June 8, 2021-- Comtech Telecommunications Corp. (NASDAQ: CMTL)
today reported its operating results for the third fiscal quarter
ended April 30, 2021 and updated its financial targets for fiscal
2021.
Fiscal 2021 Third Quarter Highlights
- Consolidated net sales of $139.4 million and Adjusted EBITDA of
$17.7 million (or 12.7% of consolidated net sales). Adjusted
EBITDA, which significantly exceeded Comtech's expectation for its
third quarter of fiscal 2021, is a non-GAAP financial measure that
is reconciled to the most directly comparable GAAP financial
measure and is more fully defined below.
- With bookings of $115.9 million, the Company achieved a
book-to-bill ratio (a measure defined as bookings divided by net
sales) of 0.83 during its third quarter of fiscal 2021. Backlog as
of April 30, 2021 was $636.5 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 $5.3 million of
acquisition plan expenses due to the April 2021 settlement of
litigation related to the 2019 acquisition of GD NG-911 as well as
the March 2021 closing of the UHP acquisition. The integration of
UHP into Comtech’s satellite ground station product line is well
underway, and it does not expect to incur any significant
acquisition plan expenses for the remainder of fiscal 2021.
- The Company's annual effective income tax rate was 11.5%,
excluding a net discrete tax expense of $0.2 million.
- Comtech reported GAAP operating income of $2.4 million, GAAP
net income of $0.8 million and GAAP net income per diluted share
("EPS") of $0.03 for the third quarter of fiscal 2021. Non-GAAP
operating income was $8.9 million, Non-GAAP net income was $6.8
million and Non-GAAP EPS was $0.26. These Non-GAAP amounts exclude
acquisition plan expenses, restructuring costs, COVID-19 related
costs, strategic emerging technology costs for next-generation
satellite technology and a net discrete tax expense. Non-GAAP
amounts are reconciled to the most directly comparable GAAP
financial measures in the table below.
- Comtech generated GAAP operating cash flows of $6.8 million
during the third quarter and had $39.2 million of cash and cash
equivalents and total debt outstanding of $215.0 million as of
April 30, 2021.
Commenting on the Company's third quarter fiscal 2021
performance, Fred Kornberg, Chairman of the Board and Chief
Executive Officer, stated, "Thanks to the hard work of all of our
team members, we achieved solid operating performance and have
recently secured important contract awards that bode well for our
future. We are continuing to invest in new state-of-the-art
production and engineering facilities as well as new
next-generation wireless technology solutions that we believe our
customers will want in the post-COVID-19 pandemic economic
recovery. Looking forward, we are confident that we will have a
strong finish to fiscal 2021 and achieve growth in fiscal
2022.”
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 $580.0 million to $590.0 million. This updated target
primarily reflects a change in anticipated revenues in its
Government Solutions segment due to the U.S. government's April
2021 announcement to fully withdraw troops from Afghanistan as well
as other program changes. At the same time, the Company's effort to
streamline business operations are paying off and it continues to
target Adjusted EBITDA in a range of $74.0 million to $76.0 million
for fiscal 2021.
- During the third quarter, Comtech incurred $0.3 million of
strategic emerging technology costs for next-generation satellite
technology to advance its solutions offerings to be used with new
broadband satellite constellations. The Company is evaluating this
new market in relation to its long-term business strategies, and it
may incur additional costs over the next twelve months.
- As disclosed in the Company's Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission (“SEC”) today, at
the start of Comtech’s fourth quarter of fiscal 2021, it entered
into a multi-year agreement enabling a customer to potentially
order hundreds of millions of dollars of its next-generation
satellite earth station technology. Shortly after Comtech signed
this agreement, it received its first order valued at more than
$13.0 million to make certain customizations on behalf of this
customer. Work on these efforts has commenced immediately.
- Comtech expects fiscal 2021 revenue in its Commercial Solutions
segment to be slightly higher than the amount it achieved in fiscal
2020, primarily due to: (i) strong demand for Comtech's public
safety technology solutions; (ii) delivering 5G virtual mobile
location-based technology solutions for two U.S. tier-one mobile
network operators; (iii) contract performance in support of 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; and (iv) deliveries of SLM-5650B satellite
modems and firmware related to a previously awarded contract from
the U.S. Naval Information Warfare Systems Command.
- Comtech expects fiscal 2021 revenue in its Government Solutions
segment to be significantly lower than the amount it achieved in
fiscal 2020. Fiscal 2021 is anticipated to reflect significantly
lower sales of field support services, partially offset by 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.
- During its third quarter of fiscal 2021, Comtech initiated an
effort to improve efficiencies and streamline operations in its
Government Solutions segment. These efforts, which remain ongoing,
include the consolidation of certain administrative and operating
functions in both its Florida and Maryland locations. In addition,
Comtech has started to shift 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 as well as the combination of certain related functions.
This new facility is located less than 10 miles from its current
facilities and 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 Company's third quarter fiscal
2021 performance and updated fiscal 2021 targets can be found in
the Company’s Form 10-Q as filed with the SEC. Because of the
pandemic's continuing impact on global business conditions, 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 Tuesday, June 8, 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) 839-4568 or (402) 220-2681. 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 HeightsTM
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 April 30,
Nine months ended April 30,
2021
2020
2021
2020
Net sales
$
139,376,000
$
135,121,000
$
435,886,000
$
467,042,000
Cost of sales
86,360,000
82,120,000
276,982,000
289,872,000
Gross profit
53,016,000
53,001,000
158,904,000
177,170,000
Expenses:
Selling, general and administrative
26,997,000
32,313,000
83,999,000
93,538,000
Research and development
13,092,000
12,324,000
37,391,000
40,925,000
Amortization of intangibles
5,310,000
5,517,000
15,671,000
15,952,000
Acquisition plan expenses
5,267,000
5,983,000
99,807,000
14,397,000
50,666,000
56,137,000
236,868,000
164,812,000
Operating income (loss)
2,350,000
(3,136,000
)
(77,964,000
)
12,358,000
Other expenses (income):
Interest expense
1,518,000
1,504,000
5,233,000
4,924,000
Interest (income) and other
(276,000
)
108,000
(276,000
)
37,000
Income (loss) before provision for
(benefit from) income taxes
1,108,000
(4,748,000
)
(82,921,000
)
7,397,000
Provision for (benefit from) income
taxes
316,000
(759,000
)
(2,078,000
)
1,503,000
Net income (loss)
$
792,000
$
(3,989,000
)
$
(80,843,000
)
$
5,894,000
Net income (loss) per share:
Basic
$
0.03
$
(0.16
)
$
(3.12
)
$
0.24
Diluted
$
0.03
$
(0.16
)
$
(3.12
)
$
0.24
Weighted average number of common shares
outstanding – basic
25,911,000
24,982,000
25,875,000
24,730,000
Weighted average number of common and
common equivalent shares outstanding – diluted
26,266,000
24,982,000
25,875,000
24,892,000
COMTECH TELECOMMUNICATIONS
CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
April 30, 2021
July 31, 2020
(Unaudited)
(Audited)
Assets
Current assets:
Cash and cash equivalents
$
39,198,000
$
47,878,000
Accounts receivable, net
144,132,000
126,816,000
Inventories, net
83,106,000
82,302,000
Prepaid expenses and other current
assets
25,801,000
20,101,000
Total current assets
292,237,000
277,097,000
Property, plant and equipment, net
29,366,000
27,037,000
Operating lease right-of-use assets,
net
47,296,000
30,033,000
Goodwill
347,780,000
330,519,000
Intangibles with finite lives, net
274,048,000
258,019,000
Deferred financing costs, net
1,839,000
2,391,000
Other assets, net
6,026,000
4,551,000
Total assets
$
998,592,000
$
929,647,000
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
33,277,000
$
23,423,000
Accrued expenses and other current
liabilities
97,602,000
85,161,000
Operating lease liabilities, current
8,755,000
8,247,000
Dividends payable
2,600,000
2,468,000
Contract liabilities
56,192,000
40,250,000
Interest payable
227,000
163,000
Total current liabilities
198,653,000
159,712,000
Non-current portion of long-term debt,
net
215,000,000
149,500,000
Operating lease liabilities,
non-current
41,542,000
24,109,000
Income taxes payable
2,588,000
1,963,000
Deferred tax liability, net
24,495,000
17,637,000
Long-term contract liabilities
8,997,000
9,596,000
Other liabilities
15,695,000
17,831,000
Total liabilities
506,970,000
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 41,102,215 shares and
39,924,439 shares at April 30, 2021 and July 31, 2020,
respectively
4,110,000
3,992,000
Additional paid-in capital
601,029,000
569,891,000
Retained earnings
328,332,000
417,265,000
933,471,000
991,148,000
Less:
Treasury stock, at cost (15,033,317 shares
at April 30, 2021 and July 31, 2020)
(441,849,000
)
(441,849,000
)
Total stockholders’ equity
491,622,000
549,299,000
Total liabilities and
stockholders’ equity
$
998,592,000
$
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, strategic emerging technology costs (for next-generation
satellite technology), 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
Nine months ended
Fiscal
April 30,
April 30,
Year
2021
2020
2021
2020
2020
Reconciliation of GAAP Net Income
(Loss) to Adjusted EBITDA:
Net income (loss)
$
792,000
$
(3,989,000
)
$
(80,843,000
)
$
5,894,000
$
7,020,000
Provision for (benefit from) income
taxes
316,000
(759,000
)
(2,078,000
)
1,503,000
2,290,000
Interest (income) and other
(276,000
)
108,000
(276,000
)
37,000
(190,000
)
Interest expense
1,518,000
1,504,000
5,233,000
4,924,000
6,054,000
Amortization of stock-based
compensation
1,204,000
981,000
3,190,000
3,098,000
9,275,000
Amortization of intangibles
5,310,000
5,517,000
15,671,000
15,952,000
21,595,000
Depreciation
2,274,000
2,650,000
7,283,000
8,022,000
10,561,000
Estimated contract settlement costs
—
476,000
—
444,000
444,000
Acquisition plan expenses
5,267,000
5,983,000
99,807,000
14,397,000
20,754,000
Restructuring costs
594,000
—
1,195,000
—
—
COVID-19 related costs
416,000
—
576,000
—
—
Strategic emerging technology costs
315,000
—
315,000
—
—
Adjusted EBITDA
$
17,730,000
$
12,471,000
$
50,073,000
$
54,271,000
$
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 nine months ended April 30,
2021 and 2020:
April 30, 2021
Three months ended
Nine 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
$
2,350,000
$
792,000
$
0.03
$
(77,964,000
)
$
(80,843,000
)
$
(3.12
)
Acquisition plan expenses
5,267,000
4,661,000
0.18
99,807,000
96,379,000
3.70
Restructuring costs
594,000
526,000
0.02
1,195,000
1,058,000
0.04
COVID-19 related costs
416,000
368,000
0.01
576,000
510,000
0.02
Strategic emerging technology costs
315,000
279,000
0.01
315,000
279,000
0.01
Interest expense
—
—
—
—
1,043,000
0.04
Net discrete tax expense (benefit)
—
189,000
0.01
—
(592,000
)
(0.02
)
Non-GAAP measures
$
8,942,000
$
6,815,000
$
0.26
$
23,929,000
$
17,834,000
$
0.69
April 30, 2020
Three months ended
Nine months ended
Operating
(Loss)
Income
Net (Loss)
Income
Net (Loss)
Income
per Diluted
Share*
Operating
Income
Net Income
Net Income
per Diluted
Share*
Reconciliation of GAAP to Non-GAAP
Earnings:
GAAP measures, as reported
$
(3,136,000
)
$
(3,989,000
)
$
(0.16
)
$
12,358,000
$
5,894,000
$
0.24
Acquisition plan expenses
5,983,000
4,128,000
0.16
14,397,000
9,934,000
0.40
Estimated contract settlement costs
476,000
328,000
0.01
444,000
306,000
0.01
Net discrete tax expense (benefit)
—
713,000
0.03
—
(790,000
)
(0.03
)
Non-GAAP measures
$
3,323,000
$
1,180,000
$
0.05
$
27,199,000
$
15,344,000
$
0.62
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. Non-GAAP EPS
adjustments for the nine months ended April 30, 2021 were computed
using 26,016,000 weighted average diluted shares outstanding during
the respective period. In addition, non-GAAP EPS adjustments for
three months ended April 30, 2020 were computed using 25,058,000
weighted average diluted shares outstanding during the respective
period.
ECMTL
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Media Contact: Michael D. Porcelain, President and Chief
Operating Officer (631) 962-7000 Info@comtechtel.com
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