Iridium (IRDM) Q2 Loss Narrower Than Estimates, Revenues Fall

Iridium Communications Inc. IRDM reported tepid second-quarter 2020 results, with GAAP net loss narrowing year over year on lower revenues. The stock inched up 4.6% in response to the results and closed at $28.62 on Jul 28.

Net Loss

On a GAAP basis, net loss in the June quarter was $12.4 million or loss of 9 cents per share. The figure was narrower than net loss of $18.1 million or loss of 16 cents per share in the prior-year quarter. The year-over-year improvement was driven by lower R&D expenses and lower operating costs. Decline in net interest expenses associated with the company’s refinancing of high-yield notes and credit facility in the year-ago quarter was also a contributing factor. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 14 cents.

Iridium Communications Inc Price, Consensus and EPS Surprise

Iridium Communications Inc price-consensus-eps-surprise-chart | Iridium Communications Inc Quote

Revenues

Quarterly revenues totaled $140.2 million compared with $143.1 million in the year-ago quarter. The downtick was mainly caused by lower engineering and support service revenues as well as subscriber equipment sales due to COVID-19 pandemic. Nevertheless, the top line surpassed the consensus mark of $136 million.

Total service revenues increased 2.3% to $113.4 million from $110.8 million in the year-ago quarter. This was primarily driven by growing subscriber base in the commercial and government service business. Markedly, service revenues contributed 80.9% to total revenues in the second quarter. Subscriber equipment revenues declined 15.4% to $19.8 million from $23.4 million in the year-ago quarter due to the adverse impact of the outbreak. Engineering and support service revenues declined 21.1% to $7 million mainly due to the episodic nature of contracted work with the U.S. government.

Other Details

Total operating expenses were $134.3 million compared with $139.4 million in the prior-year quarter. The improvement was primarily led by lower R&D expenses. Operational EBITDA (OEBITDA) increased $0.2 million to $85.3 million, or 60.8% of revenues from $85.1 million, or 59.4% of revenues in the second quarter of 2019.

During the quarter, the company registered 1,362,000 billable subscribers compared with 1,213,000 in the year-ago quarter. The year-over-year increase was backed by growth in commercial and government IoT customers.

Cash Flow & Liquidity

During the quarter, Iridium’s capital expenditures were $9.2 million compared with $57.9 million in the prior-year quarter. As of Jun 30, the company had $119.1 million in cash and equivalents with $1,526.8 million of net debt.

2020 Guidance Updated

Considering the COVID-19 pandemic, Iridium has revised its outlook for 2020. Despite macroeconomic challenges, the company expects full-year 2020 total service revenues to grow within a range of 1-2% backed by stabilized IoT and voice business post COVID-19 crisis.

The company currently anticipates softness in equipment revenues due to market downfall coupled with supply chain disruptions triggered by the global pandemic. Iridium expects full-year 2020 OEBITDA to be nearly $340 million compared with 2019 guidance of $331.7 million. Net leverage is anticipated to be nearly 4.3x OEBITDA compared with the prior expectation of 4.4x OEBITDA at the end of 2020.

Zacks Rank & Stocks to Consider

Iridium currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader industry are T-Mobile US, Inc. TMUS, Calix, Inc. CALX and Cisco Systems, Inc. CSCO. While T-Mobile and Calix sport a Zacks Rank #1 (Strong Buy), Cisco carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

T-Mobile’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 19.4%, on average.

Calix’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 59.7%, on average.

Cisco’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 4%, on average.

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