Comtech Telecommunications Corp. Announces Results for First Quarter of Fiscal 2017 and Confirms Its Fiscal 2017 Guidance
MELVILLE, N.Y.--(BUSINESS WIRE)--
December 7, 2016--Comtech Telecommunications Corp. (NASDAQ: CMTL) today
reported its operating results for the first quarter ended October 31,
2016 and confirmed its fiscal 2017 guidance.
Fiscal 2017 First Quarter Highlights
Net sales for the three months ended October 31, 2016 were $135.8
million compared to $64.1 million for the three months ended October
31, 2015. The period-over-period increase in net sales reflects
incremental sales of approximately $78.0 million as a result of the
February 23, 2016 acquisition of TeleCommunication Systems, Inc.
("TCS"), partially offset by lower sales of legacy Comtech products.
Backlog as of October 31, 2016 was $461.9 million. The Company
achieved bookings of approximately $113.7 million during the first
quarter of fiscal 2017. The Company has a number of large
opportunities in its order pipeline and currently expects its
book-to-bill ratio for fiscal 2017 to exceed 1.0.
GAAP operating loss for the quarter was $0.7 million and GAAP net loss
was $2.5 million, or $(0.11) per diluted share, for the three months
ended October 31, 2016.
Adjusted EBITDA was $10.0 million for the quarter. Adjusted EBITDA is
a Non-GAAP financial measure that the Company defines and reconciles
to the most directly comparable GAAP financial measure in the below
table.
As of October 31, 2016, the Company had $62.7 million of cash and cash
equivalents. During the first quarter of fiscal 2017, the Company
generated better than expected cash flows from operating activities of
$7.6 million.
In commenting on the Company's performance during the first quarter of
fiscal 2017, Fred Kornberg, President and Chief Executive Officer, noted
"Although international business conditions remain challenging, we are
pleased with our first quarter fiscal 2017 results, which we view as a
solid foundation for the rest of fiscal 2017."
2017 Fiscal Year Financial Targets
Revenue goal of approximately $600.0 million.
GAAP diluted EPS goal of approximately $0.30 and an Adjusted EBITDA
goal of approximately $70.0 million.
Total annual amortization of intangibles is expected to range from
$22.0 million to $24.0 million, total depreciation expense is expected
to range from $16.0 million to $18.0 million and total amortization of
stock-based compensation is expected to be approximately $5.0 million.
Interest expense is expected to reflect a rate (including amortization
of deferred financing costs) of 5.0% to 6.0%.
The Company's effective income tax rate (excluding discrete tax items
in fiscal 2017) is expected to approximate 32.0%.
Based on the anticipated timing of shipments and performance related to
orders currently in its backlog, as well as expected orders, the Company
anticipates its second quarter of fiscal 2017 net sales and Adjusted
EBITDA to approximate the same level of performance that it achieved in
its first quarter of fiscal 2017. Additionally, as previously announced,
the Company's net sales, operating income and Adjusted EBITDA are
expected to improve in the third quarter of fiscal 2017, with the fourth
quarter amounts being the peak quarter, by far.
Additional information about the Company's fiscal 2017 guidance is
included in the Company's first quarter investor presentation which is
located on the Company's website at www.comtechtel.com.
Conference Call
The Company has scheduled an investor conference call for 8:30 AM (ET)
on Thursday, December 8, 2016. Investors and the public are invited to
access a live webcast of the conference call from the Investor Relations
section of the Comtech web site at www.comtechtel.com.
Alternatively, investors can access the conference call by dialing (888)
632-3384 (domestic), or (785) 424-1675 (international) and using the
conference I.D. "Comtech." A replay of the conference call will be
available for seven days by dialing (800) 283-5758 or (402) 220-0863. In
addition, an updated investor presentation, including earnings guidance,
is available on the Company's web site.
About Comtech
Comtech Telecommunications Corp. designs, develops, produces and markets
innovative products, systems and services for advanced communications
solutions. The Company sells products to a diverse customer base in the
global commercial and government communications markets.
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 from the acquisition of TeleCommunication Systems, Inc.
("TCS") will not be fully realized, or will not be realized within the
anticipated time period; the risk that Comtech's and TCS's businesses
will not be integrated successfully; the possibility of disruption from
the acquisition, making it more difficult to maintain business and
operational relationships or retain key personnel; 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; changing customer
demands; 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 and TCS's
legacy legal proceedings, customer claims for indemnification, and other
similar matters; risks associated with Comtech's obligations under its
Secured Credit Facility; risks associated with the Company's large
contracts; and other factors described in this and the Company's other
filings with the SEC.
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended October 31,
2016
2015
Net sales
$
135,786,000
$
64,117,000
Cost of sales
83,678,000
35,915,000
Gross profit
52,108,000
28,202,000
Expenses:
Selling, general and administrative
32,685,000
16,718,000
Research and development
14,096,000
7,940,000
Amortization of intangibles
6,055,000
1,376,000
52,836,000
26,034,000
Operating (loss) income
(728,000
)
2,168,000
Other expenses (income):
Interest expense and other
3,325,000
75,000
Interest income and other
(2,000
)
(112,000
)
(Loss) income before (benefit from) provision for income taxes
(4,051,000
)
2,205,000
(Benefit from) provision for income taxes
(1,562,000
)
766,000
Net (loss) income
$
(2,489,000
)
$
1,439,000
Net (loss) income per share:
Basic
$
(0.11
)
$
0.09
Diluted
$
(0.11
)
$
0.09
Weighted average number of common shares outstanding - basic
23,385,000
16,171,000
Weighted average number of common and common equivalent shares
outstanding - diluted
23,385,000
16,194,000
Dividends declared per issued and outstanding common share as of the
applicable dividend record date
$
0.30
$
0.30
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
October 31, 2016
July 31, 2016
Assets
Current assets:
Cash and cash equivalents
$
62,711,000
$
66,805,000
Accounts receivable, net
136,948,000
150,967,000
Inventories, net
75,659,000
71,354,000
Prepaid expenses and other current assets
17,590,000
14,513,000
Total current assets
292,908,000
303,639,000
Property, plant and equipment, net
37,186,000
38,667,000
Goodwill
288,409,000
287,618,000
Intangibles with finite lives, net
278,639,000
284,694,000
Deferred financing costs, net
3,127,000
3,309,000
Other assets, net
3,183,000
3,269,000
Total assets
$
903,452,000
$
921,196,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
29,893,000
$
33,462,000
Accrued expenses and other current liabilities
96,680,000
98,034,000
Dividends payable
7,013,000
7,005,000
Customer advances and deposits
27,494,000
29,665,000
Current portion of long-term debt
12,174,000
11,067,000
Current portion of capital lease obligations
3,366,000
3,592,000
Interest payable
1,244,000
1,321,000
Total current liabilities
177,864,000
184,146,000
Non-current portion of long-term debt, net
237,952,000
239,969,000
Non-current portion of capital lease obligations
3,304,000
4,021,000
Income taxes payable
2,928,000
2,992,000
Deferred tax liability, net
10,083,000
9,798,000
Customer advances and deposits, non-current
6,244,000
5,764,000
Other liabilities
3,789,000
4,105,000
Total liabilities
442,164,000
450,795,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.10 per share; shares authorized and
unissued 2,000,000
—
—
Common stock, par value $.10 per share; authorized 100,000,000
shares; issued 38,555,405 shares and 38,367,997 shares at October
31, 2016 and July 31, 2016, respectively
3,856,000
3,837,000
Additional paid-in capital
525,291,000
524,797,000
Retained earnings
373,990,000
383,616,000
903,137,000
912,250,000
Less:
Treasury stock, at cost (15,033,317 shares at October 31, 2016 and
July 31, 2016)
(441,849,000
)
(441,849,000
)
Total stockholders' equity
461,288,000
470,401,000
Total liabilities and stockholders' equity
$
903,452,000
$
921,196,000
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 before interest, income taxes,
depreciation and amortization of intangibles, amortization of
stock-based compensation and acquisition plan expenses. The Company's
definition of Adjusted EBITDA may differ from the definition of EBITDA
used by other companies and therefore may not be comparable to similarly
titled measures used by other companies, including a similarly titled
measure previously utilized by TCS. 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
our performance and comparability of our results with other companies.
These Non-GAAP financial measures have limitations as an analytical tool
as they exclude the financial impact of transactions necessary to
conduct Comtech'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 table,
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 Comtech's SEC filings. The
Company has not quantitatively reconciled its fiscal 2017 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, costs related to its
acquisition plan and interest expense are certain 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 October 31,
2016
2015
Reconciliation of GAAP Net (Loss) Income to Adjusted EBITDA: