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Iridium (IRDM) Down 5.3% Since Last Earnings Report: Can It Rebound?

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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 5.3% 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 catalysts.

Iridium Q2 Earnings Top Estimates on Higher Revenues

Iridium reported impressive second-quarter 2021 results, with both the bottom line and top line surpassing their respective Zacks Consensus Estimate. Growing subscriber base and higher service revenues supported by solid demand for consumer-oriented personal communications and tracking devices amid modest recovery post the COVID-19 turmoil acted as major tailwinds.

Bottom Line

On a GAAP basis, net income in the June quarter was $3.8 million or 3 cents per share against net loss of $12.4 million or loss of 9 cents per share in the prior-year quarter. The year-over-year improvement was mainly driven by higher revenues, fueled by strength in recurring service revenues. The bottom line beat the Zacks Consensus Estimate by 11 cents.

Revenues

Quarterly revenues totaled $149.9 million compared with $140.2 million in the year-ago quarter, mainly driven by strength in subscriber equipment sales and higher service revenues. The top line surpassed the consensus mark of $148 million.

Total service revenues increased 7% to $121.3 million from $113.4 million in the year-ago quarter. This was primarily driven by strong revenues from growing subscriber base. Service revenues contributed 81% to total revenues in the second quarter. Robust performance in broadband, commercial voice and data, and IoT played a contributing role as well.

Subscriber equipment revenues grew 9.8% to $21.8 million from $19.8 million in the year-ago quarter due to its solid demand. However, engineering and support service revenues declined 2.4% to $6.8 million from $7 million in the prior-year quarter, mainly due to the episodic nature of contract work with the U.S. government.

Other Details

Total operating expenses were $138.3 million compared with $134.3 million in the prior-year quarter mainly due to higher selling, general and administrative expenses. Operational EBITDA (OEBITDA) jumped 11.2% to $94.8 million or 63.2% of revenues from $85.3 million or 60.8% of revenues in the second quarter of 2020. The development was mainly driven by higher service revenues.

During the quarter, the company registered 1,616,000 billable subscribers compared with 1,362,000 in the year-ago quarter. The year-over-year increase was backed by growth across all service categories, followed by continued strength in personal communications and tracking devices.

Cash Flow & Liquidity

During the first six months of 2021, Iridium generated $126 million of net cash from operations compared with $104.5 million in the prior-year period. Capital expenditures were $19.2 million compared with $18.7 million in the year-ago period. As of Jun 30, the company had $213.4 million in cash and cash equivalents with $1,590.8 million of net long-term secured debt. As part of the previously announced $300 million share buyback program, the company repurchased 1.7 million shares at a total purchase price of $63.2 million.

2021 Guidance Updated

Despite macroeconomic headwinds caused by the pandemic, Iridium has emerged as a strong player on the back of its resilient business model. The company has raised 2021 outlook for total service revenues. It expects service revenues to grow between 4% and 5% compared with previous outlook of 3%. 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 below 3.5x OEBITDA at the end of 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 57.81% due to these changes.

VGM Scores

At this time, Iridium has a nice Growth Score of B, a grade with the same score on the momentum front. However, 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 trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Iridium has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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