Iridium Communications Inc. (NASDAQ:IRDM) Q2 2020 Earnings Conference Call - Final Transcript

Jul 28, 2020 • 08:30 am ET


Iridium Communications Inc. (NASDAQ:IRDM) Q2 2020 Earnings Conference Call - Final Transcript


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Matthew J. Desch

outlook for service revenue and operational EBITDA. Perhaps most important in the current climate we have maintained our ability to generate strong free cash flow and continue to delever our balance sheet, which means our long-term investment thesis remains intact.

As I highlighted last quarter, the impact of the global lockdown was most pronounced in our commercial IoT business. This segment spans a variety of different industries and user types and into the second quarter the pandemic continue to weigh particularly hard on our aviation partners and to a lesser extent partner activities in oil and gas. The decline in aviation flight hours means that IoT transmissions for Cockpit Safety Services is running below normal seasonal trends. Aireon is measuring the global air traffic has recovered almost 50% of the global movement since January, but the international flight that Iridium primarily serves are recovering more slowly. While their data is showing week by week recovery in traffic, most industry analysts still anticipate a relatively slow recovery in aviation, which means the current environment will likely persist for the remainder of the year and into 2021.

On a positive note, we've seen a bounce back in consumer oriented IoT services coinciding with the reopening of many retail stores in the second quarter and the desired of many to seek out remote activities. This is revised sales and use of devices like Garmin's inReach and other personal communicators like the new satellite communicator from ZOLEO, Somewear Labs Global Hotspot and Bivystick.

In the second quarter, Iridium added 33,000 net new IoT subscribers, predominantly consumer oriented subs with activations in June being the strongest month by far. In our legacy voice business, we expressed concern in April that COVID disruptions would restrain activations during our peak selling season, which it has. Fortunately, the headwind has not been as great as we originally forecast. Based on the trends we saw through April, we had anticipated a decline of more than 5,000 net voice subscribers in the quarter, but the decline has turned out to be only about 2,000, which is encouraging. As we said last quarter, the problem hasn't been customer deactivations, it's been fewer customers activating new or reactivating the existing devices for their typical summer activities, but there seems to be more of that -- as activities are slowly opening up again around the world. Now that we're halfway through our peak selling season, we're getting better visibility on usage trends.

Within maritime the slowdown in shipping activity persists with the reduction in routes and ongoing logistical challenge of getting installation crews on vessels. Out of abundance of caution, not to expose ships into their crew to the Coronavirus, many vessels have remained in lockdown making it difficult for our partners to access vessels to install new equipment already purchased, as well as meet with ship owners on the procurement of new services.

Even in the current environment, we're not sitting idly by. We've been engaging with our partners and been proactive