[Satellite News 08-08-11] Iridium Communications reported $11.7 million in 2011 second quarter earnings — a considerable leap from the $3.2 million generated in the same period last year, marking the second consecutive quarter that Iridium has exceeded analysts’ forecasts.
In its latest financial results issued Aug. 8, Iridium recoded a 14 percent second-quarter total revenue increase at $95.9 million, which consisted of $30.8 million of equipment, engineering and support revenue and a 10 percent increase in service revenues at $65.1 million. Service revenues constituted 68 percent of the mobile satellite operator’s total revenue for the second quarter of 2011.
Raymond James Analyst Chris Quilty said Iridium’s performance during the quarter suggests that the company is on track to meet or exceed its full-year forecast. “The most noteworthy driver was the company’s commercial voice business with satellite phones, which posted year-over-year revenue growth of 8 percent and was 3 percent higher than our estimate,” Quilty told Satellite News. “This provides further evidence that Iridium can continue to grow its voice business despite increasing competition from VSAT providers and [Inmarsat’s] IsatPhone. Iridium’s commercial machine-to-machine (M2M) also was excellent and exhibited revenue and net addition growth of 18.8 percent and 82 percent respectively, driven by the company’s high speed 9602 modem.”
Iridium CEO Matt Desch told Satellite News that in the past, the company found itself being too conservative with 9602 projections. “We’ve seen it develop to the point where its size and price performance have been extremely well received across a wide range of markets. We know our partners have a lot of choices for a machine-to-machine solution,” he said. “The only problem that we tend to run into is that our devices were a little bit too expensive. Our goal was to fix that by the time we came out with the 9602. Now, we’re cost-competitive and have the best technical solution and we’re seeing that those customers who weren’t working with us before have been moving towards us and that those who had been working with us can now address more of their markets.”
Iridium achieved double-digit subscriber and operational EBITDA growth in the fiscal period, ending the quarter with 478,000 total billable subscribers — a 25 percent increase from Iridium’s 383,000-subscriber mark in the 2010 second quarter. Iridium’s operational EBITDA jumped 34 percent to $48.4 million, representing a margin of 50 percent.
Desch said his company has focused on strengthening its revenue profile in new markets. “Approximately 40 percent of our total service revenue now comes from data products and services. Showcasing our strength in the data market, we grew commercial M2M data revenue more than 18 percent in the second quarter.”
The operator saw $114.6 million in capital expenditures during the second quarter, which were primarily related to investments in the company’s next-generation satellite constellation, Iridium Next, as well as upgraded ground network infrastructure at its commercial gateway.
Iridium also reported success in the government market, with sector revenues up 14 percent, reflecting 12 percent growth in voice revenues and a two-fold increase in government M2M revenues. While the operator’s overall government subscribers increased 24 percent from 2010 second-quarter to 48,000, Quilty noted that its sequential growth was minimal at approximately 1,000 new subscribers. “We expect subscriber growth to pick up in the back half of the year once Iridium completes its phase 3 development work on the Netted Iridium program, which is a precursor to selling more handsets,” he said.
Desch affirmed Iridium’s 2011 financial guidance, including subscriber growth, revenue growth and operational EBITDA. To date, Iridium has delivered revenue and EBITDA growth of 13 percent. Market analysts noted that Iridium’s guidance indicates that the company will deliver back half revenue and EBITDA growth of 1 percent and 13 percent, respectively.
“We’ll continue to shape the global communications landscape along with our ecosystem of partners, bringing personal tracking devices and smartphone connections to market in support of this vision and our proven strategy of growing highly profitable service revenue. In addition to our own upcoming handset innovations, we’re also seeing rapid adoption of two-way data devices by many of our partners,” said Desch.
Iridium ended the second quarter with cash and equivalents balance of $103.8 million and gross debt of $265.3 million. The operator’s net debt stands at $147.9 million.
