MELVILLE, N.Y. –
December 6, 2017– Comtech Telecommunications Corp. (NASDAQ:CMTL) today
reported its operating results for the first fiscal quarter ended
October 31, 2017 and updated its fiscal 2018 guidance.
Fiscal 2018 First Quarter Highlights
- Net sales were $121.6 million.
-
Bookings were $165.7 million and Comtech achieved a company-wide
book-to-bill ratio (a measure defined as bookings divided by net
sales) of 1.36. - As of October 31, 2017, the Company had backlog of $490.4 million.
-
GAAP operating income was $0.2 million and GAAP net loss was $1.7
million, or $0.07 per diluted share. Comtech’s first quarter 2018
financial results do not include the benefit of $2.5 million of BFT-1
intellectual property license fees that Comtech earned in the first
quarter of fiscal 2017 supporting the U.S. Army’s Blue Force Tracking
Program. -
Adjusted EBITDA was $9.6 million for the three months ended October
31, 2017. 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. - Comtech generated cash flows from operating activities of $6.5 million.
- Comtech paid cash dividends of $2.5 million to its common stockholders.
-
As of October 31, 2017, the Company had $42.5 million of cash and cash
equivalents.
In commenting on Comtech’s performance during the first quarter of
fiscal 2018 and Comtech’s fiscal 2018 guidance, Fred Kornberg, President
and Chief Executive Officer, stated “Fiscal 2018 is off to a good start
and our first quarter results exceeded our expectations. During the
quarter, we received a number of large strategic orders and experienced
strong order flow across many of our product lines. Based on our current
business momentum, fiscal 2018 is beginning to look like a very strong
year.”
2018 Fiscal Year Financial Targets
-
Comtech is still targeting a revenue goal with a range of
approximately $550.0 million to $575.0 million. -
Comtech is increasing its GAAP diluted EPS goal to a new range of
$0.44 to $0.46, as compared to a prior range of $0.41 to $0.44. -
Comtech is increasing its Adjusted EBITDA goal to a new range of $69.0
million to $73.0 million, as compared to a prior range of $68.0
million to $72.0 million. If order flow remains strong and Comtech is
able to achieve all of its fiscal 2018 business goals, it is possible
that Adjusted EBITDA in fiscal 2018 could exceed the $70.7 million it
achieved in fiscal 2017. -
In line with Comtech’s original 2018 Fiscal Year Financial Targets,
given the straight-line amortization expense associated with
intangible assets with finite lives, on a GAAP basis, Comtech expects
to report an operating loss and net loss in the second quarter of
fiscal 2018, with each of the third and fourth quarters of fiscal 2018
achieving operating income and net income.
-
Based on the anticipated timing of shipments and performance related
to orders currently in its backlog and the timing of expected new
orders, net sales for the second quarter of fiscal 2018 are expected
to be slightly higher than the level Comtech achieved in its most
recent fiscal quarter but lower than its second quarter of fiscal
2017. Adjusted EBITDA for Comtech’s second quarter of fiscal 2018 is
expected to approximate the $9.6 million it achieved in its first
quarter of fiscal 2018. -
Comtech’s fourth quarter of fiscal 2018 is expected to be the peak
quarter – by far – for consolidated net sales, GAAP operating income,
GAAP net income and Adjusted EBITDA. -
Comtech’s 2018 Fiscal Year Financial Targets do not include $6.7
million of BFT-1 intellectual property license fees that Comtech
earned in fiscal 2017 supporting the U.S. Army’s Blue Force Tracking
Program.
Additional information about the Company’s fiscal 2018 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 7, 2017. Investors and the public are invited to
access a live webcast of the conference call from the Investor Relations
section of the Comtech website at www.comtechtel.com.
Alternatively, investors can access the conference call by dialing (866)
342-8591 (domestic), or (203) 518-9822 (international) and using the
conference I.D. “Comtech.” A replay of the conference call will be
available for seven days by dialing (800) 753-5207 or (402) 220-2156. In
addition, an updated investor presentation, including earnings guidance,
is available on the Company’s website.
About Comtech
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.
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 HEIGHTSTM Dynamic Network Access
Technology; 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 the
Company’s obligations under its Secured Credit Facility, as amended;
risks associated with the Company’s large contracts; the impacts of any
potential reform of the Internal Revenue Code which is currently being
debated amongst members of the U.S. Presidential administration and
Congress; and other factors described in this and the Company’s other
filings with the Securities and Exchange Commission.
|
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) |
|||||||||
| Three months ended October 31, | |||||||||
| 2017 | 2016 | ||||||||
| Net sales | $ | 121,569,000 | $ | 135,786,000 | |||||
| Cost of sales | 73,853,000 | 83,678,000 | |||||||
| Gross profit | 47,716,000 | 52,108,000 | |||||||
| Expenses: | |||||||||
| Selling, general and administrative | 28,475,000 | 32,685,000 | |||||||
| Research and development | 13,750,000 | 14,096,000 | |||||||
| Amortization of intangibles | 5,269,000 | 6,055,000 | |||||||
| 47,494,000 | 52,836,000 | ||||||||
| Operating income (loss) | 222,000 | (728,000 | ) | ||||||
| Other expenses (income): | |||||||||
| Interest expense | 2,588,000 | 3,325,000 | |||||||
| Interest (income) and other | 39,000 | (2,000 | ) | ||||||
| Loss before benefit from income taxes | (2,405,000 | ) | (4,051,000 | ) | |||||
| Benefit from income taxes | (745,000 | ) | (1,562,000 | ) | |||||
| Net loss | $ | (1,660,000 | ) | $ | (2,489,000 | ) | |||
| Net loss per share: | |||||||||
| Basic | $ | (0.07 | ) | $ | (0.11 | ) | |||
| Diluted | $ | (0.07 | ) | $ | (0.11 | ) | |||
| Weighted average number of common shares outstanding – basic | 23,797,000 | 23,385,000 | |||||||
|
Weighted average number of common and common equivalent shares outstanding – diluted |
23,797,000 | 23,385,000 | |||||||
|
Dividends declared per issued and outstanding common share as of the applicable dividend record date |
$ | 0.10 | $ | 0.30 | |||||
|
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Condensed Consolidated Balance Sheets |
||||||||
| October 31, 2017 | July 31, 2017 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets |
|
|||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 42,507,000 | 41,844,000 | |||||
| Accounts receivable, net | 113,943,000 | 124,962,000 | ||||||
| Inventories, net | 70,191,000 | 60,603,000 | ||||||
| Prepaid expenses and other current assets | 15,302,000 | 13,635,000 | ||||||
| Total current assets | 241,943,000 | 241,044,000 | ||||||
| Property, plant and equipment, net | 31,401,000 | 32,847,000 | ||||||
| Goodwill | 290,633,000 | 290,633,000 | ||||||
| Intangibles with finite lives, net | 256,602,000 | 261,871,000 | ||||||
| Deferred financing costs, net | 2,850,000 | 3,065,000 | ||||||
| Other assets, net | 2,803,000 | 2,603,000 | ||||||
| Total assets | $ | 826,232,000 | 832,063,000 | |||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 30,512,000 | 29,402,000 | |||||
| Accrued expenses and other current liabilities | 63,103,000 | 68,610,000 | ||||||
| Dividends payable | 2,351,000 | 2,343,000 | ||||||
| Customer advances and deposits | 22,668,000 | 25,771,000 | ||||||
| Current portion of long-term debt | 16,135,000 | 15,494,000 | ||||||
| Current portion of capital lease obligations | 2,064,000 | 2,309,000 | ||||||
| Interest payable | 69,000 | 282,000 | ||||||
| Total current liabilities | 136,902,000 | 144,211,000 | ||||||
| Non-current portion of long-term debt, net | 175,193,000 | 176,228,000 | ||||||
| Non-current portion of capital lease obligations | 1,293,000 | 1,771,000 | ||||||
| Income taxes payable | 2,550,000 | 2,515,000 | ||||||
| Deferred tax liability, net | 20,024,000 | 17,306,000 | ||||||
| Customer advances and deposits, non-current | 8,695,000 | 7,227,000 | ||||||
| Other liabilities | 5,556,000 | 2,655,000 | ||||||
| Total liabilities | 350,213,000 | 351,913,000 | ||||||
| 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 38,640,511 shares and 38,619,467 shares at October 31, 2017 and July 31, 2017, respectively |
3,864,000 | 3,862,000 | ||||||
| Additional paid-in capital | 532,940,000 | 533,001,000 | ||||||
| Retained earnings | 381,064,000 | 385,136,000 | ||||||
| 917,868,000 | 921,999,000 | |||||||
| Less: | ||||||||
|
Treasury stock, at cost (15,033,317 shares at October 31, 2017 and July 31, 2017) |
(441,849,000 | ) | (441,849,000 | ) | ||||
| Total stockholders’ equity | 476,019,000 | 480,150,000 | ||||||
| Total liabilities and stockholders’ equity | $ | 826,232,000 | 832,063,000 | |||||
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 SEC. The Company’s Adjusted EBITDA is a
Non-GAAP measure that represents earnings (loss) before income taxes,
interest (income) and other expense, interest expense, amortization of
stock-based compensation, amortization of intangibles, depreciation
expense, settlement of intellectual property litigation, acquisition
plan expenses or strategic alternatives analysis expenses and other. The
Company’s definition of Adjusted EBITDA may differ from the definition
of EBITDA used by other companies and therefore 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 the Company’s performance and comparability of its
results with other companies. These Non-GAAP financial measures have
limitations as an analytical tool as they exclude the financial impact
of transactions necessary to conduct the Company’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 the Company’s SEC filings. The Company has not
quantitatively reconciled its fiscal 2018 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 and interest expense, which are specific
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 financial
results.
| Three months ended October 31, | Fiscal Year | |||||||||||
| 2017 | 2016 | 2017 | ||||||||||
| Reconciliation of GAAP Net (Loss) Income to Adjusted EBITDA: | ||||||||||||
| Net (loss) income | $ | (1,660,000 | ) | (2,489,000 | ) | $ | 15,827,000 | |||||
| (Benefit from) provision for income taxes | (745,000 | ) | (1,562,000 | ) | 9,654,000 | |||||||
| Interest (income) and other expense | 39,000 | (2,000 | ) | (68,000 | ) | |||||||
| Interest expense | 2,588,000 | 3,325,000 | 11,629,000 | |||||||||
| Amortization of stock-based compensation | 747,000 | 970,000 | 8,506,000 | |||||||||
| Amortization of intangibles | 5,269,000 | 6,055,000 | 22,823,000 | |||||||||
| Depreciation | 3,346,000 | 3,749,000 | 14,354,000 | |||||||||
| Settlement of intellectual property litigation | – | – | (12,020,000 | ) | ||||||||
| Adjusted EBITDA | $ | 9,584,000 | 10,046,000 | $ | 70,705,000 | |||||||
ECMTL
View source version on businesswire.com: http://www.businesswire.com/news/home/20171206006296/en/
Media:
Michael D. Porcelain, Senior Vice President and Chief
Financial Officer
(631) 962-7103
[email protected]
