I'm Ric Prentiss, head of TMT Research at Raymond James. As you all know, we refer to, in my space, T for towers, M for media, T for telecom satellite services. On the 47th annual Raymond James Institutional Investors Conference, my 30th institutional conference at Raymond James, we're pleased to have Vince O'Neill, CFO of Iridium with us. Brent's gonna run it from here. Brent, Vince, you're on.
All right.
Thanks.
Thanks, Ric.
Thanks for the introduction, Ric. Thanks for everyone for being here in Orlando, for the Institutional Investor Conference. Thanks, Vince, for joining us. This is an all-cap, all-sector conference, so there's a lot of generalist, international investors, a lot of PMs here. Can you start us off, just an introduction to Iridium, who you are and where you fit into. Obviously, there's a lot of excitement right now about space and satellite, where you fit into that equation.
Sure. Thanks, Brent. Good to be here. Yeah, just, you know, high level for us, we operate in the mobile satellite spectrum space. We have a network that covers the globe. Just very quickly, our network architecture is 66 satellites, six planes of 11 satellites in each plane, and they're constantly circumferencing around the globe. The importance of that is that you always get a signal no matter where you are in the world. You know, you can think of coverage as being ubiquitous in the North Pole as in Upstate New York.
The other thing that's really important is that has inbuilt redundancy and resiliency into the network in that if you did happen to lose one of those 66 satellites, you've got another satellite coming quickly along at another look angle. You're never, you're never gonna be without service for a long period. We also have, with the 66 satellites, we also have 14 in orbit spare. There's a lot of inbuilt redundancy there, and that's really important. Why do I go through that? We operate in the L-band spectrum, which we have 8.5 MHz of global rights to global landing rights to L-band spectrum.
The L-band spectrum itself is very resilient by its nature, and it means that we're certified for critical safety services in both aviation and maritime. There's only two companies in the world that have that certification. We're one. There's another satellite provider that has that, and that's because they have the L-band spectrum. We're big in critical safety services. Also think of us, you know, anywhere where you need to get a signal where a connection is absolutely necessary. If you're not moving big chunks of data, you're probably doing it on our satellite network if you're off the grid.
Great example would be, we have a IoT personal communications business and you can go in with a major retailer, take one of their devices, pair it with your cell phone, and you have two-way text messaging and SOS capability when you're off the grid. As I said, you get a signal anywhere. In terms of financially, the company is extremely sound. We have revenue of close to $900 million. Service revenue of close to $650 million, which is basically think of that as airtime and access. We generate close to $500 million of EBITDA a year.
For a satellite company, we're really unusual 'cause we actually throw off cash, and we throw off This year, we'll throw off over $300 million of pro forma free cash flow. I think high level, I think that's it, Brent.
Yeah, that's a great overview. I heard a lot of safety, mission-critical, emergency, and that's all driven by the L-band spectrum you have, a kind of a unique, resilient spectrum. That's been your moat for a while. Often when we talk about satellite, SpaceX Starlink comes up. It's hard to talk about satellite without talking about Starlink. This past summer, they bought some spectrum in the S-band. Now they can more directly compete with you. What was you all's reaction at Iridium when you saw that announcement? What does that mean for you? What are they gonna be able to do in your markets?
Well, I think first of all, when they bought the S-band spectrum, they obviously paid a lot of money to EchoStar for that spectrum. They talked about, you know, the direct-to-cell space, like connecting with cell phones down here on planet Earth. For us, I think in the short term, it really doesn't change much, Brent. We, you know, as we operate our business today, we don't see that much of Starlink. They've had a very acute impact on a very small piece of our maritime business. That's, you know, that's very much ring-fenced. We do think that we have moats around other areas of our business.
You know, I, you know, a classic example I give people all the time is we've got about 2.5 million subscribers. About 400,000 of those are telephony, voice, and data subscribers, and they're the kind of subscribers that, you know, they pay $48 of ARPU a month, and they really want our specialty service, and they're really paying for the fact that we've got that redundancy and that resiliency in our network. Think of, you know, highly industrialized commercial use cases, you know, governments, NGOs, disaster recovery type organizations, you know, and the idea that they're gonna trade that in for, you know, a consumer, a consumer direct-to-device product, I think is, I just don't agree with. I don't think that's right.
Having said all of that, I do think that Starlink will have, you know, Starlink will encroach on some limited areas of our business as we go forward. You know, I do think the first thing I would say is I do think it's gonna take them at least three to four years to build that network out. They've got a lot of wood to chop. They've obviously shown that they can chop wood, so I'm not doubting that they're gonna chop it, but I think it's gonna take them longer than the two years they've said. There's a lot of regulatory barriers and hurdles that they will have to overcome, especially in Europe. Maybe less so in the U.S., but especially in Europe.
I think for us as well so we think we have, you know, we think in a lot of areas we have moats around our business, like I talked to in the telephony business, I think IoT to a large extent. We obviously have a lot of, which I know we've talked about on our prior quarterly calls, and I'm guessing you'll get to, Brent. We think we have a lot of incremental opportunities for revenue growth as we look forward here.
One thing a lot of investors are trying to figure out is how many more casual users do you have? You know, people who might not necessarily need.
Mm-hmm.
-the robust, resilient devices and connectivity Iridium can offer. Is there any way you can quantify for us, you know, your exposure to those customers?
I think what I would say is that certainly if you look at our telephony base, for example, I would say that they're mission-critical type applications. I think of it, you know, I think of it's either, you know, regulatory mandated in terms of, you know, it's a safety backup and you have to have it, or it's some mission-critical application. I look at our telephony base and, you know, I think it's definitely covered by the mission-critical aspect of that. I think where we get the question most often, Brent, is maybe in the IoT space where, you know, we have a big personal comms business that has grown at a very healthy clip over the last four or five years.
Typically what I say to investors is that, you know, the users that we have, or certainly the majority of the users that we have in that personal comms space are, you know, it's a lifestyle. It's, you know, they're, you know, call them professional hikers or whatever it is they're doing, where they know on a regular basis that they are gonna be off the grid, and they want the bells and whistles that comes with those products and that functionality.
I've always said and I still feel that direct-to-device itself or direct-to-cell, as we call it, is more of casual usage, and I think it's gonna be more of a use case where, you know, people in this room, you know, you might find yourself off the grid when you don't expect to be, or I have my own personal examples from my own life where, you know, I actually think I have terrestrial coverage, and I don't. It's in those instances that I would actually pay a lot for a connection via my smartphone at that point. That's typically how I think about it, Brent.
Yeah. You talked on the 3Q call, you acknowledged competition from Starlink. On the most recent 4Q call, you all got more specific in terms of the four areas that you can invest that you think are much more insulated from that competition. PNT
Mm-hmm.
NTN, IoT, a lot of acronyms. national security, including Golden Dome-
Yeah.
Aviation safety. I guess I'll kick it off to you to just start with, you know, why you identified those four areas.
'Cause we think that they're areas that play very much into the characteristics and the strength of our network, and I'll go through each of those four briefly. Also that they are areas that I would classify as being adjacent to Starlink or having a moat from Starlink. If you think of PNT, which is the first one Brent mentioned, that's our position, navigation, timing solution. That's basically think of that as a GPS backup. We have a product on our satellites. We acquired a company called Satelles about 18 months ago, and it's their technology that runs on our satellites.
Basically, their signal is 1,000 times stronger than than GPS. This honestly is one of the most products, if not the single most product I'm most excited about in our in our quiver at the moment because, you know, you can see over the last two, three years that there's a much higher awareness around GPS resilience or lack of resilience, I should say, in the fact that GPS isn't really that hard to jam. You know, I think the Ukrainian war has brought some of that to the fore with with some of the jamming of the weapon systems there that effectively rendered millions and millions of dollars of high technology weapons worthless because they didn't have a GPS signal.
Another interesting factoid which gets thrown around a lot by the PNT people is that there's actually more GPS receivers in the world than there are toothbrushes. GPS is everywhere. There's a much higher, you know, there's a much higher awareness around the vulnerabilities of GPS. And this is something where we think like our Satelles PNT product comes in, where it's got a lot of government and commercial application, where it can act as a backup to GPS, and it's, as I said, it's much harder to jam or spoof it. The signal is 1,000 times stronger. It's almost like a fail-safe or a backup for GPS. The second area that Brent mentioned was NTN, our standards-based, IoT solution.
We've gone down the standards-based path for our Narrowband-IoT solution. While everybody talks about direct-to-cell, we're actually really excited about the opportunity for Narrowband-IoT, which is effectively taking cellular IoT today and the challenge with cellular IoT today has been that once you go off the grid and you go into satellite, it gets very expensive. The cost of equipment was a real inhibitor to actually growing that market. The fact that it's now part of the standards, it will be specced into manufacturers' chips. Nordic Semiconductor, for example, are currently rolling out a standards-based version of the chip. They're big chip manufacturer in the IoT space.
The fact that that's now happening and that technology is on the chip, we believe just makes it very cost-effective to roll out Narrowband-IoT beyond non-terrestrial coverage. We have signed MOUs with some of the most prominent MNOs in the world. Vodafone, for example, Deutsche Telekom, both have significant chops in the IoT space. I think you can expect to see more of those announcements coming. That's a greenfield opportunity for us where I wouldn't expect to see much revenue in 2026, but certainly 2027 and beyond, I would expect to start to see that ramp. I think the third example was with the U.S. Government.
I know everybody talks about Golden Dome at the moment, but we have a unique relationship with the U.S. government. They were our first customer over 30 years ago. We have a fixed price service revenue contracts with them for access and air around satellite handsets and SBD. The engineering part of our business has grown significantly over the last few years, which is primarily come from the U.S. government, and it has primarily been part of the Space Development Agency contract, where we're heavily involved and integral to that activity. We think going forward that we have a lot of incremental opportunities, sorry, to grow revenue there.
I would just tell you anecdotally that, you know, over the last six to 12 months, I've been at Iridium for 11 years, and I've never seen as much activity with the USG as I've seen over the last six to 12 months. We think that's significant for us. Then the last piece is aviation safety services. Just very quickly, you know, as I said, you'll find us in the cockpit of an airplane. You'll never find us in a cabin or in the cabin, or at least I hope you don't. We do believe that, with our position in the cockpit, we have an opportunity to take a significant share.
Matt's talked about this, that we have an opportunity to take a much more significant share of that business, both from a critical safety information perspective, but also non-critical safety data, for the airlines. I think the airlines are keen, and they're hungry for that. We would expect those four areas to contribute significantly to, our revenue profile over the next three or four years.
On the last one there, aviation safety, you've talked about the possibility of M&A in that area and maybe some other areas as well. Help us understand why that's an opportunity to you, how you get one plus one equals three, with something in that space.
Well, I think some of that. I don't think it's just aviation. I think it's a little bit broader than that, Brent. Where we have the opportunity to accelerate opportunities, whether that's by, you know, acquiring technology in cases, or in some cases it could be just relationship based and a way to get to market and go to market quicker, we will do that.
Okay. Okay. A lot of what you just described your business, really almost all of it, you know, it's enabled by the spectrum that you own, and you all more openly have talked about, the ability to monetize that spectrum. I think ever since the EchoStar deal, they sold their spectrum, people have been looking for where else is there spectrum value.
Mm-hmm.
Can you expand on how you all might be able to monetize your spectrum beyond the businesses you have today?
Well, I think first of all, we have always recognized the value of our L-band spectrum. You know, we have built a business off that's $500 million of EBITDA thrown off $300 million of free cash flow a year across a number of diverse product portfolios, serving mission-critical applications across the globe. I think some of the unique properties of our L-band spectrum is, one, it's global. It's truly global. You know, nobody else has truly global L-band spectrum. We have landing rights all over the world. As I said earlier, you can get, you know, you can get ubiquitous experience, whether you're in New York or, you know, sorry, upstate New York or in the North Pole. It's truly unique in that way.
L-band is certified for safety services, you know, we're certified for aviation and maritime, and, you know, it's been critical to us building out the business we've had. The perception of mobile, specifically dedicated mobile satellite spectrum, the perception of that value, I think, has changed probably over the last 12 months. If you go back a couple of years ago, when everybody was talking about direct-to-cell, people were talking about how did they address that opportunity. There was, you know, there was the approach where you take the Starlink approach, where you partner with T-Mobile and you parse some of the terrestrial spectrum, you use that. You could take more of an AST approach where, you know, you're rolling out these big satellites in the sky and you're just, you know, you're basically...
I know this isn't technically correct, but basically you're blasting down and you're picking up, you know, you're picking up the antenna on the cell phone. You've seen what Apple did with Globalstar. Apple went and partnered with Globalstar, got access to 85% of their spectrum, which I think was Apple acknowledging you need MSS spectrum if you wanna do this. I think you can see that the market's moved to that over the last 12 months. You've had the deal between AST, Ligado, and Inmarsat. I know that's subject to litigation at the moment, that would give AST rights to most, if not all of Inmarsat's L-band spectrum in North America. You've seen the, you know, you've seen the EchoStar deal that was just announced six months ago.
We've always placed a lot of value on our L-band. We've got 8.5 MHz, Brent. It's prime beachfront property, you know, as we said on the last call, you know, we will look at any future business alliances that maximizes shareholder value. I mean, that's what we're here to do.
Yeah. How open-minded are you on that? Is there anything that's off the table that is a non-starter in terms of monetizing that spectrum?
You know, I wouldn't say there's anything off or on the table. I think it's really a question of, you know, what's the best solution that maximizes shareholder value. That's ultimately what we're gonna do.
Okay. You all are in a CapEx holiday right now. We thought it might stretch to 2030. Now it sounds like it might stretch to the mid-2030s. The question is becoming, do you all launch another satellite constellation? Do you maybe hitchhike on someone else's satellites? Can you update us in terms of... It's still early-
Mm-hmm
... what is your thinking in terms of what are your different options for that next generation constellation?
I think first of all, as you think about the current constellation, which is currently throwing off over $300 million of free cash flow and growing, you know, we had an initial useful life on that of 12 and a half years. We extended it a couple of years ago to 17 and a half years. you know, if you just follow the math on that, we launched this current constellation across 2017 to 2019. That would take you out to 2035, 2036. We're very happy with how the network is performing. Network health is really good. And I think at this point of its life cycle, it's probably tracking ahead of virtually all metrics that we had laid out.
We're very happy with the health of the network and, you know, my hope sitting here as the CFO would be that it could last longer. Obviously, I can't commit to that here today, but certainly at a minimum, we expect to have it through the middle of the next decade. In terms of, you know, in terms of a next generation, I mean, it is early. There's a lot of different variables there. Cost of manufacturing and cost of launch has come down significantly since we paid approximately $3 billion to put the current constellation up there.
You know, if we were doing a like for like constellation today, I don't know what it would cost, but I would expect it to be significantly cheaper. That being said, you know, there are other potential variables to look at as well. You know, if you wanted to get better spectrum reuse out of the constellation that we currently have, you'd put more satellites up there, you know? Instead of a 66 satellite constellation, maybe the next one would be a 132 satellite, and you just have much tighter spectrum reuse, and you're getting much more efficient use out of your spectrum. Another option, which I think you alluded to, Brent, is to maybe run as a payload on somebody else's satellite system.
They're all options that are on the table. Some of that's gonna come back to, you know, what are the types of markets that we're trying to serve? What's it gonna take to serve those markets? What do the economics ultimately look like?
Okay, great. You talked about your strong relationship with the U.S. government. There's several contracts in place there. Can you expand upon what is your moat with the government, you know, as Starlink and others, enter satellite space, you know, what prevents them from being able to compete for or win some of that business? Just expand upon that.
What we do for the U.S. government, I don't think anyone else can do. Again, I think it goes back to the characteristics of our network that I've been talking about. Specific to the U.S. government, you know, they have the capability with us to send a signal up. You can imagine that somebody's in a bad place with bad actors. They wanna send a signal up. That goes up to our satellite, is encrypted across all of our satellites, and lands in their proprietary gateway in the United States, the U.S. government's proprietary gateway. Nobody else sees that traffic. That gateway is basically engineered for only Iridium traffic. It's not like they're landing other satellite traffic there.
It's just Iridium traffic that gets landed there. There are two other ancillary contracts tied to that. One is the gateway maintenance contract. So we help them maintain that gateway. That contract was renewed, I think it was renewed in 2024 through 2029. Ken will keep me honest here, but something like that. Then the gateway evolution contract, which is a separate contract to the maintenance contract, that was renewed last year, and that was renewed through 2029 or 2030. Point being here that those run past the current renewal, which is in September of 2026.
we fully expect that as part of the EMSS contract, the government has the right to push out the contract six months, which we fully would expect them to take advantage of that. They've done that for prior renewals. For those of you who are new to the story, by the way, at least the last three or four contracts, which have been seven-year or five-year contracts, have been sole-sourced. They will probably push that out six months and, you know, we'll negotiate a renewal with them at that time, which will be March of next year, this time next year.
Obviously, we're all watching closely what's going on in Iran. Can you talk about how that would affect your business?
I think right now, I don't know that it would have a huge impact per se, Brent. I mean, if things change there and it was, it became an elongated exercise or activity that might change things. Certainly if you're in a position where you would have troops on the ground or something like that, I think that would probably dramatically change things. As we stand here today, I don't think it's gonna have a major impact. That's for the government, that's one of the great things about the contract they have. They have, they effectively have within reason, an all-you-can-eat airtime contract for both handset and SBD.
They like that price certainty, and they want that surety of use as well when they need it.
Okay. You all put out a guidance of $1.5 billion-$1.8 billion of free cash flow cumulatively between 2026 and 2030. Help us understand the variables that go into what would cause you to hit $1.5 billion versus $1.8 billion? Then what's your level of confidence of being within that range?
I would say, high level of confidence of being within the range. You know, if you think about it today, we're throwing off just over $300 million of free cash flow. If you just flatlined it for the next, you know, four years, whatever, you go five years, you're at the $1.5 billion. I think in terms of getting to the $1.8 billion, it's really, you know, it's about proving our competitive moat on the business and also, you know, growing some of those revenue streams that we talked about across the four growth pillars: PNT, narrowband IoT, national security missions, and aviation cockpit services.
You know, my hope of obviously sitting here as CFO is that we're hugely successful growing that and that we're here in a couple of years' time and you're giving me a hard time for undercalling it. But a high degree of confidence.
Never give you a hard time. We're in the last few seconds here. A lot of generalists here. Can you give us your one-liner pitch on why people should dig more into Iridium?
My one-liner pitch would be, you know, we're a very different satellite company. We're throwing off cash today. I don't think the moats and the customized niche products that we offer around our business are fully understood. I think if they were, I think investors would understand that there's a much longer tailwind on our revenue than they're giving us credit for at the moment.
All right, great. Thanks, Vince.
All right. Thanks, Brent.