Iridium Communications Inc. Q3 FY2025 Earnings Call

Good day, and welcome to Iridium's Third Quarter 2025 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Ken Levy, Vice President of Investor Relations. Please go ahead.

Thanks, Clowey. Good morning, and welcome to Iridium's Third Quarter 2025 Earnings Call. Joining me on today's call are our CEO, Matt Desch; and our CFO, Vince O'Neill. Today's call will begin with a discussion of our third 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, 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 in 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, I'd like to turn the call over to Matt.

Good morning, everyone. We just finished another solid quarter, which puts us on track to meet our OEBITDA growth expectations for the year. I'd like to use my time today to share some broader thoughts about the satellite space and our plans to address and capitalize on the changing landscape. Vince will then recap Iridium's quarterly performance in greater detail and highlight the trends we have seen since our last earnings call. As you are well aware, the recent proposed acquisition of EchoStar Spectrum by Starling to build a global D2D capability is a significant event for the satellite industry. We believe this acquisition will likely be disruptive to the status quo and will hasten the introduction of a global service that over time will connect new smartphones configured to use this spectrum. It could also accelerate the adoption of IoT devices that better compete with our global IoT services, at least better than the current D2D efforts using cellular spectrum on a regional basis in a few countries around the world. We acknowledge that more competition is coming to our corner of the satellite market. We take this increased competition seriously and believe that this development will affect us as early as the latter years of this decade and most certainly into the 2030s. Now that being said, we do have exciting prospects as well as an enviable position in established growing markets because of the quality and durability of our partnerships and satellite solutions. We have tremendous experience developing thousands of Iridium-connected solutions that are already in the market. This knowledge and our network will serve us well in responding to the changes taking place in the industry today. To be clear, we will be proactive and pivot to strengthen our position amid ongoing changes to the satellite market landscape. We have a long history of doing this and I'm confident we will be successful and can continue to grow revenues as the market for satellite services evolve. Iridium has focused on providing unique specialized services in the satellite industry. While we have some areas of overlap with other satellite providers, we have never sought to participate in price-driven commodity markets and we don't plan to now. Our current development of Iridium NTN Direct is a great entry point into providing a new standards-based D2D service that will expose us to a new and potentially larger market opportunity. However, broadband D2D is still a nascent unproven market. And absent a partner with spectrum and committed capital to support this type of build-out, we have no plans to go it alone. As we think about our long-term future and think about the services we'd include in a follow-on constellation, we will look to opportunities that provide us with the greatest return on capital. For now, and doesn't fit that profile for us. Instead, we plan to build on our market strengths and focus even more deeply on the areas we are uniquely qualified to deliver. This includes continuing to prudently invest in new growth areas around our unique industrial-grade IoT and PNT services and exploring acquisitions in adjacent areas that are complementary. We will focus on regulated applications where demand for safety services are growing, and our unique global satellite capability can provide a critical solution such as maritime and aviation cockpit safety services. In addition, we believe Iridium has a strong and defensible position in the growing autonomous systems market as a failsafe connection for drones, crewless vessels, and other autonomous vehicles. These vehicles will need multiple redundant connections for safety and reliability, and we'll also appreciate our PNT technology to protect their location and navigation. As I said before, we will continue with our investment in Iridium NTN Direct. Our development work with standards-based IoT continues to provide an exciting opportunity and is complementary to other D2D efforts in the industry. We are making strong progress on this new service, and we're now in the process of on-air testing from live satellites. We are getting good traction from mobile network operators. You likely saw our announcements with Deutsche Telekom and Carrier One, and there are more announcements to come. We're finding demand from MNOs for a global Iridium service onto which their IoT customers can roam and we believe Iridium NTN Direct will augment our already successful and growing IoT portfolio and expand our addressable market into the broader terrestrial IoT space. We will also seek to build or acquire intellectual property and assets that provide Iridium with other outlets for growing new revenue streams that won't compete directly with these new D2D services coming in a few years. For example, Iridium has a very unique platform with our powerful new PNT service which has the ability to reshape security applications and fortify terrestrial networks. We're seeing a lot of traction in a number of commercial and government industries that need an alternative to GPS for critical infrastructure, protection for their navigation systems and accurate in-building time sources in addition to other security uses. We are also developing a unique quantum-safe cybersecurity product using our PNT signal that can improve identity access management and provide authentication for high-value transactions, tapping into the $20 billion identity verification industry and creating a new revenue stream. Even capturing a small portion of this growing market would be meaningful to a company of our size. We are also continuing our focus on U.S. national security missions, building on our collaboration with the U.S. government over the last 25 years. Iridium's network is relied upon for primary and backup communications, secured transmissions, specialized IoT services, tactical radios, and much more. Many government agencies depend on Iridium service for critical data transfer, asset management, and situational awareness to name a few. And of course, our technology is embedded into so many applications and missions. So it is not easily replaced by other satellite systems or evolving D2D services. We continue to discuss our EMSS contract renewal with the U.S. government and expect a positive and productive outcome in the next year as the government continues to rely more heavily on commercial satellite services like ours. Similarly, our contract with the Space Force Space Development Agency is another important touchpoint with the U.S. government. We see the work we're doing on building the ground entry points and operation centers for SBA's new network has given us great visibility into the government's Golden Dome initiative and credibility to support its future needs. We are well-positioned to expand the scope of our work with the government going forward as they invest heavily in Golden Dome. These are just a few areas for which we believe disciplined capital deployment can provide continued strong revenue and bottom line growth, and we look forward to being able to share additional details as we execute on our vision. Beyond our valuable global L-band satellite spectrum and the growing number of partners and solutions we've developed over our three decades of operations, Iridium is unique in the satellite industry in that we generate strong cash flows with reasonable capital cycles. With a healthy, flexible and still young satellite constellation, we won't need to spend on a new network until well into the 2030s with bus and launch costs significantly less than we experienced with our second-generation system, we feel good about our options for lower-cost construction and launch when the time comes, including potentially as hosted payloads on another constellation system. Further, we have confidence that our strong cash flow should continue over the next five years and into the 2030s when a replacement system may be needed. Even with the increased uncertainty provided by new satellite entrants, we still expect to generate at least $1.5 billion to $1.8 billion in total cash flows from 2026 through 2030, giving us a lot of flexibility as we enhance our business and focus on new growth opportunities. Given the increased focus on solidifying our competitive position, we have decided that we will pause our share repurchase program to emphasize strategic growth initiatives and continue our discipline in the deployment of capital as we remain committed to deleveraging the balance sheet. We believe this is a prudent course for now, even as we continue with our quarterly dividend program. As you can see by our earnings report today, we continue to grow revenue in subscribers, and we expect to grow well into the future. Since the beginning of the year, we've signed up more than 70 new technology and distribution partners to the Iridium ecosystem to either build new solutions or license our technology for new Iridium-based products. These are indicative of the continuing value of our network and demonstrate the strong pipeline we have for continued growth. We are confident that Iridium's many product lines will continue to be relevant, and we are excited to begin to invest in related technologies and businesses where we see meaningful growth potential. While the EchoStar Spectrum sale is a major development, it does not come as a complete surprise to us. More D2D competition is coming, but we have time to respond as market reaction will be slow. We've seen this with a limited market reaction to Apple's D2D offerings and the response to the new T-Mobile satellite services which have been underwhelming as well. We agree that the communications market is changing and new industries which hadn't previously seriously considered using satellite solutions are now beginning to explore or build applications that offer real value to their customers. This is an attractive environment for us, and we expect Iridium's opportunities will expand. As we invest in new technologies and adjust our market focus, we know that our competitive advantage comes from focusing on specialized products and services for which high reliability and customized solutions remain key points of differentiation. With that, I'll now turn the call over to Vince to discuss our quarterly results and outlook.

Thanks, Matt. Good morning, everyone. As Matt noted, I'll review Iridium's financial results for the third quarter. I'll also highlight some of the trends we're seeing across the industry and share details on Iridium's leverage and capital position. Operational EBITDA was up 10% in the third quarter to $136.6 million, driven by a combination of revenue from recurring services and engineering and support. On the commercial side of our business, service revenue was up 4% to $138.3 million, largely due to growth in commercial IoT, PNT, and voice and data. Voice and data revenue rose 4% from a year earlier to $59.9 million, largely reflecting price increases implemented in the beginning of July, which drove a 4% increase in ARPU. Commercial IoT revenue totaled $46.7 million in the third quarter, up 7% from a year earlier. This increase continues to reflect broad-based growth of our IoT services for both consumer and commercial applications. Commercial broadband was down 17% from the year-ago period, though largely in line with our internal forecast. We anticipated the decline in broadband this quarter, which was largely attributable to a non-maritime contract from the prior year period that was not renewed. Excluding this $1.4 million take-or-pay contract, the decline in broadband this quarter was consistent with the trend we saw in the first half of the year. Hosting and other data services revenue was $18.7 million this quarter, up 14% from last year's comparable quarter, reflecting an increase in PNT accentuated by a discrete event associated with the customer contract. We are in the early days of PNT business development and see robust opportunity ahead for meaningful revenue growth. We are encouraged by the level of market interest in the service that spans sectors and solutions. There is an increasing need for resilient position and timing solutions, especially for civil and commercial applications, to address jamming and spoofing and protect critical infrastructure. Government service revenue was up modestly in the third quarter to $26.9 million, reflecting the step-up in our EMSS contract with the U.S. government in mid-September. This is the last price step-up to our contract, which will yield $110.5 million during the final year of the 7-year term. I should note that the government has the option to extend the contract for a period of 6 months at the current rate, which they traditionally exercise. Our formal negotiations on the new EMSS contract with the government will commence in 2026 in earnest. We entered this process with a strong relationship built over 25 years and understand well their priorities, needs, and expectations. A good example of this is the integration of Iridium's technology in Colcom's new Snapdragon Mission Tactical Radio for U.S. government and Allied users. Turning to subscriber equipment. Sales were $21.5 million in the third quarter, down marginally from the prior year's quarter. We now forecast full year sales will modestly under last year's level. Engineering and support revenue was $40.2 million in the third quarter as compared to $30.7 million in the prior year period. The strong increase from the prior year quarter continues to reflect Iridium's growing work with the Space Development Agency as well as new R&D and study contracts awarded in the prior year. For 2025, we are tightening our full year forecast for service revenue growth to approximately 3% and are narrowing our OEBITDA guidance between $495 million and $500 million, the higher end of our previously guided range. The primary driver of our adjustment to service revenue relates to the timing of PNT revenue. As previewed during our second quarter call, PNT revenue that had initially been expected to come in 2025 will now be delayed and pushed into future periods. And existing large customers working on a major deployment of PNT. Their investment is significant. However, the timing of implementation rests on factors outside of our control. We continue to work closely with this customer to support their rollout. This will result in hosted payload and other data services growth below trend in the fourth quarter and full year service revenue trending to the bottom end of our previously guided range. PNT remains a very attractive market for Iridium and will drive incremental revenue growth. We especially like the fact that it is a wide area of broadcast service that supports an unlimited number of users while using minimal network resources. We've been happy to see Iridium PNT expand into a number of new applications like 5G networks. For example, you may have seen this week's announcement that T-Mobile is increasing their deployment of Iridium P&T for network resilience. Beyond this item, I would offer a couple of comments on trends we are seeing in our commercial lines of business as well as our ongoing work with the U.S. government. As I noted earlier, we initiated a price increase in our commercial voice and data business in July. Coincident with this rise in ARPU, we have seen a modest amount of subscriber deactivations tied to this pricing action. Going forward, we expect ARPU for our voice and data business to average $48 for the foreseeable future. Revenue in subscribers in IoT continue to grow. While we expect fourth quarter growth to increase from the 7% posted in Q3 due to contracted revenue with a large customer, we believe IoT revenue growth will now come in just below 10% for the full year. Our IoT business is running well. And as Matt noted, we have a number of new partners that have joined Iridium's ecosystem that are building new applications and will help drive future growth. As I mentioned earlier, the decline in our broadband revenue growth rate in the third quarter was abnormally high due to the impact of a non-maritime contract from the prior year period that was not renewed. We anticipate that the year-over-year decline in broadband revenue will continue into the fourth quarter and trend closer to 8%. A faster conversion of maritime vessels from primary to companion service this year is hastening a mix shift in our maritime business and will continue to be visible in our ARPU through the end of the year. Over time, we believe subscriber gains from the adoption of new Iridium Certus GMDSS plans will help to offset these ARPU pressures and that Iridium will remain an important player in the maritime sector. Iridium's government business will generate $108 million in EMSS revenue from the DoD this year. We also expect that the strong trends we've seen in engineering and support, primarily tied to our work with the FDA, will continue into the fourth quarter and support another year of record engineering revenue. Finally, with the tax legislation passed this summer, we expect an additional year of tax savings. We now expect Iridium to pay cash taxes of less than $10 million per year through 2027 and don't anticipate being a taxpayer at the full statutory rate until 2029. This updated tax profile will add further support to incremental cash generation. We hope this color is helpful as we enter the final quarter of the year. During the third quarter, Iridium retired approximately 1.9 million shares of common stock at an average price of $26.22. While Iridium stock trades at an attractive valuation, we believe it is prudent to enhance our incremental financial flexibility in the face of future changes to the competitive landscape. As Matt has already noted, we are pausing our share buybacks. Over the normal course, pausing our repurchase program will add approximately $50 million to our cash position by the end of the year and drive our net leverage slightly lower. Given the free cash flow Iridium will continue to generate, we have the ability to delever and quickly reduce net leverage from today's 3.5x. This increased financial flexibility allows us to consider options such as potentially buying back some of our debt, which reduces ongoing carrying costs. Absent an acquisition, Iridium could quickly delever below 2x net leverage well in advance of our targeted timeline of 2030. Further, financial flexibility supports our ability to pursue strategic initiatives, including bolt-on M&A that bolsters our position in certain target markets. Moving to our capital position as of September 30, Iridium had a cash and cash equivalents balance of $88.5 million and ended the quarter with net leverage of 3.5x OEBITDA. On September 30, Iridium made a quarterly dividend payment of $0.15 per share to shareholders. This increase in the dividend rate results in a full-year growth rate of approximately 5% over 2024. We are committed to an active and growing dividend program as it augments long-term shareholder returns. Capital expenditures in the third quarter were $21.5 million. As we have noted previously, we anticipate higher capital expenditures in 2025 to support our work on Iridium NTN Direct and 5G standards. Turning to our pro forma free cash flow. We present a description of our cash flow metrics, along with the reconciliation to GAAP measures in a supplemental presentation, under the Events tab on our Investor Relations website. In those materials, we project pro forma free cash flow of about $304 million for 2025, with a conversion rate of OEBITDA to free cash flow of 61% in '25 and a yield approaching 18%. As Matt has previously noted, we expect that the Spectrum deals announced this year will bring more competition to the MSS industry over time. To ensure we are providing the most relevant guidance, we continue to guide service revenue on a year-by-year basis, but are withdrawing our 2030 service revenue outlook. Iridium has a durable and resilient business that will continue to generate significant cash flow over the long term. That strength is driven in part by Iridium-connected solutions that are not easily displaced and drive our recurring revenue quarter after quarter and year after year. We anticipate that even in the evolving competitive environment, Iridium has the capacity to generate at least $1.5 billion to $1.8 billion of free cash flow over the balance of this decade. I'd remind investors that Iridium is currently generating about $300 million per year of pro forma free cash flow. Just maintaining this run rate generates $1.5 billion through the end of the decade. Iridium occupies a unique position in the satellite market today. We have great assets, strong cash flow, and many opportunities for incremental growth. While we acknowledge that the competitive dynamics in the satellite industry are likely to move at a faster pace, we remain very excited about our prospects and the durability of our existing business. With that, I'll turn things back to the operator and look forward to your questions.

The first question comes from Edison Yu with Deutsche Bank.

I want to follow up on the strategic options that the team has mentioned and maybe take it from two angles. First, you mentioned M&A several times. I'm wondering what the timeline maybe is for some of these actions and that's in the context stuff. Is this a case where you had a bunch of M&A in the pipeline already and you're speeding it up? Or are you now looking for different types of targets post all the events that have occurred in the last couple of months?

Yes. We haven't been a big acquisition company. Obviously, we did Satellus a few years ago, but hadn't done any since. We have been looking at some areas that are complementary to what we're doing. We're looking at some now. I can't really comment on any specific timing because it's not completely within our control. But I did want to signal to you that, that will be a bigger focus for us going forward for obvious reasons. I mean there are things we can do to accelerate revenues and growth that are complementary to the specific areas we've targeted, and we're going to focus on those a bit more heavily. But there's not lots of targets. We're obviously not going to do many, many at the time, but we will focus on that more.

Understood. And then when I take a look at the M&A angle from, I guess, the opposite side, does it make sense to you for Iridium to be part whether directly or indirectly of some type of other solution, whether it's another big tech company trying to get into D2D in some way? Do you think that is a sensible thing after what's happened and transpired in the last couple of months?

Well, it's only sensible based upon the value that, that would create for shareholders, which is our job to maximize. So clearly, we'd be open to those who have that desire. But I don't know for sure, but I wouldn't say that the recent news of spectrum purchase of that size and given the still uncertainty of the market will attract more to the market. I mean it might be less. But there's only so many of us that do have spectrum. We obviously have an important position there. And so if someone really wanted to do it globally, we could obviously be part of that. But that's not really for us to decide. That's not really something we can plan and execute on. That's for others to decide, but we'll do what's in the best interest in the long-term value that we can create.

The next question comes from Brent Penter with Raymond James.

Appreciate the commentary on the competitive environment. So at a high level, which of your business lines do you think are totally insulated from the competitive risk where you don't think about it at all really? Which business lines are maybe mostly insulated and which business lines do you think are most potentially exposed?

That's a detailed question. No business is entirely insulated from competition. We have been highly competitive in the sectors we operate in due to our global network and L-band spectrum, allowing us to be a regulated provider when others cannot. There are significant challenges that competitors face in areas like cockpit safety services or maritime safety services. Others have attempted to enter these markets, and it has taken years for them to succeed. Consequently, these sectors will likely remain insulated from competition. For instance, in Positioning, Navigation, and Timing (PNT), we have a 15-year head start, and recreating a service of that nature would be incredibly challenging, making it well-protected. Similarly, Industrial IoT benefits from a vast ecosystem and the solutions we provide. We have a mix of proprietary and soon-to-be standards-based services, which enhances attractiveness in a field with multiple suppliers. Competition won’t always be head-to-head; there will be various solutions available, especially in autonomous sectors where we are integrating terrestrial and broadband capabilities. The government sector is another area where, after 25 years of establishing our presence and credibility, we see significant opportunities. Our experience gives us an edge, and we are now positioned to pursue business we couldn't previously. Overall, we believe we have robust strength in our current businesses and considerable momentum for the future. Over the next decade, our business will evolve, and we are committed to driving that evolution ourselves. This is why we are confident in the cash flows we anticipate generating in the next five years.

Okay. Great. I appreciate all that detail. And so to take a big broad question and make it a little more specific. If we look at the Voice and Data segment, can you give us a rough breakdown of what percent of your base there are more leisure or casual users versus what portion are maybe more industrial types or users that really need that more robust device and service that might be at less risk?

When discussing voice and data, we are primarily referring to satellite phones and push-to-talk devices. There isn’t much in the way of leisure use; the majority of what we provide is geared towards security and industrial applications, including NGOs, first responders, and military use. I don’t encounter many individuals who own satellite phones for recreational purposes or use push-to-talk devices for family outings. Thus, the consumer-grade segment is quite limited. Regarding subscriber demographics, we have observed some shifts year-over-year, though they remain minor, primarily stemming from industrial sectors, such as funding from USAID and the UN that benefit NGOs. We also implemented a small price increase this year which seems to have influenced some governmental agencies to potentially reduce their usage. Tariffs have had a slight effect as well, while recent events such as troop drawdowns and the quiet hurricane season have had minimal impact. Overall, I don’t see a significant influence from direct-to-device technology on our business, particularly as most users are industrial and related to safety and security rather than casual consumers. I hope this clarifies the current landscape of our voice and data segment.

Yes. Yes. Very helpful color. And so my last question would just be kind of take a similar question with the IoT business. Can you all update us on what portion of that base is personal communication kind of or consumer users?

It's about 900,000 of the IoT subscriber base, roughly about 900,000 are personal subscriber users.

Most of these users have a low ARPU. As you can see, this business continues to grow and expand in terms of the number of devices and users. However, the majority of this business is not driven by everyday users who only use it occasionally. Many of these users require a rugged, purpose-built device for tracking, including many first responders. I believe that over half of our higher margin business comes from the broader industrial IoT sector, which is experiencing traditional growth rates.

The next question comes from Mathieu Robilliard with Barclays.

If I could dive in some of the verticals a bit more. In terms of the broadband, one, you mentioned that there was a one-off kind of a contract that was not renewed. But I was wondering if you were still seeing an impact from the loss of core connectivity services that you had in the past but I thought would be down by the end of last year or beginning of this year. So I just wanted to make sure what was the exposure still to connectivity service on the maritime. And then on the IoT and clearly, I think from what you've said, this is potentially the area where D2D could become the biggest competitor. At the same time, you are developing your home, D2D IoT or NTN IoT solution. And I think you signed the deal with Deutsche Telekom recently, and I wanted to clarify what exactly it is? Because my understanding is that your services are not yet commercially available. And so if you could clarify exactly the nature of what you signed with Deutsche Telekom. And also, which is another way to look at the threat of D2D or the opportunity. Clearly, when we look at pure mobile terrestrial IoT ARPUs, we're talking about less than $1 or low single-digit dollars per month per user, which is not the case in your IoT business, and I understand there's lots of different price points. But is your D2D initiative, is that something that could protect you to some extent, but also just bring lower ARPU for the same amount of subscribers?

You mentioned broadband, and I want to clarify that a one-time revenue adjustment impacted this quarter because it was revenue we had to recognize last year due to a contract termination. This was not related to the maritime contract, which was a larger one-time event. When we normalize these figures, we are still adjusting our approach in the maritime industry, and I believe we will see improvements eventually. New products are in the pipeline, with a notable announcement from Intellian regarding a combined backup GMDSS terminal that should attract interest, and there are more products on the way. I expect broadband revenue to stabilize, and no new trends are emerging in that area. Regarding IoT, the recent announcements from Deutsche Telekom and others pertain to roaming agreements, allowing their terrestrial customers to use our network. There’s significant interest in this area, and mobile network operators are seeking multiple partnerships. Even those that have previously invested in their own solutions may start leveraging our network due to its robustness and reliability. While ARPU may be lower overall, we anticipate market expansion through opportunities in applications we currently cannot serve, such as the smart meter and various agricultural sensor markets. Our network will be well-suited for these applications, and we expect mobile network operators will find value in having the ability to roam onto our network. Thus, this represents a positive growth opportunity for us. I believe I've addressed all your points, but please let me know if I missed anything.

No, that's very clear. What I understand about the agreement you signed with Deutsche is that it is based on your existing satellite IoT solutions. You're just bringing on a new partner, which is great in itself, but it is unrelated to your...

That's not true, Mathieu. The deal with DT was for Iridium NTN Direct. Whenever you hear the term Iridium NTN Direct, that's our service name for our new narrowband IoT standards-based solution based upon 3GPP Release 19 standards and the new chipsets and all that sort of thing. So that's what we're testing right now. It's actually starting to really do initial testing on live satellites. It's going to evolve into a service that we think will be ready next year, and we'll generate new solutions in devices that can both handle terrestrial and satellite communications.

The next question comes from Colin Canfield with Cantor.

Following up on that, I would like to ask more directly about the potential value of Iridium and the process involved. If we consider starting today and the costs associated with it, could we realistically expect a timeline of 9 to 12 months to see the full value of Iridium realized? Additionally, regarding the key value of Iridium's constellation RF network and downstream devices, what are the main factors that other partners might seek to leverage or incorporate into their wholesale operations? There seems to be significant monetary flow in this area, and while one could argue that the space equity market will likely rise further, it remains challenging to receive public market recognition for such a lasting and valuable asset.

That's a good question and a challenging one to answer. Our value lies in our extensive experience and the ecosystem we've developed, along with the variety of solutions and growing market segments we serve. We have several important and enduring assets, such as our U.S. government business and our unique PNT technology. We have been the leader in IoT satellite services for some time, and that momentum is not hindering our ability to explore other markets. I do find myself feeling a bit envious when I see others with no revenues but only long-term growth prospects, especially since the market does not currently recognize our value. This is why I believe our recent announcement about shifting focus and increasing investments in long-term growth areas is wise, as the market seems to value that direction over immediate capital returns. While I hope that answered your question, I also think we have some undervalued assets. Perhaps we are more underestimated than others right now, which may be linked to businesses that have not maintained their operations as well, even if they possess larger spectrum assets. Our spectrum assets are indeed valuable, but we haven't actively marketed them. It seems there may have been a reevaluation of satellite spectrum value in the mobile satellite services sector, which we haven't been promoting. Nevertheless, we still hold value, and while we are not currently positioning that as our company's future focus, I believe we can achieve significant long-term growth, and that will ultimately be demonstrated.

Got it. Got it. Definitely agree. But as we think about rank order of partners, right? Like the EchoStar SpaceX deal, I think you're talking a pretty clear indication that this basically plans to go after a handset, right? And so within that construct, kind of the big competitors that are read have substantial ecosystems are probably 1 in 1 alone and as a third company, right? So as we think of kind of that construct, is there a rank order of folks that you probably have a great relationship, someone like Paul Jacobs at Globalstar or kind of some of the Amazon folks? Like how do you rank order the potential teammates that you would probably want to work with in the future?

That's a challenging question to answer. It's leading towards potential partnerships that I prefer not to disclose at this moment. Having been here for almost 19 years, I have established connections with many people in the industry. Currently, there is a lot of activity and discussions happening, but I want to clarify that this does not necessarily mean there are any imminent deals or projects. The landscape has changed significantly, with larger players entering the market that weren't around five or ten years ago, like Amazon, Kiper, and Apple, along with newer entities like SpaceX and Starlink. These companies have the resources and strategic capability to explore many directions, which is a new dynamic for our industry. I believe we can thrive in this environment and may even find opportunities to benefit from it.

The next question comes from Tim Horan with Oppenheimer.

Matt, just following up on that question. On the spectrum front, do you have a sense of what percentage of the world EchoStar Spectrum covers at this point? And I believe you and Globalstar are the only ones with really global spectrum coverage. If you can just elaborate on that, that would be great.

It's a complex issue. The ITU provides a sort of directory for spectrum on a country-by-country basis that indicates priority holders. We hold the top priority for our network in many countries, established over 30 years. Therefore, there are many regions where Starlink may not be present because those countries can decide whether they want them there or not based on EchoStar's spectrum applications. It’s difficult to determine the exact placement, as they can now service oceans they couldn't before and can enter markets with weaker regulatory frameworks, but some markets may reject them. This situation is not easy to describe and will take time. The spectrum involved is geostationary, requiring reallocation and approval. Others may try to advance in the queue, potentially including us. Thus, it will take time for everything to be reallocated and reapproved. I don’t want to dwell solely on the challenges they may face in establishing a system but want to assure investors that we recognize their potential. Their capability to build a more global system exceeds what EchoStar could achieve alone, especially since they possess rockets, satellites, and resources that others lack. Deployment of their network will happen sooner than we initially anticipated, though we always believed that such a network would eventually be deployed. Initially, we thought it would be around 2035, instead of potentially as soon as 2029 or whatever it turns out to be. I want to be clear that while there may be gaps, they may not achieve the same level of global coverage that we do. Our strategy isn’t about directly competing; rather, we aim to complement them with initiatives like Iridium NTN Direct, which we believe retains significant value regardless of the outcome.

That's really helpful. So on PNT, it seems like the opportunity now is much larger than it even was 2 or 3 years ago. I guess do you still think you can hit those revenue targets on PNT? And what does it kind of take to do that?

Yes, we do. I'm as bullish about actually more bullish about PNT than I've ever been. I will say it's a little lumpy as the business gets off the ground. There are some really big opportunities that we see ahead of us. It's just the timing of those aren't clear. I think you're going to see a number of announcements in the future, which will give you a bit more clear understanding of why we're as confident as we are about that. But a lot of trials going on. We really do see we have a significant competitive advantage. I think we saw the Department of Transportation announcement this week with T-Mobile. I mean that's just a small fraction of the potential even in that market. And we're really seeing that the technology is very complementary to our IoT business. There's a lot of business, for example, in autonomous vehicles of all types that really need a really reliable timing and location signal to make sure that what they're depending on in GPS or any other GNSS system can be relied on. So yes, I think we have a tremendous head start and a great opportunity. And I did tease out an opportunity that we're building on top of that. I don't really want to go too much more into the cybersecurity applications. But again, it's things that we can do on that platform that others can't do and that we think could create interesting new revenue streams, potentially even above and above the projections we provided before.

So the next few years, you're not going to really see any increased competition. You give us a sense of the revenue growth. Will it be better than this year? Are there any just some of the tailwinds or headwinds? I mean are we thinking mid-single-digit revenue growth? Any kind of color given you pull some of the longer-term guidance would be really helpful.

Yes. I mean I'd really like to focus more on providing that in February. I agree with you. I don't think that there is sort of a near-term direct competitive change. But I don't think we're getting any benefits from providing really long-term guidance that in a changing competitive environment. And so I'd really like to get back at least for some of the guidance. We'll always be probably a much longer-term guider than anybody else. I just think everyone should be providing as much long-term guidance as they can. And we're not going to completely pull off of that. But I just would rather not kind of try to lead you to some specific number over the next 2 or 3 years. But as you can tell, we're still pretty bullish on our cash flow projection. So I think you can back into it that we're not really coming off any kind of general trends here.

The next question comes from Gregory Mesniaeff with Kingswood Capital Partners.

Matt, you mentioned that you guys picked up about 70 new distribution partners have been signed. Can you talk about any changes in the terms with these third-party resellers in terms of revenue split or economics? And how is that trending as you pick up new distribution partners?

When we onboard a new partner, such as someone looking to integrate us into their drone systems or ocean sensors, there are many potential companies to consider. Typically, we license them to deploy our technology, allowing integration into their chipsets or end-to-end systems. They can provision and activate our technology, with a pricing structure in place that can vary. This structure has remained consistent over the last 25 years, providing a flexible pricing model that allows them to offer competitive services to their customers. While the basic terms haven't changed, we do see some significant new opportunities, especially in the PNT area where pricing is evolving. Some partners are interested in incorporating 5 to 10 years of PNT protection into their services through a capital model. We're open to options like pay-as-you-go or region-based pricing. These specifics will be included in contracts with new partners, but overall, I don't see this as being different from our approach in the past.

Next question comes from Chris Quilty with Quilty Analytics.

I want to follow up on the T-Mobile DOT announcement. You mentioned a fraction of the sites. I think it was 90% for the announcement. Can you give us a sense, I mean, of the sort of volume of units, just if you look at specifically the cellular market or took it out to the data center market, what sort of penetration do they need? Do they need in every site or a portion of the sites based upon the operations? And I'm just trying to get a scale for how big that might be?

Yes, it's a global market focused on safeguarding cellular infrastructure from jamming, and it's just starting to gain recognition. Specifically, the Department of Transportation is the U.S. government agency responsible for protecting critical infrastructure like GPS, and they are examining vulnerabilities in the U.S. market related to terrorism and other threats. They are exploring various solutions and have allocated funding to several organizations. We were informed that, with T-Mobile, we are among the most prepared and currently offering the only comprehensive global solution to address this issue. We had previously collaborated with T-Mobile on some of their in-building systems, and this contract aims to showcase the effectiveness of our technology in protecting macro base station sites. This project has essentially doubled the number of applications, and if successful, I can envision a much broader deployment across thousands of cell sites. Furthermore, other cellphone companies that are currently unprotected will likely recognize this as a cost-effective method to enhance the protection of critical infrastructure. Our cell phones and the ability to operate on land are vital, indicating that it's a significant market.

And real quickly, I mean, in your core business, you're wholly focused on the wholesale market. Obviously, having acquired Catellus, they had a direct and indirect approach to the market. What's your go-to-market approach long term there?

Yes, lots of new partner discussions, a lot of new areas. We're not necessarily going to go direct as well. I don't think there will be many opportunities for that. We have developing new technology. I think you'll hear about that shortly that I think will expand the market tremendously. We've had some talk about putting our algorithms into their systems directly, but it will really it'll be similar to the way we go to market in a two-way communication solution, but will be a much larger expanded base of companies that will want to embed us into their solutions. So it will not be direct still; it will be companies who like the ones today who are experts in the timing market or in the PNT market. There will be a lot of new companies as well that will want to integrate us into their solutions.

And to be clear, the ripe opportunity is that all the service and license revenue? Or is there a hardware component? And what does that mix look like over time?

There's a hardware component to it potentially, and we make margin on. But as anything else, where if there's high volume, which this is something that could become a high-volume business that will be high volume of kind of low-margin hardware equipment. But we really want service revenue, global service revenue and whether that's baked into our partners' product or it's something we offer on a regional basis or something that's really developing right now.

The next question comes from Justin Lang with Morgan Stanley.

I'll just stick to one here. Matt, just coming back to the acquisition pipeline, my apologies if I missed this, but curious if you could just generally size some of the opportunities you're looking at or just give us some general parameters. Is this more about a series of smaller deals that give you a hold in new markets? Or are you really weighing something transformational, and that's the message we should take away?

Yes, I don't want to guide to either one of those necessarily. There are companies in both those categories. I would say I would lean towards more transformational deals as opposed to given the effort involved with very small things. We're not looking to radically change our business model, though. So I think I'm not going to be that different in terms of what we're looking at is that what I've told you in the past. Our goal isn't to go retail, for example. I mean we're probably likely to stay wholesale. But there are some business areas that are complementary for which we can take a bigger part of the value chain and for which would lead us into using our network in new ways. Some of those are big and some of those are small. But we'll let you know when we get a bit more specific about those things.

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

Yes, I know this is a bit lengthy. I wanted to address the many questions and give everyone an opportunity to discuss it considering the industry's evolving nature and the topics we covered today. I hope you can feel our ongoing enthusiasm and confidence. It was a significant announcement recently, and while I'm aware of the market's response, I strongly believe we possess great potential and a promising future filled with opportunities. We look forward to continuing the conversation with you, both in the interim and certainly at our next quarterly call. Thank you for being with us.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.