| [March 11, 2015] |
 |
Comtech Telecommunications Corp. Announces Results for the Second Quarter of Fiscal 2015 and Provides Updated Fiscal 2015 Guidance
March 11, 2015--Comtech Telecommunications (News - Alert) Corp. (NASDAQ:
CMTL) today reported its operating results for the three and six months
ended January 31, 2015.
Net sales for the three months ended January 31, 2015 were $81.8 million
compared to $85.5 million for the three months ended January 31, 2014.
The period-over-period decrease reflects lower net sales in all three of
the Company's operating segments. GAAP net income was $7.6 million, or
$0.46 per diluted share, for the three months ended January 31, 2015 as
compared to $6.0 million, or $0.32 per diluted share, for the three
months ended January 31, 2014.
Net sales for the six months ended January 31, 2015 were $158.2 million
compared to $168.9 million for the six months ended January 31, 2014.
The period-over-period decrease reflects lower net sales in all three of
the Company's operating segments. GAAP net income was $12.8 million, or
$0.78 per diluted share, for the six months ended January 31, 2015 as
compared to $11.3 million, or $0.60 per diluted share, for the six
months ended January 31, 2014.
The Company also announced that it is updating its fiscal 2015 revenue
guidance which is now expected to range from $320.0 million to $330.0
million and is updating its GAAP diluted earnings per share guidance to
a range of $1.35 to $1.51. The Company expects its adjusted EBITDA (as
defined in the below table) to range from $52.0 million to $56.0
million. Our updated earnings guidance for fiscal 2015 includes
approximately $1.0 million of incremental costs associated with the
senior leadership changes that were announced in late December 2014.
In commenting on the Company's performance and updated fiscal 2015
business outlook, Dr. Stanton Sloane, President and Chief Executive
Officer, stated, "Although we were able to deliver solid financial
results during our second quarter, bookings for our satellite earth
station products in many geographic regions, in particular Russia and
certain Middle Eastern countries, have been impacted by volatile
business conditions including the continuing decline in oil prices and
the strengthening of the U.S. dollar, both of which lower the purchasing
power of many of our international customers. At the same time, although
we continue to see strong demand from both the U.S. government and new
international customers for our over-the-horizon microwave systems, we
also see a significant shifting of revenue and earnings associated with
certain expected large orders for these products from fiscal 2015 to
fiscal 2016."
Dr. Sloane added, "Since joining Comtech as President and Chief
Executive Officer in January 2015, I have spent a lot of time meeting
with employees and partners and visiting our operating locations.
Although market conditions continue to be volatile, I believe that our
product portfolio is second to none, our pipeline of opportunities is
strong, and we are well positioned for future growth. I am confident
that Comtech is on the right path and I look forward to leading our
efforts to grow the Company."
Selected Fiscal 2015 Second Quarter Financial Metrics and Other Items
-
Backlog as of January 31, 2015 was $129.4 million compared to $149.3
million as of October 31, 2014.
-
Total bookings for the three and six months ended January 31, 2015
were $61.9 million and $154.2 million, respectively, compared to $70.7
million and $147.2 million for the three and six months ended January
31, 2014, respectively.
-
Adjusted EBITDA was $14.9 million and $28.2 million for the three and
six months ended January 31, 2015, respectively, as compared to $15.5
million and $29.8 million for the three and six months ended January
31, 2014, respectively. Adjusted EBITDA is a Non-GAAP financial
measure and is defined in the below table.
-
The Company notes that it expects consolidated net sales in the third
quarter of fiscal 2015 to be lower than consolidated net sales
achieved during the second quarter of fiscal 2015 and GAAP diluted
earnings per share for the third quarter is expected to range between
$0.20 to $0.24. As discussed further in our Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission today, the
second quarter of fiscal 2015 financial results reflect: (i) benefits
to operating income of approximately $1.5 million resulting from
better than anticipated performance and warranty reserve reductions
for certain over-the-horizon microwave systems contracts and (ii) $0.6
million of discrete tax benefits. Our third quarter of fiscal 2015 is
expected to reflect period-to-period mix differences (including
shipments of production units pursuant to our contract to develop and
manufacture the Advanced Time Division Multiple Access Interface
Processor (News - Alert) ("ATIP") for the U.S. Navy's Space and Naval Warfare Systems
Command which are anticipated to occur at lower margins than our
historical product mix). In addition, our third quarter of fiscal 2015
is expected to reflect incremental expenses associated with senior
leadership changes announced by our Board in late December 2014.
-
Excluding the impact of any discrete tax items, the Company's fiscal
2015 estimated effective tax rate is expected to approximate 34.75%.
-
As of January 31, 2015, the Company had $135.1 million of cash and
cash equivalents which does not reflect the quarterly dividend of $4.9
million that was paid on February 18, 2015.
-
As of March 10, 2015, the Company is authorized to repurchase
approximately $13.7 million of additional common stock pursuant to its
existing stock repurchase program. During the three months ended
January 31, 2015, the Company did not repurchase any shares of its
common stock.
-
As previously announced in December 2014, our Board of Directors named
Dr. Stanton D. Sloane Chief Executive Officer and President. Dr.
Sloane succeeded Fred Kornberg (News - Alert) in these positions on January 26, 2015.
Mr. Kornberg continues to serve the Company as Executive Chairman of
the Board of Directors.
Additional information about the Company's updated fiscal 2015 guidance
is included in the Company's second 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, March 12, 2015. 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 (866)
952-1906 (domestic), or (785) 424-1825 (international) and using the
conference I.D. "Comtech." A replay of the conference call will be
available for seven days by dialing (800) 753-5212 or (402) 220-2673. 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 believes many of its solutions play a vital role
in providing or enhancing communication capabilities when terrestrial
communications infrastructure is unavailable, inefficient or too
expensive. The Company conducts business through three complementary
segments: telecommunications transmission, RF microwave amplifiers and
mobile data communications. The Company sells products to a diverse
customer base in the global commercial and government communications
markets. The Company believes it is a leader in most of the market
segments that it serves.
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 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 legal proceedings and other matters; risks
associated with U.S. government investigations; risks associated with
the Company's large contracts, and other factors described in the
Company's filings with the Securities and Exchange Commission.
|
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COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three months ended January 31,
|
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Six months ended January 31,
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
81,802,000
|
|
|
85,499,000
|
|
|
158,193,000
|
|
|
168,867,000
|
|
|
Cost of sales
|
|
43,927,000
|
|
|
48,130,000
|
|
|
84,993,000
|
|
|
95,120,000
|
|
|
Gross profit
|
|
37,875,000
|
|
|
37,369,000
|
|
|
73,200,000
|
|
|
73,747,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
16,026,000
|
|
|
16,349,000
|
|
|
31,552,000
|
|
|
32,547,000
|
|
|
Research and development
|
|
9,666,000
|
|
|
8,266,000
|
|
|
19,685,000
|
|
|
16,765,000
|
|
|
Amortization of intangibles
|
|
1,560,000
|
|
|
1,582,000
|
|
|
3,121,000
|
|
|
3,164,000
|
|
|
|
|
27,252,000
|
|
|
26,197,000
|
|
|
54,358,000
|
|
|
52,476,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
10,623,000
|
|
|
11,172,000
|
|
|
18,842,000
|
|
|
21,271,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
69,000
|
|
|
1,998,000
|
|
|
334,000
|
|
|
4,016,000
|
|
|
Interest income and other
|
|
(90,000
|
)
|
|
(228,000
|
)
|
|
(174,000
|
)
|
|
(501,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
10,644,000
|
|
|
9,402,000
|
|
|
18,682,000
|
|
|
17,756,000
|
|
|
Provision for income taxes
|
|
3,059,000
|
|
|
3,419,000
|
|
|
5,872,000
|
|
|
6,468,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
7,585,000
|
|
|
5,983,000
|
|
|
12,810,000
|
|
|
11,288,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
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Basic
|
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$
|
0.47
|
|
|
0.37
|
|
|
0.79
|
|
|
0.70
|
|
|
Diluted
|
|
$
|
0.46
|
|
|
0.32
|
|
|
0.78
|
|
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic
|
|
16,241,000
|
|
|
15,970,000
|
|
|
16,229,000
|
|
|
16,212,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common equivalent shares
outstanding - diluted
|
|
16,505,000
|
|
|
22,487,000
|
|
|
16,510,000
|
|
|
22,552,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per issued and outstanding common share as of the
applicable dividend record date
|
|
$
|
0.30
|
|
|
0.30
|
|
|
0.60
|
|
|
0.575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
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|
|
January 31, 2015
|
|
July 31, 2014
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
135,139,000
|
|
|
154,500,000
|
|
|
Accounts receivable, net
|
|
68,896,000
|
|
|
54,887,000
|
|
|
Inventories, net
|
|
67,472,000
|
|
|
61,332,000
|
|
|
Prepaid expenses and other current assets
|
|
11,153,000
|
|
|
9,947,000
|
|
|
Deferred tax asset, net
|
|
10,056,000
|
|
|
10,178,000
|
|
|
Total current assets
|
|
292,716,000
|
|
|
290,844,000
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
17,448,000
|
|
|
18,536,000
|
|
|
Goodwill
|
|
137,354,000
|
|
|
137,354,000
|
|
|
Intangibles with finite lives, net
|
|
23,099,000
|
|
|
26,220,000
|
|
|
Deferred financing costs, net
|
|
-
|
|
|
65,000
|
|
|
Other assets, net
|
|
870,000
|
|
|
833,000
|
|
|
Total assets
|
|
$
|
471,487,000
|
|
|
473,852,000
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
17,896,000
|
|
|
18,902,000
|
|
|
Accrued expenses and other current liabilities
|
|
27,559,000
|
|
|
29,803,000
|
|
|
Dividends payable
|
|
4,869,000
|
|
|
4,844,000
|
|
|
Customer advances and deposits
|
|
8,597,000
|
|
|
12,610,000
|
|
|
Interest payable
|
|
-
|
|
|
29,000
|
|
|
Total current liabilities
|
|
58,921,000
|
|
|
66,188,000
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
4,181,000
|
|
|
4,364,000
|
|
|
Income taxes payable
|
|
1,980,000
|
|
|
2,743,000
|
|
|
Deferred tax liability, net
|
|
4,069,000
|
|
|
3,632,000
|
|
|
Total liabilities
|
|
69,151,000
|
|
|
76,927,000
|
|
|
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 31,095,737 shares and 31,016,469 shares at January
31, 2015 and July 31, 2014, respectively
|
|
3,110,000
|
|
|
3,102,000
|
|
|
Additional paid-in capital
|
|
423,678,000
|
|
|
421,240,000
|
|
|
Retained earnings
|
|
412,408,000
|
|
|
409,443,000
|
|
|
|
|
839,196,000
|
|
|
833,785,000
|
|
|
Less:
|
|
|
|
|
|
Treasury stock, at cost (14,857,582 shares at January 31, 2015 and
July 31, 2014)
|
|
(436,860,000
|
)
|
|
(436,860,000
|
)
|
|
Total stockholders' equity
|
|
402,336,000
|
|
|
396,925,000
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
471,487,000
|
|
|
473,852,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three months ended January 31,
|
|
Six months ended January 31,
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Net Income to Adjusted EBITDA(1):
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
$
|
7,585,000
|
|
|
5,983,000
|
|
|
12,810,000
|
|
|
11,288,000
|
|
Income taxes
|
|
3,059,000
|
|
|
3,419,000
|
|
|
5,872,000
|
|
|
6,468,000
|
|
Net interest (income) expense and other
|
|
(21,000
|
)
|
|
1,770,000
|
|
|
160,000
|
|
|
3,515,000
|
|
Amortization of stock-based compensation
|
|
1,061,000
|
|
|
1,069,000
|
|
|
2,398,000
|
|
|
2,016,000
|
|
Depreciation and other amortization
|
|
3,182,000
|
|
|
3,255,000
|
|
|
6,351,000
|
|
|
6,547,000
|
|
Strategic alternatives analysis expenses
|
|
-
|
|
|
-
|
|
|
585,000
|
|
|
-
|
|
Adjusted EBITDA
|
|
$
|
14,866,000
|
|
|
15,496,000
|
|
|
28,176,000
|
|
|
29,834,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents earnings before interest, income taxes, depreciation and
amortization of intangibles and stock-based compensation and
strategic alternatives analysis expenses. Adjusted EBITDA is a
non-GAAP operating metric used by management in assessing the
Company's operating results. The Company's definition of Adjusted
EBITDA may differ from the definition of EBITDA used by other
companies and may not be comparable to similarly titled measures
used by other companies. 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 (News - Alert) filings,
in assessing its ability to generate cash flow and service debt.
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