Summary
- Management at Iridium Communications continues to surprise investors with growing subscriber counts.
- This came despite the COVID-19 pandemic, but not everything was great.
- ARPU was particularly weak in some areas, and the company's top-line results could have been better.
- Some uncertainty does exist and shares are not cheap by any means, but it could be an interesting prospect for the right kind of investor.
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One of the most unique companies on the market today is Iridium Communications (IRDM). With its satellite constellation encircling the globe, the company is a niche play on global communications. Mariners at sea, governments looking for connectivity to telecommunications assets across the globe, and even travelers who make treks into the great unknown utilize the firm’s services. After completing the launch of its constellation last year, the firm has had the opportunity to prove that its multi-billion-dollar gamble on the satellites will pay off. In its latest earnings release, the firm did reveal some results that were a little disappointing, but given the effects of the COVID-19 pandemic that should be temporary in nature and the number of subscribers utilizing its system, the firm still offers investors with attractive long-term prospects.
Mixed results
Iridium is a company that is still very much in growth mode. Even with that said, investors cannot expect every quarter to post growth across the board. As an example, consider the company’s revenue for its most recent quarter, the second quarter of its 2020 fiscal year. According to management, revenue came in at $140.17 million. This is actually 2% lower than the $143.10 million the firm reported the same quarter last year. It’s worth saying that not all revenue components behaved similarly.
Services revenue actually ended up growing 2.3% year over year, while Subscription Equipment sales dropped 15.4% from $23.42 million to $19.82 million. Even within Services, revenue was volatile based on service line. Broadband revenue, for instance, managed to grow by 15% year over year. Hosted payload revenue was even stronger, surging by 29%. Meanwhile, the much-larger Voice & Data category reported a 3% decline in sales, while IoT Data sales dropped 5%.
*Taken from Iridium Communications
There’s a lot to unpack here, but at the end of the day there was really one thing that drove sales down: weak ARPU (average revenue per user) on a per-month basis. Voice & Data ARPU ticked down only modestly from $41 per month to $40, but IoT Data ARPU plummeted from $11.40 to $8.91. Fortunately, Broadband fared better, rising from $245 to $258. On the Voice & Data side, the company was hurt by a falling user count. The number of subscribers it had there fell by 3% from 358 thousand last year to 349 thousand today, largely due to weakness caused by COVID-19. This was more the exception than the rule.
