward. So I think that's what the shorts are missing. And I think for us, it's just about continued execution and keep executing against our plan.
It feels to us almost like Iridium's more complementary to what Starlink's trying to do as opposed to Starlink is competitive against Iridium.
Yeah. I mean, you know, to that point, as I said, Starlink have obviously had a big impact in areas on the GEOs and taken share. For us, there are areas where we get stitched together with Starlink as part of a complementary solution. So, and Maritime's a good example of that where, you know, we have a companion service and it will be stitched together with Starlink as a primary service, or could indeed be stitched together with another VSAT as well. So for the most part, we see Starlink has been complementary and maybe in cases even growing the TAM that might not have otherwise been available to us. So, you know, overall a positive.
Great. Well, we'll wrap it there. Get everybody off to their lunch. We've got a breakout that we'll do downstairs. Thanks everybody.
All right. Thank you.