The hurricanes that struck Puerto Rico, Florida, Texas, and other portions of the Caribbean and the Gulf Coast had monumental impacts on millions of people. For many, power and communications are still down, showing the limitations of terrestrial-based power and telecom infrastructure. Iridium Communications (NASDAQ: IRDM) offers an alternative, and its satellite-communications network became a go-to resource for first responders in disaster-stricken areas.
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Coming into Thursday's third-quarter financial report, Iridium investors were hopeful that ongoing efforts to modernize the company's satellite network would result in more business. Yet the rise in demand for Iridium products linked to the recent hurricanes came as a welcome surprise for many shareholders, and the sat-com provider sees its positive momentum continuing to carry it forward. Let's look more closely at how Iridium Communications did and what its future looks like.
Iridium rides the wind
Iridium Communications' third-quarter results showed its strength in the face of adversity. Revenue climbed 3% to $116.5 million, which was far better than the 1% gains that most analysts following the stock were expecting to see. Net income declined 7% to $29.3 million, but the resulting earnings of $0.23 per share compared favorably to the $0.18-per-share consensus forecast.
Iridium's growth was fairly consistent across its business. Service revenue matched the company's overall sales gains of 3%, while equipment sales trended higher by 9% even as the small amount of revenue that Iridium gets from government-sponsored projects fell slightly.
Overall subscriber counts were impressive. The company reported 949,000 total billable subscribers, up 37,000 in the quarter and higher by 111,000 compared to this time last year. On the commercial side, segment revenue rose 4% on a gain of 98,000 customers over the past 12 months. Demand for data subscriptions far outpaced the 3% rise in voice-and-data packages, and machine-to-machine data connections are approaching three-fifths of Iridium's overall business on the commercial side. Average revenue per user was down slightly, likely reflecting new customers getting familiar with the service.
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Performance on the government service side of the business was less exciting. Segment revenue of $22 million was little changed from a year ago, although 13,000 new subscribers brought the company's total count to 95,000.
CEO Matt Desch was extremely pleased with how the quarter played out. "Large storms in Florida, Texas and Puerto Rico demonstrated the criticality of Iridium's communications network," Desch said, "as thousands of Iridium devices were deployed by first responders and relief organizations to provide aid in impacted areas." The CEO also cited typical seasonal upticks in equipment sales demand that helped drive further success.
What's NEXT for Iridium?
Iridium also said that its deployment of the Iridium NEXT satellite system continues apace. The company launched its third batch of satellites in early October, and the next launch should come in late December if SpaceX's current schedule remains unchanged.
In light of its favorable results, Iridium boosted its guidance. The sat-com provider still thinks that service revenue will rise by between 3% and 5% this year, but it now expects operational pre-tax operating earnings of $260 million to $265 million, which is the upper half of its previous guidance range. If it can finish Iridium NEXT's deployment next year as scheduled, Iridium still sees between $440 million and $465 million in service revenue in 2019, with comfortable leverage levels over the next two years.
With a new vote of confidence among a key group of potential users, Iridium could use its experience during recent natural disasters as another way to emphasize the need for satellite-communications capabilities.
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