Comtech Telecommunications Corp. Announces Results for Fiscal 2016 Fourth Quarter and Full Year and Provides Fiscal 2017 Guidance
October 6, 2016 at 5:30 PM EDT
MELVILLE, N.Y.--(BUSINESS WIRE)--
October 6, 2016--Comtech Telecommunications Corp. (NASDAQ:CMTL) today
reported its operating results for the fourth quarter and fiscal year
ended July 31, 2016. The Company also announced financial targets for
its 2017 fiscal year.
2016 Fourth Quarter Highlights
Net sales for the three months ended July 31, 2016 were $152.4 million
compared to $77.5 million for the three months ended July 31, 2015.
The period-over-period increase in net sales reflects incremental
sales of approximately $85.4 million as a result of the acquisition of
TeleCommunication Systems, Inc. ("TCS"), partially offset by lower
sales of legacy Comtech products. As previously announced, the TCS
acquisition closed on February 23, 2016.
The Company achieved bookings of approximately $202.8 million during
the fourth quarter of fiscal 2016 which translates into a book-to-bill
ratio (bookings divided by net sales) for the quarter of 1.33 compared
with an average book-to-bill ratio of 0.96 for the prior three
Backlog as of July 31, 2016 was $484.0 million.
Operating income was $7.5 million. During the fourth quarter, the
Company expensed $0.6 million of pre-tax acquisition plan expenses,
related to the Company's acquisition of TCS. Excluding these expenses,
the Company would have reported operating income for the fourth
quarter of $8.1 million.
GAAP net income was $2.7 million, or $0.14 per diluted share, for the
three months ended July 31, 2016.
Adjusted EBITDA was $18.8 million. Adjusted EBITDA is a Non-GAAP
financial measure that the Company defines and reconciles to the most
directly comparable GAAP financial measure in the below table.
As of July 31, 2016 the Company had $66.8 million of cash and cash
equivalents which does not reflect the quarterly dividend payment of
$7.0 million that was paid on August 19, 2016. In June 2016, the
Company sold an aggregate of 7,145,000 shares of its common stock in a
public offering resulting in net proceeds to the Company of $95.0
2016 Fiscal Year Highlights
Net sales for the fiscal year ended July 31, 2016 were $411.0 million
compared to $307.3 million for the fiscal year ended July 31, 2015.
The year-over-year increase in net sales reflects incremental sales of
approximately $151.4 million as a result of the acquisition of TCS in
the third fiscal quarter, partially offset by lower sales of legacy
The Company achieved bookings of approximately $451.3 million during
fiscal 2016 which translates into a book-to-bill ratio (bookings
divided by net sales) for the year of 1.10.
Operating loss was $0.6 million for the fiscal year ended July 31,
2016. During the fiscal year ended July 31, 2016, we expensed $21.3
million of pre-tax acquisition plan expenses, almost all of which
relate to the Company's acquisition of TCS. Excluding these expenses,
we would have reported operating income for fiscal year ended July 31,
2016 of $20.7 million.
GAAP net loss was $7.7 million, or $(0.46) per diluted share, for the
fiscal year ended July 31, 2016.
Adjusted EBITDA was $48.1 million for the fiscal year ended July 31,
2017 Fiscal Year Financial Targets
Revenue goal of approximately $600.0 million.
GAAP diluted EPS goal of approximately $0.30.
Adjusted EBITDA goal of approximately $70.0 million.
Total annual amortization of intangibles is expected to range from
$22.0 million to $24.0 million.
Total depreciation expense is expected to range from $16.0 million to
Total amortization of stock-based compensation is expected to be
approximately $5.0 million.
Interest expense is expected to reflect a rate (including amortization
of deferred financing costs) of 5.0% to 6.0%.
The Company's effective income tax rate (excluding discrete tax items
in fiscal 2017) is expected to approximate 33.0%.
Based on the anticipated timing of shipments and performance related
to orders currently in backlog as well as expected orders, the Company
anticipates its financial performance to be heavily weighted toward
the second half of fiscal 2017 with fourth quarter net sales,
operating income and Adjusted EBITDA expected to be the peak quarter,
by far. As a result, the Company expects to report an operating loss
in the first quarter of fiscal 2017 with each of the subsequent fiscal
2017 quarters being profitable.
The Company's fiscal 2017 Adjusted EBITDA target includes twelve full
months of TCS operations and synergies obtained to date. The Company's
fiscal 2017 financial targets also reflect a tactical shift in strategy,
particularly in the Government Solutions segment, as the Company intends
to focus less on large commodity service contracts with more emphasis on
winning small contracts for the Company's niche products with higher
margins. The Company's fiscal 2017 targets also reflect costs associated
with September 2016 leadership changes, as well as expected legal
expenses associated with legacy TCS intellectual property matters which
are discussed in more detail in the Company's Form 10-K filed with the
Securities and Exchange Commission ("SEC") earlier today.
In commenting on the Company's performance during the fourth quarter of
fiscal 2016, Fred Kornberg, President and Chief Executive Officer, noted
"The fourth quarter was an outstanding finish to a transformative year
for Comtech. The fundamentals of our two business segments are solid and
we see strong demand for our product and service offerings, as evidenced
by recent order activity. I am excited about 2017 and believe it will be
the first of many years of sustainable growth."
Additional information about the Company's fiscal 2017 guidance is
included in the Company's fourth quarter investor presentation which is
located on the Company's website at www.comtechtel.com.
The Company has scheduled an investor conference call for 8:30 AM (ET)
on Friday, October 7, 2016. Investors and the public are invited to
access a live webcast of the conference call from the Investor Relations
section of the Comtech web site at www.comtechtel.com.
Alternatively, investors can access the conference call by dialing (877)
876-9177 (domestic), or (785) 424-1666 (international) and using the
conference I.D. "Comtech." A replay of the conference call will be
available for seven days by dialing (800) 839-1198 or (402) 220-0458. In
addition, an updated investor presentation, including earnings guidance,
is available on the Company's web site.
Comtech Telecommunications Corp. designs, develops, produces and markets
innovative products, systems and services for advanced communications
solutions. The Company sells products to a diverse customer base in the
global commercial and government communications markets.
Certain information in this press release contains forward-looking
statements, including but not limited to, information relating to the
Company's future performance and financial condition, plans and
objectives of the Company's management and the Company's assumptions
regarding such future performance, financial condition, and plans and
objectives that involve certain significant known and unknown risks and
uncertainties and other factors not under the Company's control which
may cause its actual results, future performance and financial
condition, and achievement of plans and objectives of the Company's
management to be materially different from the results, performance or
other expectations implied by these forward-looking statements. These
factors include, among other things: the possibility that the expected
synergies from the acquisition of TeleCommunication Systems, Inc.
("TCS") will not be fully realized, or will not be realized within the
anticipated time period; the risk that Comtech's and TCS's businesses
will not be integrated successfully; the possibility of disruption from
the acquisition, making it more difficult to maintain business and
operational relationships or retain key personnel; the nature and timing
of receipt of, and the Company's performance on, new or existing orders
that can cause significant fluctuations in net sales and operating
results; the timing and funding of government contracts; adjustments to
gross profits on long-term contracts; risks associated with
international sales; rapid technological change; evolving industry
standards; new product announcements and enhancements; changing customer
demands; changes in prevailing economic and political conditions;
changes in the price of oil in global markets; changes in foreign
currency exchange rates; risks associated with the Company's and TCS's
legacy legal proceedings, customer claims for indemnification, and other
similar matters; risks associated with Comtech's obligations under its
Secured Credit Facility and acquisition debt; risks associated with the
Company's large contracts; and other factors described in this and the
Company's other filings with the SEC.
COMTECH TELECOMMUNICATIONS CORP.
Consolidated Statements of Operations
Three months ended July 31,
Twelve months ended July 31,
Cost of sales
Selling, general and administrative
Research and development
Acquisition plan expenses
Amortization of intangibles
Operating income (loss)
Other expenses (income):
Interest expense and other
Interest income and other
Income (loss) before provision for income taxes
Provision for (benefit from) income taxes
Net income (loss)
Net income (loss) per share:
Weighted average number of common shares outstanding - basic
Weighted average number of common and common equivalent shares outstanding
Dividends declared per issued and outstanding common share as
of the applicable dividend record date
COMTECH TELECOMMUNICATIONS CORP.
Consolidated Balance Sheets
July 31, 2016
July 31, 2015
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Deferred tax asset, net
Total current assets
Property, plant and equipment, net
Intangibles with finite lives, net
Deferred financing costs, net
Other assets, net
Liabilities and Stockholders' Equity
Accrued expenses and other current liabilities
Customer advances and deposits, current
Current portion of long-term debt
Current portion of capital lease obligations
Total current liabilities
Non-current portion of long-term debt, net
Non-current portion of capital lease obligations
Income taxes payable
Deferred tax liability, net
Customer advances and deposits, non-current
Commitments and contingencies
Preferred stock, par value $.10 per share; shares authorized and
Common stock, par value $.10 per share; authorized 100,000,000
shares; issued 38,367,997 shares and 31,165,401 shares at
July 31, 2016 and 2015, respectively
Additional paid-in capital
Treasury stock, at cost (15,033,317 shares at July 31, 2016 and 2015)
Total stockholders' equity
Total liabilities and stockholders' equity
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Reconciliation
of Non-GAAP Financial Measures to GAAP Financial Measures (Unaudited)
Use of Non-GAAP Financial Measures
In order to provide investors with additional information regarding its
financial results, this press release contains "Non-GAAP financial
measures" under the rules of the SEC. The Company's Adjusted EBITDA is a
Non-GAAP measure that represents earnings before interest, income taxes,
depreciation and amortization of intangibles, amortization of
stock-based compensation, acquisition plan expenses and strategic
alternatives analysis expenses. The Company's definition of Adjusted
EBITDA may differ from the definition of EBITDA used by other companies
and may not be comparable to similarly titled measures used by other
companies, including a similarly titled measure previously utilized by
TCS. Adjusted EBITDA is also a measure frequently requested by the
Company's investors and analysts. The Company believes that investors
and analysts may use Adjusted EBITDA, along with other information
contained in its SEC filings, in assessing its ability to generate cash
flow and service debt. These Non-GAAP financial measures have
limitations as an analytical tool as they exclude the financial impact
of transactions necessary to conduct Comtech's business, such as the
granting of equity compensation awards, and are not intended to be an
alternative to financial measures prepared in accordance with GAAP.
These measures are adjusted as described in the reconciliation of GAAP
to Non-GAAP in the below table, but these adjustments should not be
construed as an inference that all of these adjustments or costs are
unusual, infrequent or non-recurring. Non-GAAP financial measures should
be considered in addition to, and not as a substitute for or superior
to, financial measures determined in accordance with GAAP. Investors are
advised to carefully review the GAAP financial results that are
disclosed in Comtech's SEC filings. The Company has not quantitatively
reconciled its fiscal 2017 Adjusted EBITDA target to the most directly
comparable GAAP measure because items such as stock-based compensation,
adjustments to the provision for income taxes, amortization of
intangibles, costs related to its acquisition plan and interest expense
are certain items that impact these measures, have not yet occurred, are
out of the Company's control, or cannot be predicted. For example,
quantification of stock-based compensation expense requires inputs such
as the number of shares granted and market price that are not currently
ascertainable. Accordingly, reconciliations to the Non-GAAP forward
looking metrics are not available without unreasonable effort and such
unavailable reconciling items could significantly impact the Company's
Three months ended July 31,
Twelve months ended July 31,
Reconciliation of GAAP Net Income to Adjusted