Globecomm Systems Inc. (NASDAQ:GCOM), a leading global provider
of communications solutions and services, today announced financial
results for the fiscal 2011 fourth quarter and fiscal year ended
June 30, 2011. Globecomm is reporting its financial results on a
generally accepted accounting principles (GAAP) basis as well as
adjusted EBITDA and adjusted diluted net income per common share,
both non-GAAP financial measures, for which the Company provides
detailed reconciliations on the attached tables. The following are
highlights:
- Service revenues for the quarter
increased 32.7% to a record $52.5 million as compared to $39.6
million in the same period last year. For the twelve months ended
June 30, 2011, service revenues increased 39.0% to a record $188.7
million as compared to $135.8 million last year.
- Consolidated revenues for the quarter
increased 25.6% to a record $88.3 million as compared to $70.3
million in the same period last year. For the twelve months ended
June 30, 2011, consolidated revenues increased 20.4% to a record
$274.2 million as compared to $227.8 million last year.
- Adjusted EBITDA for the quarter
increased 45.9% to a record $10.2 million as compared to $7.0
million in the same period last year. For the twelve months ended
June 30, 2011, adjusted EBITDA increased 62.3% to a record $33.9
million as compared to $20.9 million last year.
- Adjusted diluted net income per common
share for the quarter increased 53.8% to a record $0.20 as compared
to $0.13 last year. For the twelve months ended June 30, 2011,
adjusted diluted net income per common share increased 77.1% to
$0.62 as compared to $0.35 last year.
- Diluted net income per common share for
the quarter decreased 47.4% to $0.10 as compared to $0.19 last
year. For the twelve months ended June 30, 2011, diluted net income
per common share increased 7.9% to $0.41 as compared to $0.38 last
year.
Fiscal Year 2011 Fourth Quarter Results
Revenues for the Company’s fiscal 2011 fourth quarter increased
25.6% to a record $88.3 million as compared to $70.3 million in the
same period last year. Revenues from services increased 32.7% to a
record $52.5 million as compared to $39.6 million in the same
period last year. Growth in the Company’s access and hosted product
lines were the primary drivers of the quarterly revenue growth,
coupled with a three month contribution from Globecomm’s
acquisition of ComSource completed on April 8th, 2011. In
particular, the Company continues to see strength in the wireless
and government vertical marketplaces.
Revenues from infrastructure solutions increased by 16.5% to
$35.7 million as compared to $30.7 million in the same period last
year. The Company’s infrastructure government business unit is
experiencing growth during difficult economic times. Globecomm
expects infrastructure solutions revenues to experience
quarter-to-quarter shifts and may reduce as a percentage of the
Company’s overall consolidated revenues as the service segment
continues to expand.
Net income for the Company’s fiscal 2011 fourth quarter
decreased to $2.2 million, or $0.10 diluted net income per common
share, as compared to net income of $4.0 million, or $0.19 diluted
net income per common share in the same period last year. In the
fiscal 2011 fourth quarter the Company recorded the following
adjustments:
- A previously announced $1.9 million
($0.08 per diluted share) charge for the remaining earn-out
obligation with respect to the Company’s acquisition of Carrier to
Carrier Telecom B.V. and Evolution Communications Limited
(C2C/Evocomm). This charge, while accelerated, resulted from the
change in fair value of the earn-out as a result of the better than
expected performance of the two entities. Globecomm anticipates
that this saved the Company up to $1.0 million in future charges
based on the continued improved performance of the two entities and
has allowed management to focus on accelerating synergies as the
Company proceeds with integration of acquired entities.
- A $0.4 million ($0.02 per diluted
share) charge for an increase in the fair value of the earn-out
resulting from the Company’s acquisition of ComSource completed on
April 8, 2011.
Excluding these charges, the Company’s adjusted diluted net
income per common share increased 53.8% to $0.20 as compared to
$0.13 in the same period last year.
Adjusted EBITDA for the fourth quarter of 2011 increased to
$10.2 million, a quarterly record, as compared to adjusted EBITDA
of $7.0 million in the fourth quarter of 2010. The increase in
adjusted EBITDA has resulted mainly from the performance and
overall synergies the Company is experiencing in the service
segment from acquisitions.
Fiscal Year 2011 Full Year Results
Revenues for the Company's fiscal year ended June 30, 2011
increased 20.4% to $274.2 million, a Company record, as compared to
$227.8 million last year. Revenues from services increased 39.0% to
a record $188.7 million as compared to $135.8 million last year.
Growth in the Company’s access product line was the primary driver
of the full year revenue growth, coupled with a full year of
contribution from the C2C/Evocomm acquisition, which was completed
on March 5, 2010 and provided four months of revenue contribution
in fiscal 2010, along with a three month contribution from
Globecomm’s acquisition of ComSource completed on April 8th, 2011.
In particular, the Company continues to see strength in the
wireless and government vertical marketplaces.
Revenues from infrastructure solutions decreased 7.1% to $85.5
million as compared to $92.0 million last year. The decrease in
infrastructure solutions revenues was primarily driven by a large
job from NATO, which was anticipated to be recognized as revenue in
the fourth quarter and will be recognized in fiscal 2012.
Net income for the Company's fiscal year ended June 30, 2011
increased to $9.0 million or $0.41 diluted net income per common
share, compared to net income of $7.9 million or $0.38 diluted net
income per common share last year. During the fiscal 2011 the
Company recorded the following adjustments:
- Non-recurring acquisition expenses of
$0.5 million ($0.02 per diluted share) per share relating to the
acquisition of ComSource completed on April 8, 2011.
- Non-recurring tax credit of $0.7
million ($0.03 per diluted share) related to research and
development tax credits for fiscal years 2005 and 2010.
- A $4.5 million charge ($0.20 per
diluted share) for the fair value of the earn-out of the
C2C/Evocomm acquisition as a result of the better than anticipated
performance. On June 17, 2011, Globecomm announced that the Company
would take a final $1.9 million ($0.08 per diluted share) charge
for the remaining earn-out obligation. Globecomm anticipates that
this saved the Company up to $1.0 million in future charges based
on the continued improved performance of the two entities.
- A $0.4 million ($0.02 per diluted
share) charge for an increase in the fair value of the earn-out
resulting from the Company’s acquisition of ComSource.
Excluding these net charges, the Company’s adjusted diluted net
income per common share increased 77.1% to $0.62 as compared to
$0.35 in the same period last year.
Adjusted EBITDA for fiscal 2011 increased 62.3% to $33.9 million
compared to $20.9 million last year. The increase in adjusted
EBITDA has mainly resulted from the performance and overall
synergies the Company is experiencing in the service segment from
acquisitions.
Fiscal Year 2011 Highlights
Corporate
- Acquired ComSource Inc., the largest
acquisition in Globecomm’s history, a Frederick, MD-based wireless
engineering company that utilizes their state of the art test
facility to provide independent test and evaluation of a variety of
wireless telecommunications equipment and related recurring long
term application support, including new feature sets.
- Increased committed credit facility
with Citibank from $65 million to $72.5 million. The credit
facility accommodates documentary and standby letters of credit,
term loans, foreign exchange transactions, and also includes a
revolving credit facility. The term loan portion of the facility
was increased from $40 million to $50 million in order to
accommodate the Company's continued growth. The credit facility
will be used to issue bid bonds and performance bonds relating to
projects and contracts worldwide, term loans for potential
acquisitions and support for the Company's working capital
needs.
- Reached a settlement agreement with
Satellite Telecom Holdings Limited (formerly Carrier to Carrier
Telecom Holdings Limited) on the remaining earn-out obligation with
respect to Globecomm's previously-announced acquisition of Carrier
to Carrier Telecom B.V. and Evolution Communications Limited. The
Company made a final payment of $4.5 million in July 2011.
Globecomm anticipates that this will save the Company up to $1.0
million in potential future charges.
- Announced the Company was ranked 12th
in the large-sized companies category as one of the best companies
to work for in New York for 2011. The fourth annual statewide
survey and awards program identifies and recognizes the best places
of employment in the State of New York.
Services Segment
- Launched Globecomm Maritime to provide
a comprehensive suite of maritime communication solutions for the
maritime market sectors, commercial, fishing, leisure and
government. Globecomm Maritime is the result of the integration of
the Company's well-known maritime business units with Globecomm's
global managed network communications platform and engineering
capabilities. Four well-established Globecomm companies, Telaurus,
Mach6, Evosat, and Carrier to Carrier come together under the
Globecomm Maritime brand. Each of these four companies has areas of
specific expertise, and each adds a vital piece to the
communication jigsaw so that whatever the customer's requirements,
whether they be Inmarsat, Iridium or VSAT based, Globecomm Maritime
has the solution in its portfolio.
- Announced that the Company is preparing
its wireless hosted platform for migration to 4G/ LTE. Globecomm's
multi-technology, flexible wireless platform will enable 2G and 3G
operators to cost-effectively migrate to 4G/LTE. This new upgraded
platform will encompass the migration of both CDMA/EVDO and
GSM/UMTS to LTE.
- Awarded GSA FCSA Schedule-70 Special
Identification Numbers (SIN) 132-54 Transponded and 132-55
Subscription service. Both Indefinite Delivery/Indefinite Quantity
(IDIQ) awards cover a period of five years with two, five year
renewal options. The overall value of the IDIQ is approximately $3
billion. The U.S. government-wide Transponded Services SIN pertains
to the leasing of short and long term satellite bandwidth for most
frequency bands, locations and transponder configurations. The
Subscription Services SIN includes leasing short and long term
communications services such as Inmarsat and Iridium as well as
managed broadband services that enable robust connectivity and
quick provisioning.
- Received an increase in scope under a
multi-year contract with a major U.S. Government prime contractor.
During the first four years of the contract, $95.0 million has been
authorized by the customer. The customer has now exercised its
option to authorize $57.0 million for the fifth contract year,
bringing the contract total to $152.0 million.
Infrastructure Segment
- Awarded Ka-Band contract by Hughes
valued at $18.0 million to design, install, and test multiple
Ka-band earth stations within the US, as part of the nation's
leading broadband satellite service infrastructure owned and
operated by Hughes. The agreement includes options, which if
exercised would bring the total contract value up to $24.0 million
over 5 years.
- Announced the launch of its next
generation Auto-ExplorerTM 1.2 Meter Multi-Band terminal.
The versatile, auto-aligning VSAT antenna uses band-specific feed
cartridges with integrated RF electronics to enable quick and
simple frequency conversion in the field from X to Ka to Ku
satellite bands, and supports several OEM L-band modem products
from CEFD, iDirect, HNS and Viasat. Available in single, dual or
tri-band configurations, it supports voice, fax, data, video,
Internet and LAN-to-LAN connections, and is among the first auto
acquisition terminals in this class to be ARSTRAT-certified for
Ka-band WGS operation.
- Announced the introduction of FAST
(Forward Deployed Asset Support Terminal), which provides
organizations quick-deploy communications solutions. FAST
differentiates itself from other disaster-recovery solutions, in
that the platform is enterprise-class, able to deliver tens of
megabits of connectivity and technology options that can turn the
platform into a multipurpose hub for local communications. With the
FAST terminal comes a range of support, logistic, and service
solutions including ready-to-deploy technical personnel to provide
set-up and maintenance of the hub on short notice, coordination of
shipping, travel and customers, and satellite bandwidth on demand
with no reservation fee.
- Received contract extension from NATO
valued at $8.5 million for GPS-Based Force Tracking System.
Globecomm previously announced approximately $44 million in
contracts from NATO for this project to design and install a GPS
FTS, bringing the combined contract value to approximately $52.5
million. The FTS provides NATO with high levels of tracking data
and messaging traffic.
Management’s Review of Results and Expectations
David Hershberg, Chairman and CEO, said, “Despite the continued
economic downturn that is providing a difficult operating
environment for the Company’s infrastructure segment, Globecomm is
proud to have completed yet another year of record revenues and
adjusted EBITDA, along with projecting another record year for both
these metrics in fiscal 2012. We continue to expand the Company’s
sales force, invest in new products, expand the global service
network footprint and look for strategic acquisition opportunities.
The balance sheet remains strong and the Company anticipates strong
cash flow in fiscal 2012, which will provide ample liquidity to
execute the business plan. Furthermore, we see tremendous
opportunity in the wireless and government vertical marketplaces.”
Mr. Hershberg continued, “The ComSource acquisition, completed in
fiscal 2011, is executing as anticipated and we are very excited
about their future. I want to thank the entire Globecomm team for
an excellent year and look forward to a strong year ahead.”
Keith Hall, President and COO, added, “We continue to execute on
our vision toward becoming the global leader in customized managed
and hosted communication solutions and are proud to report another
successful year of growth and profitability. Our vision has led to
the development of a diverse set of recurring revenue streams
within our service business segment and highlights our overall
fiscal performance. The combination of our infrastructure
engineering know-how with our world-class global network provides
us a unique competitive advantage and positions us for success in
the emerging next generation communication marketplace. Toward this
goal we will be addressing several new initiatives in fiscal 12
including development and enhancement of our pre-engineered
solutions, hosted soft switch and wireless applications, Tempo
Enterprise Media Platform and our Ka Band based solution
offerings.”
Management’s Current Expectations for the Fiscal Year Ending
June 30, 2012
Globecomm currently expects the following financial results for
the fiscal year 2012:
- Consolidated revenues to be between
$370 and $400 million.
- Service segment revenues to be
between $220 and $230 million.
- GAAP diluted net income per common
share to be between $0.65 and $0.75.
- Adjusted diluted net income per common
share to be between $0.73 and $0.83.
- Adjusted EBITDA to be between $42.5 and
$46.0 million.
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP measure which represents net
income before interest income, interest expense, provision for
income taxes, depreciation, amortization expense, non-cash stock
compensation expense, acquisition costs and earn-out fair value
adjustments. Globecomm believes this provides greater transparency
by helping illustrate comparability between current and prior
periods. Under a new accounting pronouncement on business
combinations, effective in fiscal 2010 for the Company, acquisition
related costs are required to be expensed rather than capitalized,
and changes to the fair value of earn-out payments must be
recognized in earnings. Therefore, the exclusion of acquisition
related costs and the earn-out fair value adjustments in the
adjusted EBITDA calculation provides better comparability.
Adjusted EBITDA does not represent cash flows as defined by
GAAP. Globecomm discloses adjusted EBITDA since it is a financial
measure commonly used in its industry. Because adjusted EBITDA
facilitates internal comparisons of our historical financial
position and operating performance on a more consistent basis, the
Company also uses adjusted EBITDA in measuring performance relative
to that of our competitors and in evaluating acquisition
opportunities. The Company’s management regularly uses supplemental
non-GAAP financial measures internally to understand, manage and
evaluate the Company’s business and make operating decisions.
Adjusted EBITDA is not meant to be considered a substitute or
replacement for net income as prepared in accordance with GAAP.
Adjusted EBITDA may not be comparable to other similarly titled
measures of other companies. Reconciliation between GAAP net income
and adjusted EBITDA is provided in a table immediately following
the Condensed Consolidated Balance Sheets.
Reconciliation of adjusted diluted net income per common share
excludes acquisition related costs, earn-out fair value adjustments
and non-recurring tax adjustments. These amounts are not in
accordance with GAAP. However, Globecomm believes this measure
provides greater transparency by helping illustrate comparability
between current and prior periods. The non-recurring tax adjustment
primarily relates to research and development tax credits for
fiscal 2005 thru 2010, therefore they have been excluded as a
non-GAAP measure to provide better comparability of results.
Non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for comparable GAAP measures, and
should be read only in conjunction with the Company’s consolidated
financial statements prepared in accordance with GAAP. The
Company’s management regularly uses supplemental non-GAAP financial
measures internally to understand, manage and evaluate the
Company’s business and make operating decisions.
About Globecomm Systems
Globecomm Systems Inc., or Globecomm, is a leading global
provider of satellite-based managed network solutions. Employing
our expertise in emerging communication technologies we are able to
offer a comprehensive suite of system integration, system products,
and network services enabling a complete end-to-end solution for
our customers. We believe our integrated approach of in-house
design and engineering expertise combined with a world-class global
network and our 24 by 7 network operating centers provides us a
unique competitive advantage. We are now taking this value
proposition to selective vertical markets, including government,
wireless, media, enterprise and maritime. As a network solution
provider we leverage our global network to provide customers
managed access services to the United States Internet backbone,
video content, the public switched telephone network or their
corporate headquarters, or government offices. We currently have
customers for which we are providing such services in the United
States, Europe, South America, Africa, the Middle East, and
Asia.
Based in Hauppauge, New York, Globecomm also maintains offices
in Maryland, New Jersey, Virginia, the Netherlands, South Africa,
Hong Kong, Germany, Singapore, the United Arab Emirates and
Afghanistan.
This press release contains forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward looking statements are
based on management's current expectations and observations. You
should not place undue reliance on our forward-looking statements
because the matters they describe are subject to certain risks,
uncertainties and assumptions that are difficult to predict. Our
forward-looking statements are based on the information currently
available to us and speak only as of the date of this press
release. Over time, our actual results, performance or achievements
may differ from those expressed or implied by our forward-looking
statements, and such differences might be significant and
materially adverse to our security holders.
We have identified some of the important factors that could
cause future events to differ from our current expectations and
they are described in our most recent Annual Report on Form 10-K,
including without limitation under the captions ''Risk Factors''
and ''Management's Discussion and Analysis of Financial Condition
and Results of Operations,'' and in other documents that we may
file with the SEC, all of which you should review carefully. Please
consider our forward-looking statements in light of those risks as
you read this press release.
-Financial tables follow-
Globecomm Systems Inc.
Consolidated Statements of Operations (In thousands,
except per share data) Three Months Ended
Year Ended June 30, June 30, June 30,
June 30, 2011 2010 2011
2010
Revenues from services
$
52,541
$
39,600
$
188,700
$
135,796
Revenues from infrastructure solutions 35,720
30,659 85,491 92,021
Total revenues 88,261 70,259
274,191 227,817 Costs and
operating expenses:
Costs from services
35,561
28,517
131,329
99,424
Costs from infrastructure solutions 30,350 25,488 70,423 75,974
Selling and marketing 5,087 4,161 18,015 14,977 Research and
development 1,572 1,069 4,304 3,342 General and administrative
9,505 6,748 30,038 23,957 Earn-out fair value adjustments
2,275 155 4,824
178 Total costs and operating expenses 84,350
66,138 258,933
217,852 Income from operations 3,911 4,121 15,258
9,965 Interest income 42 60 186 386 Interest (expense)
(192 ) (79 ) (410
)
(106 ) Income before income taxes 3,761 4,102 15,034 10,245
Provision for income taxes 1,603
87 6,046 2,343 Net income
$ 2,158 $ 4,015 $ 8,988 $ 7,902
Basic net income per common share
$
0.10
$
0.19
$
0.42
$
0.38
Diluted net income per common share
$
0.10
$
0.19
$
0.41
$
0.38
Weighted-average shares used in the calculation of basic net income
per common share 21,642 20,842
21,332 20,560 Weighted-average
shares used in the calculation of diluted net income
per common share
22,459 21,318 22,026
20,992
Globecomm Systems Inc. Condensed Consolidated Balance
Sheets (In thousands) June 30, June
30, 2011 2010 Assets
Current assets: Cash and cash equivalents $ 47,964 $ 42,863
Restricted cash - 5,025 Accounts receivable, net 59,335 49,222
Inventories 42,429 34,486 Prepaid expenses and other current assets
5,620 3,100 Deferred income taxes 1,642
1,602 Total current assets 156,990 136,298 Fixed assets, net 42,147
37,839 Goodwill 70,171 40,594 Intangibles, net 23,055 16,196
Deferred income taxes - 7,635 Other assets 2,248
2,148 Total assets $ 294,611 $ 240,710
Liabilities and Stockholders’ Equity Current
liabilities $ 77,304 $ 59,586 Other liabilities 9,248 2,443 Long
term debt 20,675 9,375 Deferred income taxes 3,594 2,203 Total
stockholders’ equity 183,790 167,103
Total liabilities and stockholders’ equity $ 294,611
$ 240,710
Globecomm Systems Inc.
Reconciliation of Net Income to adjusted EBITDA (In
thousands) (Unaudited) Three
Months Ended Year Ended June 30, June
30, June 30, June 30, 2011
2010 2011 2010
Net income
$
2,158
$
4,015
$
8,988
$
7,902
Adjustments: Interest (income) (42 ) (60 ) (186 ) (386 ) Interest
expense 192 79 410 106 Earn-out fair value adjustments 2,275 155
4,824 178 Provision for income taxes 1,603 87 6,046 2,343
Depreciation and amortization 2,871 2,088 9,703 7,479 Stock
compensation expense 1,166 645 3,679 2,349 Acquisition related
costs 6 - 468
940 Adjusted EBITDA $ 10,229 $
7,009 $ 33,932 $ 20,911
Globecomm Systems Inc.
Reconciliation of adjusted diluted Net Income per common
share (In thousands) (Unaudited)
Three Months Ended Year Ended June 30,
June 30, June 30, June 30,
2011 2010 2011 2010
Diluted net income per common share
$
0.10
$
0.19
$
0.41
$
0.38
Acquisition related costs (A) - - 0.02 0.03 Earn-out fair value
adjustments (B) 0.10 0.01 0.22 0.01 Non-recurring tax adjustments
(C) - (0.07 ) (0.03 )
(0.07 ) Adjusted diluted net income per common share $ 0.20
$ 0.13 $ 0.62 $ 0.35 (A) Amounts
represent acquisition costs of approximately $0.5 million related
to the Company’s acquisition of ComSource (completed on April 8,
2011) for the year ended June 30, 2011 and acquisition costs of
approximately $0.9 million related to the Company’s acquisition of
C2C/Evocomm for the year ended June 30, 2010. (B) Amounts represent
an increase in fair value of the earn-out of the C2C/Evocomm
acquisition. This increase was primarily due to C2C/Evocomm
performing better than our original forecasts based on current and
future anticipated results. Additionally, the amount includes $0.4
million related to ComSource acquisition. (C) Amounts represent
non-recurring tax adjustments related to research and development
tax credits for fiscal years 2005 thru 2010.
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