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Iridium (IRDM) Records Narrower Q1 Loss, Revenues Up Y/Y

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Iridium Communications Inc. (IRDM - Free Report) reported relatively healthy first-quarter 2021 results, with GAAP net loss narrowing year over year on higher revenues. Despite double-digit subscriber growth supported by robust demand for consumer-oriented IoT devices amid modest recovery post the COVID-19 turmoil, the stock plunged 6.6% to close at $35.93 on Apr 20.

Bottom Line

On a GAAP basis, net loss in the March quarter was $5.2 million or loss of 4 cents per share. The figure was narrower than net loss of $31.7 million or loss of 24 cents per share in the prior-year quarter. The year-over-year improvement was mainly driven by higher revenues. Absence of debt extinguishment costs, along with refinancing of senior unsecured notes in the prior-year period, was also a contributing factor. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 5 cents.

Iridium Communications Inc Price, Consensus and EPS Surprise

Iridium Communications Inc Price, Consensus and EPS Surprise

Revenues

Quarterly revenues totaled $146.5 million compared with $145.3 million in the year-ago quarter, mainly driven by strength in subscriber equipment sales and higher service revenues. The top line matched the consensus mark of $147 million.

Total service revenues inched up 0.2% to $116.2 million from $116 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% to total revenues in the first quarter.

Subscriber equipment revenues improved 8% to $24 million from $22.3 million in the year-ago quarter due to its robust demand. Favorable shipments and healthy growth trend are expected to drive its sales. However, engineering and support service revenues declined 8.8% to $6.4 million from $7 million in the prior-year quarter, mainly due to the episodic nature of contracted work with the U.S. government.

Other Details

Total operating expenses were $137.5 million compared with $133.5 million in the prior-year quarter mainly due to higher selling, general and administrative expenses. Operational EBITDA (OEBITDA) decreased 2.5% to $89.8 million or 61.3% of revenues from $92.1 million or 63.4% of revenues in the first quarter of 2020.

During the quarter, the company registered 1,518,000 billable subscribers compared with 1,332,000 in the year-ago quarter. The year-over-year increase was backed by growth in commercial and government IoT customers, driven by continued strength in personal communications devices.

Cash Flow & Liquidity

During the first three months of 2021, Iridium generated $50.8 million of net cash from operations compared with $40.8 million in the prior-year period. Capital expenditures were $9.4 million in the reported quarter compared with $9.5 million in the year-ago period. As of Mar 31, the company had $214.8 million in cash and cash equivalents with $1,594 million of net long-term secured debt. As part of the previously announced $300 million share buyback program, the company repurchased 1.6 million shares at a total purchase price of $59.3 million.

2021 Guidance Restated

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 reiterated 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 & Stocks to Consider

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

Some better-ranked stocks in the broader industry are Cambium Networks Corporation (CMBM - Free Report) , ORBCOMM Inc. (ORBC - Free Report) and Nokia Corporation (NOK - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cambium delivered a trailing four-quarter positive earnings surprise of 128%, on average.

ORBCOMM delivered a trailing four-quarter positive earnings surprise of 24%, on average.

Nokia delivered a trailing four-quarter positive earnings surprise of 40.2%, on average.

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