8 May 2013

Globecomm Systems Inc. reported financial results for the fiscal 2013 third quarter and nine months ended March 31, 2013. Globecomm is reporting its financial results on a generally accepted accounting principles (GAAP) basis as well as adjusted EBITDA and adjusted diluted net income per common share, both non-GAAP financial measures, for which the Company provides detailed reconciliations in the attached tables. The following are highlights:

Revenues ($M)
				Q3 FY13			Q3 FY12			% Change			9 Months			9 Months			% Change
													FY13			FY12
Service				$	51.8		$	65.9		(21.5	)		$	149.1		$	170.8		(12.7	)
Infrastructure solutions				$	26.3		$	45.0		(41.5	)		$	89.9		$	106.3		(15.4	)
Consolidated				$	78.1		$	110.9		(29.6	)		$	239.0		$	277.1		(13.8	)
GAAP Results ($M except EPS)
				Q3 FY13			Q3 FY12			% Change			9 Months			9 Months			% Change
													FY13			FY12
Net income				$	4.2		$	2.9		43.9			$	10.7		$	21.5		(50.3	)
Diluted EPS				$	0.18		$	0.13		38.5			$	0.46		$	0.95		(51.6	)
Non-GAAP Results ($M except EPS)
				Q3 FY13			Q3 FY12			% Change			9 Months			9 Months			% Change
													FY13			FY12
Adjusted EBITDA				$	10.4		$	13.3		(22.0	)		$	28.2		$	33.5		(15.9	)
Adjusted Diluted EPS				$	0.18		$	0.25		(28.0	)		$	0.46		$	0.61		(24.6	)

Management’s Review of Results

David Hershberg, Chairman and CEO, said: “Despite several on-going challenges, specifically in the government marketplace, including the withdrawal of military forces in Iraq, government efforts to reduce its expenditures in upcoming budgets and the added pressure of the recent sequestration, Globecomm has met our plan for this quarter. Sequestration provides for an uncertain backdrop for government contracts; however at this time, we continue to see strong government service contract renewals, and we remain focused on executing on our overall business plan and vision. Globecomm’s Tempo platform continues to be well received and we continue to look for upsell opportunities supporting digital signage and “over the top” solutions. We also have a strong pipeline of infrastructure opportunities within our media segment, which bodes well for the coming fiscal year.”

Keith Hall, President and COO, added: “The team did an excellent job in meeting our Q3 objectives. The Company continues to invest in a number of strategic initiatives centered around the development of our global platform and data management capabilities. We see tremendous upside potential for both our media platform and our global machine-to-machine platform. We continue to develop the application based value proposition of these platforms to serve multiple market vertical segments. Our opportunity pipeline remains solid across the board, and we remain excited about the opportunities in front of us.”

Fiscal Year 2013 Third Quarter Results

Revenues for the Company’s fiscal 2013 third quarter were $78.1 million as compared to $110.9 million in the same period last year, a decrease of 29.6%. Revenues from services were $51.8 million as compared to $65.9 million in the same period last year, a decrease of 21.5%. The decrease in service revenues was primarily due to a one-time equipment sale of $12.8 million in the three months ended March 31, 2012 along with a decrease in the Company’s access service offering in the government marketplace due to the reduction of services in Iraq. Revenues from infrastructure solutions were $26.3 million as compared to $45.0 million in the same period last year, a decrease of 41.5%. The decrease in infrastructure solutions was primarily driven by the decrease in achievement of revenue milestones of approximately $16.1 million under a major government program with a lower than normal margin which was substantially complete as of December 31, 2012.

Net income for the Company’s fiscal 2013 third quarter was $4.2 million, or $0.18 of diluted net income per common share, compared to net income of $2.9 million, or $0.13 of diluted net income per common share in the same period last year. During the third quarter of fiscal 2012, the Company recorded a charge for the change in fair value of the earn-out resulting from the achievement of an earn-out payment to the former ComSource shareholders based on ComSource’s operating results. In accordance with GAAP, this change in the fair value of the earn-out resulted in a $2.8 million ($0.12 per diluted share) charge to net income. Adjusted diluted net income per common share for the third quarter of fiscal year 2013 was $0.18 compared to $0.25 in the same period last year. The reduction in adjusted diluted net income per common share was primarily driven by the reduction of revenues in both operating segments, partially offset by reductions in other operating expenses based on certain cost cutting initiatives.

Adjusted EBITDA for the third quarter of 2013 was $10.4 million as compared to $13.3 million in the same period last year.

Fiscal Year 2013 Nine Month Results

Revenues for the Company’s fiscal 2013 nine months ended March 31, 2013 were $239.0 million as compared to $277.1 million in the same period last year, a decrease of 13.8%. Revenues from services were $149.1 million as compared to $170.8 million in the same period last year, a decrease of 12.7%. The decrease in revenues was primarily due to the significant equipment sale in the three months ended March 31, 2012 along with a decrease in our access service offering in the government marketplace due to the reduction of services in Iraq. Revenues from infrastructure solutions were $89.9 million as compared to $106.3 million in the same period last year, a decrease of 15.4%. The decrease in infrastructure solutions was primarily driven by the decrease in achievement of revenue milestones of approximately $18.5 million under the major government program which was substantially complete as of December 31, 2012.

Net income for the Company’s fiscal 2013 nine months ended March 31, 2013 was $10.7 million, or $0.46 of diluted net income per common share, compared to net income of $21.5 million, or $0.95 of diluted net income per common share, in the same period last year. During the nine months ended March 31, 2012, the Company recorded a gain for the change in fair value of the ComSource earn-out as a result of changes in ComSource’s actual results and forecasted performance. In accordance with GAAP, this change in the fair value of the earn-out resulted in a $7.7 million ($0.34 per diluted share) gain to net income. Adjusted diluted net income per common share for the fiscal year 2013 nine months ended March 31, 2013 was $0.46 as compared to $0.61 in the same period last year. The reduction in adjusted diluted net income per common share was primarily driven by the reduction of service revenues, partially offset by reductions in other operating expenses based on certain cost cutting initiatives.

Adjusted EBITDA for the nine months ended March 31, 2013 decreased to $28.2 million as compared to $33.5 million in the same period last year.

Management’s Current Expectations for the Fiscal Year Ending June 30, 2013

Based on the Company’s performance to date and management’s expectations for the fourth quarter, Globecomm currently expects the following financial results for the fiscal year 2013:

• Consolidated revenues to be between $310 and $320 million, down from the previously announced range of $320 to $340 million.
• Services segment revenues to be between $200 and $205 million, refining the previously announced range of $200 to $210 million.
• GAAP diluted net income per common share to be between $0.66 and $0.68, refining the previously announced range of $0.66 to $0.71.
• Adjusted EBITDA to be between $40 and $41 million, refining the previously announced range of $40 to $42 million.