March 7, 2018-- Comtech Telecommunications Corp. (NASDAQ:
CMTL) today reported its operating results for the second fiscal
quarter ended January 31, 2018 and updated its fiscal 2018
guidance.
Fiscal 2018 Second Quarter Highlights
- Net sales were $133.7 million.
- Bookings were $210.6 million, with a
book-to-bill ratio (a measure defined as bookings divided by net
sales) of 1.57.
- Backlog was $567.3 million, which is
close to Comtech's record high. Comtech's backlog does not include
the unfunded portions of multi-year contracts. As such, the total
value of multi-year contracts that Comtech has received is
substantially higher.
- Comtech received several strategic
contract awards including: (i) a $134.0 million award to provide
one of the largest wireless carriers in the U.S. with enhanced 911
services; (ii) a $123.6 million contract to be the sole provider of
sustainment support services for the U.S. Army’s “SNAP” mobile
satellite communications program; and (iii) an initial $11.7
million order to provide several thousand of Comtech's next
generation MT-2025 mobile satellite transceivers to support the
U.S. Army’s Blue Force Tracking-2 (“BFT-2”) system.
- GAAP operating income was $4.9 million
and GAAP net income was $15.8 million, or $0.66 per diluted
share.
- GAAP net income includes a net tax
benefit of $14.0 million, or $0.59 per diluted share ("Tax Gain"),
primarily due to the remeasurement of deferred tax assets and
liabilities as a result of Tax Reform, which also resulted in a
reduction to Comtech's fiscal 2018 estimated effective tax rate to
approximately 27.75%. Excluding the $0.59 per diluted share Tax
Gain, GAAP net income would have been approximately $1.8 million,
or $0.07 per diluted share.
- Adjusted EBITDA was $14.5 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.
- Cash flows from operating activities
were $2.7 million.
- Cash dividends of $2.4 million were
paid to common stockholders.
- $40.5 million of cash and cash
equivalents as of January 31, 2018.
In commenting on Comtech’s performance during the second quarter
of fiscal 2018 and Comtech’s fiscal 2018 guidance, Fred Kornberg,
President and Chief Executive Officer, stated, "I could not be more
pleased with our better than expected second quarter results and
the major multi-year contract awards that we have received to-date.
Business momentum remains strong and shows no signs of slowing
down. Given our year-to-date performance and strong positive
business momentum, we are increasing our 2018 fiscal year financial
targets and expect that fiscal 2018 will be a very strong
year."
Updated 2018 Fiscal Year Financial Targets
- Comtech is increasing its revenue
target to a new range of approximately $570.0 million to $585.0
million, as compared to a prior range of $550.0 million to $575.0
million. Despite the absence of $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, the mid-point of
Comtech’s new fiscal 2018 revenue target range represents a
year-over-year growth rate of close to 5.0%.
- Comtech is increasing its Adjusted
EBITDA target to a new range of $72.0 million to $76.0 million, as
compared to a prior range of $69.0 million to $73.0 million.
Despite the absence of the $6.7 million of BFT-1 intellectual
property license fees, the mid-point of the new fiscal 2018
Adjusted EBITDA target range represents a year-over-year growth
rate of close to 5.0%.
- Comtech’s third quarter consolidated
net sales and Adjusted EBITDA are expected to be higher than the
related amounts achieved in its second quarter of fiscal 2018 by
approximately 10.0%. Comtech’s consolidated GAAP operating income
and Adjusted EBITDA, as a percentage of its consolidated third
quarter fiscal 2018 net sales, are expected to approximate 4.0% and
11.0%, respectively, with significant increases in each metric in
the fourth quarter of fiscal 2018.
- Comtech is increasing its GAAP diluted
EPS target to a new range of $1.08 to $1.23, as compared to a prior
range of $0.44 to $0.46. This new target range includes the
benefits of the $0.59 per diluted share Tax Gain and better than
expected operating performance, partially offset by an increase in
expected amortization of stock-based compensation. GAAP diluted EPS
for Comtech's third quarter of fiscal 2018 is expected to
approximate a range of $0.10 to $0.12 per diluted share, which is
higher than the $0.07 per diluted share Comtech achieved in its
second quarter of fiscal 2018 when excluding the $0.59 per diluted
share Tax Gain.
- In line with its original Business
Outlook for 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 and Adjusted EBITDA.
- Comtech's new estimated effective tax
rate of 27.75% reflects seven months of benefit related to Tax
Reform. Although Comtech continues to perform an analysis of Tax
Reform and its impact, Comtech's initial assessment is that its
effective tax rate in fiscal 2019, before any discrete items, will
range from 24.5% to 26.0%.
- If order flow remains strong and
Comtech is able to achieve all of its fiscal 2018 business goals,
it is possible that Comtech's actual fiscal 2018 consolidated net
sales, GAAP diluted EPS and Adjusted EBITDA could be higher than
its targeted amounts.
Additional information about Comtech’s fiscal 2018 guidance is
included in Comtech’s second quarter investor presentation which is
located on Comtech’s website at www.comtechtel.com.
Conference Call
Comtech has scheduled an investor conference call for 8:30 AM
(ET) on Thursday, March 8, 2018. 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 (888) 632-3389 (domestic), or (785)
424-1673 (international) and using the conference I.D. "Comtech." A
replay of the conference call will be available for seven days by
dialing (800) 839-2383 or (402) 220-7202. In addition, an updated
investor presentation, including earnings guidance, is available on
Comtech's website.
About Comtech
Comtech Telecommunications Corp. designs, develops, produces and
markets innovative products, systems and services for advanced
communications solutions. Comtech 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 Heights™ Dynamic Network Access Technology
("HEIGHTS" or "HDNA"); 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 TeleCommunication
Systems, Inc.'s ("TCS") 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 impact of H.R.1, also known as the Tax Cuts and Jobs Act ("Tax
Reform"), which was recently enacted in the U.S.; 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 January 31, Six months ended January 31,
2018 2017 2018 2017 Net sales $ 133,731,000
139,028,000
255,300,000 274,814,000 Cost of sales 82,930,000 85,824,000
156,783,000 169,502,000 Gross profit
50,801,000 53,204,000 98,517,000 105,312,000
Expenses: Selling, general and administrative
27,215,000 30,988,000 55,690,000 63,673,000 Research and
development 13,435,000 13,314,000 27,185,000 27,410,000
Amortization of intangibles 5,268,000 6,032,000 10,537,000
12,087,000 Settlement of intellectual property litigation —
(9,979,000 ) — (9,979,000 ) 45,918,000 40,355,000
93,412,000 93,191,000 Operating income
4,883,000 12,849,000 5,105,000 12,121,000 Other expenses
(income): Interest expense 2,519,000 2,852,000 5,107,000 6,177,000
Interest (income) and other (48,000 ) (74,000 ) (9,000 ) (76,000 )
Income before (benefit from) provision for income taxes
2,412,000 10,071,000 7,000 6,020,000 (Benefit from) provision for
income taxes (13,349,000 ) 3,486,000 (14,094,000 ) 1,924,000
Net income $ 15,761,000 6,585,000
14,101,000 4,096,000 Net income per share:
Basic $ 0.66 0.28
0.59 0.17 Diluted $ 0.66 0.28
0.59 0.17 Weighted average number of common
shares outstanding – basic 23,816,000 23,428,000
23,805,000 23,406,000 Weighted average number
of common and common equivalent shares outstanding – diluted
23,953,000 23,445,000 23,942,000 23,427,000
Dividends declared per issued and outstanding common
share as of the applicable dividend record date $ 0.10 0.10
0.20
0.40
COMTECH TELECOMMUNICATIONS
CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
January 31, 2018 July 31, 2017 (Unaudited) (Audited) Assets
Current assets: Cash and cash equivalents $ 40,472,000 41,844,000
Accounts receivable, net 117,973,000 124,962,000 Inventories, net
71,707,000 60,603,000 Prepaid expenses and other current assets
14,915,000 13,635,000 Total current assets
245,067,000 241,044,000 Property, plant and equipment, net
30,122,000 32,847,000 Goodwill 290,633,000 290,633,000 Intangibles
with finite lives, net 251,334,000 261,871,000 Deferred financing
costs, net 2,635,000 3,065,000 Other assets, net 2,860,000
2,603,000 Total assets $ 822,651,000 832,063,000
Liabilities and Stockholders’ Equity Current liabilities:
Accounts payable $ 27,662,000 29,402,000 Accrued expenses and other
current liabilities 60,585,000 68,610,000 Dividends payable
2,351,000 2,343,000 Customer advances and deposits 24,848,000
25,771,000 Current portion of long-term debt 17,211,000 15,494,000
Current portion of capital lease obligations 1,858,000 2,309,000
Interest payable 83,000 282,000 Total current
liabilities 134,598,000 144,211,000 Non-current portion of
long-term debt, net 174,225,000 176,228,000 Non-current portion of
capital lease obligations 885,000 1,771,000 Income taxes payable
2,558,000 2,515,000 Deferred tax liability, net 6,088,000
17,306,000 Customer advances and deposits, non-current 8,385,000
7,227,000 Other liabilities 5,291,000 2,655,000 Total
liabilities 332,030,000 351,913,000 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
38,653,430 shares and 38,619,467 shares at January 31, 2018 and
July 31, 2017, respectively 3,865,000 3,862,000 Additional paid-in
capital 534,224,000 533,001,000 Retained earnings 394,381,000
385,136,000 932,470,000 921,999,000 Less:
Treasury stock, at cost (15,033,317 shares
at January 31, 2018
and July 31, 2017)
(441,849,000 ) (441,849,000 ) Total stockholders’ equity
490,621,000 480,150,000 Total liabilities and
stockholders’ equity $ 822,651,000 832,063,000
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 January 31, Six months ended
January 31, Fiscal Year 2018 2017 2018 2017
2017
Reconciliation of GAAP Net Income to Adjusted EBITDA:
Net income $ 15,761,000 6,585,000 14,101,000 4,096,000 $ 15,827,000
(Benefit from) provision for income taxes (13,349,000 ) 3,486,000
(14,094,000 ) 1,924,000 9,654,000 Interest (income) and other
expense (48,000 ) (74,000 ) (9,000 ) (76,000 ) (68,000 ) Interest
expense 2,519,000 2,852,000 5,107,000 6,177,000 11,629,000
Amortization of stock-based compensation 1,080,000 1,019,000
1,827,000 1,989,000 8,506,000 Amortization of intangibles 5,268,000
6,032,000 10,537,000 12,087,000 22,823,000 Depreciation 3,317,000
3,568,000 6,663,000 7,317,000 14,354,000 Settlement of intellectual
property litigation — (9,979,000 ) — (9,979,000 )
(12,020,000 ) Adjusted EBITDA $ 14,548,000 13,489,000
24,132,000 23,535,000 $ 70,705,000
ECMTL
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180307006352/en/
Media:Michael D. Porcelain, Senior Vice President and
Chief Financial Officer(631) 962-7103Info@comtechtel.com
Comtech Telecommunications (NASDAQ:CMTL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Comtech Telecommunications (NASDAQ:CMTL)
Historical Stock Chart
From Apr 2023 to Apr 2024