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

Zacks Equity Research
·4-min read

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 and EPS Surprise
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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