Globecomm Systems Reports Fiscal 2010 Second Quarter and Six-Month Financial Results

9 February 2010

Globecomm Systems Inc. announced financial results for the fiscal 2010 second quarter and six months ended December 31, 2009. Globecomm is reporting its financial results on a generally accepted accounting principles (GAAP) basis as well as adjusted EBITDA, a non-GAAP financial measure. In the attached table the Company provides a detailed reconciliation of GAAP earnings to adjusted EBITDA. A summary of the Company’s results are:

• Service revenues increased 80.1% to a record $33.6 million as compared to $18.6 million in the same period last year.
• Revenues from infrastructure solutions increased 10.2% to $23.5 million as compared to $21.3 million in the same period last year.
• Consolidated revenues were a record $57.1 million in the fiscal 2010 second quarter as compared to $40.0 million in the same period last year.
• GAAP earnings per diluted share increased 40.0% to $0.07 in the second quarter of fiscal 2010 as compared to GAAP earnings per diluted share of $0.05 in the same period last year.
• Adjusted EBITDA increased 42.9% to $4.4 million in the second quarter of fiscal 2010 as compared to $3.1 million in the same period last year.

Fiscal Year 2010 Second Quarter Results

Revenues for the Company’s fiscal 2010 second quarter increased 42.8% to a record $57.1 million as compared to $40.0 million in the same period last year. Revenues from infrastructure solutions increased 10.2% to $23.5 million as compared to $21.3 million in the same period last year. Revenues from services increased 80.1% to a record $33.6 million as compared to $18.6 million in the same period last year. The increase in service revenue was driven by the Company’s acquisitions of Mach 6 and Telaurus, which combined contributed $8.3 million, along with an increase in the access services offering primarily due to the government marketplace. The increase in infrastructure solutions revenues was primarily driven by the timing of revenue milestones reached in the systems design and integration offering. Bookings and revenue in the infrastructure solutions segment continue to be adversely impacted by the global economic slowdown.

Net income for the Company’s fiscal 2010 second quarter increased 47.8% to $1.4 million, or $0.07 per diluted share, as compared to net income of $0.9 million, or $0.05 per diluted share, in the second quarter of fiscal 2009 on a GAAP basis. Adjusted EBITDA for the second quarter of 2010 increased 42.9% to $4.4 million compared to $3.1 million in the second quarter of 2009. The increase in net income and adjusted EBITDA was primarily driven by an increase in revenues offset by lower infrastructure gross margins.

Fiscal Year 2010 Six Month Results

Revenues for the Company’s fiscal 2010 six months ended December 31, 2009 increased 27.2% to a record $104.8 million as compared to $82.3 million in the same period last year. Revenues from infrastructure solutions decreased 5.1% to $42.6 million as compared to $44.9 million in the same period last year. Revenues from services increased 66.0% to a record $62.2 million as compared to $37.5 million in the same period last year. The increase in service revenue was primarily driven by the Company’s acquisitions of Mach 6 and Telaurus, which combined contributed $16.5 million, coupled by an increase in access services in the government marketplace. The decrease in infrastructure solution revenues was primarily caused by the global economic slowdown resulting in government and commercial customers and prospects delaying projects, which in particular affected pre-engineered systems.

Net income for the Company’s first six months of fiscal 2010 increased 48.8% to $2.6 million, or $0.13 per diluted share, compared to net income of $1.8 million, or $0.09 per diluted share, in the same period last year on a GAAP basis. Adjusted EBITDA for the first six months of fiscal 2010 increased 38.1% to $8.4 million compared to $6.1 million in the same period past year. The increase in net income and adjusted EBITDA was primarily driven by an increase in service revenues offset by lower infrastructure gross margins.

Management’s Review of Results and Expectations

David Hershberg, Chairman and CEO of the Company, said, “The Company continues to execute as planned and looks forward to a strong second half of the current fiscal year. The service segment continues to be robust providing stability, predictability and visibility. We are more excited than ever about our future and despite the current economic backdrop that has plagued our infrastructure segment, we look forward to record revenues for the full year. With nearly $50 million of cash and zero debt, we have a balance sheet that affords the Company with financial flexibility to carry out our business plan.”

Keith Hall, President and COO of the Company said, “I am very proud of our team’s execution in meeting the Q2 fiscal results. We remain focused on the growth of our service offerings and have increased our services revenue guidance to $130 million as we explore new market verticals and expand our presence in existing ones. The second quarter was highlighted by the launch of our IP Based cellular switch as we continue to add capability to our Hosted platform in support of the wireless market. We also added X-Band service capability to our Global Network and received initial orders for our X-Band Man-Pack solution, TOM-CAT. Our presence in Afghanistan continues to expand and we are well positioned to support the expansion of troops in the region.”

Management’s Current Expectations for the Fiscal Year Ending June 30, 2010

Globecomm currently expects the following financial results for the fiscal year 2010:

• Consolidated revenues to be between $215 million and $225 million.
• Service segment revenues to be approximately $130 million.
• GAAP earnings per diluted share to be between $0.30 and $0.35.
• Adjusted EBITDA to be approximately $20 million.