Comtech Telecommunications Corp. Announces Results for the First Quarter of Fiscal 2016 and Provides Updated Fiscal 2016 Guidance
MELVILLE, N.Y.--(BUSINESS WIRE)--
December 9, 2015--Comtech Telecommunications Corp. (NASDAQ:CMTL) today
reported its operating results for the three months ended October 31,
2015.
Net sales for the three months ended October 31, 2015 were $64.1 million
compared to $76.4 million for the three months ended October 31, 2014.
The period-over-period decrease reflects significantly lower net sales
in the Company's telecommunications transmission segment, partially
offset by higher net sales in its RF microwave amplifier segment. Sales
in its mobile data communications segment were nominally lower
period-over-period. Consistent with the Company's prior guidance
discussed during its September 29, 2015 investor call, the Company's
first quarter results are expected to be the lowest quarter of fiscal
2016.
GAAP net income was $1.4 million, or $0.09 per diluted share, for the
three months ended October 31, 2015 as compared to $5.2 million, or
$0.32 per diluted share, for the three months ended October 31, 2014.
Excluding $1.4 million of pre-tax expenses related to the Company's
focused acquisition plan that were incurred during the three months
ended October 31, 2015, diluted EPS would have been $0.15. The large
majority of the focused acquisition plan expenses related to activities
which resulted in the November 2015 signing of a definitive merger
agreement to acquire TeleCommunication Systems, Inc. ("TCS"), a leading
provider of mission critical Command, Control, Communications,
Computers, Intelligence, Surveillance and Reconnaissance ("C4ISR")
solutions and next generation emergency 911 services to leading cellular
and Voice Over Internet Protocol ("VoIP") providers.
The Company also announced that it is maintaining its fiscal 2016
revenue guidance of $300.0 million to $310.0 million and maintaining its
fiscal 2016 Adjusted EBITDA guidance of $50.0 million to $54.0 million.
Including the $1.4 million of pre-tax expenses related to the Company's
focused acquisition plan, GAAP diluted EPS is now expected to be between
$1.28 and $1.44. Excluding the $1.4 million of pre-tax expenses related
to the Company's focused acquisition plan, the Company's diluted EPS
guidance for fiscal 2016 would have been between $1.34 and $1.50. The
Company's fourth quarter of fiscal 2016 is still expected to be the peak
quarter in fiscal 2016. The Company's fiscal 2016 guidance does not give
effect to the TCS acquisition, which is expected to close no later than
March 2016. The Company expects to provide combined revenue, Adjusted
EBITDA and diluted earnings per share guidance, which will give effect
to the TCS acquisition, in a future announcement following the closing
of the acquisition.
In commenting on the Company's performance and fiscal 2016 business
outlook, Dr. Stanton Sloane, President and Chief Executive Officer,
stated, "Although market conditions remain challenging, we continue to
execute our business strategies and position ourselves for growth when
our end-markets improve."
Dr. Sloane added, "I believe that the acquisition of TCS is a turning
point for Comtech and I am excited about the growth opportunities that
are ahead of us. With a combination of experience, careful planning and
preparation, we are well on our way to bring these two great companies
together and I look forward to working with all stakeholders to make
this acquisition a success."
Selected Fiscal 2016 First Quarter Financial Metrics and Other Items
Backlog as of October 31, 2015 was $107.9 million compared to $117.7
million as of July 31, 2015.
Total bookings for the three months ended October 31, 2015 were $54.3
million compared to $92.3 million for the three months ended October
31, 2014.
Adjusted EBITDA was $7.5 million for the three months ended October
31, 2015 as compared to $13.3 million for the three months ended
October 31, 2014. Adjusted EBITDA is a Non-GAAP financial measure and
is defined in the below table.
The Company's effective tax rate for the three months ended October
31, 2015 was 34.75% and is expected to approximate the same percentage
for the fiscal year ending July 31, 2016.
As of October 31, 2015, the Company had $150.7 million of cash and
cash equivalents which does not reflect the quarterly dividend of $4.8
million that was paid on November 20, 2015.
As discussed further in the Company's Form 10-Q filed earlier today,
the Company announced that the U.S. government has closed, without
taking any action, the previously reported investigations related to
our Executive Chairman.
As previously announced, the Company's President and Chief Executive
Officer continues to perform an assessment of operations to determine
whether or not a different approach may enhance the company's
business, increase operational efficiencies and enhance its growth
trajectory. This assessment has now been expanded to include a review
of the Company and TCS on a combined basis and may result in future
one-time charges which are not reflected in the Company's updated
fiscal 2016 earnings guidance.
Additional information about the Company's updated fiscal 2016 guidance
is included in the Company's first quarter investor presentation which
is located on the Company's website at www.comtechtel.com.
Conference Call
The Company has scheduled an investor conference call for 8:30 AM (ET)
on Thursday, December 10, 2015. 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 (866)
952-7534 (domestic), or (785) 424-1835 (international) and using the
conference I.D. "Comtech." A replay of the conference call will be
available for seven days by dialing (800) 839-5103 or (402) 220-2687. In
addition, an updated investor presentation, including earnings guidance,
is available on the Company's web site.
About Comtech
Comtech Telecommunications Corp. designs, develops, produces and markets
innovative products, systems and services for advanced communications
solutions. The Company conducts business through three complementary
segments: telecommunications transmission, RF microwave amplifiers and
mobile data communications. The Company sells products to a diverse
customer base in the global commercial and government communications
markets. The Company believes it is a leader in most of the market
segments that it serves.
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 risk that the acquisition of
TCS may not be consummated for reasons including that the conditions
precedent to the completion of the acquisition may not be satisfied or
the occurrence of any event, change or circumstance that could give rise
to the termination of the merger agreement; the possibility that the
expected synergies from the proposed merger will not be 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
risk that requisite regulatory approvals will not be obtained; the
possibility of disruption from the merger making it more difficult to
maintain business and operational relationships or retain key personnel;
any actions taken by either of the companies, including but not limited
to, restructuring or strategic initiatives (including capital
investments or asset acquisitions or dispositions); 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 legal
proceedings and other matters; risks associated with U.S. government
investigations; risks associated with the Company's large contracts, and
other factors described in the Company's and TCS's filings with the
Securities and Exchange Commission.
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended October 31,
2015
2014
Net sales
$
64,117,000
76,391,000
Cost of sales
35,915,000
41,066,000
Gross profit
28,202,000
35,325,000
Expenses:
Selling, general and administrative
16,718,000
15,526,000
Research and development
7,940,000
10,019,000
Amortization of intangibles
1,376,000
1,561,000
26,034,000
27,106,000
Operating income
2,168,000
8,219,000
Other expenses (income):
Interest expense
75,000
265,000
Interest income and other
(112,000
)
(84,000
)
Income before provision for income taxes
2,205,000
8,038,000
Provision for income taxes
766,000
2,813,000
Net income
$
1,439,000
5,225,000
Net income per share:
Basic
$
0.09
0.32
Diluted
$
0.09
0.32
Weighted average number of common shares outstanding - basic
16,171,000
16,217,000
Weighted average number of common and common equivalent shares
outstanding - diluted
16,194,000
16,513,000
Dividends declared per issued and outstanding common share as of the
applicable dividend record date
$
0.30
0.30
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
October 31, 2015
July 31, 2015
Assets
Current assets:
Cash and cash equivalents
$
150,725,000
150,953,000
Accounts receivable, net
59,350,000
69,255,000
Inventories, net
62,893,000
62,068,000
Prepaid expenses and other current assets
5,622,000
7,396,000
Deferred tax asset, net
—
11,084,000
Total current assets
278,590,000
300,756,000
Property, plant and equipment, net
14,477,000
15,370,000
Goodwill
137,354,000
137,354,000
Intangibles with finite lives, net
18,633,000
20,009,000
Deferred tax asset, net, non-current
9,643,000
—
Other assets, net
345,000
388,000
Total assets
$
459,042,000
473,877,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
12,691,000
15,708,000
Accrued expenses and other current liabilities
26,034,000
29,470,000
Dividends payable
4,844,000
4,839,000
Customer advances and deposits
10,237,000
14,320,000
Income taxes payable
1,603,000
—
Total current liabilities
55,409,000
64,337,000
Other liabilities
3,178,000
3,633,000
Income taxes payable
1,345,000
1,573,000
Deferred tax liability, net
—
2,925,000
Total liabilities
59,932,000
72,468,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.10 per share; shares authorized and
unissued 2,000,000
—
—
Common stock, par value $.10 per share; authorized 100,000,000
shares; issued 31,180,605 shares and 31,165,401 shares at October
31, 2015 and July 31, 2015, respectively
3,118,000
3,117,000
Additional paid-in capital
428,178,000
427,083,000
Retained earnings
409,663,000
413,058,000
840,959,000
843,258,000
Less:
Treasury stock, at cost (15,033,317 shares at October 31, 2015 and
July 31, 2015)
(441,849,000
)
(441,849,000
)
Total stockholders' equity
399,110,000
401,409,000
Total liabilities and stockholders' equity
$
459,042,000
473,877,000
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
(Unaudited)
Three months ended October 31,
2015
2014
Reconciliation of GAAP Net Income to Adjusted EBITDA(1):
GAAP net income
$
1,439,000
5,225,000
Income taxes
766,000
2,813,000
Net interest (income) expense and other
(37,000
)
181,000
Amortization of stock-based compensation
1,051,000
1,337,000
Depreciation and other amortization
2,906,000
3,169,000
Acquisition plan expenses
1,392,000
—
Strategic alternatives analysis expenses
—
585,000
Adjusted EBITDA
$
7,517,000
13,310,000
(1)
Represents earnings before interest, income taxes, depreciation
and amortization of intangibles and stock-based compensation,
acquisition plan expenses and strategic alternatives analysis
expenses. Adjusted EBITDA is a non-GAAP operating metric used by
management in assessing the Company's operating results. 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.
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.