Greg Mesniaeff

Greg Mesniaeff asked about any changes in the terms, such as revenue split or economics, with the approximately 70 new distribution partners Iridium has signed.

Answer

CEO Matt Desch explained that new partners license Iridium's technology for integration into their systems, with a flexible but consistent pricing schedule that hasn't significantly changed in 25 years. He noted that PNT pricing is evolving, with openness to capital models, pay-as-you-use, or regional approaches, but this is built into specific contracts and is not a new trend.

Greg Mesniaeff of Kingswood Capital Partners inquired about Iridium's strategy for broadening its partner network across different verticals and the potential impact on SG&A expenses. He also asked for more details on the recently announced partnership with Syniverse.

Answer

CEO Matthew Desch stated that the company can expand its partner base within the current SG&A envelope by focusing on larger partners like MNOs and new verticals such as autonomous systems. He explained that the Syniverse partnership is crucial for the Iridium NTN Direct service, as it provides a seamless connection to the global cellular ecosystem for roaming and billing, eliminating a significant development hurdle for Iridium.

Greg Mesniaeff of Kingswood Capital Partners asked for details on the drivers of the significant margin expansion, questioning if it was due to geographic or sales mix, and inquired about the company's visibility on future margin trends versus revenue growth.

Answer

Ordan Trabelsi, President & CEO, attributed the margin improvement to operational efficiencies in Europe and the inherently higher-margin, cloud-based model in the U.S. He cautioned that quarterly margins can be volatile due to the varying stages and mix of numerous global projects. Trabelsi stated that while the long-term trend for margins is positive, driven by scale and U.S. expansion, it is currently difficult to predict the precise pace of either margin expansion or revenue growth due to this project-level variability.

Greg Mesniaeff of Kingswood Capital Partners asked about the significant sequential increase in deferred revenue and its implications for future quarters. He also questioned why Q3 gross margin guidance wasn't more aggressive, given the high hardware sales in Q2, suggesting a "razor/razorblade" effect.

Answer

President, CEO & Director Bruce McClelland explained that deferred revenue is influenced by the timing of maintenance contract renewals, which often peak in Q4, and by large, multi-quarter product and service programs. Regarding gross margin, he noted that while it is expected to improve sequentially in Q3 due to a better software mix, it remains lower year-over-year because of increased professional services tied to modernization projects.