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Why Is Iridium (IRDM) Down 1.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Iridium Communications (IRDM - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Iridium due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Iridium Records Narrower Q1 Loss, Revenues Up Y/Y
Iridium reported relatively healthy first-quarter 2021 results, with GAAP net loss narrowing year over year on higher revenues. The company recorded double-digit subscriber growth in the quarter driven by robust demand for consumer-oriented IoT devices amid modest recovery post the COVID-19 turmoil.
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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -26.32% due to these changes.
VGM Scores
Currently, Iridium has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Iridium has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Iridium (IRDM) Down 1.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Iridium Communications (IRDM - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Iridium due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Iridium Records Narrower Q1 Loss, Revenues Up Y/Y
Iridium reported relatively healthy first-quarter 2021 results, with GAAP net loss narrowing year over year on higher revenues. The company recorded double-digit subscriber growth in the quarter driven by robust demand for consumer-oriented IoT devices amid modest recovery post the COVID-19 turmoil.
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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -26.32% due to these changes.
VGM Scores
Currently, Iridium has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Iridium has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.