Iridium says coronavirus clouding revenue projection
MT LAUREL, New Jersey — The coronavirus pandemic is making it harder for Iridium to line up customers for its recently upgraded satellite constellation, but isn’t expected to reverse the company’s six-year annual growth streak, according to CEO Matt Desch.
Iridium, a mobile satellite services pioneer that completed its second-generation constellation last year, said April 28 that it expects to finish 2020 with more revenue than 2019 even though the coronavirus pandemic has made full-year forecasting impossible. Prior to the pandemic, McLean, Virginia-based Iridium had told analysts to expect 2020’s results to beat last year’s $447.2 million in revenue by 6-8%.
Desch, in an April 28 earnings call, said the coronavirus is slowing equipment sales into the hard-hit aviation, maritime and oil markets. Sales and activations of satellite phones and specialized texting devices popular with farflung travelers are also down amid widespread stay-at-home orders and the temporary closure of many retailers.
The sales slump Iridium is beginning to experience lands in the middle of the company’s historical peak growth season — the spring and summer in the northern hemisphere — when travel is normally high, boosting demand for Iridium communication devices and services.
Government revenue remains stable, anchored by a seven-year, $738.5 million contract Iridium signed with the U.S. Defense Department in September.
But Iridium’s commercial maritime market presents unique coronavirus-related challenges, Desch said, since ship owners don’t want installation crews coming onboard to install satellite terminals and potentially bringing the disease onboard.
As a result, Iridium no longer expects to reach its goal of growing its new Certus broadband service to $100 million in annual revenue in 2021 because of the coronavirus pandemic, Desch said.
Iridium reported $145.3 million in revenue for the first three months of 2020, up 9% from the same period last year, and counted 32,000 net new subscribers.
Desch said the quarter showed strong growth for Iridium mainly before the coronavirus hampered global markets. “Unfortunately it isn’t what the year is going to pan out to be,” he said.
Analysts say Iridium remains positioned for growth despite the impact of the coronavirus. Raymond James analyst Ric Prentiss wrote April 28 that he expects the pandemic will “be a fleeting impact to results, with a rebound in 2021/2022.”
William Blair analyst Louie DiPalma maintained his “outperform” rating for Iridium’s stock, but cautioned that share value could suffer if the coronavirus pandemic extends into 2021. Iridium shares closed April 28 at $24.29, down nearly 30% from its 52-week high.
Speedcast and OneWeb worries nil, Ligado worries real but tempered
Desch said the back-to-back bankruptcies of Iridium partners Speedcast in April and OneWeb in March will have little impact on the satellite operator.
Iridium was listed as one of Speedcast’s largest unsecured creditors, with a claim worth $877,000. Desch said Speedcast inherited some business with Iridium through its acquisitions of satellite services providers Globecomm and Harris CapRock. Iridium hoped to do more business with Speedcast, but viewed the Australian network operator as more of a future partner, he said.
Tom Fitzpatrick, Iridium’s chief financial officer, said Iridium nonetheless expects to be labeled a critical vendor to Speedcast, ensuring payment. “We expect to collect that receivable, notwithstanding their bankruptcy,” he said.
Desch said significant revenues from OneWeb were at best years away.
Iridium and OneWeb announced a partnership in September to develop a combined service offering that would pair Iridium’s robust but low data rate L-band connectivity with OneWeb’s future high-throughput Ku-band service. Very little progress had been made since that announcement though, Desch said.
“We had no expectations of any revenue coming from that for a while, and in fact we could see that OneWeb wasn’t working too hard on the product,” Desch said.
One company whose status Iridium is concerned about is Ligado, a geostationary L-band satellite operator that on April 20 received FCC approval to build a network of signal transmitters across the United States.
Ligado plans to use its satellite and a network of signal transmitters — an ancillary terrestrial component — for a 5G network aimed mainly at internet-of-things devices.
Desch said Iridium worries Ligado’s service will interfere with Iridium’s services, and that Iridium will join other L-band stakeholders in the GPS and aviation communities fighting against Ligado rolling out service.
Iridium’s assessment is that Ligado is a long way from activating service, giving Iridium and others plenty of time to respond to the FCC’s decision.
“It’s years down the road but we shouldn’t have to be dealing with it,” he said. “That’s why we continue to reject it. We continue to fight it.”