March 11, 2021-- Comtech Telecommunications Corp. (NASDAQ: CMTL)
today reported its operating results for the second fiscal quarter
ended January 31, 2021 and updated its financial targets for fiscal
2021.
Fiscal 2021 Second Quarter Highlights
- Consolidated net sales of $161.3 million and Adjusted EBITDA of
$18.1 million (or 11.2% of consolidated net sales) significantly
exceeded Comtech's expectation for its second quarter of fiscal
2021. 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.
- With bookings of $215.8 million, the Company achieved a
book-to-bill ratio (a measure defined as bookings divided by net
sales) of 1.34 during its second quarter of fiscal 2021. Backlog as
of January 31, 2021 was $660.0 million. The total value of
multi-year contracts that Comtech has received is substantially
higher than its reported backlog. When adding Comtech’s backlog and
the total unfunded value of multi-year contracts that Comtech has
received and for which it expects future orders, its revenue
visibility approximates $1.1 billion.
- The Company incurred an aggregate of $3.4 million of
acquisition plan expenses. The large majority of these expenses
related to GD NG-911 acquisition-related expenses and the
acquisition of UHP which closed on March 2, 2021. UHP is a leading
provider of innovative and disruptive satellite ground station
technology solutions. Based in Canada, UHP has developed
revolutionary technology that Comtech believes is transforming the
Very Small Aperture Terminal ("VSAT") market. Feedback from
customers has been extremely positive and initial order flow for
UHP products looks strong.
- The Company's annual effective income tax rate was 17.0%,
excluding a net discrete tax benefit of $0.8 million.
- Including all acquisition plan expenses, restructuring costs
and COVID-19 related costs, Comtech reported GAAP operating income
of $5.4 million, GAAP net income of $4.2 million and GAAP net
income per diluted share ("EPS") of $0.17 for the second quarter of
fiscal 2021. Excluding such costs, the net discrete tax benefit and
as reconciled to the most directly comparable GAAP financial
measures in the table below, Non-GAAP operating income was $9.5
million, Non-GAAP net income was $6.8 million and Non-GAAP EPS was
$0.27.
- As of January 31, 2021, Comtech had $30.9 million of cash and
cash equivalents and total debt outstanding of $208.0 million.
Commenting on the Company's second quarter fiscal 2021
performance, Fred Kornberg, Chairman of the Board and Chief
Executive Officer, stated, "I could not be more pleased with our
outstanding performance during the quarter, including our very
strong bookings and a growing pipeline of opportunities.” Mr.
Kornberg added, “Demand appears to be strengthening across our
markets, showing early signs of the post-pandemic recovery. With
our investment in innovation, including our recently completed
acquisition of UHP, and our market leadership positions, I believe
we are exceedingly well-positioned for a banner year in fiscal 2022
and achieving many years of sustainable profitable growth.”
COMMENTS AND FINANCIAL TARGETS FOR EXPECTED FISCAL 2021
PERFORMANCE
Comtech is making the following comments on expected fiscal 2021
performance:
- Comtech expects fiscal 2021 consolidated net sales to be in a
range of $610.0 million to $620.0 million. This revenue range
reflects an updated assessment of the timing of shipment for
existing and anticipated orders. The Company continues to target
Adjusted EBITDA in a range of $74.0 million to $76.0 million.
- Comtech was awarded a statewide contract valued at up to $175.1
million to design, deploy, and operate next-generation 911
("NG-911") services for the Commonwealth of Pennsylvania. This
contract was awarded to the Company shortly after it announced the
receipt of a $54.0 million contract to design, deploy and operate
NG-911 services for the State of South Carolina. Based on
anticipated timing of performance, the Company expects meaningful
revenue contribution from these contracts to begin in fiscal
2022.
- Fiscal 2021 consolidated net sales are anticipated to reflect a
similar percentage of Commercial Solutions segment net sales
achieved in fiscal 2020 and: (i) strong demand for Comtech's public
safety technology solutions; (ii) providing 5G virtual mobile
location-based technology solutions for two U.S. tier-one mobile
network operators and (iii) deliveries to support a critical U.S.
Air Force and U.S. Army Anti-jam Modem (“A3M”) program under the
U.S. Space Force’s Space and Missile Systems Center (“SMC”)
agency.
- Fiscal 2021 consolidated net sales are anticipated to reflect a
similar percentage of Government Solutions segment net sales
achieved in fiscal 2020 and ongoing demand for: (i) Manpack
Satellite Terminals, networking equipment and other advanced VSAT
products by the U.S. Army; (ii) ongoing sustainment services for
the U.S. Army for the AN/TSC-198A SNAP terminal; (iii) sustainment
services for the U.S. Army's Project Manager Mission Command (“PM
MC”) Blue Force Tracking (“BFT-1”) program; and (iv) Joint Cyber
Analysis Course (“JCAC”) training solutions.
- At the start of its third quarter of fiscal 2021, Comtech
initiated an effort to improve efficiencies and streamline
operations in its Government Solutions segment. Such efforts
include the consolidation of certain administrative and operating
functions in both its Florida and Maryland locations and the
elimination of certain duplicate functions. In addition, Comtech
expects to continue shifting production of many of its key
satellite earth station products from its existing Tempe, Arizona
locations to a new 146,000 square foot facility in Chandler,
Arizona. This new facility, which is located less than 10 miles
from its current facilities, is expected to support anticipated
growth and long-term business goals. Over time, these efforts are
expected to improve consolidated Adjusted EBITDA margins.
- Additional information about the UHP acquisition and other
acquisition plan expenses can be found in the Company’s Form 10-Q
as filed with the Securities and Exchange Commission. Because of
the pandemic's continuing impact on global business conditions and
the difficulty of estimating ongoing acquisition plan litigation
expenses, the Company is not providing any GAAP operating income,
GAAP net income or GAAP EPS guidance or a reconciliation of the
Company’s projected Adjusted EBITDA results to the most comparable
GAAP measure, as such a reconciliation cannot be prepared without
unreasonable effort. For the same reasons, the Company is unable to
address the probable significance of the unavailable information,
which could be material to future results.
Conference Call
The Company has scheduled an investor conference call for 4:30
PM (ET) on Thursday, March 11, 2021. 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 (800) 895-3361 (domestic), or (785)
424-1062 (international) and using the conference I.D. "Comtech." A
replay of the conference call will be available for seven days by
dialing (800) 839-5490 or (402) 220-2550. In addition, an updated
investor presentation is available on the Company's website.
About Comtech
Comtech Telecommunications Corp. is a leader in the global
communications market headquartered in Melville, New York. With a
passion for customer success, Comtech designs, produces and markets
advanced secure wireless solutions to more than 1,000 customers in
more than 100 countries. For more information, please visit
www.comtechtel.com.
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 and benefits from 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 the Company successfully;
the possibility of disruption from recent acquisitions, 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 expanding the sales of the Company's Heights™
Network Platform ("HEIGHTS"); 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 legal proceedings, customer claims
for indemnification, and other similar matters; risks associated
with the Company’s obligations under its Credit Facility; risks
associated with the Company's large contracts; risks associated
with the COVID-19 pandemic; 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,
2021
2020
2021
2020
Net sales
$
161,292,000
$
161,654,000
$
296,510,000
$
331,921,000
Cost of sales
105,612,000
101,052,000
190,622,000
207,752,000
Gross profit
55,680,000
60,602,000
105,888,000
124,169,000
Expenses:
Selling, general and administrative
29,462,000
29,374,000
57,002,000
61,225,000
Research and development
12,664,000
13,740,000
24,299,000
28,601,000
Amortization of intangibles
4,795,000
5,229,000
10,361,000
10,435,000
Acquisition plan expenses
3,357,000
6,025,000
94,540,000
8,414,000
50,278,000
54,368,000
186,202,000
108,675,000
Operating income (loss)
5,402,000
6,234,000
(80,314,000
)
15,494,000
Other expenses (income):
Interest expense
1,418,000
1,616,000
3,715,000
3,420,000
Interest (income) and other
(66,000
)
6,000
—
(71,000
)
Income (loss) before (benefit from)
provision for income taxes
4,050,000
4,612,000
(84,029,000
)
12,145,000
(Benefit from) provision for income
taxes
(155,000
)
1,117,000
(2,394,000
)
2,262,000
Net income (loss)
$
4,205,000
$
3,495,000
$
(81,635,000
)
$
9,883,000
Net income (loss) per share:
Basic
$
0.17
$
0.14
$
(3.22
)
$
0.40
Diluted
$
0.17
$
0.14
$
(3.22
)
$
0.40
Weighted average number of common shares
outstanding – basic
25,337,000
24,659,000
25,321,000
24,607,000
Weighted average number of common and
common equivalent shares outstanding – diluted
25,420,000
25,058,000
25,321,000
24,904,000
COMTECH TELECOMMUNICATIONS
CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
January 31, 2021
July 31, 2020
(Unaudited)
(Audited)
Assets
Current assets:
Cash and cash equivalents
$
30,934,000
$
47,878,000
Accounts receivable, net
149,928,000
126,816,000
Inventories, net
81,630,000
82,302,000
Prepaid expenses and other current
assets
19,417,000
20,101,000
Total current assets
281,909,000
277,097,000
Property, plant and equipment, net
26,136,000
27,037,000
Operating lease right-of-use assets,
net
51,020,000
30,033,000
Goodwill
333,793,000
330,519,000
Intangibles with finite lives, net
247,758,000
258,019,000
Deferred financing costs, net
2,023,000
2,391,000
Other assets, net
3,956,000
4,551,000
Total assets
$
946,595,000
$
929,647,000
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
38,994,000
$
23,423,000
Accrued expenses and other current
liabilities
79,185,000
85,161,000
Operating lease liabilities, current
8,771,000
8,247,000
Dividends payable
2,495,000
2,468,000
Contract liabilities
49,990,000
40,250,000
Interest payable
265,000
163,000
Total current liabilities
179,700,000
159,712,000
Non-current portion of long-term debt,
net
208,000,000
149,500,000
Operating lease liabilities,
non-current
45,259,000
24,109,000
Income taxes payable
2,286,000
1,963,000
Deferred tax liability, net
16,442,000
17,637,000
Long-term contract liabilities
15,066,000
9,596,000
Other liabilities
16,558,000
17,831,000
Total liabilities
483,311,000
380,348,000
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 40,059,977 shares and
39,924,439 shares at January 31, 2021 and July 31, 2020,
respectively
4,006,000
3,992,000
Additional paid-in capital
570,891,000
569,891,000
Retained earnings
330,236,000
417,265,000
905,133,000
991,148,000
Less:
Treasury stock, at cost (15,033,317 shares
at January 31, 2021 and July 31, 2020)
(441,849,000
)
(441,849,000
)
Total stockholders’ equity
463,284,000
549,299,000
Total liabilities and stockholders’
equity
$
946,595,000
$
929,647,000
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,
write-off of deferred financing costs, interest expense,
amortization of stock-based compensation, amortization of
intangible assets, depreciation expense, estimated contract
settlement costs, settlement of intellectual property litigation,
acquisition plan expenses, restructuring costs, COVID-19 related
costs, facility exit costs, strategic alternatives analysis
expenses and other. The Company's definition of Adjusted EBITDA may
differ from the definition of EBITDA or Adjusted 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. The Company's Non-GAAP
measures for consolidated operating income, net income and net
income per diluted share reflect the GAAP measures as reported,
adjusted for certain items as discussed below. 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 tables, 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 2021 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
Six months ended
Fiscal
January 31,
January 31,
Year
2021
2020
2021
2020
2020
Reconciliation of GAAP Net Income
(Loss) to Adjusted EBITDA:
Net income (loss)
$
4,205,000
$
3,495,000
$
(81,635,000
)
$
9,883,000
$
7,020,000
(Benefit from) provision for income
taxes
(155,000
)
1,117,000
(2,394,000
)
2,262,000
2,290,000
Interest (income) and other
(66,000
)
6,000
—
(71,000
)
(190,000
)
Interest expense
1,418,000
1,616,000
3,715,000
3,420,000
6,054,000
Amortization of stock-based
compensation
1,287,000
1,238,000
1,986,000
2,117,000
9,275,000
Amortization of intangibles
4,795,000
5,229,000
10,361,000
10,435,000
21,595,000
Depreciation
2,457,000
2,721,000
5,009,000
5,372,000
10,561,000
Estimated contract settlement costs
—
(262,000
)
—
(32,000
)
444,000
Acquisition plan expenses
3,357,000
6,025,000
94,540,000
8,414,000
20,754,000
Restructuring costs
601,000
—
601,000
—
—
COVID-19 related costs
160,000
—
160,000
—
—
Adjusted EBITDA
$
18,059,000
$
21,185,000
$
32,343,000
$
41,800,000
$
77,803,000
In addition, a reconciliation of Comtech's GAAP consolidated
operating income (loss), net income (loss) and net income (loss)
per diluted share to the corresponding non-GAAP measures is shown
in the tables below for the three and six months ended January 31,
2021 and 2020:
January 31, 2021
Three months ended
Six months ended
Operating
Income
Net Income
Net Income per
Diluted Share*
Operating (Loss) Income
Net (Loss)
Income
Net (Loss)
Income per
Diluted Share*
Reconciliation of GAAP to Non-GAAP
Earnings:
GAAP measures, as reported
$
5,402,000
$
4,205,000
$
0.17
$
(80,314,000
)
$
(81,635,000
)
$
(3.22
)
Acquisition plan expenses
3,357,000
2,786,000
0.11
94,540,000
90,368,000
3.56
Restructuring costs
601,000
499,000
0.02
601,000
499,000
0.02
COVID-19 related costs
160,000
133,000
0.01
160,000
133,000
0.01
Interest expense
—
—
—
—
978,000
0.04
Net discrete tax benefit
—
(843,000
)
(0.03
)
—
(9,000
)
—
Non-GAAP measures
$
9,520,000
$
6,780,000
$
0.27
$
14,987,000
$
10,334,000
$
0.41
January 31, 2020
Three months ended
Six months ended
Operating
Income
Net Income
Net Income per Diluted Share*
Operating
Income
Net Income
Net Income per Diluted
Share*
Reconciliation of GAAP to Non-GAAP
Earnings:
GAAP measures, as reported
$
6,234,000
$
3,495,000
$
0.14
$
15,494,000
$
9,883,000
$
0.40
Acquisition plan expenses
6,025,000
4,639,000
0.19
8,414,000
6,479,000
0.26
Estimated contract settlement costs
(262,000
)
(202,000
)
(0.01
)
(32,000
)
(25,000
)
—
Net discrete tax expense (benefit)
—
57,000
—
—
(531,000
)
(0.02
)
Non-GAAP measures
$
11,997,000
$
7,989,000
$
0.32
$
23,876,000
$
15,806,000
$
0.63
Fiscal Year 2020
Operating
Income
Net Income
Net Income per
Diluted Share*
Reconciliation of GAAP to Non-GAAP
Earnings:
GAAP measures, as reported
$
15,174,000
$
7,020,000
$
0.28
Estimated contract settlement costs
444,000
280,000
0.01
Acquisition plan expenses
20,754,000
13,075,000
0.53
Net discrete tax benefit
—
(1,155,000
)
(0.05
)
Non-GAAP measures
$
36,372,000
$
19,220,000
$
0.77
* Per share amounts may not foot due to
rounding. In addition, non-GAAP EPS adjustments for the six months
ended January 31, 2021 was computed using 25,365,000 weighted
average diluted shares outstanding during the respective
period.
ECMTL
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210311006002/en/
Media Contact: Michael D. Porcelain, President and Chief
Operating Officer (631) 962-7000 Info@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