Iridium Revenue Up in Q3, But Stock Price is Down Due to Qualcomm Frustration, Analyst Notes

Photo: Iridium

Revenue at Iridium Communications increased 7% in the third quarter of 2023 compared to the same time last year, but the company’s stock value dipped after the results were released on Oct. 19. Iridium did not have an update on its Qualcomm chip partnership, which one analyst noted is frustrating investors. 

Iridium’s third quarter revenue was $197.6 million, an increase of 7% year-over-year. However, Iridium reported a net loss for the quarter of $1.6 million, compared to net income of $2.1 million in the same time last year. Iridium said the net loss from costs associated with refinancing of Iridium’s credit facility, which extends the maturity to September 2030 and reduces the interest rate.

The company ended the quarter with 2,236,000 total billable subscribers, an increase of 96,000 from the prior quarter, and up 13% year-over-year, driven by growth in commercial IoT. 

Iridium reported a 12% increase in commercial service revenue in the third quarter, with growth across voice and data, IoT data, and broadband. 

However, equipment revenue of $20.4 million was down 27% compared to the same time last year, and Iridium is expecting equipment sales to be lower than 2022’s record level.

Iridium updated its guidance, increasing the midpoint of the 2023 adjusted EBITDA estimates to $462.5 million, compared with the prior midpoint of $460 million. It also updated guidance for 2023 service revenue growth to be approximately 10%, rather than a range of 9% to 11%.

Iridium did not have an update on its partnership with Qualcomm for satellite-compatible chips that will enable messaging on Android cell phones via Iridium’s satellite constellation. Last quarter, Iridium said it doesn’t expect the first cell phones to be activated until 2024. 

“Adoption of this service by manufacturers is slower than Qualcomm originally projected, but we continue to believe that Iridium will be a player over the coming years in smartphones, automobiles, and other consumer products,” Iridium CEO Matt Desch told investors last week.

Iridium’s stock value has fallen about 12% since the results were released. 

William Blair analyst Louie DiPalma published a note on Iridium earnings, writing that the lack of updates on Qualcomm has been disappointing. The previous expectation was that high-margin Iridium smartphones would reach the market late this year. 

DiPalma noted that investors no longer expect Iridium to be in the marquee Samsung Galaxy S24 phone that may hit the market in January, and investors are “very frustrated.”

“Iridium previously expressed confidence in Qualcomm, conveying that it knows what it is doing. We ultimately got this aspect of the story wrong as we placed too much faith in Qualcomm,” DiPalma said. “Although Qualcomm was historically one of the cutting-edge global chip leaders, it has fallen from grace and risks becoming a legacy tech company. Regardless, Iridium’s core business continues to generate strong growth and free cash flow. The stock should trend higher when investors get over the Qualcomm disappointment.”