So first you say that Govt rev is not going to grow at all, and now you admit that it will in fact grow, but at a rate less than the overall projections...maybe you should do your homework before authoring your comments...and I repeat..the DoD $ is GUARANTEED growth, and it contributes mightily to the company's ability to make good on their long term projected growth rate! As for Aireon, the fact that the second largest Airtraffic Service Provider (ASP) NAV Canada is willing to not only sign up as a customer, but also invest $150 million in the venture ($55 million paid to-date) tells me that someone with a lot more insight than you or I thinks that Aireon will be a success (and an additional 4 ASPs have also signed on)...and you are factually incorrect to state that the FAA is working on an alternative system...As to the $34 million in annual revenue that IRDM will be getting from Aireon in 2018...that is ALL theirs...that comes from the hosting fees and customer data contracts...their ownership interest is separate and distinct from that, in fact, in order for them to take their ownership interest down to 25% they will be paid $120 million for the 25ish% they will be selling.
But lets take a look at voice. While the market is not growing high double digits, the present customer base is pretty rock solid...if you are working on an off-shore oil rig, or you are driving a big rig across Canada, you are going to keep your IRDM phone. As for growth, the new Iridium Go! product they just released should be strong driver of incremental demand. Why? because it essentially lets you use your smart phone to connect to the Go! hotspot (and 5 devices can do so). So if you own a pleasure fishing boat, don't you want to have a Go! on your boat with pre-paid minutes so that you can call home (or keep on top of your business)? This piece of hardware is a game-changer in that you don't need a sat phone to have sat phone capabilities and back-up....again to be continued..
The government business is "fixed" in that we know what the DoD will be paying every year...that is a huge positive, rather than a negative, especially if you are a lender to IRDM. The contract also calls for 49% revenue growth over the course of the 5 year contract (2013-18). Now while that compounds at less than 10% per year, it is guaranteed growth. So contrary to your comments, the company will in fact receive growth from the government. It is also becoming apparent that the DoD is using "more" of the service, since they are not paying anything incremental on the service side...consequently, you can believe that a fair amount of equipment will be sold to satisfy this increase...there has even been talk about creating an M2M connection for every soldier in the field. So when the contract comes due in 5 years, it is highly likely that not only will it be renewed, but on terms that will include a significant bump up in revenue for IRDM.
You also conveniently forget about AIREON. And in light of the recent Malaysian airliner disaster, you can be sure that more and more "FAAs" of the world will be signing on. Not even counting the cash flow the company will receive for their ownership interest, AIREON will generate close to $35 million in annual revenue starting in 2018. Given that the contribution margin on this business will be close to 100%...what do you value a steadily rising $35 million cash flow at? 12 times? 15 times?
While Aireon would do nothing to prevent the tragedy, if Aireon were in place today, authorities would know EXACTLY where the plane went down instead of merely looking for oil spills and pieces of wreckage...If a plane were to go down and passengers/crew survived the "landing" this immediate location data would enable rescuers to potentially save survivors. The FAA should use this as a wake up call to join the 21st century.
not a huge transaction, but Denmar Dixon (Vice Chair and EVP) bought 2500 shares in the open market on March 3rd...for $25.10 raising his holdings to 229,028 shares (he has big incentive to get the stock to double)
they issued a "preliminary" statement because they haven't been able to close the books on 2013 quite yet, but the estimates they give (notice the very tight range) are pretty accurate. Since they are going to the market raising capital, they effectively HAD to make these statements now, otherwise would be in hot water if these facts slipped out during the underwriting proess...ie Reg FD requires that a company announce material items to ALL investors at the same time. And of course, no investor is going to want to buy into a secondary and then have earnings news come out..so they either had to put out the prelim statement, or wait until their financials were completely buttoned down. So the question is: Why Now? IMO they do NOT need this additional cash for the Pacer deal (they publically stated that), so they either don't want to risk a weakening market environment (which I don't believe is the case) or the pipeline of deals is so full, that they are on the cusp of announcing yet another deal (more likely to be the case). If you bought XPO and did NOT think that there would be additional equity offerings, then you weren't paying attention. The attractive aspect of these deals is that the big Funds (who want to ride with Jacobs) would rather buy into deals like this, and know what price they are paying, than try to accumulate a position in the market; drive up the price, and perhaps still not get the shares they want.