Comtech Telecommunications Corp. Announces Results for Fiscal 2019 Third Quarter and Updates Its Fiscal 2019 Guidance
Fiscal 2019 Third Quarter Highlights
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Net sales for the third quarter of fiscal 2019 were
$170.4 million as compared to the$147.9 million achieved during the third quarter of fiscal 2018, representing an increase of$22.5 million , or 15.2%. Net sales for the first nine months of fiscal 2019 were$495.4 million as compared to the$403.2 million achieved during the first nine months of fiscal 2018, representing an increase of$92.2 million , or 22.9%. -
Bookings during the third quarter of fiscal 2019 were
$331.2 million , with a company-wide book-to-bill ratio (a measure defined as bookings divided by net sales) of 1.94 with both its Commercial and Government Solutions Segments achieving book-to-bill ratios in excess of 1.00. Bookings this quarter reflect strength in almost all of Comtech’s product lines, especially its safety and security technology solutions and HeightsTM satellite earth station technology solutions. -
Backlog as of
April 30, 2019 reflects a record high of$747.1 million . Backlog does not include the portions of multi-year contracts that have not been funded. When including the total value of multi-year contracts thatComtech has actually received, its revenue visibility is over$1.0 billion . -
Adjusted EBITDA for the third quarter of fiscal 2019 was
$24.0 million . Adjusted EBITDA for the first nine months of fiscal 2019 was$65.2 million as compared to the$47.7 million achieved during the first nine months of fiscal 2018, representing an increase of$17.5 million , or 36.7%. Adjusted EBITDA is a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure and is more fully defined below. Comtech took several strategic steps to enhance its business including: (i) closed on the acquisition ofSolacom Technologies Inc. (“Solacom”) onFebruary 28, 2019 ; (ii) closed on the acquisition of the state and local government next-generation 911 business fromGeneral Dynamics Information Technology, Inc. (the “GD NG-911 business”) onApril 29, 2019 ; (iii) initiated efforts to acquire a small technology company with complimentary solution offering; and (iv) continued its ongoing evaluation and repositioning of its enterprise technology product solution line. In connection with these steps,Comtech incurred$1.7 million of acquisition plan expenses and$2.5 million of estimated contract settlement costs. It also recorded$0.6 million of discrete tax benefit. Including all of these expenses, GAAP operating income was$11.3 million , GAAP net income was$7.6 million and GAAP earnings per diluted share ("EPS") was$0.31 .-
As shown in the table below, Non-GAAP EPS for the third quarter of
fiscal 2019 would have been
$0.42 which was 23.5% higher than the Non-GAAP EPS of$0.34 for the third quarter of fiscal 2018. Non-GAAP EPS for the first nine months of fiscal 2019 was$1.05 or 208.8% higher than the Non-GAAP EPS of$0.34 for the first nine months of fiscal 2018. -
Cash flows from operating activities during the third quarter of
fiscal 2019 were
$40.8 million . Cash flows from operating activities during the nine months endedApril 30, 2019 were$53.8 million .
In commenting on Comtech’s performance for the third quarter of fiscal
2019,
Mr. Kornberg further added, “The Company’s strategic acquisitions of Solacom and the GD NG-911 business significantly enhanced Comtech’s ability to deliver innovative market-leading products and services to public safety agencies around the world. Anchored by our strong backlog, recent acquisitions and expected strong fiscal 2019 finish, fiscal 2020 is looking like it will be a terrific year.”
Updated 2019 Fiscal Year Financial Targets
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Comtech’s fiscal 2019 consolidated net sales are now expected to be
$660.0 million which is higher than the mid-point of its prior expected range of$645.0 million to $660.0 million . Fourth quarter consolidated net sales are estimated to approximate$164.6 million . Comtech’s updated fiscal 2019 net sales target of$660.0 million reflects an anticipated growth rate of 15.7% from the$570.6 million it achieved in fiscal 2018. Comtech fiscal 2019 consolidated Adjusted EBITDA is now expected to be$90.0 million which is better than the high-point of its prior expected range of$85.0 million to $89.0 million . Fourth quarter consolidated Adjusted EBITDA is expected to approximate$24.8 million . Comtech’s updated fiscal 2019 Adjusted EBITDA target of$90.0 million reflects an anticipated growth rate of 14.8% from the$78.4 million it achieved in fiscal 2018.-
Total amortization of intangible assets is expected to approximate
$18.3 million in fiscal 2019 with the fourth quarter approximating$5.2 million .
-
Total amortization of stock-based compensation expense is expected to
approximate
$12.0 million in fiscal 2019 with the fourth quarter approximating$8.6 million . Comtech's estimated effective income tax rate for fiscal 2019 (excluding net discrete items) is expected to approximate 23.0%.Comtech expects its fourth quarter of fiscal 2019 to be impacted by a charge of approximately$2.2 million or$0.07 GAAP EPS primarily related to ongoing efforts for a small targeted acquisition and its enterprise technology product solutions repositioning. Including the impact of such charge,Comtech's updated GAAP EPS target for fiscal 2019 is now$0.88 with its fourth quarter GAAP EPS approximating$0.10 .-
Excluding the net charges of
$0.27 GAAP EPS during the nine months endedApril 30, 2019 (as described in the below table) and the aforementioned fiscal 2019 fourth quarter charge of$0.07 GAAP EPS, Non-GAAP EPS for fiscal 2019 is expected to approximate$1.22 with fourth quarter Non-GAAP EPS of$0.17 .Comtech's fiscal 2019 Non-GAAP EPS target of$1.22 represents a 62.7% increase from the$0.75 Non-GAAP EPS it achieved in fiscal 2018, as shown in the below table. -
There is no certainty that Comtech’s ongoing efforts related to a
small targeted acquisition will be successful and, except for
acquisition plan expenses, Comtech’s updated fiscal 2019 financial
targets do not include any impact of such targeted acquisition plan.
If order flow remains strong and
Comtech can achieve all of its fiscal 2019 business goals, it is possible that consolidated net sales and Adjusted EBITDA could be higher than its targeted amounts.
Additional information about Comtech’s third 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 possibility that the expected
synergies from the recent acquisitions will not be fully realized, or
will not be realized within the anticipated time periods; the risk that
the acquired businesses will not be integrated with
COMTECH TELECOMMUNICATIONS CORP. | ||||||||||||||
AND SUBSIDIARIES | ||||||||||||||
Condensed Consolidated Statements of Operations |
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(Unaudited) |
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Three months ended April 30, | Nine months ended April 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Net sales | $ | 170,448,000 | 147,854,000 | $ | 495,425,000 | 403,154,000 | ||||||||
Cost of sales | 106,032,000 | 85,418,000 | 311,995,000 | 242,201,000 | ||||||||||
Gross profit | 64,416,000 | 62,436,000 | 183,430,000 | 160,953,000 | ||||||||||
Expenses: | ||||||||||||||
Selling, general and administrative | 33,409,000 | 30,410,000 | 97,243,000 | 86,100,000 | ||||||||||
Research and development | 13,471,000 | 12,778,000 | 40,664,000 | 39,963,000 | ||||||||||
Amortization of intangibles | 4,536,000 | 5,269,000 | 13,113,000 | 15,806,000 | ||||||||||
Settlement of intellectual property litigation | — | — | (3,204,000 | ) | — | |||||||||
Acquisition plan expenses | 1,704,000 | — | 4,612,000 | — | ||||||||||
53,120,000 | 48,457,000 | 152,428,000 | 141,869,000 | |||||||||||
Operating income | 11,296,000 | 13,979,000 | 31,002,000 | 19,084,000 | ||||||||||
Other expenses (income): | ||||||||||||||
Interest expense | 2,159,000 | 2,500,000 | 7,095,000 | 7,607,000 | ||||||||||
Write-off of deferred financing costs | — | — | 3,217,000 | — | ||||||||||
Interest (income) and other | (22,000 | ) | 198,000 | (7,000 | ) | 189,000 | ||||||||
Income before provision for (benefit from) income taxes | 9,159,000 | 11,281,000 | 20,697,000 | 11,288,000 | ||||||||||
Provision for (benefit from) income taxes | 1,547,000 | 3,071,000 | 1,791,000 | (11,023,000 | ) | |||||||||
Net income | $ | 7,612,000 | 8,210,000 | $ | 18,906,000 | 22,311,000 | ||||||||
Net income per share: | ||||||||||||||
Basic | $ | 0.31 | 0.34 | $ | 0.79 | 0.94 | ||||||||
Diluted | $ | 0.31 | 0.34 | $ | 0.78 | 0.93 | ||||||||
Weighted average number of common shares outstanding – basic | 24,192,000 | 23,834,000 | 24,074,000 | 23,819,000 | ||||||||||
Weighted average number of common and common equivalent shares outstanding – diluted | 24,330,000 | 24,052,000 | 24,263,000 | 23,999,000 | ||||||||||
COMTECH TELECOMMUNICATIONS CORP. | |||||||
AND SUBSIDIARIES | |||||||
Condensed Consolidated Balance Sheets |
|||||||
April 30, 2019 | July 31, 2018 | ||||||
(Unaudited) | (Audited) | ||||||
Assets |
|
||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 45,152,000 | 43,484,000 | ||||
Accounts receivable, net | 142,770,000 | 147,439,000 | |||||
Inventories, net | 83,034,000 | 75,076,000 | |||||
Prepaid expenses and other current assets | 18,263,000 | 13,794,000 | |||||
Total current assets | 289,219,000 | 279,793,000 | |||||
Property, plant and equipment, net | 29,388,000 | 28,987,000 | |||||
Goodwill | 310,247,000 | 290,633,000 | |||||
Intangibles with finite lives, net | 267,097,000 | 240,796,000 | |||||
Deferred financing costs, net | 3,311,000 | 2,205,000 | |||||
Other assets, net | 4,225,000 | 2,743,000 | |||||
Total assets | $ | 903,487,000 | 845,157,000 | ||||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 37,225,000 | 43,928,000 | ||||
Accrued expenses and other current liabilities | 79,744,000 | 65,034,000 | |||||
Dividends payable | 2,405,000 | 2,356,000 | |||||
Contract liabilities | 40,759,000 | 34,452,000 | |||||
Current portion of long-term debt | — | 17,211,000 | |||||
Current portion of capital lease and other obligations | 1,030,000 | 1,836,000 | |||||
Interest payable | 515,000 | 499,000 | |||||
Total current liabilities | 161,678,000 | 165,316,000 | |||||
Non-current portion of long-term debt, net | 173,500,000 | 148,087,000 | |||||
Non-current portion of capital lease and other obligations | 435,000 | 765,000 | |||||
Income taxes payable | 54,000 | 2,572,000 | |||||
Deferred tax liability, net | 12,117,000 | 10,927,000 | |||||
Long-term contract liabilities | 10,037,000 | 7,689,000 | |||||
Other liabilities | 20,717,000 | 4,117,000 | |||||
Total liabilities | 378,538,000 | 339,473,000 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, par value $0.10 per share; shares authorized and unissued 2,000,000 | — | — | |||||
Common stock, par value $0.10 per share; authorized 100,000,000
shares; |
3,917,000 | 3,886,000 | |||||
Additional paid-in capital | 546,198,000 | 538,453,000 | |||||
Retained earnings | 416,683,000 | 405,194,000 | |||||
966,798,000 | 947,533,000 | ||||||
Less: | |||||||
Treasury stock, at cost (15,033,317 shares at April 30, 2019 and July 31, 2018) |
(441,849,000 | ) | (441,849,000 | ) | |||
Total stockholders’ equity | 524,949,000 | 505,684,000 | |||||
Total liabilities and stockholders’ equity | $ | 903,487,000 | 845,157,000 | ||||
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
Three months ended | Nine months ended | Fiscal | ||||||||||||||||
April 30, | April 30, | Year | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||
Reconciliation of GAAP Net Income to Adjusted EBITDA: | ||||||||||||||||||
Net income | $ | 7,612,000 | 8,210,000 | $ | 18,906,000 | 22,311,000 | $ | 29,769,000 | ||||||||||
Provision for (benefit from) income taxes | 1,547,000 | 3,071,000 | 1,791,000 | (11,023,000 | ) | (5,143,000 | ) | |||||||||||
Interest (income) and other | (22,000 | ) | 198,000 | (7,000 | ) | 189,000 | 254,000 | |||||||||||
Write-off of deferred financing costs | — | — | 3,217,000 | — | — | |||||||||||||
Interest expense | 2,159,000 | 2,500,000 | 7,095,000 | 7,607,000 | 10,195,000 | |||||||||||||
Amortization of stock-based compensation | 1,119,000 | 1,104,000 | 3,356,000 | 2,931,000 | 8,569,000 | |||||||||||||
Amortization of intangibles | 4,536,000 | 5,269,000 | 13,113,000 | 15,806,000 | 21,075,000 | |||||||||||||
Depreciation | 2,918,000 | 3,170,000 | 8,618,000 | 9,833,000 | 13,655,000 | |||||||||||||
Estimated contract settlement costs | 2,465,000 | — | 6,351,000 | — | — | |||||||||||||
Settlement of intellectual property litigation | — | — | (3,204,000 | ) | — | — | ||||||||||||
Acquisition plan expenses | 1,704,000 | — | 4,612,000 | — | — | |||||||||||||
Facility exit costs | — | — | 1,373,000 | — | — | |||||||||||||
Adjusted EBITDA | $ | 24,038,000 | 23,522,000 | $ | 65,221,000 | 47,654,000 | $ | 78,374,000 | ||||||||||
In addition, a reconciliation of
April 30, 2019 | ||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||
Operating |
Net Income |
Net Income |
Operating |
Net Income |
Net Income |
|||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: | ||||||||||||||||||||||||
GAAP measures, as reported | $ | 11,296,000 | $ | 7,612,000 | $ | 0.31 | $ | 31,002,000 | $ | 18,906,000 | $ | 0.78 | ||||||||||||
Estimated contract settlement costs | 2,465,000 | 1,898,000 | 0.08 | 6,351,000 | 4,890,000 | 0.20 | ||||||||||||||||||
Settlement of intellectual property litigation | — | — | — | (3,204,000 | ) | (2,467,000 | ) | (0.10 | ) | |||||||||||||||
Acquisition plan expenses | 1,704,000 | 1,312,000 | 0.05 | 4,612,000 | 3,551,000 | 0.15 | ||||||||||||||||||
Facility exit costs | — | — | — | 1,373,000 | 1,057,000 | 0.04 | ||||||||||||||||||
Write-off of deferred financing costs | — | — | — | — | 2,477,000 | 0.10 | ||||||||||||||||||
Net discrete tax benefit | — | (559,000 | ) | (0.02 | ) | — | (2,991,000 | ) | (0.12 | ) | ||||||||||||||
Non-GAAP measures | $ | 15,465,000 | $ | 10,263,000 | $ | 0.42 | $ | 40,134,000 | $ | 25,423,000 | $ | 1.05 | ||||||||||||
April 30, 2018 | ||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||
Operating |
Net Income |
Net Income |
Operating |
Net Income |
Net Income |
|||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: | ||||||||||||||||||||||||
GAAP measures, as reported | $ | 13,979,000 | $ | 8,210,000 | $ | 0.34 | $ | 19,084,000 | $ | 22,311,000 | $ | 0.93 | ||||||||||||
Net discrete tax benefit | — | — | — | — | (14,071,000 | ) | (0.59 | ) | ||||||||||||||||
Non-GAAP measures | $ | 13,979,000 | $ | 8,210,000 | $ | 0.34 | $ | 19,084,000 | $ | 8,240,000 | $ | 0.34 | ||||||||||||
Fiscal Year | ||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||
Operating |
Net Income |
Net Income |
||||||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: | ||||||||||||||||||||||||
GAAP measures, as reported | $ | 35,075,000 | $ | 29,769,000 | $ | 1.24 | ||||||||||||||||||
Net discrete tax benefit | — | (11,792,000 | ) | (0.49 | ) | |||||||||||||||||||
Non-GAAP measures | $ | 35,075,000 | $ | 17,977,000 | $ | 0.75 | ||||||||||||||||||
* Per share amounts may not foot due to rounding.
ECMTL
View source version on businesswire.com: https://www.businesswire.com/news/home/20190605005962/en/
Source:
Media:
Michael D. Porcelain, Senior Vice President and Chief
Operating Officer
(631) 962-7000
Info@comtechtel.com