Foot on the gas. Iridium started 2023 on a strong note, reporting itsfifth consecutive quarter of double-digit topline growth (up 22% in Q1) that beat the consensus estimate by ~9%. OEBITDA improved 8.5% y/y to a record ~$112 million, beating the consensus estimate by ~6%.
Service revenues up ~15%. Commercial service revenues (ex.-hosting) grew at a double-digit rate for the eighth consecutive quarter, with all three segments (voice, broadband, IoT) contributing double-digit growth.
Record equipment revenues – again. Equipment sales grew ~24% y/y to a record ~$42 million – Iridium's fourth quarter of record sales in the past five quarters. Management indicated that equipment sales could ""possibly exceed"" last year's record results.
Voice & Data price hike. Voice & Data revenues grew nearly 17% in Q1 23 (best growth rate since Q4 13), aided by a one-time price hike (first in five years), an expanding product portfolio, and wilting competition.
Management is now forecasting ""high single-digit"" growth between 2023-2025 (vs. prior guidance of mid-single-digit growth);IoT on the march. Iridium added 53,000 commercial IoT subs in the quarter (up 6% y/y) and finished the quarter with 1.5 million subs in service (up 21% y/y). Personal communications subs, which now represent more than half of all subs, are up more than 2x since the end of 2020.
Engineering up. Engineering & Support revenues (representing both the Space Development Agency and Qualcomm) grew nearly 3x in the quarter, contributing meaningfully to topline growth, but with a concomitant impact on hardware and service margins (down 430 and 720 bp, respectively).
Tweaking guidance. Although management raised the long-term outlook for the Voice & Data segment, we are leaving our 2023/2024 estimates largely unchanged for the time being with plans to revisit our forecast once the impact of Iridium's DTD strategy becomes more apparent.