Iridium(US:IRDM)2019-07-23 17:09Financial Data and Key Metrics Changes - Iridium generated total revenue of $143.1 million in Q2 2019, a 6% increase compared to the same quarter last year, driven by growth in service revenue and engineering support revenue [38] - Operational EBITDA was $85.1 million, reflecting an 8% increase from the prior year's quarter [38] - Service revenue reached $86.3 million, up 5% year-over-year, with a notable increase in commercial IoT revenue by 15% to $23.9 million [39][40] Business Line Data and Key Metrics Changes - Voice and data revenue rose 3%, with ARPU increasing to $46, primarily due to price changes in handset programs [40] - Commercial IoT data subscribers now represent 66% of billable commercial subscribers, up from 61% in the previous year [42] - Engineering and support revenue increased to $8.9 million, compared to $5.1 million in the prior year's quarter, driven by heightened activity with U.S. government customers [45] Market Data and Key Metrics Changes - Government service revenue was $24.5 million, reflecting short-term extensions to the EMSS contract, with government subscribers growing 17% year-over-year [43] - The U.S. government added 12,000 subscribers in the first half of the year, a 70% increase compared to the same period last year [30] - Equipment sales revenue was $23.4 million, indicating a moderation from the record pace of the previous year [44] Company Strategy and Development Direction - The company aims to leverage its upgraded constellation to support new applications and capture market opportunities, particularly through the Iridium Certus broadband service [14][18] - Iridium is focused on the L-band market, where it enjoys strong brand recognition and sees opportunities for collaboration with new Ku and Ka-band LEO mega constellations [20][22] - The company plans to generate strong cash flow moving forward and intends to deploy excess cash for refinancing existing corporate debt and executing shareholder-friendly activities [50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year guidance for service revenue and operational EBITDA, forecasting total service revenue of approximately $440 million [46] - The company anticipates a step-up in data service revenue in the second half of the year, particularly from Aireon, which is expected to rise from about $1.1 million to approximately $1.9 million per month [47] - Management highlighted the robust growth in subscriber numbers and the potential for significant value creation for shareholders due to the financial transformation [13][36] Other Important Information - The company has completed the Iridium NEXT project, leading to a reduction in capital expenditures, with maintenance CapEx expected to average approximately $35 million annually for the next 10 years [49] - Iridium's cash and cash equivalents stood at $175.8 million as of June 30, 2019 [48] - The company converted all outstanding shares of Series B preferred stock into common stock, eliminating future dividend payments [55] Q&A Session Summary Question: What does long-term mean for the government contract? - Management expects the new long-term contract to be at least as long as the previous five-year contract [63] Question: How should SG&A be modeled moving forward? - SG&A decreased due to a reduction in stock appreciation rights accruals, and management does not expect a significant increase in SG&A in 2019 [66][69] Question: What is the outlook for the new PTT product? - The new PTT device is expected to improve market adoption due to its design and interoperability with existing systems [75] Question: What is the status of subscriber growth? - The majority of new subscribers are in the IoT space, with many being high-quality new personal communication-type subscribers [84] Question: What is the expected ARPU trend for maritime services? - ARPU for new maritime services is expected to be significantly higher than previous offerings, approaching Inmarsat-type ARPU ranges [114] Question: How is the company addressing spoofing and jamming issues? - Satellite Time and Location technology can help address spoofing and jamming concerns, and the company is engaged with U.S. government applications [120][121]