Strong 1Q 2025 results. Iridium’s 1Q print exceeded our expectations both on total revenue and on EPS (revenues of $214.9M versus our $210.0M estimate, and EPS of $0.27 versus our $0.26 estimate), and reiterated 2025 guidance thats lightly exceeded our model’s assumptions of 4.3% y/y revenue growth.
Total revenue increased 5% y/y, including a 4% increase in total service revenue. Service revenue (mostly recurring revenue from Iridium's subscriber base), was 72% of total revenue in 1Q.
Commercial IoT data revenue was $43.8M, +11% y/y. Subscriber growth was 7% from the year-ago period to 1,885,000 subscribers, driven by continued growth in consumer communications devices. Average revenue per user (ARPU) was $7.75 in 1Q, compared to $7.57 last year. Government service revenue grew 1% to $26.8M in 1Q, reflecting a contractual rate increase in the EMSS Contract.
Iridium's U.S. government business ended the quarter with 133,000 subscribers, which compares to 145,000 for the prior-year quarter and 141,000 for 4Q’24. Management indicated that the government business has remained safe from the ongoing cost-cutting activities at various Federal agencies.
Guidance for 2025: Total service revenue growth of 5%-7% for full-year 2025. Full-year 2025 O-EBITDA (Operational, or Adjusted EBITDA) of $490M-$500M million. O-EBITDA for 2024 was $470.6 million. Net leverage below 4.0x O-EBITDA through 2026 and falling below 2.0xO-EBITDA by the end of the decade, assuming ongoing execution of Iridium’s share repurchase authorization and the payment of expected quarterly dividends. Net leverage was 3.6xO-EBITDA on December 31, 2024.
Minimal changes to our model: We are maintaining our 2Q’25 revenue estimate of $211.1M. Our YE’25 revenue estimate increases slightly due to strong 1Q results, from $866.0M to $870.9M, implying 4.8% y/y growth; our O-EBITDA estimate for 2025 increases from $498M to$499.8M, and our 2025 EPS estimate increases from $1.12 to $1.15.
Tariff potential impact of ~$3M mostly on Thailand-made equipment. Management indicated on the earnings call that assuming a settled 10% tariff on equipment imports from their manufacturing base Thailand, the potential impact to O-EBITDA in 2025 would be ~$3M, and that the company would be able to absorb this incremental expense without and change to net O-EBITDA guidance.
Maintaining Price Target at $45. Shares are currently trading at ~4.9x our revised FY25 O-EBITDA estimate of $499.8M. In our opinion, IRDM shares can appreciate from current price levels, as Iridium shows acceleration of its previous ~4% revenue growth in FY24 to over 5% as its connectivity potential for mission-critical IoT networks begins to be realized. Our revised $45price target values IRDM shares at an EV/O-EBITDA multiple of ~10.2x our 2025 O-EBITDA estimate of $499.8M.
IRDM shares have room for further price appreciation, we believe.