Iridium Increases 2022 Guidance, Hints at Satellite-to-Cell Announcement
Iridium Communications increased 2022 guidance for the second time this year after posting more gains in the third quarter. CEO Matt Desch also said the company expects to share more details about a technology development to bring Iridium technology to smartphones by the end of the year.
The satellite operator logged double-digit increases in both total revenue and subscribers in the third quarter compared to the same time last year. Desch said the company is on track for another record year — following 2021’s subscriber growth of 17%.
Last quarter, Iridium said it signed a development agreement with an unnamed strategic partner to enable Iridium’s technology in smartphones. In a call with investors on Oct. 20, Desch said he expects Iridium’s partners to make an announcement by the end of the year.
Desch said he believes Iridium has plenty of capacity to support additional services on its current network.
“We have plenty of capacity to support the services that we’re expecting using our existing network and existing spectrum,” Desch said. “We’re one of the few complete networks right now that is able to provide services to those types of devices and is ready to go with very little effort to do that. The announcement with Apple and Globalstar, there’s a fair amount of investment that even has to happen … We don’t have that same situation. We’re in a great environment really to make this an incremental activity on top of what we’re doing.”
He did not share many details on what type of service/applications this partnership would support, but does not think it would cannibalize Iridium’s service to specialized satphones.
“If you make a connection to a smartphone, you can do a lot more than just push an emergency button. I won’t go into exactly how and what more you can do, but our network is very efficient at sending information back and forth,” Desch said. “Not just with smartphones. Our long-term future is to be connected in other types of consumer devices. Maybe tablets, watches, vehicles, cars, maybe not for everyday use, but as a complement to other technologies that are going into those vehicles.”
Third Quarter Financial Results
Iridium reported third-quarter total revenue of $184.1 million, an increase of 14% from the comparable period of 2021.
Net income was $2.1 million in the third quarter, compared to a net loss of $2.1 million in the third quarter of 2021, due to increased income.
Overall, Iridium ended the quarter with 1,973,000 total billable subscribers, compared to 1,690,000 for the year-ago period and up from 1,875,000 for the quarter ended June 30, 2022. Total billable subscribers grew 17% year-over-year driven primarily by growth in commercial IoT.
The company updated its full year outlook for service revenue growth, now projecting total service revenue growth between 8% and 9% for the full year. This is up from previous guidance of service revenue growth between 7% and 9%, and the original guidance projected growth between 5% and 7%.
Most of the revenue, $139 million is from services and $45 million is from equipment sales, engineering, and support projects.
Commercial service — including services to maritime, aviation, energy, recreation, and forestry — remains the largest part of Iridium’s business, representing 61% of the company’s total revenue during the third quarter. Commercial service revenue of $112.5 million was up 10% from last year’s comparable period, which Iridium attributed to growth in voice and data services, IoT, and broadband.
Voice and data, commercial IoT data and commercial broadband all saw at least 10% growth in revenue during the quarter. Commercial broadband revenue of $13.6 million grew the most, up 19% from the year-ago period because of new activations for the Iridium Certus broadband service. Commercial broadband ARPU increased from $299 in Q3 last year to $315 during the third quarter.
Government service revenue grew incrementally. The segment’s $26.5 million in the third quarter compared to $25.9 million in the prior-year period, due to increased revenue from a step up in the Enhanced Mobile Satellite Services contract (EMSS) in Sept. 2021.
Desch Predicts IoT Consolidation
Desch also believes the company is “well situated” for the broader market slowdown, and the company is evaluating partnerships with smaller narrowband IoT companies.
He forecasted more consolidation in the narrowband IoT market amid the tighter capital environment and said Iridium is in a favorable position with its network upgrade completed, and the company is exploring partnerships with narrowband IoT companies.
“With the industry in this new, more challenging environment, we are seeing some new strategic relationships emerge to weather the capital slowdown that many of us expect will endure for at least the next few years,” he said. “We continue to evaluate the narrowband IoT area, as we think those types of network could be very complementary to our current leadership position in satellite IoT, and only a few of the many announced networks are likely to survive the current investment climate.”
Desch believes the cooling investment environment is “good” for the industry in the long-term and will rationalize competition.