Comtech Telecommunications Corp. Announces Results for Its Fiscal 2021 Second Quarter and Updates Its Financial Targets for Fiscal 2021
Fiscal 2021 Second Quarter Highlights
-
Consolidated net sales of
$161.3 million and Adjusted EBITDA of$18.1 million (or 11.2% of consolidated net sales) significantly exceededComtech's expectation for its second quarter of fiscal 2021. Adjusted EBITDA is a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure and is more fully defined below. -
With bookings of
$215.8 million , the Company achieved a book-to-bill ratio (a measure defined as bookings divided by net sales) of 1.34 during its second quarter of fiscal 2021. Backlog as ofJanuary 31, 2021 was$660.0 million . The total value of multi-year contracts thatComtech has received is substantially higher than its reported backlog. When adding Comtech’s backlog and the total unfunded value of multi-year contracts thatComtech has received and for which it expects future orders, its revenue visibility approximates$1.1 billion . -
The Company incurred an aggregate of
$3.4 million of acquisition plan expenses. The large majority of these expenses related to GD NG-911 acquisition-related expenses and the acquisition of UHP which closed onMarch 2, 2021 . UHP is a leading provider of innovative and disruptive satellite ground station technology solutions. Based inCanada , UHP has developed revolutionary technology thatComtech believes is transforming the Very Small Aperture Terminal ("VSAT") market. Feedback from customers has been extremely positive and initial order flow for UHP products looks strong. -
The Company's annual effective income tax rate was 17.0%, excluding a net discrete tax benefit of
$0.8 million . -
Including all acquisition plan expenses, restructuring costs and COVID-19 related costs,
Comtech reported GAAP operating income of$5.4 million , GAAP net income of$4.2 million and GAAP net income per diluted share ("EPS") of$0.17 for the second quarter of fiscal 2021. Excluding such costs, the net discrete tax benefit and as reconciled to the most directly comparable GAAP financial measures in the table below, Non-GAAP operating income was$9.5 million , Non-GAAP net income was$6.8 million and Non-GAAP EPS was$0.27 . -
As of
January 31, 2021 ,Comtech had$30.9 million of cash and cash equivalents and total debt outstanding of$208.0 million .
Commenting on the Company's second quarter fiscal 2021 performance,
COMMENTS AND FINANCIAL TARGETS FOR EXPECTED FISCAL 2021 PERFORMANCE
-
Comtech expects fiscal 2021 consolidated net sales to be in a range of$610.0 million to$620.0 million . This revenue range reflects an updated assessment of the timing of shipment for existing and anticipated orders. The Company continues to target Adjusted EBITDA in a range of$74.0 million to$76.0 million . -
Comtech was awarded a statewide contract valued at up to$175.1 million to design, deploy, and operate next-generation 911 ("NG-911") services for theCommonwealth of Pennsylvania . This contract was awarded to the Company shortly after it announced the receipt of a$54.0 million contract to design, deploy and operate NG-911 services for theState of South Carolina . Based on anticipated timing of performance, the Company expects meaningful revenue contribution from these contracts to begin in fiscal 2022. -
Fiscal 2021 consolidated net sales are anticipated to reflect a similar percentage of Commercial Solutions segment net sales achieved in fiscal 2020 and: (i) strong demand for
Comtech's public safety technology solutions; (ii) providing 5G virtual mobile location-based technology solutions for twoU.S. tier-one mobile network operators and (iii) deliveries to support a criticalU.S. Air Force andU.S. Army Anti-jam Modem (“A3M”) program under theU.S. Space Force’s Space and Missile Systems Center (“SMC”) agency. -
Fiscal 2021 consolidated net sales are anticipated to reflect a similar percentage of Government Solutions segment net sales achieved in fiscal 2020 and ongoing demand for: (i) Manpack Satellite Terminals, networking equipment and other advanced VSAT products by the
U.S. Army ; (ii) ongoing sustainment services for theU.S. Army for the AN/TSC-198A SNAP terminal; (iii) sustainment services for theU.S. Army's Project Manager Mission Command (“PM MC”) Blue Force Tracking (“BFT-1”) program; and (iv) Joint Cyber Analysis Course (“JCAC”) training solutions. -
At the start of its third quarter of fiscal 2021,
Comtech initiated an effort to improve efficiencies and streamline operations in its Government Solutions segment. Such efforts include the consolidation of certain administrative and operating functions in both itsFlorida andMaryland locations and the elimination of certain duplicate functions. In addition,Comtech expects to continue shifting production of many of its key satellite earth station products from its existingTempe, Arizona locations to a new 146,000 square foot facility inChandler, Arizona . This new facility, which is located less than 10 miles from its current facilities, is expected to support anticipated growth and long-term business goals. Over time, these efforts are expected to improve consolidated Adjusted EBITDA margins. -
Additional information about the UHP acquisition and other acquisition plan expenses can be found in the Company’s Form 10-Q as filed with the
Securities and Exchange Commission . Because of the pandemic's continuing impact on global business conditions and the difficulty of estimating ongoing acquisition plan litigation expenses, the Company is not providing any GAAP operating income, GAAP net income or GAAP EPS guidance or a reconciliation of the Company’s projected Adjusted EBITDA results to the most comparable GAAP measure, as such a reconciliation cannot be prepared without unreasonable effort. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.
Conference Call
The Company has scheduled an investor conference call for
About
Cautionary Statement Regarding Forward-Looking Statements
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 and benefits from recent acquisitions will not be fully realized, or will not be realized within the anticipated time periods; the risk that the acquired businesses will not be integrated with the Company successfully; the possibility of disruption from recent acquisitions, making it more difficult to maintain business and operational relationships or retain key personnel; the risk that the Company will be unsuccessful in implementing a tactical shift in its Government Solutions segment away from bidding on large commodity service contracts and toward pursuing contracts for its niche products with higher margins; 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, including the risks associated with expanding the sales of the Company's Heights™ Network Platform ("HEIGHTS"); changing customer demands and or procurement strategies; 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 legal proceedings, customer claims for indemnification, and other similar matters; risks associated with the Company’s obligations under its Credit Facility; risks associated with the Company's large contracts; risks associated with the COVID-19 pandemic; and other factors described in this and the Company's other filings with the
AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) |
||||||||||||||||
|
|
Three months ended |
|
Six months ended |
||||||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Net sales |
|
$ |
161,292,000 |
|
|
$ |
161,654,000 |
|
|
$ |
296,510,000 |
|
|
$ |
331,921,000 |
|
Cost of sales |
|
105,612,000 |
|
|
101,052,000 |
|
|
190,622,000 |
|
|
207,752,000 |
|
||||
Gross profit |
|
55,680,000 |
|
|
60,602,000 |
|
|
105,888,000 |
|
|
124,169,000 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Expenses: |
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative |
|
29,462,000 |
|
|
29,374,000 |
|
|
57,002,000 |
|
|
61,225,000 |
|
||||
Research and development |
|
12,664,000 |
|
|
13,740,000 |
|
|
24,299,000 |
|
|
28,601,000 |
|
||||
Amortization of intangibles |
|
4,795,000 |
|
|
5,229,000 |
|
|
10,361,000 |
|
|
10,435,000 |
|
||||
Acquisition plan expenses |
|
3,357,000 |
|
|
6,025,000 |
|
|
94,540,000 |
|
|
8,414,000 |
|
||||
|
|
50,278,000 |
|
|
54,368,000 |
|
|
186,202,000 |
|
|
108,675,000 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Operating income (loss) |
|
5,402,000 |
|
|
6,234,000 |
|
|
(80,314,000 |
) |
|
15,494,000 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other expenses (income): |
|
|
|
|
|
|
|
|
||||||||
Interest expense |
|
1,418,000 |
|
|
1,616,000 |
|
|
3,715,000 |
|
|
3,420,000 |
|
||||
Interest (income) and other |
|
(66,000 |
) |
|
6,000 |
|
|
— |
|
|
(71,000 |
) |
||||
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) before (benefit from) provision for income taxes |
|
4,050,000 |
|
|
4,612,000 |
|
|
(84,029,000 |
) |
|
12,145,000 |
|
||||
(Benefit from) provision for income taxes |
|
(155,000 |
) |
|
1,117,000 |
|
|
(2,394,000 |
) |
|
2,262,000 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) |
|
$ |
4,205,000 |
|
|
$ |
3,495,000 |
|
|
$ |
(81,635,000 |
) |
|
$ |
9,883,000 |
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
||||||||
Basic |
|
$ |
0.17 |
|
|
$ |
0.14 |
|
|
$ |
(3.22 |
) |
|
$ |
0.40 |
|
Diluted |
|
$ |
0.17 |
|
|
$ |
0.14 |
|
|
$ |
(3.22 |
) |
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common shares outstanding – basic |
|
25,337,000 |
|
|
24,659,000 |
|
|
25,321,000 |
|
|
24,607,000 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common and common equivalent shares outstanding – diluted |
|
25,420,000 |
|
|
25,058,000 |
|
|
25,321,000 |
|
|
24,904,000 |
|
||||
|
|
|
|
|
|
|
|
|
AND SUBSIDIARIES Condensed Consolidated Balance Sheets |
|||||||
|
|
|
|
||||
|
(Unaudited) |
|
(Audited) |
||||
Assets |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
30,934,000 |
|
|
$ |
47,878,000 |
|
Accounts receivable, net |
149,928,000 |
|
|
126,816,000 |
|
||
Inventories, net |
81,630,000 |
|
|
82,302,000 |
|
||
Prepaid expenses and other current assets |
19,417,000 |
|
|
20,101,000 |
|
||
Total current assets |
281,909,000 |
|
|
277,097,000 |
|
||
Property, plant and equipment, net |
26,136,000 |
|
|
27,037,000 |
|
||
Operating lease right-of-use assets, net |
51,020,000 |
|
|
30,033,000 |
|
||
|
333,793,000 |
|
|
330,519,000 |
|
||
Intangibles with finite lives, net |
247,758,000 |
|
|
258,019,000 |
|
||
Deferred financing costs, net |
2,023,000 |
|
|
2,391,000 |
|
||
Other assets, net |
3,956,000 |
|
|
4,551,000 |
|
||
Total assets |
$ |
946,595,000 |
|
|
$ |
929,647,000 |
|
Liabilities and Stockholders’ Equity |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
38,994,000 |
|
|
$ |
23,423,000 |
|
Accrued expenses and other current liabilities |
79,185,000 |
|
|
85,161,000 |
|
||
Operating lease liabilities, current |
8,771,000 |
|
|
8,247,000 |
|
||
Dividends payable |
2,495,000 |
|
|
2,468,000 |
|
||
Contract liabilities |
49,990,000 |
|
|
40,250,000 |
|
||
Interest payable |
265,000 |
|
|
163,000 |
|
||
Total current liabilities |
179,700,000 |
|
|
159,712,000 |
|
||
Non-current portion of long-term debt, net |
208,000,000 |
|
|
149,500,000 |
|
||
Operating lease liabilities, non-current |
45,259,000 |
|
|
24,109,000 |
|
||
Income taxes payable |
2,286,000 |
|
|
1,963,000 |
|
||
Deferred tax liability, net |
16,442,000 |
|
|
17,637,000 |
|
||
Long-term contract liabilities |
15,066,000 |
|
|
9,596,000 |
|
||
Other liabilities |
16,558,000 |
|
|
17,831,000 |
|
||
Total liabilities |
483,311,000 |
|
|
380,348,000 |
|
||
Commitments and contingencies |
|
|
|
||||
Stockholders’ equity: |
|
|
|
||||
Preferred stock, par value |
— |
|
|
— |
|
||
Common stock, par value |
4,006,000 |
|
|
3,992,000 |
|
||
Additional paid-in capital |
570,891,000 |
|
|
569,891,000 |
|
||
Retained earnings |
330,236,000 |
|
|
417,265,000 |
|
||
|
905,133,000 |
|
|
991,148,000 |
|
||
Less: |
|
|
|
||||
|
(441,849,000 |
) |
|
(441,849,000 |
) |
||
Total stockholders’ equity |
463,284,000 |
|
|
549,299,000 |
|
||
Total liabilities and stockholders’ equity |
$ |
946,595,000 |
|
|
$ |
929,647,000 |
|
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
|
Three months ended |
|
Six months ended |
|
Fiscal |
||||||||||||||
|
|
|
|
|
Year |
||||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
2020 |
||||||||||
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) |
$ |
4,205,000 |
|
|
$ |
3,495,000 |
|
|
$ |
(81,635,000 |
) |
|
$ |
9,883,000 |
|
|
$ |
7,020,000 |
|
(Benefit from) provision for income taxes |
(155,000 |
) |
|
1,117,000 |
|
|
(2,394,000 |
) |
|
2,262,000 |
|
|
2,290,000 |
|
|||||
Interest (income) and other |
(66,000 |
) |
|
6,000 |
|
|
— |
|
|
(71,000 |
) |
|
(190,000 |
) |
|||||
Interest expense |
1,418,000 |
|
|
1,616,000 |
|
|
3,715,000 |
|
|
3,420,000 |
|
|
6,054,000 |
|
|||||
Amortization of stock-based compensation |
1,287,000 |
|
|
1,238,000 |
|
|
1,986,000 |
|
|
2,117,000 |
|
|
9,275,000 |
|
|||||
Amortization of intangibles |
4,795,000 |
|
|
5,229,000 |
|
|
10,361,000 |
|
|
10,435,000 |
|
|
21,595,000 |
|
|||||
Depreciation |
2,457,000 |
|
|
2,721,000 |
|
|
5,009,000 |
|
|
5,372,000 |
|
|
10,561,000 |
|
|||||
Estimated contract settlement costs |
— |
|
|
(262,000 |
) |
|
— |
|
|
(32,000 |
) |
|
444,000 |
|
|||||
Acquisition plan expenses |
3,357,000 |
|
|
6,025,000 |
|
|
94,540,000 |
|
|
8,414,000 |
|
|
20,754,000 |
|
|||||
Restructuring costs |
601,000 |
|
|
— |
|
|
601,000 |
|
|
— |
|
|
— |
|
|||||
COVID-19 related costs |
160,000 |
|
|
— |
|
|
160,000 |
|
|
— |
|
|
— |
|
|||||
Adjusted EBITDA |
$ |
18,059,000 |
|
|
$ |
21,185,000 |
|
|
$ |
32,343,000 |
|
|
$ |
41,800,000 |
|
|
$ |
77,803,000 |
|
|
|
|
|
|
|
|
|
|
|
In addition, a reconciliation of
|
|
||||||||||||||||||||||
|
Three months ended |
|
Six months ended |
||||||||||||||||||||
|
Operating Income |
|
Net Income |
|
Net Income per Diluted Share* |
|
Operating
|
|
Net (Loss) Income |
|
Net (Loss) Income per Diluted Share* |
||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
GAAP measures, as reported |
$ |
5,402,000 |
|
|
$ |
4,205,000 |
|
|
$ |
0.17 |
|
|
$ |
(80,314,000 |
) |
|
$ |
(81,635,000 |
) |
|
$ |
(3.22 |
) |
Acquisition plan expenses |
3,357,000 |
|
|
2,786,000 |
|
|
0.11 |
|
|
94,540,000 |
|
|
90,368,000 |
|
|
3.56 |
|
||||||
Restructuring costs |
601,000 |
|
|
499,000 |
|
|
0.02 |
|
|
601,000 |
|
|
499,000 |
|
|
0.02 |
|
||||||
COVID-19 related costs |
160,000 |
|
|
133,000 |
|
|
0.01 |
|
|
160,000 |
|
|
133,000 |
|
|
0.01 |
|
||||||
Interest expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
978,000 |
|
|
0.04 |
|
||||||
Net discrete tax benefit |
— |
|
|
(843,000 |
) |
|
(0.03 |
) |
|
— |
|
|
(9,000 |
) |
|
— |
|
||||||
Non-GAAP measures |
$ |
9,520,000 |
|
|
$ |
6,780,000 |
|
|
$ |
0.27 |
|
|
$ |
14,987,000 |
|
|
$ |
10,334,000 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
||||||||||||||||||||||
|
Three months ended |
|
Six months ended |
||||||||||||||||||||
|
Operating Income |
|
Net Income |
|
Net Income
|
|
Operating Income |
|
Net Income |
|
Net Income
Share* |
||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
GAAP measures, as reported |
$ |
6,234,000 |
|
|
$ |
3,495,000 |
|
|
$ |
0.14 |
|
|
$ |
15,494,000 |
|
|
$ |
9,883,000 |
|
|
$ |
0.40 |
|
Acquisition plan expenses |
6,025,000 |
|
|
4,639,000 |
|
|
0.19 |
|
|
8,414,000 |
|
|
6,479,000 |
|
|
0.26 |
|
||||||
Estimated contract settlement costs |
(262,000 |
) |
|
(202,000 |
) |
|
(0.01 |
) |
|
(32,000 |
) |
|
(25,000 |
) |
|
— |
|
||||||
Net discrete tax expense (benefit) |
— |
|
|
57,000 |
|
|
— |
|
|
— |
|
|
(531,000 |
) |
|
(0.02 |
) |
||||||
Non-GAAP measures |
$ |
11,997,000 |
|
|
$ |
7,989,000 |
|
|
$ |
0.32 |
|
|
$ |
23,876,000 |
|
|
$ |
15,806,000 |
|
|
$ |
0.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Fiscal Year 2020 |
|
|
||||||||||||||||||||
|
Operating Income |
|
Net Income |
|
Net Income per Diluted Share* |
|
|
|
|
|
|
||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
GAAP measures, as reported |
$ |
15,174,000 |
|
|
$ |
7,020,000 |
|
|
$ |
0.28 |
|
|
|
|
|
|
|
||||||
Estimated contract settlement costs |
444,000 |
|
|
280,000 |
|
|
0.01 |
|
|
|
|
|
|
|
|||||||||
Acquisition plan expenses |
20,754,000 |
|
|
13,075,000 |
|
|
0.53 |
|
|
|
|
|
|
|
|||||||||
Net discrete tax benefit |
— |
|
|
(1,155,000 |
) |
|
(0.05 |
) |
|
|
|
|
|
|
|||||||||
Non-GAAP measures |
$ |
36,372,000 |
|
|
$ |
19,220,000 |
|
|
$ |
0.77 |
|
|
|
|
|
|
|
* Per share amounts may not foot due to rounding. In addition, non-GAAP EPS adjustments for the six months ended
ECMTL
View source version on businesswire.com: https://www.businesswire.com/news/home/20210311006002/en/
Media Contact:
(631) 962-7000
Info@comtechtel.com
Source: