Iridium <\/b>CEO Matt Desch walked investors through how tariffs are impacting Iridium\u2019s equipment supply chain, saying that for now, Iridium is absorbing a higher cost of importing goods into the U.S. rather than passing on the cost to its customers. <\/p>\n
Desch explained that most of Iridium\u2019s equipment is manufactured in Thailand by a contracted facility. Iridium used to import all of the equipment into the U.S. before distributing it to customers around the world. However the company made a change last year to use a third-party logistics partner in Europe for shipments headed to the EU. <\/p>\n
Iridium is expanding its relationship with the logistics partner to use it for all non-U.S. partner shipments, which makes up about 75% of shipments, Desch said. This means that import tariffs will only impact the equipment destined for the U.S., about 25% of Iridium\u2019s equipment. <\/p>\n
Desch said the company estimates with current trade policies of a 10% tariff for Thailand, this will result in $3 million of incremental cost to Iridium this year. <\/p>\n
Yet if tariffs reverted to the original proposed levels of 36% tariffs on Thailand, Desch said this would cause $6 million to $7 million in incremental costs. Iridium is not incorporating this scenario into its guidance at this point because of the \u201cuncertainty and ongoing discussions.\u201d <\/p>\n
\u201cAt this time, we think we can absorb this lower level of tariffs within our currently guided [operational] EBITDA range,\u201d Desch said. \u201cWhile we could choose to mitigate some of the remaining import costs through equipment surcharges to our customers, at this time, we prefer not to undermine our strong market position and business momentum.\u201d <\/p>\n
He said the impact would have been a lot higher if Iridium did not have the EU distribution center. <\/p>\n
\u201cWe\u2019ve been on lots of calls with my supply chain team scrambling. [We\u2019re] really glad we put in this third-party logistics center last year because that will enable us [within] weeks to move and mitigate the effects, which would have been a lot higher than $6 million to $7 million,\u201d Desch said. \u201cMy supply chain team really showed out in terms of their ability to quickly manage the situation.\u201d <\/p>\n
Desch said there is minimal impact from higher tariffs on China, as the company has moved to minimize exposure to China and sources \u201cvery little\u201d from China. <\/p>\n
Iridium is the first satellite operator to report second quarter results, and Desch provided the first public in-depth account of how tariffs are impacting a satellite operator. <\/p>\n
He noted that Iridium\u2019s business has been \u201cresilient\u201d in economic disruptions, and the company grew service revenue through both the 2008 recession and 2020 pandemic. He said in recent discussions, the company\u2019s partners are \u201cbullish\u201d on their opportunities with Iridium\u2019s network including next-generation IoT, alternative PNT, and the direct-to-device Iridium NTN Direct initiative. <\/p>\n
\u201cIt\u2019s too early to tell,\u201d how tariffs could impact service revenue or subscriber growth in the long term, he said. \u201cIf tariffs go up and they remain in place for a long time and global trade wars continue indefinitely \u2014 no one knows what that territory looks like and how that would affect the global economy. But right now, we don\u2019t see demand changes that concern us too highly right now.\u201d<\/p>\n
Desch also said he does not believe Iridium\u2019s existing contracts with the U.S. government, particularly the Iridium Enhanced Mobile Satellite Services (EMSS) contract, will be impacted by cost-cutting efforts. <\/p>\n
The decision to shutter USAID had a \u201csmall\u201d impact for Iridium, as some international organizations were using Iridium satellite services. A small portion of deactivations in voice and data during the quarter were due to USAID program funding being cut. <\/p>\n
\u201cWe do believe that the geopolitical environment will remain influx. There\u2019s no disputing that international dynamics are changing. Between the new tariffs and U.S. government rightsizing and shifting priorities, we expect to see impact on our industry, some potentially positive as space remains a priority right now, but some negative as well,\u201d Desch said. \u201cRight now, we have no reason to believe these changes will be material to our business.\u201d <\/p>\n
Overall, Iridium reported 5% year-over-year revenue growth in the first quarter of 2025, reporting $214.9 million in revenue. <\/p>\n
Service revenue from the company\u2019s subscriber base grew 4% from the year-ago period. The company lost 17,000 billable subscribers during the quarter, but the number of subscribers is up about 5% from the same time last year. <\/p>\n
Iridium said the sequential decline was due to a large IoT customer starting to phase out annual plans, which makes subscriber numbers more seasonal. But this did not impact revenue because the customer is on a fixed-price contract. <\/p>\n
Net income was $30.4 million in the first quarter, compared to net income of $19.7 million for the first quarter of 2024. Operational EBITDA increased 6% year-over-year to $122.1 million. <\/p>\n
Iridium reiterated its full-year 2025 outlook of total service revenue growth between 5% and 7% for full-year 2025, and operational EBITDA between $490 million and $500 million.<\/p>\n","protected":false},"excerpt":{"rendered":"
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