Globecomm Systems Inc. (NASDAQ:GCOM), a leading communications
solutions provider, today reported financial results for the fiscal
2013 third quarter and nine months ended March 31, 2013. 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 in the attached tables. The following are
highlights:
Revenues ($M)
Q3
FY13
Q3
FY12
%
Change
9
Months
9
Months
%
Change
FY13
FY12
Service $ 51.8 $ 65.9 (21.5 )
$
149.1
$ 170.8 (12.7 ) Infrastructure solutions $ 26.3 $ 45.0 (41.5
)
$
89.9
$ 106.3 (15.4 ) Consolidated $ 78.1 $ 110.9 (29.6 )
$
239.0
$ 277.1 (13.8 )
GAAP
Results ($M except
EPS)
Q3
FY13
Q3
FY12
%
Change
9
Months
9
Months
%
Change
FY13
FY12
Net income $ 4.2 $ 2.9 43.9
$
10.7
$ 21.5 (50.3 ) Diluted EPS $ 0.18 $ 0.13 38.5
$
0.46
$ 0.95 (51.6 )
Non-GAAP
Results ($M except
EPS)
Q3
FY13
Q3
FY12
%
Change
9
Months
9
Months
%
Change
FY13
FY12
Adjusted EBITDA $ 10.4 $ 13.3 (22.0
)
$ 28.2
$
33.5
(15.9 ) Adjusted Diluted EPS $ 0.18 $ 0.25 (28.0
)
$ 0.46
$
0.61
(24.6 )
Management’s Review of Results
David Hershberg, Chairman and CEO, said: “Despite several
on-going challenges, specifically in the government marketplace,
including the withdrawal of military forces in Iraq, government
efforts to reduce its expenditures in upcoming budgets and the
added pressure of the recent sequestration, Globecomm has met our
plan for this quarter. Sequestration provides for an uncertain
backdrop for government contracts; however at this time, we
continue to see strong government service contract renewals, and we
remain focused on executing on our overall business plan and
vision. Globecomm’s Tempo platform continues to be well received
and we continue to look for upsell opportunities supporting digital
signage and “over the top” solutions. We also have a strong
pipeline of infrastructure opportunities within our media segment,
which bodes well for the coming fiscal year.”
Keith Hall, President and COO, added: “The team did an excellent
job in meeting our Q3 objectives. The Company continues to invest
in a number of strategic initiatives centered around the
development of our global platform and data management
capabilities. We see tremendous upside potential for both our media
platform and our global machine-to-machine platform. We continue to
develop the application based value proposition of these platforms
to serve multiple market vertical segments. Our opportunity
pipeline remains solid across the board, and we remain excited
about the opportunities in front of us.”
Fiscal Year 2013 Third Quarter Results
Revenues for the Company’s fiscal 2013 third quarter were $78.1
million as compared to $110.9 million in the same period last year,
a decrease of 29.6%. Revenues from services were $51.8 million as
compared to $65.9 million in the same period last year, a decrease
of 21.5%. The decrease in service revenues was primarily due to a
one-time equipment sale of $12.8 million in the three months ended
March 31, 2012 along with a decrease in the Company’s access
service offering in the government marketplace due to the reduction
of services in Iraq. Revenues from infrastructure solutions were
$26.3 million as compared to $45.0 million in the same period last
year, a decrease of 41.5%. The decrease in infrastructure solutions
was primarily driven by the decrease in achievement of revenue
milestones of approximately $16.1 million under a major government
program with a lower than normal margin which was substantially
complete as of December 31, 2012.
Net income for the Company’s fiscal 2013 third quarter was $4.2
million, or $0.18 of diluted net income per common share, compared
to net income of $2.9 million, or $0.13 of diluted net income per
common share in the same period last year. During the third quarter
of fiscal 2012, the Company recorded a charge for the change in
fair value of the earn-out resulting from the achievement of an
earn-out payment to the former ComSource shareholders based on
ComSource’s operating results. In accordance with GAAP, this change
in the fair value of the earn-out resulted in a $2.8 million ($0.12
per diluted share) charge to net income. Adjusted diluted net
income per common share for the third quarter of fiscal year 2013
was $0.18 compared to $0.25 in the same period last year. The
reduction in adjusted diluted net income per common share was
primarily driven by the reduction of revenues in both operating
segments, partially offset by reductions in other operating
expenses based on certain cost cutting initiatives.
Adjusted EBITDA for the third quarter of 2013 was $10.4 million
as compared to $13.3 million in the same period last year.
Fiscal Year 2013 Nine Month Results
Revenues for the Company’s fiscal 2013 nine months ended March
31, 2013 were $239.0 million as compared to $277.1 million in the
same period last year, a decrease of 13.8%. Revenues from services
were $149.1 million as compared to $170.8 million in the same
period last year, a decrease of 12.7%. The decrease in revenues was
primarily due to the significant equipment sale in the three months
ended March 31, 2012 along with a decrease in our access service
offering in the government marketplace due to the reduction of
services in Iraq. Revenues from infrastructure solutions were $89.9
million as compared to $106.3 million in the same period last year,
a decrease of 15.4%. The decrease in infrastructure solutions was
primarily driven by the decrease in achievement of revenue
milestones of approximately $18.5 million under the major
government program which was substantially complete as of December
31, 2012.
Net income for the Company’s fiscal 2013 nine months ended March
31, 2013 was $10.7 million, or $0.46 of diluted net income per
common share, compared to net income of $21.5 million, or $0.95 of
diluted net income per common share, in the same period last year.
During the nine months ended March 31, 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 $7.7 million ($0.34 per diluted
share) gain to net income. Adjusted diluted net income per common
share for the fiscal year 2013 nine months ended March 31, 2013 was
$0.46 as compared to $0.61 in the same period last year. The
reduction in adjusted diluted net income per common share was
primarily driven by the reduction of service revenues, partially
offset by reductions in other operating expenses based on certain
cost cutting initiatives.
Adjusted EBITDA for the nine months ended March 31, 2013
decreased to $28.2 million as compared to $33.5 million in the same
period last year.
Management’s Current Expectations for the Fiscal Year Ending
June 30, 2013
Based on the Company’s performance to date and management’s
expectations for the fourth quarter, Globecomm currently expects
the following financial results for the fiscal year 2013:
- Consolidated revenues to be between
$310 and $320 million, down from the previously announced range of
$320 to $340 million.
- Services segment revenues to be between
$200 and $205 million, refining the previously announced range of
$200 to $210 million.
- GAAP diluted net income per common
share to be between $0.66 and $0.68, refining the previously
announced range of $0.66 to $0.71.
- Adjusted EBITDA to be between $40 and
$41 million, refining the previously announced range of $40 to $42
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, 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 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 earn-out fair value adjustments, which is. not in
accordance with GAAP. However, Globecomm believes this measure
provides greater transparency by helping illustrate comparability
between current and prior periods. 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
and Quarterly Report on Form 10-Q, 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) (Unaudited)
Three Months Ended Nine
Months Ended March 31, March 31, March
31, March 31, 2013 2012
2013 2012
Revenues from services
$
51,761
$
65,931
$
149,105
$
170,822
Revenues from infrastructure solutions 26,306
44,998 89,864 106,267 Total revenues
78,067 110,929 238,969 277,089
Costs and operating expenses: Costs from services 35,030 47,182
100,813 116,968 Costs from infrastructure solutions 22,816 40,047
81,595 94,539 Selling and marketing 4,485 4,843 13,191 14,291
Research and development 1,194 1,398 3,133 4,902 General and
administrative 8,071 8,179 23,677 24,913 Earn-out fair value
adjustments - 2,829 -
(7,745) Total costs and operating expenses 71,596
104,478 222,409 247,868 Income from
operations 6,471 6,451 16,560 29,221 Interest income 79 59
246 171 Interest (expense) (92) (141)
(309) (463) Income before income taxes 6,458 6,369
16,497 28,929 Provision for income taxes 2,282
3,467 5,816 7,450 Net income $ 4,176
$ 2,902 $ 10,681 $ 21,479
Basic net income per common share
$
0.18
$
0.13
$
0.47
$
0.98
Diluted net income per common share
$
0.18
$
0.13
$
0.46
$
0.95
Weighted-average shares used in the calculation of basic net income
per common share 22,804 22,213 22,620
22,006 Weighted-average shares used in the
calculation of diluted net income per common share 23,190
22,839 23,010 22,680
Globecomm Systems Inc. Condensed Consolidated
Balance Sheets (In thousands)
March 31, June 30, 2013
2012 (Unaudited) Assets Current assets: Cash
and cash equivalents $ 71,414 $ 72,196 Accounts receivable, net
62,023 59,224 Inventories 32,801 30,664 Prepaid expenses and other
current assets 4,432 4,101 Deferred income taxes 1,261
7,041 Total current assets 171,931 173,226 Fixed
assets, net 50,483 47,712 Goodwill 68,649 68,463 Intangibles, net
17,239 19,331 Other assets 1,450 1,335 Total
assets $ 309,752 $ 310,067
Liabilities and
Stockholders’ Equity Current liabilities $ 53,087 $ 63,389
Other liabilities 96 230 Long term debt 10,000 14,575 Deferred
income taxes 12,485 12,485 Total stockholders’ equity
234,084 219,388 Total liabilities and stockholders’
equity $ 309,752 $ 310,067
Globecomm Systems Inc.
Reconciliation of Net Income to adjusted EBITDA (In
thousands) (Unaudited)
Three Months Ended Nine Months Ended March 31,
March 31, March 31, March 31,
2013 2012 2013 2012
Net income
$
4,176
$
2,902
$
10,681
$
21,479
Adjustments: Interest (income) (79) (59) (246) (171) Interest
expense 92 141 309 463 Earn-out fair value adjustments - 2,829 -
(7,745) Provision for income taxes 2,282 3,467 5,816 7,450
Depreciation and amortization 2,951 3,195 8,743 9,391 Stock
compensation expense 983 862 2,869
2,627 Adjusted EBITDA $ 10,405 $ 13,337 $ 28,172 $
33,494
Globecomm Systems Inc.
Reconciliation of adjusted diluted Net Income per common
share (Unaudited) Three
Months Ended Nine Months Ended March 31,
March 31, March 31, March 31,
2013 2012 2013 2012
Diluted net income per common share
$
0.18
$
0.13
$
0.46
$
0.95
Earn-out fair value adjustments - 0.12
- (0.34)
Adjusted diluted net income per common
share
$
0.18
$
0.25
$
0.46
$
0.61
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