Comtech Announces Results for Its Fiscal 2021 Third Quarter and Updates Its Financial Targets for Fiscal 2021

June 8, 2021

 Comtech Telecommunications Corp. reported its operating results for the third fiscal quarter ended April 30, 2021 and updated its financial targets for fiscal 2021.

Fiscal 2021 Third Quarter Highlights 

Consolidated net sales of $139.4 million and Adjusted EBITDA of $17.7 million (or 12.7% of consolidated net sales). Adjusted EBITDA, which significantly exceeded Comtech's expectation for its third quarter of fiscal 2021, is a non-GAAP financial measure that is reconciled to the most directly comparable GAAP financial measure and is more fully defined below.

With bookings of $115.9 million, the Company achieved a book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.83 during its third quarter of fiscal 2021. Backlog as of April 30, 2021 was $636.5 million. The total value of multi-year contracts that Comtech has received is substantially higher than its reported backlog. 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 $1.1 billion.

The Company incurred an aggregate of $5.3 million of acquisition plan expenses due to the April 2021 settlement of litigation related to the 2019 acquisition of GD NG-911 as well as the March 2021 closing of the UHP acquisition. The integration of UHP into Comtech’s satellite ground station product line is well underway, and it does not expect to incur any significant acquisition plan expenses for the remainder of fiscal 2021.

The Company's annual effective income tax rate was 11.5%, excluding a net discrete tax expense of $0.2 million.

Comtech reported GAAP operating income of $2.4 million, GAAP net income of $0.8 million and GAAP net income per diluted share ("EPS") of $0.03 for the third quarter of fiscal 2021. Non-GAAP operating income was $8.9 million, Non-GAAP net income was $6.8 million and Non-GAAP EPS was $0.26. These Non-GAAP amounts exclude acquisition plan expenses, restructuring costs, COVID-19 related costs, strategic emerging technology costs for next-generation satellite technology and a net discrete tax expense. Non-GAAP amounts are reconciled to the most directly comparable GAAP financial measures in the table below.

Comtech generated GAAP operating cash flows of $6.8 million during the third quarter and had $39.2 million of cash and cash equivalents and total debt outstanding of $215.0 million as of April 30, 2021.

Commenting on the Company's third quarter fiscal 2021 performance, Fred Kornberg, Chairman of the Board and Chief Executive Officer, stated, "Thanks to the hard work of all of our team members, we achieved solid operating performance and have recently secured important contract awards that bode well for our future. We are continuing to invest in new state-of-the-art production and engineering facilities as well as new next-generation wireless technology solutions that we believe our customers will want in the post-COVID-19 pandemic economic recovery. Looking forward, we are confident that we will have a strong finish to fiscal 2021 and achieve growth in fiscal 2022.”

COMMENTS AND FINANCIAL TARGETS FOR EXPECTED FISCAL 2021 PERFORMANCE 

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

Comtech expects fiscal 2021 consolidated net sales to be in a range of $580.0 million to $590.0 million. This updated target primarily reflects a change in anticipated revenues in its Government Solutions segment due to the U.S. government's April 2021 announcement to fully withdraw troops from Afghanistan as well as other program changes. At the same time, the Company's effort to streamline business operations are paying off and it continues to target Adjusted EBITDA in a range of $74.0 million to $76.0 million for fiscal 2021.

During the third quarter, Comtech incurred $0.3 million of strategic emerging technology costs for next-generation satellite technology to advance its solutions offerings to be used with new broadband satellite constellations. The Company is evaluating this new market in relation to its long-term business strategies, and it may incur additional costs over the next twelve months.

As disclosed in the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) today, at the start of Comtech’s fourth quarter of fiscal 2021, it entered into a multi-year agreement enabling a customer to potentially order hundreds of millions of dollars of its next-generation satellite earth station technology. Shortly after Comtech signed this agreement, it received its first order valued at more than $13.0 million to make certain customizations on behalf of this customer. Work on these efforts has commenced immediately.

Comtech expects fiscal 2021 revenue in its Commercial Solutions segment to be slightly higher than the amount it achieved in fiscal 2020, primarily due to: (i) strong demand for Comtech's public safety technology solutions; (ii) delivering 5G virtual mobile location-based technology solutions for two U.S. tier-one mobile network operators; (iii) contract performance in support of 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 (iv) deliveries of SLM-5650B satellite modems and firmware related to a previously awarded contract from the U.S. Naval Information Warfare Systems Command.

Comtech expects fiscal 2021 revenue in its Government Solutions segment to be significantly lower than the amount it achieved in fiscal 2020. Fiscal 2021 is anticipated to reflect significantly lower sales of field support services, partially offset by demand for: (i) Manpack Satellite Terminals, networking equipment and other advanced VSAT products by the U.S. Army; (ii) ongoing sustainment services for 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.

During its third quarter of fiscal 2021, Comtech initiated an effort to improve efficiencies and streamline operations in its Government Solutions segment. These efforts, which remain ongoing, include the consolidation of certain administrative and operating functions in both its Florida and Maryland locations. In addition, Comtech has started to shift production of many of its key satellite earth station products from its existing Tempe, Arizona locations to a new 146,000 square foot facility in Chandler, Arizona as well as the combination of certain related functions. This new facility is located less than 10 miles from its current facilities and 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 Company's third quarter fiscal 2021 performance and updated fiscal 2021 targets can be found in the Company’s Form 10-Q as filed with the SEC. Because of the pandemic's continuing impact on global business conditions, 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.