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.”