Iridium Communications Inc. (IRDM) Earnings Call Transcript & Summary

Good afternoon, everyone, and thanks for coming. My name is Anthony Klarman. I'm the high-yield telecom cable and satellite analyst for DB, and I want to thank everyone, again, for coming to our 30th Annual Media, Internet and Telecom Conference. This is the session here for Iridium Communications. And with me here from the company is Chief Financial Officer, Tom Fitzpatrick. So Tom, thank you very much for making the trip to see us.

Sure. My pleasure, Anthony.

Appreciate it. So I wanted to kind of level set and starting out the questions from sort of a bigger picture perspective to kind of frame the narrative a little bit. Growth seems strong in most pockets of your business, and you talked a little bit about on the earnings call. And you're certainly seeing some tailwinds in the business as you come out of COVID and things get back to more normalized. Where are you seeing these growth opportunities coming from? And are there specific areas of use in the network that you're seeing a lot of the most pent-up demand starting to come out sort of post-COVID?

Right. So you'll recall this, Anthony, that our initial guide on service revenue growth for last year was 3% growth. And we hosted an Analyst Day in May last year that said, well, our short-term guide for the current year is 3%. We had conviction that we thought we were -- our longer-term prospects were much better than that. And we said we thought we'd average high single-digit growth in the period '23 through '25. But it was hard to exactly calibrate how fast we'd snap back from COVID. Well, 2021 -- as 2021 progressed, we increased our guide for both service revenue and EBITDA pretty much across -- over the year and finished over 6% growth in service revenue, so double our original guide. And it was really -- the growth was really across the board. And I think if you just look at our voice and data business, that grew 4%. So we characterize that as a low single-digit grower kind of in a normal year with prospects of additional growth as we integrate higher data speeds into that, our Certus 100 offering. But 4%, that was a good year. Actually, in the prior year in 2020 on the back of COVID, we actually had a slight decline in that. So that was a nice snapback that we couldn't really calibrate with precision early on in the year. We saw great growth out of our broadband business. That's about a $40 million business. We grew that 20%. So we're starting to see. We're starting to get back on ships now that COVID is starting to abate. And we think that our Certus product line is just a better mousetrap in the competition. And we're not surprised that we grew by 20%. We think it should grow at that kind of rate and think we have a nice long runway of growth there because there's the installed base of the incumbent is hundreds of millions of dollars, and we have a $40 million base. So we think we have some room to continue to take share there. IoT grew by 14%, so about $110 million piece of our business. The fundamental driver there is personal communications with firms like Garmin and ZOLEO that have a device that you sync to your smartphone and you can text anywhere in the globe. So we grew 14% there. We think that that is a very long runway for growth. I think...

And that's revenue you're talking about.

Yes.

Because I think devices even grew faster than and maybe speak to some future accelerating growth rates in that business.

So we think we're just at the early stages. If you just consider, right, there's 6.6 billion smartphones in the world that don't work in 85% of the globe, right? So this device, you sync it to your smartphone and you get text capability anywhere in the globe. So with that kind of an addressable market in the multiple billions, I think we only have about 500,000 subs so far. But I think the subs are growing about 40% right there. So that's the biggest driver of growth within IOT but our normal IOT business is doing very well, too. The industries connecting their trucks and other pieces of equipment for asset-tracking and telemetry. We think there's good growth prospects there as well. So I would say they were they major drivers and we were really, really happy with the growth. And so the takeaway is we had conviction that we would be a high single digit grower when we thought that 2021 was a 3% year-over-year growth. We really feel it now after we put up the results that we put up.

And I guess if there was -- the news even on the back of that is that it doesn't sound like you're beholden to a specific application, technology or use. The increases you're seeing are pretty widespread across the business.

Yes, yes. That's right, yes.

I also was intrigued you had signed an agreement with a value-added developer who looked like they were going to be introducing some new network and product capabilities for Certus. I think it was -- the name's escaping me now. But I'm sort of wondering, are there other opportunities like that? What are the other levers that you can pull to sort of accelerate some of the creation of new use cases for the Certus network in particular in areas that might not have been sort of a traditional end target market for you?

Right. So when we first developed Certus, we went to the high end because you saw this install base of -- that we thought we could go after. So that was -- initial foray was 350 to 700. We also have a device with Certus 100 and 200 that are lower data speeds but that can be integrated into our satellite phone and into our IOT modems to get a lot more data. So right now, our IOT in phones get 2.4 kilobits per second. So that's going to go to 100 kilobits per second. And so then with that kind of additional data speed, you can do things like push pictures and a lot more functionality that should be highly accretive to our ARPUs, right? So in our personal communications ARPUs now, they're running in the $4 range, you start pushing pictures, and that's highly accretive to that ARPU.

I want to pivot a little bit and talk about Maritime. If we go back to when the new constellation was launched, Maritime was always viewed as 1 of those areas where there was a real opportunity for you. You got the GMDSS certification done. The thought was that that was kind of a leading indicator to some future additional revenue opportunities in Maritime. You're competing against essentially, I know there's -- it's more than that, but 1 big incumbent kind of has a lot of that market. And at the very high end, but that market is also 1 of the ones that really shut during COVID. It was hard to get on ships and vessels and do things. Where does the Maritime market stand now? And are there opportunities given that the incumbent is sort of going through their own M&A process where you can maybe be a bit more aggressive on trying to get some share in Maritime?

Right. So as you know, so we are 1 of 2, the incumbent who was built for safety services on Maritime and Iridium that had -- that are certified for safety services in Maritime, so-called GMDSS. We have that very same sort of [ case ] as them. And what that does is it kind of acts as a seal of approval. Any ship over 60,000 tons must be fit out with GMDSS for safety services. And we don't see the GMDSS as the opportunity so much as that it's kind of the bona fides that you're a real player in Maritime if you have that certification since there's only 1 other player that does. And so our competitive strategy versus the incumbent is we just have a better mousetrap. Our Certus product is 350 to 700 kilobits per second. Their product is 200 to 400 kilobits per second. So it's -- we're faster, we're much smaller size, and we're cheaper. And so we just -- that's our basic strategy is we think we have a better mousetrap and we have the same certification as the incumbent. And that's why we grew that business 20% last year.

Yes. I want to talk a little bit about guidance, the guidance you provided and sort of what it implies for growth, but also a little bit about the margins of the business. So I think the rough framework, I think you have total service revenue up 5% to 7%. And I think you gave OEBITDA of $400 million to $410 million. So at the midpoint, OEBITDA looks like it's up about 7% versus '21, which is similar to your high end for service revenue growth. And I guess I'm wondering -- I know that that analysis has muddied a little bit because there are nonservice revenue things in the OEBITDA like equipment and engineering that are lower margin. Can you talk a little bit about what the incremental margin opportunity looks like for Iridium? I think in the past, you maybe have spoken about what you think really aspirational margins are for a network like this and a business like yours?

Right. So we have a long-standing record really of telling investors, look, there's a lot of operating leverage in this business. So when we announced our new next-generation constellation in 2010, I think our EBITDA margins were sort of in the mid-40s, something like that, mid- to high 40s. And we said we see them at around 60% when we're done this build. And that was a long-term guide. It was sort of 2010, and we finished the network build in 2019. In 2019, we were 60% margin. So we kind of nailed it, nailed that, which is really a long guide. And the takeaway here is the operating leverage isn't going away, right? So fundamentally, we're growing our service revenues by 7%, whatever. It's hard -- the variable cost to produce an incremental minute on the network is really small. So the operating leverage is kind of automatic. It happens. And so if you look at mature satellite companies that have just been at it for a lot longer than we have and you see EBITDA margins in the high 70%, 80% range. And so there's no reason that we can't get to that kind of a level, just as we enjoy the scale advantages and the operating leverage as the results.

And I know that you don't -- maybe this is an unfair question, so I apologize in advance. I know you don't report the segment information like that. But what would your service revenue margins look like today? Because again, I know it will be higher than what your reported OEBITDA margins are because engineering and...

On the increment?

Yes, on the increments.

Oh, on the increment it's got to be 80%.

80% right, okay. So as the revenue ramps, that 80% is kind of dropping into that OEBITDA margin line pretty significantly.

Yes, yes. And I would encourage any investor to just look at EBITDA margins over time. It's an upward sloping line.

Yes. And margins probably haven't improved much on engineering and hardware and stuff like that. So all of the margin improvement is really coming from the network utilization.

Yes. That's right.

A little bit about free cash flow and then we'll start venturing into the capital allocation questions that I know you're prepared for. The free cash flow story of this business has been what has allowed you to delever. You're now kind of at your leverage target. There aren't a lot of additional -- other additional levers, I think that you've talked about some additional OpEx investment to do some priorities around the company in terms of investments you wanted to make. Are there other kind of CapEx things that we should be thinking about? I know the next constellation is still a ways away, but the planning has started. Are there other kind of CapEx considerations for you to think about start building into your mind that there's a sort of a future need to be deploying?

Right. So I mean I think we've said we're not spectrum rich, right, so less than 9 megahertz of spectrum. As we think about the next constellation, so 10 years out, we'd sure like to get our hands on some additional spectrum and to know what that spectrum is as we're planning -- as we're building the next-generation constellation. So depending on what spectrum band it's in, you need to engineer that in. So that's something that we're definitely thinking about and have our eyes out for opportunities to capitalize on.

So the next few questions are going to be sort of like that, talking about priorities around capital. You recently set your buyback -- reset your buyback at $300 million, I think maybe by now you're done, but you were almost done at the quarter with the preauthorized number that you had. It's the same buyback level that you had previously, but your EBITDA is higher now, your free cash flow is higher now, your margins are higher now. Arguably, you could have even gone higher with the buyback because you're at your -- sort of your leverage target, too. Are there views to holding back a bit to be prepared for other strategic investments? Or how did you and the Board think about how to optimize the level of the buyback?

So I mean it was just -- that was an authorization, right? So think of it this way, the original authorization was a 2-year authorization to buy in 300. Well, we exhausted that in a year. So they just put up another authorization at a Board meeting. Let's see what happens. There's going to be plenty more authorizations where this one came from. I mean we've said that we'd see a nice return to where we calculate intrinsic value, we're going to be a buyer of the shares. That's -- we'd like leverage between 2.5 and 3.5x, and we'll buy in the shares to cause that outcome.

And as we think about the other kind of capital priorities or capital uses, you mentioned strategic investments. You're in a unique position where you're one of the few satellite companies I deal with where you're kind of at your target leverage, you're throwing off a lot of free cash flow. Your bigger capital needs are pretty far out in the future, and you've got a business that's growing. How much more aggressive can you be on some of the strategic things to maybe help accelerate growth or some of the other inorganic opportunities, even past spectrum, whether it's investments, I know you have Satelles and you have Aireon and we'll talk about them in a bit. But are there other investment-type opportunities you could be making that would be complementary to the business that maybe would accelerate growth?

So yes. So what we said is what we're not going to do is we're not going to vertically integrate. We're not -- we have 500 partners that take us to market. We really like that model. It's very efficient. And so we're not going to like buy up the channel and we tell our partners that that's not what we're going to do. But we -- you're right, we have made investments in Aireon and Satelles. We like the investments that we've made. We think Aireon has a really interesting opportunity in the whole area of data analytics. So they're in possession of -- sole possession of some really valuable information on aviation, flights in the air, flight patterns, et cetera. And the whole area of data analytics is a really hot area right now, and they see themselves having an opportunity. We would definitely consider an investment in support of such an opportunity to enhance their growth profile. So that's one area. And similarly, Satelles has had really great traction with the U.S. DoD, but they see an opportunity to accelerate their business in commercial area, things like geo authentication, cellular in-building coverage for cellular for the -- to enhance the GPS clock. And so again, that's another area. Both of them ride on our network. So that will be natural things for us to do, and we definitely give that a look.

And I think, Matt, on the last call, even sort of spoke to that point of not wanting to get too far out of the comfort zone on other strategic things. You want to sort of stick to kind of the network and things that are complementary to the L-band or the current constellation. Is that a fair way to think about the opportunity set?

I think that is, yes.

So Aireon is a bit of an odd one because your agreement with Aireon was conceived at a time when you were much more capital constrained, which is not what you are today.

You can say that again.

I remember those days, too. And the shareholder agreement is set up such that you'll actually be getting money from them. And in fact, your interest in Aireon will be getting bought down over time as they achieve certain milestones. It almost feels like you're at the point where you'd prefer to be doing the opposite and increasing your stakes. And how do you weigh the sort of upside, downside potential of things like Aireon on a set path to get smaller, but wanting to also be bigger in some other strategic ones?

Yes. So the pre-wire transaction was an output of a financing round that they did where 3 ANSPs came into the company. And at the time, one of the other ANSPs wanted to be the control equity. And pro forma for that round, that wasn't going to work. And so we really wanted to get that. It was a $120 million round. And we really wanted to get that money in because that money got the payload built, okay? And Iridium couldn't have funded that. We had bigger fish to fry building our own network. So we just agreed to sell back the same amount of shares to cause the desired result in terms of pro forma ownership. So that -- would we do that deal today? No, we wouldn't, right? But that was a deal at the time that needed to be done. We're glad we did it. And that would we buy into Aireon at a higher valuation in support of something really strategic, we would.

And we'll stick with Aireon for 1 more second and then venture off. Air travel is coming back. Volumes are coming back. Is that -- are you starting to see that show up in Aireon's numbers? And are there any chances that -- I think they have some minimum payments they owe you on an annual basis. Is there anything in terms of them achieving their business model faster that would potentially accelerate any of that timing?

So there's contractual minimums on the hosting. That's -- they're going to -- they will make that no matter what. The question is just timing on 2 slugs of capital that's coming our way. The balance of the hosting fee, right, in a slug because when they do a refinancing, right? So they need to grow into the credit metrics such if they take their current facility out and upsize the new facility to pay us a lump sum payment. And that date pushed to the right as a result of COVID. What happened is many of their contracts are variable in nature.

Volume-based.

Volume based. Some of them are not, but some of them are. And so their business plan, if you will, pushed to the right as a result of COVID. They're profitable from operations. They're adding new customers. They see this big opportunity in data analytics, but their business plan pushed to the right. So whether they take us -- whether we get that hosting fee in 2024, we'll see what happens. We're not fussed about it because they're paying us LIBOR plus 350, and we borrow at LIBOR plus 250. So we're making money on the interest that we're charging them. And we just view that as whenever the time is right, they'll do it.

Yes. I think I saw a headline today, American Airlines was commenting that traffic volumes are resuming and even business travel is resuming. So Aireon is probably sitting in a pretty good spot of the market, given that I think they are the only kind of technology provider who's doing what they're doing. So they seemingly have the market a little bit to themselves here with some path in front of them to grow.

The space-based ADS-B is only Iridium -- or only an Aireon can do that on the Iridium network. So that's -- they're the only game in town. But that -- and they think their TAM is $750 million a year. So that's going to be an important business, and I think it's going to -- you model us out over time, we've said that right now, we get $39 million from Aireon in our capacity as a vendor to them for hosting and data. And we think the dividends we get in our capacity as an owner of that business will eventually be larger than the $39 million.

So what does the CFO do who is awash with free cash flow and has investments that are actually paying dividend?

I talk to investors like you guys.

Yes. I want to venture a little bit into the, I guess, the topic du jour, a little bit of SATCOM and the smart phone. There was a company here yesterday who's going to be launching a bunch of satellites to support being satellite usability on mobile phones to really connect the unconnected parts of the world, AST. They were talking about the opportunity and they have agreements with some carriers to act as the roaming feature for the uncovered parts of the world. But they're just putting a constellation up. You have a constellation up and running today. What is the opportunity, first of all, just more broadly for SATCOM and the smartphone? It sounds like it's a when, not if. But given that you already have a constellation up and running with spare capacity to go, why don't we see agreements in the more near term that would kind of integrate SATCOM into the chipset, like we were sort of rumored to be hearing with Apple some months ago?

Right. So what I would say is Iridium providing -- Iridium is already providing connectivity to the smartphone, the Garmin device, ZOLEO device, all of them are doing it. And we're -- the takeup rate on that, 40% a year growth is kind of instructive in that there's demand for that. And there's a huge addressable market, I talked about $6.6 billion smartphones. If the integration directly into a smartphone is kind of a natural evolution from that technologically, right, in that Garmin is integrating satellite functionality, embedding it further into their product line, and they've miniaturized, they're getting a chipset from us. So the next step into a smartphone doesn't feel like it's that far. And we've said we'd love to be integrated into a smartphone.

And what is that device look that you're talking about like with Garmin and others? Is that just like a dongle for the smartphone that kind of sits as an attachment and allows you to do some certain functionality?

In the Garmin device?

Yes.

We used to sell Garmin originally a full based modem, right? And it was matchbook size or something like that. What we sell them now is just the electronics within the modem, and they do the rest integrated into their. The integration into a smartphone would be like that, right? You're going to need to have an antenna in there. It's got to fit into the base smartphone.

And I guess that's the question is, is one of the things that needs to happen is just the form factor of the equipment and the technology needs to get to the point where you could fit it into a smartphone? It doesn't increase the weight. It doesn't increase the size. It doesn't drain the battery. I mean are those where the technology needs to evolve too, to see this more reality?

Yes. Yes.

And then how do you exploit that opportunity though? I guess that's sort of where I come back to is you're just -- you're very unique in that -- look, there's a lot of LEO constellations being talked about, but they're all really sitting in a warehouse still. They're not in the sky. You actually have 60-some-odd satellites in the sky already. Is there anything that you can do to enable your role in that ecosphere more quickly given that you have a network advantage of actually having a network today versus a planned network of the future?

Yes. Like I said, our network is here and now. We're actually providing that connectivity. We're a natural -- a natural place for people to look, right, in terms of ability to accomplish that connectivity.

One of the things that -- when -- at the time that the new constellation was being constructed, you would essentially overbuild capacity. There was, I think, even some ground spares and some other things. What are some other things that you can think about as you're thinking about the strategic kind of review and thinking about how to deploy capital, are there other things that you could be doing with the network or some of the excess capacity that you have, whether it's satellites or other things that you could be doing to monetize the network? Because I guess, once it's there, it's sort of like yours to just utilize as much as you possibly can. How do you drive that strategically from an investment perspective?

Well, so we think about the ground spares as not network, not additional capacity but rather additional longevity, right, because they're spares. And so we already have 9 spares in space. We've got 6 on the ground. So the spares that are on the ground can be launched and provide additional longevity to the network. So that's how we think about that as opposed to capacity. But in terms of additional ways to utilize the network, heck, Garmin is our biggest, I think they're our largest in terms of subs anyway, partner, and they weren't a partner 5 years ago. So our partner relationships is -- that's the idea factory of additional ways to use networking. In 2010, I wasn't talking about personal communications. I'm here -- I'm leading with it here today, it wasn't on our -- so 5 years from now, there's going to be another application that some partner thought of that's using the unused capacity and driving revenues.

Yes. I want to go back to sort of reinforcing a couple of the points that I think you've made in the past that I still get once in a while from investors about why your network and why your constellation and why your offering is so different? Because everyone is talking about, well, there's LEO and the view is all of the new constellations going up are going to displace the technologies that are here today, whether it's FSS or some of what you're doing in LEO, the faster speeds and higher throughput. Can you just maybe remind everyone of like what Iridium's true competitive advantage is, why you're different than the other LEO constellations and how you really differentiate your product and your service?

Right. So we're low earth orbit. So there's other low-earth orbit, but they're in the K-band largely, they're in the K-band. The incumbent in Maritime is in the L-band. They're also in the K-band, but they're as to where we see them. They're in the L-band, but they're a geostationary, they're 50x further from the Earth than we are. So the -- our network and the band that we're in is our source of competitive advantage. It's unique. We're one of a kind, L-band, low-earth orbit mesh, okay? The functionality and the reach of our network are superior, so. And it's observable, right? So just look. I talk about personal communications. You got Garmin, you got ZOLEO, you got Somewear Labs, you got Bivystick. They're all on our network. You ask yourself a question: Why is that? Well, this is pretty obvious this is going to be a big growth area for a long period of time. You can't do that in a K-band. So even if you're in low-earth orbit, you can't do it in the K-band. So it's as simple as that. And the DOD's relationship with us, why did we win a 7-year sole-source contract from them? Because our network is mesh, so the satellites talk to each other in space. The DOD loves that, because they don't want the traffic landing near where it originated. They want it to land in their own proprietary gateway in Hawaii. Nobody else can do that. And so I lead with the investors that source of our competitive advantage, our competitor of note is our network.

And what really, I guess, distinguishes the network, if we talk about the L-band vs. the K, maybe for some of the uninitiated in the room or who are listening. Lower latency, the form factor or the equipment is smaller. You're able to get smaller devices, less power. I mean what are the real drivers there that are giving you some of that technology advantage?

So versus the K-band, it's reliability. So the K-band is great if you want to send multiple megs to a VSAT terminal point-to-point, right? You need a big antenna, but it can send a lot of data. But it's susceptible to rain fade. So on a big Maersk ship, for example, what will typically happen is that you'll have a VSAT terminal on the ship, but you're going to have a Certus terminal operating the L-band sitting next to it, because if it goes down to rain fade, you don't want to be without a communication devices. And it's that L-band resiliency which is the reason that we and Inmarsat have -- are certified for safety services both in Maritime and in aviation.

Yes. I want to talk a little bit about your view and management -- the board's view as to kind of where Iridium fits in the world. You've compared yourself, I think, to some infrastructure companies and telco infrastructure, sort of less a traditional satellite. Evaluations in the market have been sort of all over the place. You've taken advantage of that a little bit in buying your stock back. How would you sort of position where you think Iridium fits in the broader kind of investment landscape and the peer group you think you most closely resemble? Because some of them have much higher capital needs and different margin profiles than what you have.

We pull in investors. And I think there's a page in our Investor Relations website. Just some financial metrics. Consider this kind of a thing. If you look at us, the headline for us is do not compare us to satellite comps. We think that our financial metrics are way more -- are way closer to general infrastructure companies and towers. If you consider just leverage-free cash flow, leverage-free cash flow conversion, we think we look way more like a tower. We think we're kind of growthier than most and think that if you just consider our competitive circumstance, we think our prospects for long-term growth look pretty darn good. And so if you compare those prospects for long-term growth with a decade of CapEx holiday and lever-free cash flow profile that's 70% conversion, we think we stack up really well against those other comps.

And maybe a balance sheet question or 2. One of the differences relative to that peer group is you're running with a lot less leverage. And you did that intentionally. You delevered -- I forget. When we did the high-yield deal, I think leverage was well over 5...

Yes.

5.5?

We peaked it -- we think we peaked at like 5.8 or something like that.

Yes.

And when we came with -- we came with this 2.5 to 3.5 guide in that timeframe, right? Because ...

I remember.

We were very confident that we would be where we were. Heck, I've been telling the equity story since 2010. In 2014, people would -- the equity would say, "Why would I need to owe it now, own the stock now?" And we would say, "Look at the leverage-free cash flow post ..."

Launch.

Post-launch. And we were hampered by the fact other satellite companies that have gone before us promised a CapEx holiday and many of them didn't deliver. And I've heard from many investors that said, "You're one of the few that actually delivered the CapEx holiday."

That's what happens when you launch all the satellites at once. Right? And that is along the last line. I know we're coming close to the end here. When do we start seeing the early initial investments of the next phase of the network? I mean these are -- like all satellite and every LEO company that we talk to and speak of, they're in perpetual launch and build mode. But you have -- I think you had guided to 10- to 15-year kind of CapEx holiday. But I recall from the current constellation, the planning and the spending happens sort of well before that. What do investors need to map out in terms of when you have to start committing capital towards the next phase of the network and obviously be on the lookout for other spectrum that could complement that initiative?

Right. So investors should consider. So we have a very observable, if you will, comp, and that's the life of our prior constellation that had a design life of 8 years that when we took it down, it was 20-plus years old, right? And it was working fine when we de-installed it. So 8 lasted over 20. Our current constellation use state-of-the-art electronics that was 20 years hence from the prior one, clean room, et cetera, and its design life is 12.5. Sure feels to us like it last 20-plus years. And so if you consider that, we're not spending until post 2030. It's going to be 2030. It's going to have a 2030 handle on it, feels like to us.

And so -- and that would be in terms of that would be not launch, but that would even include like when you start to do some of the early seed spend. Because I think your spend on the current constellation stretched from 20 to 4 years. No?

No. Started in 2010.

2010.

And concluded in 2019.

Yes. So 9 years. Yes. And part of that though was a capital constraint of how much capital you could raise. You're in a little bit of a different position now given the bigger embedded base of business that you have and the free cash flow. Will the next investment cycle be spread over something as long as that?

No, that really wasn't capital. It was -- it took -- there were delays. There were delays in the construction. It was initially not supposed to be 9 years. It was -- I can't remember, it was less than 9. So the delays is what -- wasn't the capital. They never stopped working on the construction because of a capital constraint. It was purely -- we had a launch delay because there was a problem with the launch, not having to do with us, and -- but there were a couple of delays with the manufacturer. That's why it took that long. So hopefully, the next capital cycle won't be that long.

And as we think about the next -- or the next cycle or the next constellation, you've got a really big embedded customer in the U.S. government. They seem really happy with it because they negotiated the new contract that you're a couple of years into, I think we're in that now flattish revenue period for the next couple of years. You've also got hosted payloads. Do those all also get contemplated in the next satellite? I would imagine they're all continuing to bank on the fact that they are going to be partners with you for the long term.

Sure. I mean Aireon if you consider ...

There's really no other place for them to go.

Yes. I mean ADS-B, that is Aireon's technology, replaced radar that dated to the second world war. So this infrastructure that is used for air traffic control is a very long time frame. So sure feels like Aireon is going to be a payload on our next constellation.

Yes. And the -- one of the questions that had come up from an investor we spoke to a week -- well, after the earnings call, -- the government revenue is now pretty static for a little while, and then there are some small increases near the end. I think everyone expects that they will just renew and it will probably take longer than -- like it did last time. It always takes a little longer when the government is involved. Can you offset the flattish revenue from that with the growth in the other areas? In other words, if investors are thinking about 5% to 7% service revenue growth, but a piece of it contractually looks a little flattish in future years. Would you expect that the growth coming from the other areas more than overtakes that contractual kind of flat period for a couple of years?

Yes. So what we've said is '23 through '25 will average high single digits. And that's an all-in.

Has with the U.S. government...

So hosted payloads is not a big growth. And the DoD is contractual growth. But when you mix in 20% growth in broadband and 14% growth in IoT, that's how you get to averaging high single digits in '23 through '25.

Perfect. Well, I see that we are just about out of time, Tom. So I want to thank you very much for coming. As always, very entertaining. Thanks.

Great. Thanks Anthony.