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Iridium (IRDM) Incurs Wider GAAP Loss in Q1, Revises View

Zacks Equity Research

Iridium Communications Inc. IRDM reported unimpressive first-quarter 2020 results, with GAAP net loss widening year on year. Nevertheless, revenues increased on a year-over-year basis. The stock declined 9.8% in response to the results and closed at $21.91 on Apr 28.

Net Loss

On a GAAP basis, net loss in the March quarter was $31.7 million or loss of 24 cents per share wider than a net loss of $18 million or loss of 18 cents per share in the prior-year quarter. The deterioration was primarily caused by a loss on debt extinguishment associated with the company’s refinancing of senior unsecured notes.

First-quarter adjusted loss per share came in at 6 cents, narrower than a loss of 18 cents in the prior-year quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 16 cents.

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 amounted to $145.3 million compared with $133.7 million in the year-ago quarter. The uptick can be attributed to increased total service revenues as well as higher subscriber equipment, and engineering and support service revenues. The top line surpassed the consensus mark of $141 million.

Total service revenues increased 8.4% to $116 million from $107 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% to total revenues in the first quarter. Subscriber equipment revenues increased 6% to $22.3 million from $21 million in the year-ago quarter. Engineering and support service revenues rose 23.1% to $7 million, driven by higher volume of contracted work with the U.S. government.

Other Details

Total operating expenses were $133.5 million compared with $135.3 million in the prior-year quarter. This upside was primarily led by lower R&D and SG&A expenses. Operational EBITDA (OEBITDA) increased $14 million to $92.1 million, or 63.4% of revenues from $78 million, or 58.4% of revenues in the first quarter of 2019. The increase was driven by higher government service revenues and robust growth in commercial IoT.

During the quarter, the company registered 1,332,000 billable subscribers compared with 1,151,000 in the year-ago quarter. The year-over-year increase of 15.7% was backed by growth in commercial and government IoT customers.

Cash Flow & Liquidity

During the quarter, Iridium’s capital expenditures were $9.5 million compared with $34.6 million in the prior-year quarter. As of Mar 31, the company had $67.3 million in cash and equivalents with $1,582.7 million of net debt.

2020 Guidance Updated

Considering the COVID-19 pandemic, Iridium has revised outlook for 2020. Despite certain macroeconomic challenges, the company expects unspecified growth in total service revenues for full-year 2020. In fourth-quarter 2019, Iridium had expected that total service revenues for 2020 will grow 6-8% on broadband activations, government contracts and hosting revenues with robust IoT growth.

The company currently anticipates a decline in equipment revenues due to downfall in oil and gas markets coupled with supply chain disruptions against the prior guidance of increased equipment sales driven by product development. Iridium expects unspecified growth in OEBITDA for full-year 2020 compared with prior guidance of $355-$365 million. Net leverage is anticipated to be maximum 4.4x OEBITDA compared with the previous expectation of 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 InterDigital, Inc. IDCC, Opera Limited OPRA and Radcom Ltd. RDCM. While InterDigital sports a Zacks Rank #1 (Strong Buy), Opera and Radcom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

InterDigital’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 62%, on average.

Opera’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 192.9%, on average.

Radcom’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 47.1%, on average.

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