Good day, and welcome to the Iridium Communications First Quarter Conference Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Ken Levy. Please, go ahead.

Thanks, Sagar. Good morning, and welcome to Iridium’s first quarter 2025 earnings call. Joining me on the call this morning are our CEO, Matt Desch; and our CFO, Vince O’Neill. Today’s call will begin with a discussion of our first quarter results followed by Q&A. I trust you’ve had the 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 and 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. The first quarter met our expectations. Service revenue continued to grow due to the introduction of new services and subscriber increases over the past year. We anticipate ongoing growth across most product lines, and our partners remain optimistic about opportunities with our new offerings, including Iridium PNT. Typically, the short time between our February call and the end of the first quarter doesn't allow for many surprises, but this year was different. Recently announced tariff levels, which were implemented and then largely suspended, have created more uncertainty than we expected, especially regarding equipment expenses. We are taking steps to minimize the impact of this situation. Most of our equipment is produced in Thailand through a contracted facility, which has excellent quality. Last year, we had about 100 returned items out of over 850,000 shipped to customers, demonstrating exceptional quality that we are proud of, thanks to my supply chain management team during and after the pandemic. Given the current volatility in U.S. trade policy, I want to outline our response to the new regulations and their potential effects on our bottom line. Historically, Iridium has imported finished goods from Thailand, with minor imports from other countries, to our Arizona distribution center for inventory and packaging before shipping to partners in the U.S. and internationally. Last year, however, we started collaborating with a third-party logistics partner in Europe for regulatory compliance, leading to using their facility for EU-bound shipments. We will quickly expand this partnership to offset new tariff costs, using it for nearly all non-U.S. shipments, which account for about 75% of our total. Approximately 25% of Iridium's equipment is sent to U.S.-based partners, so import tariffs will primarily impact this segment. We have worked for years to minimize our supply chain exposure to China and now source very little from there, so the significant tariffs imposed have a minor effect on us. We estimate that the current U.S. trade policy, with a minimum 10% tariff for Thailand, would result in about $3 million in additional costs this year. We believe we can cover this within our current guidance for OEBITDA. If tariffs revert to the originally proposed levels from April 2, we would face a 36% tariff rate for all equipment made and imported from Thailand. In that case, we estimate incremental costs would be between $6 million to $7 million this year, which we have not included in our guidance assumptions due to ongoing discussions and uncertainty regarding tariff levels and exemptions with countries like Thailand. While we could address some remaining import costs through surcharges to customers, we prefer not to compromise our strong market position and business momentum. There remains significant uncertainty about tariff levels, their timing, and how our partners' businesses will navigate the changing economic landscape. Historically, Iridium has demonstrated resilience during economic challenges, continuing to grow service revenue through both the 2008 recession and the 2020 pandemic. I hope this information, along with what Vince will present shortly, will clarify how we are approaching the current environment. Once we have clarity on trade policies, it's likely to become a predictable expense. Regarding our activities in the first quarter, we engaged extensively with industry partners at the satellite show in February and our Iridium Partner Conference in Florida. Despite market disruptions, our partners are optimistic about their businesses and opportunities with Iridium, particularly related to next-generation IoT, alternative PNT from our Satelles acquisition, and D2D with Iridium NTN Direct. Our diverse partner ecosystem sets us apart within the satellite industry, covering nearly every industry that utilizes satellite communications. These partners recognize and value Iridium's unique capabilities, including a reliable satellite constellation, global coverage, and regulatory approvals. This collaborative approach gives us insight into their businesses, and we share our product roadmap and future investments, maintaining our confidence in growth despite new entrants like Starlink and regional D2D services such as AST Space Mobile. Our partners view us as complementary to these new market entrants, continuing to invest in new Iridium solutions based on our plans for further market expansion. I feel it's crucial to address Starlink and similar startups, especially since there seems to be a lack of understanding among some investors about how Iridium differentiates itself. Starlink has successfully expanded its network and entered new markets, notably in the consumer space, capturing market share from traditional players in maritime and aviation. However, Starlink lacks L-band spectrum and the comprehensive global coverage essential for mission-critical applications. They also cannot address safety applications in GMDSS on chips or air traffic control communications for complex aircraft. While there's some overlap in maritime services, where Iridium has been a primary connection for many boaters, our distribution partners still recognize Iridium's essential role in providing global coverage that can withstand weather challenges, serving as a complement to Starlink for their customers. The current challenges in our small broadband segment should normalize as more Iridium Certus GMDSS maritime products become available, catering to end-market demand for low-cost safety applications, where we excel. Regarding direct-to-device, this segment is not a zero-sum game. We expect that satellite providers offering varied cellular-based services will develop regional offerings, but these will generally be limited due to spectrum interference and regulatory hurdles, needing to meet cellular customer expectations. Our partners consistently relay that their customers desire highly reliable global service with solutions tailored to their specific business needs. They prefer purpose-built devices that streamline achieving their objectives. Thus, we don't expect cellular-based B2D services to replace the use cases Iridium addresses. However, D2D will increasingly play a role, particularly with casual users, which is why we are advancing Iridium NTN Direct. Iridium's new IoT and D2D service will leverage standardized chipsets with 3GPP Release 19. We plan to begin testing with Nordic Semiconductor and potentially others this summer, allowing potential customers to experience the reliability of global D2D service. For Iridium, these standardized chipsets also help reduce costs for manufacturers and customers that want to connect to our global network with minimal additional expenses beyond their cellular hardware investments. This should significantly benefit our IoT business and facilitate entry into new industries that previously viewed satellite technology as prohibitively expensive. The IoT market is vast, and we expect Iridium NTN Direct to contribute substantially to our revenue growth through the end of the decade. Contrary to some investors' misguided beliefs that D2D will cannibalize Iridium's legacy services, we find this narrative hard to follow. While new D2D solutions using cellular frequencies may improve, they will only slightly expand the cellular coverage area, which is only 10% to 15% of the globe, far from Iridium's comprehensive coverage. Despite excitement surrounding D2D, we are still seeing growth in personal satellite communication devices, even with new free D2D services entering the market, like Apple's on smartphones and Starlink's beta tests. Although a large market for D2D may emerge, we believe our relatively modest investment in Iridium NTN Direct will yield a strong service that complements others' D2D offerings and generate additional IoT revenue for us beginning in 2026. Shifting focus to position navigation and timing, an area where Iridium holds a significant advantage over competitors, we see tremendous potential. Our partners are eager to integrate our satellite time and location services into their solutions, driven by growing interest from new customers seeking to resolve GPS vulnerabilities with Iridium STL. The increasing prevalence of GPS jamming and location spoofing highlights the risks organizations and critical infrastructure face relying on these services. With our acquisition of Satelles, we can offer a robust timing signal and reliable location that can be provided affordably anywhere globally, and is 1,000 times more potent than GPS. We have already seen a surge in our P&T engagements this year, and we believe STL will drive considerable revenue growth through 2030 and beyond. Before handing over to Vince, I want to mention investor questions regarding the government's efforts to cut spending and improve efficiency. We do not expect that Iridium's existing U.S. government contracts will be affected by these efforts, and we firmly believe that our long-term partnership with the government is immensely valuable. Our EMSS contract with the DoD provides reliable global coverage for numerous voice and data units for about $65 per user per month, making it one of the most attractive deals in the satellite industry today. Nonetheless, we recognize that the geopolitical landscape will remain dynamic; international relations are shifting. With new tariffs and adjustments in government priorities, we anticipate some impact on our industry, potentially positive due to the focus on space, but also some negative consequences. Funding challenges may arise for foreign government agencies, NGOs, and safety organizations. We've already seen examples of reduced USAID funding to international organizations previously utilizing satellite services for security improvements. Currently, we have no reasons to believe these changes will materially impact our business. We feel somewhat insulated from recent protectionism and nationalistic sentiments, but like any company, we could encounter challenges as we progress through the year. We will remain vigilant, respond to any emerging issues, and keep investors informed of our observations. Despite recent global unrest, my team and I are highly confident in Iridium's ability to utilize our unique network to deliver new solutions and expand into new markets by 2030. We possess exceptional technology, a strong spectrum position, and a clear strategy for growing our business, service revenue, and free cash flow. Through our share buyback program and quarterly dividends, we are also adding value for our shareholders. We continue to believe our stock is undervalued and will actively work to realize this value through our remaining share repurchase authorization. These capital priorities, along with ongoing network investments, reflect our confidence in Iridium's growth prospects. Now, I'll pass it over to Vince for a financial review.

Thanks, Matt, and good morning, everyone. I’ll start my remarks today by reviewing our financial results for the first quarter and some trends we’re seeing in our major business lines. Similar to Matt, I’d also like to discuss the evolving business climate, and how it colors our outlook for the year. I’ll then close with a review of our liquidity position and capital structure. Iridium executed well in the first quarter and continued to deliver on our full year plan. Operational EBITDA was up 6% in the first quarter to $122.1 million, driven by a combination of revenue from recurring commercial services and engineering and support. On the commercial side of our business, service revenue was up 4% to $127.5 million. This increase was led by strength in IoT and Iridium PNT. Voice and data revenue rose 2% from the prior year quarter to $55.9 million and largely reflected subscriber growth in telephony services. As Matt mentioned, a small portion of the deactivations we saw during the quarter related to USAID and changes to program funding. Commercial IoT revenue totaled $43.8 million in the first quarter, up 11% from the year earlier. As noted previously, this reflects a step-up in our two-year contract with our largest IoT partner in addition to ongoing demand for personal satellite communication services. As previewed in February, we have experienced and continue to anticipate structural subscriber deactivations associated with changes to an IoT partners’ retail plans, which are phasing out plans that allow subscribers to toggle between active and inactive status throughout the contract year. These deactivations have no impact on revenue under the terms of the contract. Revenue in Commercial Broadband was down 6% from the year-ago period to $12.9 million. This decline was driven by the increasing use of Iridium as a companion service and the conversion of certain primary customers to lower usage plans. We expect the ARPU headwinds from these conversions will become less pronounced over time, especially with the proliferation of new Iridium Certus GMDSS terminals by VAM Partners in the second half of the year and into 2026. Over time, we believe gains from subscribers’ adoption of Iridium Certus GMDSS will offset the ARPU pressures we are now experiencing from primary user conversions. Hosting and other data services revenue was $14.9 million this quarter, up 7% from last year’s comparable quarter. We continue to see a pickup in Iridium PNT after having fully acquired Satelles in Q2 last year and remain very optimistic about demand for PNT services as global organizations increasingly address the vulnerabilities inherent to GPS and GNSS base systems. Government Service revenue was up modestly in the first quarter to $26.8 million, reflecting the step-up in our EMSS contract with the U.S. government this past September. Subscriber equipment sales were $23.1 million in the first quarter. While down from Q1 last year, which was the high watermark for 2024, demand continues to track expected levels. We continue to forecast full-year equipment sales in line with 2024, though we will obviously be monitoring the impact that evolving tariff policies may have on equipment costs. Engineering and support revenue was $37.5 million in the first quarter as compared to $30.4 million in the prior year period. The increase reflected our growing work with the USG including the Space Development Agency and two new contract awards from the prior year. One of the ancillary benefits of being involved with the SDA program is the insights that provides our team on new and evolving satellite technologies, which is informing our early-stage thinking on our next-generation network. As you will have noted from our release, we are affirming our full-year guidance for both service revenue and OEBITDA but I’ll make a few points in a second about what that means. Revenue in commercial voice and data is expected to accelerate from Q1, which is historically a seasonally soft quarter. As we move into the back half of the year, voice and data will also benefit from select price actions. These price changes will phase in starting in July on certain commercial services. These actions were contemplated in our full-year forecast and communicated to partners late last year. We hope this additional level of transparency will be helpful as you model our service revenue growth for the balance of the year. We forecast double-digit commercial IoT growth in 2025. This is driven by a step-up in the two-year contract we entered into with our largest IoT partner and ongoing demand for personal satellite communications. We continue to see momentum in PNT and expect new work and contracts related to our satellite-based time and location service to support our forecast. Our government business benefits from a step-up in our EMSS contract, which will result in full-year revenue of $108 million in 2025. As Matt mentioned, there remains a high level of uncertainty on tariff policies. Even though the tariff policies were not contemplated in our February guidance, we estimate that if proposed tariffs of 10% on most of the world stay in place, while it would have a negative impact on our costs for the rest of the year, which we quantify as approximately $3 million, it can still be absorbed within our current guided OEBITDA range, especially in light of our mitigation efforts. However, if the original tariffs announced on April 2nd were to be implemented, they would have a much more significant impact on our cost base, which at about $6 million to $7 million would likely cause us to be outside our OEBITDA guidance range. Taken together, this outlook supports our forecast for service revenue growth between 5% and 7% and operational EBITDA between $490 million and $500 million this year. We continue to feel good about Iridium’s business prospects. However, we will continue to engage closely with our partners and we’ll monitor for any significant changes in the business climate that may potentially impact end-user demand. Moving to our capital position. As of March 31st, Iridium had cash and cash equivalents balance of $50.9 million, which was bolstered by a $20 million draw on our revolver this quarter. Our cash flow is ample to fund operations and support ongoing payments of quarterly dividends as well as our buyback program. During the first quarter, Iridium retired approximately 2.4 million shares of common stock at an average price of $29.48. This left us with an outstanding balance of $360.3 million under our Board-approved authorization through December 31, 2027. Over the preceding 12 months, we’ve been able to retire approximately 12% of our outstanding share count. We will continue to execute on our buyback program balancing the desire to maximize return on investment with our long-term objective for deleveraging. During the first quarter, we also made a quarterly dividend payment of $0.14 per share paid on March 31st. Beginning in the third quarter of 2025, Iridium’s Board intends to increase our quarterly dividend to $0.15 per share, representing an increase of approximately 5% over the full year 2024. This reflects our confidence in the Company’s business opportunities and prospects for continued strong free cash flow generation. Capital expenditures in the first quarter were $24.5 million; we expect capital expenditures to rise in 2025 to support our work with 5G standards and moderate thereafter through the end of the decade. Turning to our pro forma free cash flow. If we use the midpoint of our 2025 OEBITDA guidance and back off $91 million in net interest pro forma for our current debt structure, approximately $90 million in CapEx for this year, $6 million in cash taxes and $6 million in working capital, inclusive of the appropriate hosted payload adjustment. We’re projecting pro forma free cash flow of $302 million for 2025. These metrics would represent a conversion rate of OEBITDA to free cash flow of 61% in 2025 and a yield approaching 11%. A more detailed description of these cash flow metrics, along with the reconciliation to GAAP measures, is available in the supplemental presentation under Events on our Investor Relations website. Iridium continues to grow its business and make strong progress on new initiatives like Iridium end-to-end Direct and PNT. As I look at the competitive landscape, I feel very good about our positioning and prospects, and with that, our ability to achieve our long-term growth targets and continue to return capital to shareholders. With that, I’ll turn things back to the operator and look forward to your questions.

Our first question comes from Ric Prentiss with Raymond James. Please go ahead.

Thank you for the insight on tariffs. It’s clearly a very dynamic and unpredictable situation, which helps us understand the cost implications. Matt, it seems you would prefer not to increase prices for customers regarding the 10% tariff. However, as we consider the long-term impact, do you have any thoughts on how these tariffs might affect subscriber growth or service revenue as a metric?

It’s too early to tell. We’ve experienced other economic shocks in the past, and since we provide critical services, demand typically remains stable for us. Currently, the mood in the market doesn’t suggest that we should expect significant changes. We can’t predict how potential tariff increases or prolonged global trade tensions will impact the global economy, but as of now, we don’t see any concerning changes in demand.

You’re making the supply chain changes too to help mitigate some of that. Okay. The dose cuts and the government efficiency stuff might be a little more firm since you’ve seen some of those changes. We did note this quarter, the government subs were down. Was that the USAID or was that in the commercial side? And what maybe drove the change in government subs?

That doesn’t really have much to do with those as much as it’s just a government cleanup activity as they, I think, sort of position themselves for our next renewal in a couple of years. If they have units that they haven’t been utilizing the different services kind of turn them off to change their relative positions with other services. But it really doesn’t speak to anything related to dose or anything like that.

Yes. And the only thing I would add there, Ric, is the USAID, you’ll see that in the commercial voice and data numbers. So that’s a driver there. And there’s also some conflict area drawdown as well as you see in Q1.

Yes, we identified that as one of the few elements we can clearly connect to. It appears to be minor and relatively predictable at this stage. Again, it's one of the limited factors that we can directly relate to, but I don't notice many other aspects like that.

And Vince, you called out that we should expect some legacy voice and data price actions in the second half. Historically, you guys like every five years, you’ve increased it maybe 10%. Should we think this is kind of more of that low single-digit increases that might happen annually instead of just such a long wait step function long way?

Yes. A year or two ago, we decided instead of having like price increases every five years, a smaller price increase every 2.5 years, would be less noticeable really by the market and sort of in line with global inflation sort of things that are happening anyway. So not expecting a lot of reaction from it. We’ve had this in planning really for the last nine months so far. Obviously, didn’t communicate that publicly, so I’m sure you didn’t have that in your models or anything, but it goes into effect as scheduled here middle of the year. And it’s a little bit why our service revenues were a bit higher in the second half than the first half, one of the reasons anyway.

Makes sense. And last one for me is, you touched on obviously the directed device items. You might start seeing some service revenues. It sounds like in ‘26 as you go through the Summer ‘25 trialing. But how should we think about how that ramps up? And what line item would that benefit your directed device plans?

Well, it really affects IoT, which is a strength of ours anyway. In some ways, the earliest revenues, I think, will be IoT roaming revenues coming from, say, a cellular device that has the right chipset and can just roam into our network without any incremental investment or really development by the end user partner. So how fast that goes. It’s unclear. It depends on how fast release 19 chipsets get into the market and the MNOs that adopt us and that sort of thing. All the interactions we’ve been having are very positive. There’s a lot of interest in having Iridium be a supplier in that marketplace. As I said, we feel good being this complementary service that sort of supports that is kind of a global glue that is there to support all those places where won't be and even many places where it will be where people want to use this. It will take a little longer to get into phones and consumer devices. So, I’m sure there’s interest there as well. So that may not hit in ‘26 as much. It will be more IoT, but that will ramp up towards the latter part of this decade.

The next question comes from Edison Yu from Deutsche Bank. Please go ahead.

First, just on the tariff situation. I know you called out the $3 million and $6 million to $7 million, is that an impact for basically half a year? And then if they continue, we’d have to roll it through for the full year next year, or what’s the, I guess, assumption on the timing of when that hits?

The $3 million impact has already begun and reflects about three-quarters of a year's effect. The stated $6 million to $7 million is not an additional amount; rather, it's a total projection. You can think of it as an extra $3 million to $4 million. These changes will likely take effect at the end of the 90-day period and influence this year's results. We aren't providing guidance for next year yet because predicting tariff policies is challenging. However, we believe the total incremental impact will not exceed $6 million to $7 million for the year, as we expect to manage other factors. This is essentially a tax on our business that we anticipate yearly, but we hope it won’t significantly affect our business momentum or other initiatives.

Understood. Higher-level question, obviously, a lot of geopolitical shifts happening. I think for the most part, we see a lot on the K-band side, especially in Europe, given the political developments. I guess how do you see that, or how do you think this could manifest, if at all, on the L-band EMSS side? I realize it’s much different market dynamics, but curious if you have any news there.

Yes, there is some protectionism present. Many investments are being made in EU space companies to create alternatives to Starlink, and we are aware of that. People are being cautious about relying too much on U.S. suppliers. However, we currently appear to be recognized as an international player, offering a unique and trusted service with partners worldwide. We have not specifically aligned with any particular entity and continue to support governments globally in critical first responder and other services. Therefore, I don't believe this situation significantly impacts us at the moment. We are keeping an eye on the situation and are attentive to any potential issues that may arise. Currently, we are being integrated into some European solutions as a backup to offer protection against GPS jamming and outages, which I am pleased about as it positions us within EU-centric solutions.

Understood. I have one more question. What is the latest update on Aviation Certus? Should we expect an increase in activity in the second half?

Yes, it is growing. Now that we have terminals available, this year is focused on flight trials to be certified for aviation safety services, allowing us to provide voice and data to cockpits. However, certification for air traffic control communications is likely to be delayed until early next year, according to the current schedule. It takes time for sufficient data from various airlines to be collected for the FAA to approve that application. We are observing an increase in applications, as evidenced by our presence in helicopters, where some partners are ramping Certus and other non-safety applications in general aviation. Drones, while still a nascent market, are also showing interest in our aviation applications, but growth in that area is progressing slowly. Therefore, I do not anticipate it being a significant driver of our service revenue growth in the second half, though it represents a long-term positive trend for our service revenue.

Our next question comes from Colin Canfield from Cantor. Please go ahead.

Apologies on mute there. Matt, I thought your comment was kind of comparing 2020 and 2025, and 2008 was pretty prescient. So maybe if you could talk about kind of previous lessons and digging into lessons from 2008 around everybody’s product portfolio at somewhat about consumer defensive. And then maybe some commentary around 2020 in discussing the trends you saw there regarding consumer electronic spend relative to probably the perception of a softening consumer environment.

Thanks, Colin. Yes, 2008, obviously, we’re still on our first-generation network quite concerned about the economic shocks that we’re going around the world, the recessions and that sort of thing. And yet I was really pleased, maybe not surprised that none of our product lines actually changed their growth trajectory almost at all because I think we found that in almost every case, what we were doing was an extremely valuable part of an enterprise or a government or it was a critical safety application. I remember some civil governments maybe had to cut back on their safety budgets and maybe had a few less phones, for example, in place, but we didn’t notice it really in the total and the growth continued to grow beyond it. 2020 was obviously had a similar reaction but was different because of just the supply chain shock that occurred. And in that case, again, I think my supply chain team really showed out in terms of their ability to quickly manage the situation. We are actually the one with the most equipment and probably took share from other suppliers who are struggling, but again, it wasn’t really a cutback in service. IoT continued to grow and other things as well, new products that we’re introducing also hit the market and grew as well. So really, this tariff situation has been an exciting last 10 weeks or so as we’ve been on lots of calls with my supply chain team scrambling, really glad we put in this third-party logistics center last year because that will enable us really in weeks to kind of move and mitigate the effects, which would have been a lot higher than $6 million to $7 million if we had kind of had a team that could respond so quickly and professionally. But I think we’re kind of ready for this. No one knows for sure if things continue to get escalator or change around the world, but right now, we’re kind of responding to this in a fairly deterministic way.

I understand. One thing to consider is how you perceive the overall government exposure for the entire business. Many people focus on the engineering segment and the specific government contracts. However, I don't fully appreciate the extent of government exposure related to the civil side, such as public safety. Is there a general way to estimate the total government exposure for the businesses, beyond just direct sales, including the end use cases of all the products?

It's a good question. We haven't really analyzed it because, as a wholesale supplier, we don't have detailed information on whether a device is being used by the government, in a commercial setting, or for other applications. In some cases, it's difficult to determine if it's for a firefighting department or a regulatory body, making it hard to classify as military or non-military. Typically, these are IoT devices tracking assets, which adds to the challenge. That said, I believe this represents a relatively small portion of our overall commercial business. If government accounts for around 20% in the U.S., then other governments worldwide are considerably less, making their share small compared to the commercial IoT and other applications. There are solid PTT business opportunities and other government services that include voice and data, IoT tracking, and personal communication devices. However, I still think government exposure is probably in the single digits.

Okay. Okay. And then last one for me, but maybe conceptually talking through. I know this is just like still early innings on all PNT, but conceptually talking through how you think about like pricing mechanics and pricing levers. I think one of the things that people kind of focus on is the dynamic of Assured Access and how national security in this environment is very much kind of a priceless feature, right? So maybe talk about kind of what you’re seeing from new adders in the government domain. How you think about that mechanic works relative to a jam environment? And then maybe like talking and trying to longer form view of the business of how you think of like the functionality in either a hot versus cold environment from a war fighting perspective?

Well, I think we’ve talked a lot in the past about how the U.S. government and other governments in the world don’t have a single choice for a communication device, whether it’s in a vehicle or a dismounted soldier or whatever it is, they really want multiple things because even in good times, things can be thwarted, whether it’s the GPS signal being jammed or communications system. So, they talk in terms of PACE, primary, alternative, contingency emergency like four different kind of categories. Sometimes we’re the primary, but almost always where the alternate contingency or emergency sort of in a solution, connecting an asset or a soldier or whatever it might be. In that environment, I think we’re quite resilient around the world to a lot of things. Even as new solutions come forward, obviously, we’re seeing a lot of interest in Starlink and StarShield, but that doesn’t really do what we do. So again, we think that as solutions like that and others, whether it’s the OneWebs and Kuipers and others of the world in Ka and Ku, they’re also looking still for L-band solutions that are more resilient, more global and provide an alternate connection really or as backup or command and control or whatever it might be, particularly given our size, weight and power is different than a lot of those solutions as well. You talked about being denied, of course, I think you’re referring to like our PNT solution. We do have a big advantage there and that we have, I think, the only global solution that can deliver protection to a GNSS system anywhere in the globe, very cost effectively and provide even service a timing signal inside a building or other asset and on that basis, I think the whole world is realizing the importance of that application. And really, the interest has been exploding really over the last year or two, but particularly since we bought Satelles, I think we just have seen lots of applications where that’s applicable to.

Next question comes from Hamed Khorsand from BWS Financial. Please go ahead.

First off, I just want to see what kind of response you’re seeing from your partners as far as equipment goes. Are they stocking more? Do they want to stock more? And what kind of level of conversation you’ve been having with them?

Yes. So far, we haven’t observed and do not encourage any kind of stocking up. I think there was a chipset order that was a bit larger than expected, which might have contributed to that impression. However, we do not see a direct connection in our supply chains at this time; we still see demand and maintain our yearly expectations. The fact that we are not passing on these costs to our customers is likely appreciated. If we had indicated a significant price increase on hardware later this year, that might have shifted our approach, but that is not the direction we intend to pursue. Overall, we haven’t noticed much difference so far.

And my other question was as far as engineering revenue is concerned, this was the second quarter in a row was $37 million. Is that going to be the same going forward? I mean, this revenue line used to be very lumpy. Could you just provide a little bit more details about that?

Yes. What I would say, Hamed, is there’ll probably be some variation in that going forward. But certainly, that level or up close to that level is probably a good assumption moving through the rest of the year.

Yes. A lot of that growth has been driven by our contract with the Space Development Agency as we’ve built their ground infrastructure and operation centers, and we’re manning the operation centers for their new proliferate warfighter network that they’re launching right now. That’s getting to a maximum sort of spend rate here soon because they’re launching satellites, and we’ll be operating them before long. So, we’ve been ramping up as we’ve been building that system and then we’ll go a bit more of a steady state on that when we go into operational mode.

Your next question comes from Chris Quilty from Quilty Space. Please go ahead.

I would like to follow up on the previous statement regarding the transition from build-out to service. Does the gross profit margin change significantly when moving from build-out to service, or does low-margin build-out equate to high-margin but smaller service revenue?

No. The margins you can charge on services or equipment are quite fixed, so they will remain consistent. The government compensates us for the work we do with a profit, which represents the additional margin we can obtain. Therefore, it doesn’t change significantly.

Great. To revisit a previous topic, I have one more question regarding equipment. Customers haven't been actively stocking inventory. However, Vince, your inventory has increased from the historical range of $30 million to $40 million, even after COVID, to between $80 million and $90 million in late '23, and it has remained at those levels. Will this inventory, along with the tariff advantage, become either a source or a use of cash as you reduce it, or does the growth of the 3PL in Europe negate any inventory optimization efforts?

No, that will definitely help, Chris. So, the fact that we have that equipment and inventory on hand certainly helps us as we move forward here and negotiate our way through the tariffs in the short term. So, I don’t know that it will be dramatic, but you probably see some drawdown in inventory as we go through Q3 and Q4.

And one other sort of inventory hardware question. As you move to the NTN Direct, I mean, currently, you source chip billboard, sell to VAMs and VARs that build stuff ostensibly as you move to an NTN model, does the need for hardware diminish or go away because these all become standard D2D IoT devices that exist?

Yes, in the long term, certain product lines will be impacted, particularly our IoT product line, which includes modules and devices. As we transition to more chipsets, whether proprietary or moving toward a chipset approach on our SBD service in the future, we expect lower revenue from standards-based solutions. While we can still maintain good margins on our systems, we will likely see higher volumes. This somewhat balances out the situation. However, there will probably be less hardware involved. As you know, hardware equipment has never been our main focus; it primarily serves as a driver for service revenue. Therefore, sending out more equipment with lower margins is beneficial because it increases our potential for service revenue. This aligns with our overall strategy.

Great. For my final question, regarding safety services in maritime and aviation, where you received certifications last year, is there a chance to accelerate customer adoption for those products? I believe you would argue that you have a competitive edge over one rival in terms of hardware and throughput. Or is this simply a market where customers do not replace existing terminals, and you are primarily selling into the new sector of configurations and setups related to GMDSS or aviation safety services?

We have some ideas about expanding our adoption and increasing our share of wallet in certain areas, especially around aviation, where we have a unique capability. Our offering is differentiated, and the market appreciates what we can provide in ways others cannot. We have strategies in mind to advance, but it’s still too early to discuss them in detail.

Our last question comes from Matthew Robillard from Barclays. Please go ahead.

I had first one on the maritime and as you flagged in many quarters, a negative impact from the fact that you’re losing some pure connectivity revenues. And I wanted to understand when exactly you expect that to disappear because when I look at the quarterly transit things, it seems it was really a big impact in Q2 last year, a little bit in Q1. But rather, it started then. And I was wondering if by Q3, Q4 this year, we could see a stabilization both in ARPU, but also in terms of subscribers on that business line.

I hope so. However, we're not really predicting a specific time for it. It's difficult to anticipate exactly when that will end. We believe that as more Iridium Certus GMDSS terminals are released, which I think there are nine in total, our forecast indicates that only a couple are currently available. We see some partners waiting for specific terminals from suppliers they prefer working with, which is slightly delaying that transition. These terminals are all expected to enter our market this year. Therefore, I expect 2026 to be the year when we are fully normalized, but pinpointing the exact time is challenging. Fortunately, this situation is only marginally affecting us. Our focus is more on achieving stabilization and possibly some growth, but this isn't a central part of our overall growth strategy or a key driver for our revenue and cash flow projections for 2030. Nonetheless, we believe it is significant enough, and we are well-positioned in this area due to the success of our GMDSS services.

That’s clear. So, if we consider the potential contribution from IRO that you mentioned earlier, along with some stabilization, that’s why you’re comfortable guiding for broadband revenues to remain largely stable year-on-year, which is obviously uncertain.

I think that’s consistent or even going back to our Investor Day. This wasn’t part of the driver. We would have liked to grow a small amount by now, but I think that, that’s going to turn around. And we really think we have a solid position that’s important and critical and long term and have really kind of worked to make sure we had the best product and market positioning so that we could see that complement to other Ka and Ku solutions. And right now, that’s the way the market sees us and is encouraging us and is telling us we should play out long term.

And then, I had a second question on D2D. You made some comments at the beginning about what coverage competing services or new constellations could add to the current terrestrial coverage. And maybe I got that wrong, but I think you said 10 or 15 percentage points of increase in coverage, which, if that’s okay, I was surprised it’s so long because I understand some of these constellations don’t cover, say, the poles, but I would have thought it would be a much bigger extension of coverage for regular smartphones. Did I get your numbers right, or is there something you want to add on that one?

No, what I was talking about is current cellular coverage of the whole world is 10% to 15%. That’s much of the world that it covers. I said that it would be incrementally pretty small even though those networks have satellites that go all around the planet and even polar, it doesn’t matter, they can’t provide service on the ground unless the frequencies that they’re able to use using cellular frequencies are allowed by that government, by that land mass to be able to operate. And right now, we believe there’s really limited markets where currently cellular-based D2D will be operating. Certainly, the U.S. is one of them, and they can fill out the coverage in the U.S., which is very good today, but isn’t 100%. There are other kind of more island nations like Australia and Japan, where I think it will also come into usage pretty quickly. But it won’t cover water. It won’t cover Europe, and it won’t cover other areas because in a lot of countries, the interference environment between those cellular frequencies and adjacent markets where those cellular frequencies are also used would create a lot of interference and inability to really offer those services. And so, governments won’t allow them to operate globally. So unlike mobile satellite service frequencies like our L-band or even S-band frequencies that some others have, those are globally allocated. They don’t cause interference market to market because they’re coordinated on a global basis, which is why our Iridium NTN Direct service being global can be really differentiated and complementary to a regional solution that’s providing kind of cellular infill in a specific market where it’s not causing interference and the regulatory agent approves it, and we can provide sort of the glue that provides a global service that complements that.

Our last question comes from Louie DiPalma from William Blair. Please go ahead.

Should IoT subscribers turn positive later in 2025 after the cleanup is done?

Yes, I would hope so. I’m not sure if it depends on when it started and when it ends. I think it was around late last year.

Late last year.

Late last year, the changeover that partner made to having customers go to a yearly to a monthly basis sort of affected. So, we expected sort of a one-year transition. And so, I don’t know we’ll see it whether in the fourth quarter, but I would certainly expect to see it in ‘26 where that affect of anybody who the activations really that were occurring on that sort of come out of it. And then we’ll be in a bit more volatile environment where people will see the subscribers on the network as they use only the months that they use it as opposed to all the time, whether they’re using it or not. But again, as we said, that doesn’t really affect our revenues since that a customer has a fixed price contract.

Great. And should that contracts stay fixed price going forward? Is that the expectation?

Well, we’re talking about that now. I think what we want to do is just have a win-win situation with that partner to encourage their growth, and I’m sure they feel the same about us. So, we grow together, and we’re having good discussions about that now.

Great. And one final question. Are all of the $75 million original Iridium NEXT satellites still functional? Additionally, you previously extended the accounting useful life. Is there a possibility that you might also extend the CapEx holiday in the future?

Yes. So, all 80 satellites actually we have in space, the 66 and 14 spares are all healthy operating fully well, haven’t needed to use knock on wood. A spare probably would have thought we would maybe by at least one by now, but actually, the network has proven to be extremely resilient and healthy and performing far greater than our expectations, original expectations are certainly what we bought them for, which is why we extended the useful life. And could there be other extent, yes, if we continue to operate in this way, we’ll extend it again. I certainly won’t do it this year. I don’t think but at some point, in the future, as the network continues to perform well, and we see that we have all these extra satellites in space then probably extend it further.

Yes. And just to add to that, Louie, we extended the useful life from 12.5 to 17.5 years, which when you do the math, takes you to the middle of the next decade. And to Matt’s point, we’ll continue to monitor the performance of the network and kind of go from there.

I think I’ve said before, I’d be disciplined. Our last generation satellite lasted over 20 years, and they weren’t built to anywhere the standards as the satellites today. So, we haven’t projected that yet and may not. But right now, I’d be disappointed if they don’t extend at least the same length of time as the first generation of satellites did.

This concludes our question-and-answer session. I would now like to turn the conference back to the management for any closing remarks.

Thank you. It’s a challenging time globally right now, and as you can see, we are one of the first to make an announcement. I'm curious to see how others are responding. I’m quite proud of my team for managing the current situation, as our business continues to align with our expectations and those for the long term. I look forward to discussing this further with you individually, and I hope this information is helpful. Thank you.

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