Comtech Telecommunications Corp. Announces Results for Fiscal 2019 First Quarter and Updates Its Fiscal 2019 Guidance
Fiscal 2019 First Quarter Highlights
-
Net sales for the first quarter of fiscal 2019 were
$160.8 million as compared to the$121.6 million achieved during the first quarter of fiscal 2018. -
Bookings during the first quarter of fiscal 2019 were
$157.4 million , with a company-wide book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.98. -
Backlog as of
October 31, 2018 reflects a near record high of$627.3 million . Backlog does not include the portions of multi-year contracts that have not been funded. As such, the total value of multi-year contracts thatComtech has received is substantially higher. Comtech received a number of strategic contracts and orders, including: (i) over$28.4 million of orders to supply Manpack Satellite Terminals, networking equipment and other advanced VSAT products to theU.S. Army ; (ii) a$6.8 million contract renewal to provide a GPS-enabled application to a key Fortune 100 customer; (iii) a strategic contract valued at$5.5 million from a global telecommunications and media company to provide virtualized mobile service device location platforms supporting various location-based services ("LBS"); (iv)$5.4 million of orders to provide ongoing sustainment services to theU.S. Army for the AN/TSC-198A SNAP (Secret Internet Protocol Router ("SIPR") and Non-classified Internet Protocol Router ("NIPR") Access Point), Very Small Aperture Terminals ("VSATs"); (v) a multi-year$1.9 million order from a top U.S. telecom service provider for hosted data assistance services related to the delivery of LBS; and (vi) a multi-year contract extension totaling$1.2 million to provideFederal Communications Commission ("FCC") mandated enhanced 911 ("E911") and emergency call routing services to a U.S. wireless carrier.-
GAAP operating income of
$7.3 million , GAAP net income of$3.5 million and GAAP diluted earnings per share of$0.14 was impacted by several steps taken byComtech to improve operating efficiencies and make progress towards achieving its long-term business goals. As presented in more detail in the below table, these steps include: (i) successfully consolidating a manufacturing facility located inTampa, Florida with its facility inOrlando, Florida ; (ii) initiating a targeted acquisition plan related to a small but growing technology solutions company; (iii) entering a new$550.0 million Credit Facility that is intended to provide increased balance sheet flexibility, improved interest rate pricing and less restrictive covenants as compared to its prior credit facility; and (iv) recording a net discrete tax benefit primarily related to the favorable resolution with theInternal Revenue Service ("IRS") with respect to their audit of its fiscal 2016 federal income tax return. Excluding the impact of these steps, operating income would have been$9.8 million , net income would have been$5.5 million and earnings per diluted share would have been$0.22 . -
Adjusted EBITDA was
$18.0 million . Adjusted EBITDA is a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure and is more fully defined in the below table.
In commenting on Comtech’s performance for the first quarter of fiscal
2019,
Updated 2019 Fiscal Year Financial Targets
Comtech is increasing its fiscal 2019 consolidated net sales goal to a range of approximately$625.0 million to $640.0 million as compared to the prior range of$600.0 million and$625.0 million .Comtech's updated GAAP net income per diluted share ("EPS") target for fiscal 2019 is now$0.95 to $1.08 . This GAAP EPS metric reflects all facility exit costs, acquisition plan expenses, write-off of deferred financing costs and net discrete tax benefits.Comtech is increasing its Adjusted EBITDA goal to a range of$84.0 million to $88.0 million . If order flow remains strong andComtech can achieve all of its fiscal 2019 business goals, it is possible that financial results could be higher than its targeted amounts.-
Although
Comtech's GAAP consolidated operating income and adjusted EBITDA in the second half of fiscal 2019 are still expected to be higher than the first half of fiscal 2019, it now expects a more balanced year. In this regard, Comtech’s second quarter consolidated net sales, operating income and Adjusted EBITDA are expected to be nearly the same as its first quarter of fiscal 2019.Comtech's third quarter results for fiscal 2019 are expected to be better than its expected results for the second quarter of fiscal 2019.Comtech still expects its fourth quarter of fiscal 2019 to be the peak quarter for consolidated net sales, operating income and Adjusted EBITDA.Comtech's updated 2019 fiscal year financial targets include a number of items, the timing of which can still shift and impact its quarterly financial performance. However,Comtech currently does not believe that changes in such timing would negatively impact its ability to achieve its updated 2019 fiscal year financial targets. -
Despite incurring facility exit costs and acquisition plan expenses,
Comtech anticipates GAAP consolidated operating income, both in dollars and as a percentage of consolidated net sales, to be higher than the$35.1 million or 6.2% it achieved in fiscal 2018. Comtech's estimated effective income tax rate for fiscal 2019 (excluding net discrete items) is now expected to approximate 22.75%.Comtech's acquisition plan efforts related to a small but growing technology solutions company are ongoing and it currently expects to incur approximately$1.0 million of additional expenses in the second quarter of fiscal 2019.Comtech anticipates making an announcement related to this potential acquisition in the near term. There is no certainty that Comtech’s acquisition efforts will be successful and except for the impact of acquisition plan expenses, its updated 2019 fiscal year financial targets do not include any impact of such acquisition.
Additional information about Comtech’s first quarter financial results
and Business Outlook for Fiscal 2019 is set forth in
Conference Call
About
Cautionary Statement Regarding Forward-Looking Statements
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 Company will be
unsuccessful in implementing a tactical shift in its Government
Solutions segment away from bidding on large commodity service contracts
and toward pursuing contracts for its niche products with higher
margins; 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, including the risks associated with the
Company's recent launch of Heights™ Dynamic Network Access Technology
("HEIGHTS" or "HDNA"); changing customer demands and or procurement
strategies; 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
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) |
||||||||||
Three months ended October 31, | ||||||||||
2018 | 2017 | |||||||||
Net sales | $ | 160,844,000 | $ | 121,569,000 | ||||||
Cost of sales | 103,075,000 | 73,853,000 | ||||||||
Gross profit | 57,769,000 | 47,716,000 | ||||||||
Expenses: | ||||||||||
Selling, general and administrative | 31,847,000 | 28,475,000 | ||||||||
Research and development | 13,210,000 | 13,750,000 | ||||||||
Amortization of intangibles | 4,289,000 | 5,269,000 | ||||||||
Acquisition plan expenses | 1,130,000 | — | ||||||||
50,476,000 | 47,494,000 | |||||||||
Operating income | 7,293,000 | 222,000 | ||||||||
Other expenses: | ||||||||||
Interest expense | 2,669,000 | 2,588,000 | ||||||||
Write-off of deferred financing costs | 3,217,000 | — | ||||||||
Interest (income) and other | 66,000 | 39,000 | ||||||||
Income (loss) before benefit from income taxes | 1,341,000 | (2,405,000 | ) | |||||||
Benefit from income taxes | (2,127,000 | ) | (745,000 | ) | ||||||
Net income (loss) | $ | 3,468,000 | $ | (1,660,000 | ) | |||||
Net income (loss) per share: | ||||||||||
Basic | $ | 0.14 | $ | (0.07 | ) | |||||
Diluted | $ | 0.14 | $ | (0.07 | ) | |||||
Weighted average number of common shares outstanding – basic | 23,999,000 | 23,797,000 | ||||||||
Weighted average number of common and common equivalent shares outstanding – diluted | 24,375,000 | 23,797,000 | ||||||||
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Condensed Consolidated Balance Sheets |
|||||||||
October 31, 2018 | July 31, 2018 | ||||||||
(Unaudited) | (Audited) | ||||||||
Assets |
|
||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 42,943,000 | 43,484,000 | ||||||
Accounts receivable, net | 159,255,000 | 147,439,000 | |||||||
Inventories, net | 89,569,000 | 75,076,000 | |||||||
Prepaid expenses and other current assets | 13,133,000 | 13,794,000 | |||||||
Total current assets | 304,900,000 | 279,793,000 | |||||||
Property, plant and equipment, net | 28,543,000 | 28,987,000 | |||||||
Goodwill | 290,633,000 | 290,633,000 | |||||||
Intangibles with finite lives, net | 236,507,000 | 240,796,000 | |||||||
Deferred financing costs, net | 3,678,000 | 2,205,000 | |||||||
Other assets, net | 2,679,000 | 2,743,000 | |||||||
Total assets | $ | 866,940,000 | 845,157,000 | ||||||
Liabilities and Stockholders’ Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 35,340,000 | 43,928,000 | ||||||
Accrued expenses and other current liabilities | 68,809,000 | 65,034,000 | |||||||
Dividends payable | 2,381,000 | 2,356,000 | |||||||
Contract liabilities | 34,460,000 | 34,452,000 | |||||||
Current portion of long-term debt | — | 17,211,000 | |||||||
Current portion of capital lease and other obligations | 1,579,000 | 1,836,000 | |||||||
Interest payable | 26,000 | 499,000 | |||||||
Total current liabilities | 142,595,000 | 165,316,000 | |||||||
Non-current portion of long-term debt, net | 193,400,000 | 148,087,000 | |||||||
Non-current portion of capital lease and other obligations | 586,000 | 765,000 | |||||||
Income taxes payable | 407,000 | 2,572,000 | |||||||
Deferred tax liability, net | 13,200,000 | 10,927,000 | |||||||
Long-term contract liabilities | 6,813,000 | 7,689,000 | |||||||
Other liabilities | 3,843,000 | 4,117,000 | |||||||
Total liabilities | 360,844,000 | 339,473,000 | |||||||
Commitments and contingencies | |||||||||
Stockholders’ equity: | |||||||||
Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000 | — | — | |||||||
Common stock, par value $0.10 per share; authorized 100,000,000 shares; issued 38,938,844 shares and 38,860,571 shares at October 31, 2018 and July 31, 2018, respectively | 3,894,000 | 3,886,000 | |||||||
Additional paid-in capital | 537,852,000 | 538,453,000 | |||||||
Retained earnings | 406,199,000 | 405,194,000 | |||||||
947,945,000 | 947,533,000 | ||||||||
Less: | |||||||||
Treasury stock, at cost (15,033,317 shares at October 31, 2018 and July 31, 2017)
|
(441,849,000 | ) | (441,849,000 | ) | |||||
Total stockholders’ equity | 506,096,000 | 505,684,000 | |||||||
Total liabilities and stockholders’ equity | $ | 866,940,000 | 845,157,000 | ||||||
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
Three months ended October 31, | Fiscal Year | |||||||||||||
2018 | 2017 | 2018 | ||||||||||||
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA: | ||||||||||||||
Net income (loss) | $ | 3,468,000 | (1,660,000 | ) | $ | 29,769,000 | ||||||||
Benefit from income taxes | (2,127,000 | ) | (745,000 | ) | (5,143,000 | ) | ||||||||
Interest (income) and other | 66,000 | 39,000 | 254,000 | |||||||||||
Write-off of deferred financing costs | 3,217,000 | — | — | |||||||||||
Interest expense | 2,669,000 | 2,588,000 | 10,195,000 | |||||||||||
Amortization of stock-based compensation | 1,046,000 | 747,000 | 8,569,000 | |||||||||||
Amortization of intangibles | 4,289,000 | 5,269,000 | 21,075,000 | |||||||||||
Depreciation | 2,851,000 | 3,346,000 | 13,655,000 | |||||||||||
Acquisition plan expenses | 1,130,000 | — | — | |||||||||||
Facility exit costs | 1,373,000 | — | — | |||||||||||
Adjusted EBITDA | $ | 17,982,000 | 9,584,000 | $ | 78,374,000 | |||||||||
In addition, a reconciliation of
Three months ended October 31, 2018 | |||||||||||||||
Operating |
Net Income |
Net Income per |
|||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: | |||||||||||||||
GAAP measures, as reported | $ | 7,293,000 | $ | 3,468,000 | $ | 0.14 | |||||||||
Facility exit costs | 1,373,000 | 1,061,000 | 0.04 | ||||||||||||
Acquisition plan expenses | 1,130,000 | 873,000 | 0.04 | ||||||||||||
Write-off of deferred financing costs | — | 2,485,000 | 0.10 | ||||||||||||
Net discrete tax benefit | — | (2,432,000 | ) | (0.10 | ) | ||||||||||
Non-GAAP measures | $ | 9,796,000 | $ | 5,455,000 | $ | 0.22 | |||||||||
ECMTL
View source version on businesswire.com: https://www.businesswire.com/news/home/20181206005994/en/
Source:
Media Contacts:
Michael D. Porcelain, Senior Vice President
and Chief Operating Officer
(631) 962-7000
Info@comtechtel.com