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Iridium Q4 earnings slip on higher expenses, but still beat Street

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Iridium Communications (NASDAQ:IRDM) said Tuesday higher expenses in its fourth quarter caused earnings to fall, though the company still beat analysts' estimates.

Total revenues for the three months ending December 31 rose eight percent to $94.98 million, from $87.93 million in the same period last year.

Still, total operating expenses also rose nine percent to $79.2 million, as research and development spending rose 77 percent, and the cost of equipment sold rose 27 percent, leading the communications company to post a net income of $8.4 million, or $0.11 per share, during the quarter, down 17 percent from $10.1 million, or $0.14 per share, a year ago.

According to FactSet, analysts were expecting $0.09 per share in earnings, on $92.2 million in sales.

CEO Matt Desch said: "2011 was a record year for Iridium as we reached important milestones for subscriber, service revenue and cash flow growth.

"Our ongoing success is rooted in having a superior network, unmatched capabilities in the highest growth segments of our market and a sustainable set of product-related competitive advantages anchored by a motivated partner channel.

"2012 is shaping up to be another year of growth as we expect to cross the $200 million Operational EBITDA threshold on our way to launching Iridium NEXT.

"We're obsessive innovators, and we'll continue to expand and improve our service portfolio in 2012 and beyond.

"With the recent launch of Iridium PilotTM, our second-generation maritime broadband platform, we're bringing enhanced voice and broadband data capabilities to our customers all over the world at a low cost.

"We'll also deliver a new, 70 percent smaller M2M device in the next few months, building on the success of a market that has grown subscribers at least 50 percent year-over-year for five consecutive quarters.

"Iridium remains healthy and strong, and we continue to make the right decisions to support recurring service revenue growth and operating cash flow expansion." 

Under Iridium's service segment, total service revenues rose 11 percent to $66.6 million.

Total commercial service revenues rose 14 percent to $50.6 million, including a nine percent rise in voice revenues and a 48 percent increase in machine-to-machine (m2m) revenues. The company increased the total number of commercial service subscribers by 24 percent during the fourth quarter, to 475,000 clients, as average revenue per user (ARPU) for its voice services fell two percent to $46.

In government services, total revenues rose three percent to $16.05 million, reflecting a 39 percent rise in m2m data service revenues, and a two percent rise in voice revenues. The company increased government subscribers by 12 percent during the quarter, as ARPU fell two percent for voice, to $138, and 14 percent for m2m data, to $19.

Total subscriber equipment sales rose seven percent during the last three months of the year, to $22.5 million, more than offset by a 14 percent decline in total engineering and support revenues, to $5.9 million.

For the full year fiscal 2011, the company reported net earnings of $39.7 million, or $0.54 per share, up 75 percent. Revenues rose 10.4 percent to $384.3 million, including $262.3 million in service revenues, and $122.0 million in equipment, engineering and support revenues.

Looking forward, the company said it predicts subscriber growth between 20 percent and 25 percent for the full year 2012, representing a range of 627,600 to 653,750 subscribers.

Total service revenues, which represented over half of the company's total revenues in the fourth quarter, are expected to increase between eight percent and 11 percent.

On the Nasdaq Exchange, shares of the McLean, Virginia-based company rose 7.3 percent to $7.94, as of 12:58 am EDT.

Quick facts: Iridium Communications

Price: 22.67 USD

NASDAQ:IRDM
Market: NASDAQ
Market Cap: $2.99 billion
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