Globecomm Systems Inc. (NASDAQ:GCOM), a leading global
communications solutions provider, today announced financial
results for the fiscal 2012 fourth quarter and fiscal year ended
June 30, 2012. 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.
Revenues ($M)
Q4 FY12 Q4 FY11 %
Change FY12 FY11
% Change Service $ 50.1 $ 52.5 (-4.6) $ 220.9 $
188.7 17.1 Infrastructure solutions $ 54.7
$ 35.7 53.2 $ 161.0 $
85.5 88.3 Consolidated $ 104.8 $
88.3 18.8 $ 381.9 $ 274.2 39.3
GAAP
Results ($M except
EPS)
Q4 FY12 Q4 FY11 %
Change FY12 FY11
% Change Net income $ 7.1 $ 2.2 228.3 $ 28.6 $
9.0 217.8 Diluted EPS $ 0.31 $ 0.10 210.0 $ 1.26 $ 0.41 207.3
Non-GAAP
Results ($M except
EPS)
Q4 FY12 Q4 FY11 %
Change FY12 FY11
% Change Adjusted EBITDA $ 9.1 $ 10.2 (11.0) $
42.6 $ 33.9 25.5 Adjusted Diluted EPS $ 0.13 $ 0.20 (35.0) $ 0.74 $
0.62 19.4
Fiscal Year 2012 Fourth Quarter Results
Consolidated revenue for the Company’s fiscal 2012 fourth
quarter increased 18.8% to $104.8 million as compared to $88.3
million in the same period last year. Infrastructure revenue
increased 53.2% to a record $54.7 million, as compared to $35.7
million in the same period last year. The increase in
infrastructure revenue was primarily driven by the achievement of
revenue milestones under a major government contract which carries
lower than traditional infrastructure margins. Service revenue has
been somewhat impacted by the reduction of troops involved in
conflicts in Iraq and Afghanistan.
Net income for the Company’s fiscal 2012 fourth quarter
increased to $7.1 million, or $0.31 diluted net income per common
share, as compared to net income of $2.2 million, or $0.10 diluted
net income per common share, in the same period last year. During
the fourth quarter of fiscal 2012, the Company recorded a gain for
the change in fair value of the ComSource earn-out as a result of
changes in ComSource’s actual results and forecasted performance.
In accordance with GAAP, this change in the fair value of the
earn-out resulted in a $4.1 million ($0.18 per diluted share) gain
to net income. In the same period last year, the Company recorded a
$2.3 million charge ($0.10 per diluted share) relating to the
earn-out of C2C and Evocomm. Excluding these charges, adjusted
diluted net income per common share decreased 35.0% to $0.13 as
compared to $0.20 in the same period last year.
Adjusted EBITDA for the Company’s fiscal 2012 fourth quarter
decreased 11.0% to $9.1 million as compared to $10.2 million in the
same period last year. The decreases in adjusted diluted net income
per common share and adjusted EBITDA were attributed to services
revenue and gross margin being somewhat impacted by the reduction
of troops involved in conflicts in Iraq and Afghanistan.
Fiscal Year 2012 Full Year Results
Consolidated revenue for the Company’s fiscal year ended June
30, 2012 increased 39.3% to a record $381.9 million as compared to
$274.2 million last year. Service revenue increased 17.1% to a
record $220.9 million as compared to $188.7 million last year. The
increase in service revenue was primarily driven by the Company’s
acquisition of ComSource, contributing $27.6 million, along with an
increase in our Access service offering, primarily in the
government marketplace. Revenues from infrastructure solutions
increased 88.3% to a record $161.0 million as compared to $85.5
million last year. The increase in infrastructure revenues was
primarily driven by the achievement of revenue milestones under a
major government contract which carries lower than traditional
infrastructure margins.
Net income for the Company’s fiscal 2012 year ended June 30,
2012 increased to $28.6 million, or $1.26 per diluted share, as
compared to net income of $9.0 million, or $0.41 per diluted share
last year. During the Company’s fiscal year 2012 the Company
recorded a gain of $11.9 million ($0.52 per diluted share) for the
change in fair value of the ComSource earn-out as a result of
changes in ComSource’s actual results and forecasted performance.
In the fiscal year ended June 30, 2011 the Company recorded a $4.8
million charge ($0.22 per diluted share) relating to the earn-out
of C2C and Evocomm, $0.5 million ($0.02 per diluted) related to the
acquisition related costs for ComSource, and a non-recurring tax
benefit of $0.7 million ($0.03 per diluted share). Excluding these
net adjustments, the Company’s adjusted diluted net income per
common share for the fiscal year 2012 increased 19.4% to $0.74 from
$0.62 last year. The increase in adjusted diluted net income per
common share was primarily attributed to the Company’s acquisition
of ComSource in April 2011.
Adjusted EBITDA for fiscal 2012 year ended June 30, 2012
increased to a record $42.6 million as compared to $33.9 million
last year. The increase in adjusted EBITDA is primarily
attributable to the increase in our Access service offering in the
government marketplace coupled with the impact of the operating
results of ComSource.
Fiscal Year 2012 Highlights
Services Segment
- Awarded a seven-year subcontract from Ericsson for a maritime
GSM/VSAT managed operation of an Ericsson mobile communication
network. The network will be implemented on up to 400 container
vessels worldwide, providing end-to-end 24/7 automated monitoring
and real-time information control.
- Awarded first managed services contract utilizing the Company’s
Tempo Enterprise Media Platform. The contract was awarded by
Rollins Corporation (NYSE:ROL). Pursuant to the terms of the four
year contract, Globecomm will deploy its Tempo Enterprise Media
Platform to over 500 of Rollin’s global locations for corporate
communications and training. The Tempo Enterprise Media Platform
provides enterprises with the ability to deliver interactive live
and on-demand streaming media to desktops, televisions, and mobile
devices. The platform works across hybrid delivery networks
including Internet CDN, private terrestrial, and satellite.
- Awarded seven-year contract renewal from Showtime Networks Inc.
Globecomm will continue providing Showtime Networks with a managed
services solution that supports the origination and broadcasting of
over 40 channels. These include standard definition, high
definition, MPEG 2 and MPEG 4, and video on demand via satellite
and terrestrial means. Globecomm broadcast technicians maintain the
on air availability of all channels 24/7, as well as supporting
SHOWTIME CHAMPIONSHIP BOXING® and other live events.
- Reached major media and broadcast milestones. Globecomm now
carries greater than 875,000 hours of video content each year via
eight distinct teleports and over 48 different satellites, and
currently broadcasts and monitors 100 high definition and/or
standard definition channels as well as analog channels.
- Reached major maritime milestone in providing connectivity to
over 3,000 vessels globally.
Infrastructure Segment
- Launched the Company’s next generation
Auto-Explorer(TM) 1.2 Meter Multi Band Lightweight Transport (LT)
Terminal. The new satellite communications terminal utilizes
integrated carbon fiber technology and reduced components weight,
making it a lightweight alternative to Globecomm's existing 1.2
Meter Auto-Explorer(TM) terminal. The LT is fully IATA compliant
for checked airline baggage. It offers a three transport case
solution - each case weighing less than 70 pounds.
- Awarded two contracts from US
Government customers valued at $17.7 million. Under the terms of
the first contract, Globecomm will provide management and related
services for delivery of advanced satellite modem technology. Under
the second contract Globecomm will provision satellite modem
equipment and related services.
- Awarded a contract from a U.S.
Government Agency valued at $74.1 million with options for
additional quantities and services. Globecomm will lead this effort
for the U.S. Government providing program management and services.
The L-3 Narda Satellite Networks, division of L-3 Communications,
will work with Globecomm as a subcontractor.
- The Company received a contract
extension from NATO CIS Agency (NCSA) valued at $8.8 million to
extend communication services and onsite support for the Company’s
previously deployed GPS-Based Force Tracking System (FTS).
Globecomm previously announced approximately $52.5 million in
contracts from NATO for this project to design and install a GPS
FTS, bringing the combined contract value to approximately $61.3
million. The FTS provides NATO with high levels of tracking data
and messaging traffic. It enables NATO to identify where its
personnel are located at all times, identify other multi-national
forces and have the ability to do so in routine and operational
situations. This is critical in assisting with the identification
of friendly forces and helps prevent fratricide or “blue-on-blue”
incidents.
Management’s Review of Results and Expectations
David Hershberg, Chairman and CEO, said “Despite a challenging
economic backdrop that continues to provide head winds for the
Company's infrastructure segment, Globecomm is proud to have
completed yet another year of record revenues and adjusted EBITDA.
Due to the uncertainty surrounding the U.S. Government’s budget
environment, including the reduced Afghanistan commitment, fiscal
2013 will be a challenge to improve on the excellent results of
fiscal 2012. ”
Mr. Hershberg continued: “The balance sheet remains strong, with
$58 million of net cash and we anticipate a strong cash flow in
fiscal 2013. This will provide us ample liquidity to execute our
overall business plan and vision. We continue to expand our sales
force, invest in new products and expand the global service network
foot print. Furthermore, we see excellent opportunity in the
wireless, media and maritime vertical marketplaces and are well
positioned in the government vertical if the budget situation is
resolved. Our acquisitions continue to perform well and we are
continuing our search for additional strategic acquisition
opportunities. 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 “Coming off a record year
in fiscal 2012, we are excited about the investments we have made
to develop our commercial market verticals. Key highlights include
our first major TEMPO award and our contract with Ericsson to
provide Machine to Machine managed services to up to 400 vessels.
Globecomm has come a long way in the development of our value
proposition as a global communication solution provider as evident
by these awards. With the evolution of the Internet and mobile
communications, we remain at the forefront of network and
application innovation. Cloud and hybrid-satellite network
opportunities are evolving based on this innovation and we continue
to develop seamless experiences for our customers. As we enter
fiscal 2013 we will continue to build upon this value proposition
and are excited about the opportunities it will afford us.”
Management’s Current Expectations for the Fiscal Year Ending
June 30, 2013
Globecomm currently expects the following financial results for
the fiscal year 2013:
- Consolidated revenues to be between
$340 and $360 million.
- Service segment revenues to be between
$200 and $210 million.
- GAAP diluted net income per common
share to be between $0.66 and $0.76.
- Adjusted EBITDA to be between $40 and
$44 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 an accounting pronouncement on business
combinations, 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 years 2004, 2005 and 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. (“we”, “our”, “us” or “Globecomm”), is a
leading global communications solutions provider. Employing our
expertise in emerging communication technologies, including
satellite and other transport mediums, 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 focus this value proposition in
selective vertical markets, including government, wireless, media,
enterprise and maritime. As a communications solutions 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 these solutions 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.
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, 2012
2011 2012
2011
Revenues from services
$
50,099
$
52,541
$
220,921
$
188,700
Revenues from infrastructure solutions 54,713
35,720 160,980
85,491 Total revenues 104,812
88,261 381,901
274,191 Costs and
operating expenses: Costs from services 35,334 35,561
152,302 131,329 Costs from infrastructure solutions 48,292 30,350
142,831 70,423 Selling and marketing 5,285 5,087 19,576 18,015
Research and development 1,349 1,572 6,251 4,304 General and
administrative 9,519 9,505 34,432 30,038 Earn-out fair value
adjustments (4,129 ) 2,275
(11,874 ) 4,824
Total costs and operating expenses 95,650
84,350 343,518
258,933 Income from operations 9,162
3,911 38,383 15,258 Interest income 75 42 246 186 Interest
(expense) (111 ) (192 )
(574 ) (410 ) Income before income
taxes 9,126 3,761 38,055 15,034 Provision for income taxes
2,042 1,603
9,492 6,046 Net income $
7,084 $ 2,158 $ 28,563
$ 8,988
Basic net income per common share
$
0.32
$
0.10
$
1.29
$
0.42
Diluted net income per common share
$
0.31
$
0.10
$
1.26
$
0.41
Weighted-average shares used in the
calculation of basic net income
per common share
22,296
21,642
22,078
21,332
Weighted-average shares used in the
calculation of diluted net income
per common share
22,828
22,459
22,711
22,026
Globecomm Systems Inc. Condensed
Consolidated Balance Sheets (In thousands)
June 30,
June 30,
2012 2011 Assets
Current assets: Cash and cash equivalents $ 72,196 $ 47,964
Accounts receivable, net 59,224 59,335 Inventories 30,664 42,429
Prepaid expenses and other current assets 4,101 5,620 Deferred
income taxes 7,041 1,642 Total
current assets 173,226 156,990 Fixed assets, net 47,712 42,147
Goodwill 68,463 70,171 Intangibles, net 19,331 23,055 Other assets
1,335 2,248 Total assets $
310,067 $ 294,611
Liabilities
and Stockholders’ Equity Current liabilities $ 63,389 $ 77,304
Other liabilities 230 9,248 Long term debt 14,575 20,675 Deferred
income taxes 12,485 3,594 Total stockholders’ equity 219,388
183,790 Total liabilities and
stockholders’ equity $ 310,067 $ 294,611
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, 2012 2011
2012 2011
Net income
$
7,084
$
2,158
$
28,563
$
8,988
Adjustments: Interest (income) (75 ) (42 ) (246 ) (186 )
Interest expense 111 192 574 410 Earn-out fair value adjustments
(4,129 ) 2,275 (11,874 ) 4,824 Provision for income taxes 2,042
1,603 9,492 6,046 Depreciation and amortization 3,223 2,871 12,614
9,703 Stock compensation expense 849 1,166 3,476 3,679 Acquisition
related costs - 6 -
468 Adjusted EBITDA $ 9,105
$ 10,229 $ 42,599 $
33,932
Globecomm Systems Inc.
Reconciliation of adjusted diluted Net Income per common
share (Unaudited)
Three Months Ended Year Ended June 30,
June 30, June 30,
June 30, 2012
2011 2012 2011
Diluted net income per common share
$
0.31
$
0.10
$
1.26
$
0.41
Acquisition related costs (A) - - - 0.02 Earn-out fair value
adjustments (0.18 ) 0.10 (0.52 ) 0.22 Non-recurring tax adjustments
(B) - - -
(0.03 ) Adjusted diluted net income per
common share
$
0.13
$
0.20
$
0.74
$
0.62
(A) Amount represents
acquisition costs of approximately $0.5 million related to the
Company’s acquisition of ComSource in April 2011. (B) Amount
represents non-recurring tax adjustment related to research and
development tax credits for fiscal years 2004, 2005 and 2010.
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