MELVILLE, N.Y. –
September 27, 2017– Comtech Telecommunications Corp. (NASDAQ: CMTL)
today reported its operating results for the fourth quarter and fiscal
year ended July 31, 2017. The Company also announced financial targets
for its 2018 fiscal year.
2017 Fourth Quarter Highlights
-
Net sales for the three months ended July 31, 2017 were $147.8 million
as compared to $152.4 million for the three months ended July 31, 2016. -
Comtech achieved a company-wide book-to-bill ratio (a measure defined
as bookings divided by net sales) of 0.90. As of July 31, 2017, the
Company had backlog of $446.2 million. -
GAAP operating income was $14.8 million and GAAP net income was $7.3
million, or $0.31 per diluted share, for the three months ended
July 31, 2017, as compared to GAAP operating income of $7.5 million
and a GAAP net income of $2.7 million, or $0.14 per diluted share, for
the three months ended July 31, 2016. -
Adjusted EBITDA was $29.1 million for the three months ended July 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. -
As of July 31, 2017, the Company had $41.8 million of cash and cash
equivalents. During the fourth quarter of fiscal 2017, the Company
generated cash flows from operating activities of $23.0 million.
2017 Fiscal Year Highlights
-
Net sales for the fiscal year ended July 31, 2017 were $550.4 million
as compared to $411.0 million for the fiscal year ended July 31, 2016.
The year-over-year increase in net sales reflects a full year of TCS
operations, which contributed incremental net sales of $147.1 million
for fiscal 2017. -
Comtech achieved a company-wide book-to-bill ratio (a measure defined
as bookings divided by net sales) of 0.93. -
GAAP operating income was $37.0 million and GAAP net income was $15.8
million, or $0.67 per diluted share, for the fiscal year ended
July 31, 2017, as compared to a GAAP operating loss of $0.6 million
and a GAAP net loss of $7.7 million, or $(0.46) per diluted share, for
the fiscal year ended July 31, 2016. -
Adjusted EBITDA was $70.7 million for the fiscal year ended July 31,
2017, which reflects $6.7 million of benefit associated with a fee
paid by the U.S. Army to use our BFT-1 intellectual property.
Effective April 1, 2017, the U.S. Army retains a limited non-exclusive
right to use this intellectual property for no additional payment. -
During the fiscal year ended July 31, 2017, the Company generated cash
flows from operating activities of $66.7 million and reduced the level
of its total indebtedness by $63.7 million.
In commenting on the Company’s performance during the fourth quarter of
fiscal 2017, Fred Kornberg, President and Chief Executive Officer, noted
“Fiscal 2017 was a very busy year for our Company. With our fourth
quarter fiscal 2017 performance, we solidified a strong finish to what
turned out to be a successful year for Comtech. I am extremely
optimistic about our growth prospects and believe that fiscal 2018 will
be even better.”
2018 Fiscal Year Financial Targets
-
Revenue goal with a range of approximately $550.0 million to $575.0
million. - GAAP diluted EPS goal with a range of approximately $0.41 to $0.44.
-
Despite the absence of BFT-1 intellectual property license fees in
fiscal 2018, adjusted EBITDA goal in a range of approximately $68.0
million to $72.0 million. -
Total annual amortization of intangibles of approximately $21.0
million. -
Total depreciation expense is expected to range from $14.0 million to
$16.0 million. -
Total amortization of stock-based compensation is expected to range
from approximately $9.0 million to $10.0 million. -
Interest expense is expected to reflect a rate (including amortization
of deferred financing costs) of 5.0%. -
The Company’s effective income tax rate (excluding discrete tax items
in fiscal 2018) is expected to approximate 34.75%. -
Based on the anticipated timing of shipments and performance related
to orders currently in the Company’s backlog and the timing of
expected new orders, net sales and Adjusted EBITDA for its first and
second quarters of fiscal 2018 are expected to be lower than the
comparable operating quarters in fiscal 2017. Given the straight-line
amortization expense associated with intangible assets with finite
lives, the Company expects to report an operating loss in both the
first and second quarters of fiscal 2018, with each of the third and
fourth fiscal 2018 quarters achieving operating profits. The Company’s
fourth quarter of fiscal 2018 is expected to be the peak quarter for
both net sales and Adjusted EBITDA.
Additional information about the Company’s fiscal 2018 guidance is
included in the Company’s fourth 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, September 28, 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)
831-8713 (domestic), or (203) 518-9713 (international) and using the
conference I.D. “Comtech.” A replay of the conference call will be
available for seven days by dialing (800) 839-2385 or (402) 220-7203. 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 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 possibility of disruption from the
acquisition, making it more difficult to maintain business and
operational relationships or retain key personnel; 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 (“HEIGHTS”); 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; and other factors
described in this and the Company’s other filings with the SEC.
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COMTECH TELECOMMUNICATIONS CORP. |
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AND SUBSIDIARIES |
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Consolidated Statements of Operations |
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| (Unaudited) | (Audited) | |||||||||||||||||
| Three months ended July 31, | Twelve months ended July 31, | |||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Net sales | $ | 147,762,000 | $ | 152,377,000 | $ | 550,368,000 | $ | 411,004,000 | ||||||||||
| Cost of sales | 87,350,000 | 90,171,000 | 332,183,000 | 239,767,000 | ||||||||||||||
| Gross profit | 60,412,000 | 62,206,000 | 218,185,000 | 171,237,000 | ||||||||||||||
| Expenses: | ||||||||||||||||||
| Selling, general and administrative | 26,484,000 | 34,114,000 | 116,080,000 | 94,932,000 | ||||||||||||||
| Research and development | 13,889,000 | 13,974,000 | 54,260,000 | 42,190,000 | ||||||||||||||
| Amortization of intangibles | 5,268,000 | 6,067,000 | 22,823,000 | 13,415,000 | ||||||||||||||
| Settlement of intellectual property litigation | – | – | (12,020,000 | ) | – | |||||||||||||
| Acquisition plan expenses | – | 587,000 | – | 21,276,000 | ||||||||||||||
| 45,641,000 | 54,742,000 | 181,143,000 | 171,813,000 | |||||||||||||||
| Operating income (loss) | 14,771,000 | 7,464,000 | 37,042,000 | (576,000 | ) | |||||||||||||
| Other expenses (income): | ||||||||||||||||||
| Interest expense and other | 2,691,000 | 4,129,000 | 11,629,000 | 7,750,000 | ||||||||||||||
| Interest income and other | (80,000 | ) | 93,000 | (68,000 | ) | (134,000 | ) | |||||||||||
|
Income (loss) before provision for |
12,160,000 | 3,242,000 | 25,481,000 | (8,192,000 | ) | |||||||||||||
| Provision for (benefit from) income taxes | 4,846,000 | 540,000 | 9,654,000 | (454,000 | ) | |||||||||||||
| Net income (loss) | $ | 7,314,000 | $ | 2,702,000 | $ | 15,827,000 | $ | (7,738,000 | ) | |||||||||
| Net income (loss) per share: | ||||||||||||||||||
| Basic | $ | 0.31 | $ | 0.14 | $ | 0.68 | $ | (0.46 | ) | |||||||||
| Diluted | $ | 0.31 | $ | 0.14 | $ | 0.67 | $ | (0.46 | ) | |||||||||
|
Weighted average number of common |
23,470,000 | 19,318,000 | 23,433,000 | 16,972,000 | ||||||||||||||
|
Weighted average number of common |
23,566,000 | 19,341,000 | 23,489,000 | 16,972,000 | ||||||||||||||
|
Dividends declared per issued and |
$ | 0.10 | $ | 0.30 | $ | 0.60 | $ | 1.20 | ||||||||||
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COMTECH TELECOMMUNICATIONS CORP. |
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AND SUBSIDIARIES |
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Consolidated Balance Sheets |
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(Audited) |
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| July 31, 2017 | July 31, 2016 | |||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 41,844,000 | $ | 66,805,000 | ||||||
| Accounts receivable, net | 124,962,000 | 150,967,000 | ||||||||
| Inventories, net | 60,603,000 | 71,354,000 | ||||||||
| Prepaid expenses and other current assets | 13,635,000 | 14,513,000 | ||||||||
| Total current assets | 241,044,000 | 303,639,000 | ||||||||
| Property, plant and equipment, net | 32,847,000 | 38,667,000 | ||||||||
| Goodwill | 290,633,000 | 287,618,000 | ||||||||
| Intangibles with finite lives, net | 261,871,000 | 284,694,000 | ||||||||
| Deferred financing costs, net | 3,065,000 | 3,309,000 | ||||||||
| Other assets, net | 2,603,000 | 3,269,000 | ||||||||
| Total assets | $ | 832,063,000 | $ | 921,196,000 | ||||||
| Liabilities and Stockholders’ Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 29,402,000 | $ | 33,462,000 | ||||||
| Accrued expenses and other current liabilities | 68,610,000 | 98,034,000 | ||||||||
| Dividends payable | 2,343,000 | 7,005,000 | ||||||||
| Customer advances and deposits, current | 25,771,000 | 29,665,000 | ||||||||
| Current portion of long-term debt | 15,494,000 | 11,067,000 | ||||||||
| Current portion of capital lease obligations | 2,309,000 | 3,592,000 | ||||||||
| Interest payable | 282,000 | 1,321,000 | ||||||||
| Total current liabilities | 144,211,000 | 184,146,000 | ||||||||
| Non-current portion of long-term debt, net | 176,228,000 | 239,969,000 | ||||||||
| Non-current portion of capital lease obligations | 1,771,000 | 4,021,000 | ||||||||
| Income taxes payable | 2,515,000 | 2,992,000 | ||||||||
| Deferred tax liability, net | 17,306,000 | 9,798,000 | ||||||||
| Customer advances and deposits, non-current | 7,227,000 | 5,764,000 | ||||||||
| Other liabilities | 2,655,000 | 4,105,000 | ||||||||
| Total liabilities | 351,913,000 | 450,795,000 | ||||||||
| Commitments and contingencies | ||||||||||
| Stockholders’ equity: | ||||||||||
|
Preferred stock, par value $.10 per share; shares authorized and |
– | – | ||||||||
|
Common stock, par value $.10 per share; authorized 100,000,000 |
3,862,000 | 3,837,000 | ||||||||
| Additional paid-in capital | 533,001,000 | 524,797,000 | ||||||||
| Retained earnings | 385,136,000 | 383,616,000 | ||||||||
| 921,999,000 | 912,250,000 | |||||||||
| Less: | ||||||||||
| Treasury stock, at cost (15,033,317 shares at July 31, 2017 and 2016) | (441,849,000 | ) | (441,849,000 | ) | ||||||
| Total stockholders’ equity | 480,150,000 | 470,401,000 | ||||||||
| Total liabilities and stockholders’ equity | $ | 832,063,000 | $ | 921,196,000 | ||||||
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 before income taxes, interest
(income) and other expense, interest expense, amortization of
stock-based compensation, amortization of intangibles, depreciation
expense, acquisition plan expenses and settlement of intellectual
property litigation. 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, 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 our performance
and comparability of our 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, costs related to its
acquisition plan, settlement of intellectual property litigation and
interest expense 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 July 31, | Twelve months ended July 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
|
Reconciliation of GAAP Net Income (Loss) to |
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| Net income (loss) | $ | 7,314,000 | 2,702,000 | 15,827,000 | (7,738,000 | ) | |||||||||
| Provision for (benefit from) income taxes | 4,846,000 | 540,000 | 9,654,000 | (454,000 | ) | ||||||||||
| Interest (income) and other expense | (80,000 | ) | 93,000 | (68,000 | ) | (134,000 | ) | ||||||||
| Interest expense | 2,691,000 | 4,129,000 | 11,629,000 | 7,750,000 | |||||||||||
| Amortization of stock-based compensation | 5,526,000 | 951,000 | 8,506,000 | 4,117,000 | |||||||||||
| Amortization of intangibles | 5,268,000 | 6,067,000 | 22,823,000 | 13,415,000 | |||||||||||
| Depreciation | 3,505,000 | 3,752,000 | 14,354,000 | 9,830,000 | |||||||||||
| Acquisition plan expenses | – | 587,000 | – | 21,276,000 | |||||||||||
| Settlement of intellectual property litigation | – | – | (12,020,000 | ) | – | ||||||||||
| Adjusted EBITDA | $ | 29,070,000 | 18,821,000 | 70,705,000 | 48,062,000 | ||||||||||
ECMTL
View source version on businesswire.com: http://www.businesswire.com/news/home/20170927006302/en/
Media Contact:
Michael D. Porcelain, Senior Vice President
and Chief Financial Officer
(631) 962-7103
[email protected]
