Iridium (IRDM) Records Narrower Q4 Loss, Offers Bullish View

Iridium Communications Inc. IRDM reported relatively healthy fourth-quarter 2020 results, with GAAP net loss narrowing year over year on higher revenues. Despite COVID-19 adversities, the company recorded double-digit subscriber growth in 2020 driven by a resilient business model and strength of its safety services and mobility platform.

Net Loss

On a GAAP basis, net loss in the December quarter was $7.9 million or loss of 6 cents per share compared with net loss of $107.9 million or loss of 82 cents per share in the prior-year quarter. The year-over-year improvement was mainly driven by higher revenues in the reported quarter and high debt extinguishment charges in the year-earlier quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 8 cents. In full-year 2020, the company reported net loss of $56.1 million or loss of 42 cents per share compared with net loss of $162 million or loss of $1.33 per share in 2019.

Iridium Communications Inc Price, Consensus and EPS Surprise

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

Revenues

Quarterly revenues totaled $146.5 million compared with $138.9 million in the year-ago quarter. The 5.5% growth was mainly driven by strength in subscriber equipment sales and higher engineering and support service revenues. The top line surpassed the consensus mark of $139 million. In full-year 2020, total revenues improved to $583.4 million from $560.4 million in 2019.

Total service revenues inched up 2.9% to $116.9 million from $113.6 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 79.8% to total revenues in the fourth quarter. Subscriber equipment revenues improved 10.5% to $18.9 million from $17.1 million in the year-ago quarter due to robust demand in the reported quarter. Continued favorable trends related to the U.S. dollar exchange rate were also a vital factor. Engineering and support service revenues soared 28.9% to $10.7 million, mainly due to the episodic nature of contracted work with the U.S. government.

Other Details

Total operating expenses were $141.4 million compared with $138.9 million in the prior-year quarter. Operational EBITDA (OEBITDA) increased 5.9% to $84.8 million or 57.9% of revenues. The company ended the quarter with 1,476,000 billable subscribers compared with 1,300,000 in the year-ago quarter. The year-over-year increase was backed by growth in commercial IoT customers, driven by rising activations of personal communications devices.

Cash Flow & Liquidity

In 2020, Iridium generated $249.8 million of net cash from operations compared with $198.1 million a year ago. Capital expenditures in 2020 were $38.7 million compared with $117.8 million in 2019. As of Dec 31, 2020 the company had $237.2 million in cash and equivalents with $1,596.9 million of net long-term secured debt compared with respective tallies of $223.6 million and $1,412.5 million in the year-ago period. Management authorized a new share buyback program that would enable the company to repurchase $300 million worth of shares by the end of 2022.

Guidance

Despite the macroeconomic headwinds caused by COVID-19 pandemic, Iridium has emerged as a strong player on the back of its resilient business model. The company has offered a bullish outlook for 2021 and expects service revenues to grow 3% year over year. Iridium expects full-year 2021 OEBITDA to be between $365 million and $375 million, up from $355.6 million in 2020. Net leverage is anticipated to be nearly 3.5x OEBITDA by the end of 2022.

Zacks Rank & Other Stocks to Consider

Iridium currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader industry are Knowles Corporation KN, sporting a Zacks Rank #1 (Strong Buy), and Viavi Solutions Inc. VIAV and Corning Incorporated GLW, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Knowles has a long-term earnings growth expectation of 10%. It delivered a positive earnings surprise of 19.3%, on average, in the trailing four quarters.

Viavi delivered a positive earnings surprise of 20.2%, on average, in the trailing four quarters.

Corning has a long-term earnings growth expectation of 2%. It delivered a positive earnings surprise of 41.6%, on average, in the trailing four quarters.

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