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Iridium (IRDM) Incurs Wider Loss in Q4, Revenues Rise Y/Y

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Iridium Communications Inc. IRDM reported tepid fourth-quarter 2019 results wherein net loss widened but revenues increased on a year-over-year basis. The stock declined 4.7% in response to the results, closing at $27.42 on Feb 25.

Net Loss

On a GAAP basis, net loss in the December quarter was $107.9 million or loss of 82 cents per share compared with a net loss of $7.6 million or loss of 9 cents per share in the prior-year quarter. The deterioration was primarily due to depreciation and amortization charges related to the completion of the Iridium NEXT program, debt extinguishment costs associated with the company’s refinancing, and higher interest expense. In 2019, net loss was $162 million or loss of $1.33 per share compared with a net loss of $13.4 million or loss of 22 cents per share in 2018.

Fourth-quarter adjusted loss per share came in at 15 cents compared with loss of 9 cents in the year-earlier quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 18 cents.

Iridium Communications Inc Price, Consensus and EPS Surprise

Revenues

Quarterly revenues were $138.9 million compared with $132.2 million in the year-ago quarter. The rise was led by higher total service revenues and engineering and support service revenues. The top line matched the consensus estimate.

Total service revenues jumped 5.8% to $113.6 million from $107.3 million in the year-ago quarter. This was primarily driven by growing subscriber base in the commercial and government service business. Subscriber equipment revenues declined 15% to $17.1 million from $20.1 million in the year-ago period. Engineering and support service revenues witnessed substantial increase of 72.7% to $8.3 million, driven by rise in activity with the U.S. government.

In 2019 revenues increased 7.2% to $560.4 million from $523 million on the back of higher service revenues, and engineering and support service revenues.

Other Details

Total operating expenses were $138.9 million compared with $132.3 million in the prior-year quarter. This was primarily due to higher depreciation and amortization charges. Operational EBITDA (OEBITDA) increased $4.7 million to $80.1 million, or 57.7% of revenues from $75.5 million, or 57.1% of revenues in the fourth quarter of 2018. The increase was driven by higher government service revenues combined with robust growth in commercial IoT.

During fourth-quarter 2019, the company registered 1,300,000 billable subscribers compared with 1,121,000 in the year-ago quarter. The year-over-year increase of 16% was backed by growth in commercial IoT and government customers.

Cash Flow & Liquidity

In 2019, Iridium’s capital expenditures were $117.8 million compared with $391.4 million in 2018. As of Dec 31, 2019, the company had $223.6 million in cash and equivalents with $1,586.4 million of net debt compared with the respective tallies of $273.4 million and $1,579.6 million a year ago.

2020 Guidance

Iridium has provided outlook for 2020. Total service revenues are estimated to grow 6-8% on the back of broadband activations, government contracts and hosting revenues with robust IoT growth. Equipment sales are likely to increase driven by product development. Revenues from hosted payloads are expected to be nearly $47 million with OEBITDA in the range of $355-$365 million. Net leverage is anticipated to be nearly 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 Telenav, Inc. TNAV, Perion Network Ltd. (PERI - Free Report) and PCTEL, Inc. PCTI. While Telenav and Perion sport a Zacks Rank #1 (Strong Buy), PCTEL carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Telenav exceeded estimates twice in the trailing four quarters, the positive earnings surprise being 77.1%, on average.

Perion exceeded estimates in each of the trailing four quarters, the positive earnings surprise being 87.9%, on average.

PCTEL exceeded estimates in each of the trailing four quarters, the positive earnings surprise being 150.6%, on average.

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