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Why ORBCOMM Stock Plunged Today

By Evan Niu, CFA - Oct 30, 2019 at 1:11PM

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The Internet of Things specialist missed revenue and profit estimates in the third quarter.

What happened

Shares of ORBCOMM (ORBC) have plunged today, down by 19% as of 12:20 p.m. EDT, after the company reported third-quarter earnings results. The maker of industrial Internet of Things technology missed on both the top and bottom lines.

So what

Total revenue in the third quarter declined to $69.2 million, shy of the consensus estimate of $71.4 million. That translated into a net loss of $4 million, or $0.05 per share, $0.01 worse than the $0.04 per share in adjusted losses that the market was expecting. Adjusted EBITDA was $16.9 million in the third quarter.

Man wearing hard hat and fluorescent yellow vest holding laptop and looking at various projected Internet of Things icons

Image source: Getty Images.

"In the third quarter we continued to ship greater quantities of the new cost-reduced, feature-rich products and made great progress in significantly raising Product Margin and Service Margin, increasing cash flow from operations," CEO Marc Eisenberg said in a statement. "We have several high-profile opportunities across our markets that are starting to fall in line, and I'm confident that we'll be able to build on this momentum, setting the stage for a strong start to 2020."

Now what

In terms of guidance, ORBCOMM expects revenue in the fourth quarter to be in the range of $68 million to $72 million, which is lower than the company had expected. ORBCOMM in July guided revenue in the second half of 2019 to $145 million to $155 million. The company attributed the shortfall to "the slowdown in the North American transportation market," as well as its ongoing shift to a subscription model that recognizes revenue over time. Adjusted EBITDA margin in the fourth quarter should be around 24%.

ORBCOMM also issued preliminary guidance for 2020, expecting product revenue to grow 10% to 15% next year. Recurring service revenue is forecast to grow "at low single digits to start 2020" before rising to "high single digit growth" in the back half of the year.

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