Comtech Telecommunications Corp. Announces Results for Fiscal 2020 Fourth Quarter and Full Year and Provides Comments and Financial Targets for Fiscal 2021

September 29, 2020

Comtech Telecommunications Corp. reported its operating results for the fourth quarter and fiscal year ended July 31, 2020. The Company also provided forward-looking comments and financial targets for fiscal 2021.

2020 Fourth Quarter Highlights

Consolidated net sales for the fourth quarter of fiscal 2020 were solid at $149.7 million, which represents a sequential increase of 10.8% as compared to the $135.1 million achieved during the Company’s third quarter ended April 30, 2020.

With bookings of $159.7 million, the Company achieved a book-to-bill ratio of 1.07 during the fourth quarter of fiscal 2020. The Company’s pipeline remains strong and includes a number of large opportunities.

On a GAAP basis, for the fourth quarter of fiscal 2020, Comtech reported operating income of $2.8 million, net income of $1.1 million and net income per diluted share ("EPS") of $0.04. Comtech’s operating income in the fourth quarter was impacted by $6.4 million of acquisition plan expenses. As reconciled to the most directly comparable GAAP financial measures in the table below, excluding acquisition plan expenses and a net discrete tax expense of $0.1 million, Non-GAAP net income and Non-GAAP EPS were $5.2 million and $0.21, respectively.

Adjusted EBITDA for the fourth quarter of fiscal 2020 was $23.5 million or 15.7% of consolidated net sales with strong GAAP operating cash flows of $13.8 million. 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.

2020 Fiscal Year Highlights

Consolidated net sales for fiscal 2020 were $616.7 million with full year bookings of $584.4 million, translating into a book-to-bill ratio of 0.95. Backlog at year end was $620.9 million. When adding Comtech's backlog and the total unfunded value of multi-year contracts that Comtech has received and for which it expects future orders, its revenue visibility approximates $1.0 billion. A number of large potential contract awards are pending.

On a GAAP basis, for fiscal 2020, Comtech reported operating income of $15.2 million, net income of $7.0 million and EPS of $0.28. Comtech’s operating income was impacted by $20.8 million of acquisition plan expenses and $0.4 million of estimated contract settlement costs. As reconciled to the most directly comparable GAAP financial measure in the table below, Non-GAAP net income and EPS were $19.2 million and $0.77, respectively.

Adjusted EBITDA for fiscal 2020 was $77.8 million or 12.6% of consolidated net sales with strong GAAP operating cash flows of $52.8 million.

As of July 31, 2020, Comtech had $47.9 million of cash and cash equivalents and lowered its total debt outstanding in fiscal 2020 by $16.2 million to $149.6 million.

In commenting on the Company's fourth quarter fiscal 2020 performance, Fred Kornberg, Chairman of the Board and Chief Executive Officer, noted, “Our fourth quarter’s results provided a strong finish to what was a challenging fiscal year as a result of the COVID-19 pandemic. Our prudent financial management in these turbulent times has enabled us to generate strong operating cash flows and given us the flexibility to continue to invest in our business. As we look to fiscal 2021, we will continue to drive long-term growth and shareholder value creation through our steadfast commitment to delivering critical technology solutions to our customers.”

COMMENTS AND FINANCIAL TARGETS FOR EXPECTED FISCAL 2021 PERFORMANCE

Comtech is making the following comments on expected fiscal 2021 performance:

Excluding the impact of any pending acquisitions, Comtech expects that fiscal 2021 consolidated net sales and Adjusted EBITDA will be slightly higher than the amounts achieved in fiscal 2020.

Fiscal 2021 consolidated net sales are anticipated to reflect a similar percentage of total Government Solutions segment sales due to strong demand for (i) Manpack Satellite Terminals, networking equipment and other advanced VSAT products by the U.S. Army; (ii) ongoing sustainment services to the U.S. Army for the AN/TSC-198A SNAP terminal; (iii) sustainment services for the U.S. Army's Project Manager Mission Command (“PM MC”) Blue Force Tracking (“BFT-1”) program; and (iv) Joint Cyber Analysis Course (“JCAC”) training solutions. Also, Comtech expects additional orders for the newly introduced Comtech COMET, the world’s smallest deployable troposcatter terminal, and its next-generation troposcatter system used by the U.S. Marine Corps.

Fiscal 2021 net sales in its Commercial Solutions segment are expected to reflect: (i) strong demand for its public safety and location technology solutions (including beginning work on its new contract to design, deploy, and operate next generation 911 services for the State of South Carolina); (ii) deliveries to support a critical U.S. Air Force and U.S. Army Anti-jam Modem (“A3M”) program under the U.S. Space Force’s Space and Missile Systems Center (“SMC”) agency; and (iii) a similar level of annual sales in its satellite earth station product line as compared to fiscal 2020. As discussed on prior earnings conference calls, fiscal 2021 net sales will reflect the absence of a high margin 911 call routing software contract from a large U.S. mobile network operator whose contract with Comtech ended in March 2020. In addition, fiscal 2021 will reflect the cessation of certain software-related services provided to a smaller U.S. mobile network operator that was recently acquired by a competitor.

Fiscal 2021 operating income will be impacted by acquisition plan expenses (including litigation expenses) associated with the pending acquisitions of Gilat Satellite Networks Ltd. ("Gilat") and UHP Networks, Inc. ("UHP"). To-date, during the first quarter of fiscal 2021, the Company has incurred approximately $14.2 million of acquisition related litigation expenses. Acquisition plan expenses are expected to continue through the Company’s second quarter of fiscal 2021. Updated information about the pending UHP and Gilat acquisitions (and related litigation) can be found in the Company’s Form 10-K as filed with the Securities and Exchange Commission. Because the amount of these expenses remains largely unpredictable, the Company is not providing any GAAP operating income, GAAP net income or any GAAP EPS guidance or a reconciliation of the Company’s projected 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.

Mr. Kornberg provided additional commentary on the Company’s expected fiscal 2021 performance saying, “We are fortunate that our technology solutions address critical communications needs. Although it remains tough to give reliable guidance given the ongoing pandemic and volatile business environment, we believe that fiscal 2021 will be better than fiscal 2020. Our initial thinking is that we can achieve better results in fiscal 2021 and are targeting to achieve fiscal 2021 consolidated net sales of approximately $610.0 million to $630.0 million with Adjusted EBITDA in the range of $74.0 million to $78.0 million. As the year progresses and new orders come in, I remain optimistic that actual 2021 results will exceed these amounts.”