GCOM Globecomm Systems Inc. (MM)

Globecomm Systems Inc. (NASDAQ:GCOM), a leading communications solutions provider, today reported financial results for the fiscal 2014 first quarter ended September 30, 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 on the attached tables. The following are highlights:

Revenues ($M)

            Q1 FY14 Q1 FY13 % Change Services $ 44.9 $ 47.2 (4.8 ) Infrastructure solutions   12.3       34.0 (63.7 ) Consolidated $ 57.2     $ 81.2 (29.4 )  

GAAP Results ($M except EPS)

  Q1 FY14 Q1 FY13 % Change Net income $ 0.2 $ 2.7 (94.2 ) Diluted EPS $ 0.01 $ 0.12 (94.5 )  

Non-GAAP Results ($M except EPS)

  Q1 FY14 Q1 FY13 % Change   Adjusted EBITDA $ 5.5 $ 8.0 (30.8 ) Adjusted Diluted EPS $ 0.04 $ 0.12 (67.4 )  

Fiscal Year 2014 First Quarter Results

Revenues for the Company’s fiscal 2014 first quarter decreased 29.4% to $57.2 million as compared to $81.2 million in the same period last year. Revenues from services decreased 4.8% to $44.9 million as compared to $47.2 million in the same period last year. The decrease in services revenues was primarily due to a decrease in our access services offering in the government marketplace due to the reduction of services in Afghanistan. Revenues from infrastructure solutions decreased by 63.7% to $12.3 million as compared to $34.0 million in the same period last year, primarily due to the timing of bookings and the achievement of revenue milestones under a major government program which contributed approximately $11.7 million in revenue in the three months ended September 30, 2012 and that carried lower than traditional infrastructure margins.

Net income for the Company’s fiscal 2014 first quarter decreased to $0.2 million or $0.01 of diluted net income per common share, as compared to net income of $2.7 million, or $0.12 of diluted net income per common share in the same period last year. Net income was negatively affected by transaction costs, related to the previously announced proposed merger transaction, of $1.2 million and a reduction in services revenue and margin. Adjusted EBITDA and Adjusted Diluted EPS for the first quarter of 2014, which excluded transaction costs, decreased as compared to the same period last year primarily due to a reduction in services revenue and margin.

The Proposed Merger Transaction

On August 26, 2013 the Company announced that an affiliate of Wasserstein & Co. has entered into a definitive merger agreement to acquire Globecomm for $14.15 per share in cash.

On October 21, 2013, the Company filed a notice of meeting and definitive Proxy Statement announcing the special meeting date of November 22, 2013 for Globecomm’s stockholders to consider adopting the merger agreement.

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 transaction costs. Globecomm believes this provides greater transparency by helping illustrate comparability between current and prior periods.

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 transaction costs, 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.

Additional Information and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction, Globecomm has filed proxy materials with the Securities and Exchange Commission, or the SEC relating to the solicitation of proxies to vote at a special meeting of stockholders to approve the proposed transaction. The definitive proxy statement was mailed to the stockholders of Globecomm. Stockholders of Globecomm are urged to read the proxy statement and other relevant materials when they become available, as they will contain important information about the proposed transaction. Stockholders may obtain a free copy of the proxy statement and any other relevant documents at the SEC’s web site at http://www.sec.gov. The definitive proxy statement and these other documents also are available on Globecomm’s website (http://www.globecomm.com) and may be obtained free of charge from Globecomm by directing a request to Globecomm Systems Inc., Attn: Corporate Secretary, 45 Oser Avenue, Hauppauge, NY 11788.

Globecomm and its directors and certain executive officers may be deemed to be participants in the solicitation of proxies from Globecomm’s stockholders in respect of the proposed transaction. Information about the directors and executive officers’ interests in Globecomm by security holdings or otherwise is set forth in the proxy statement.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include statements regarding future performance, benefits of the proposed transaction, financing for the transaction and the completion of the transaction. These statements are based on the current expectations of the management of Globecomm. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this document. For example, among other things, our actual results, performance or achievements may differ from those expressed or implied, conditions to the closing of the transaction may not be satisfied and the transaction may involve unexpected costs, unexpected liabilities or unexpected delays. Additional factors that may affect the future results of Globecomm are set forth in its Annual Report on Form 10-K for the fiscal year ended June 30, 2013 and filed with the SEC on September 13, 2013, which is available at http://www.sec.gov. Unless required by law, Globecomm undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

-Financial tables follow-

 

Globecomm Systems Inc.

Consolidated Statements of Operations (In thousands, except per share data)

(Unaudited)

      Three Months Ended September 30,     September 30, 2013     2012   Revenues from services

$

44,920

$

47,172

Revenues from infrastructure solutions   12,342         33,991   Total revenues   57,262         81,163     Costs and operating expenses: Costs from services 31,378 32,004 Costs from infrastructure solutions 10,838 32,072 Selling and marketing 4,453 4,288 Research and development 1,012 953 General and administrative   9,351         7,695   Total costs and operating expenses   57,032         77,012   Income from operations 230 4,151   Interest income 96 85 Interest (expense)   (77 )       (114 ) Income before income taxes 249 4,122   Provision for income taxes   94         1,446   Net income $ 155       $ 2,676    

Basic net income per common share

$

0.01

     

$

0.12

 

Diluted net income per common share

$

0.01

     

$

0.12

   

Weighted-average shares used in the

calculation of basic net income

per common share

 

 

23,199

       

 

22,425

    Weighted-average shares used in the

calculation of diluted net income

per common share

 

 

23,589

       

 

22,859

    Globecomm Systems Inc. Condensed Consolidated Balance Sheets (In thousands)       September 30,     June 30, 2013     2013 (Unaudited) Assets Current assets: Cash and cash equivalents $ 90,986 $ 87,286 Accounts receivable, net 49,701 58,426 Inventories 20,858 17,076 Prepaid expenses and other current assets 5,577 4,056 Deferred income taxes   4,254       4,309 Total current assets 171,376 171,153 Fixed assets, net 50,089 50,367 Goodwill 72,474 68,818 Intangibles, net 17,169 16,576 Other assets   1,517       1,327 Total assets $ 312,625     $ 308,241     Liabilities and Stockholders’ Equity Current liabilities $ 45,453 $ 42,819 Other liabilities 111 111 Long term debt 6,950 8,475 Deferred income taxes 12,383 12,383 Total stockholders’ equity   247,728       244,453 Total liabilities and stockholders’ equity $ 312,625     $ 308,241  

Globecomm Systems Inc.

Reconciliation of Net Income to adjusted EBITDA (In thousands) (Unaudited)         Three Months Ended

September 30,2013

September 30,

2012

  Net income $ 155 $ 2,676 Adjustments: Interest (income) (96 ) (85 ) Interest expense 77 114 Transaction costs 1,233 - Provision for income taxes 94 1,446 Depreciation and amortization 3,225 2,973 Stock compensation expense 832   869   Adjusted EBITDA $ 5,520   $ 7,993        

Globecomm Systems Inc.

Reconciliation of adjusted diluted Net Income per common share (In thousands) (Unaudited)   Three Months Ended

September 30,2013

September 30,2012

  Diluted net income per common share $ 0.01 $ 0.12 Transaction costs 0.03   -   Adjusted diluted net income per common share $ 0.04   $ 0.12  

For Globecomm Investor Relations information:Matthew Byron, 631-457-1301Senior Vice President, Corporate Office IR/M&Air@globecommsystems.comorGlobecomm Systems Inc.Phone: 631-231-9800; Fax: 631-231-1557Web: http://www.globecommsystems.com