March 10, 2014
COM DEV International Ltd. announced first quarter results
for the three-month period ended January
31, 2014. All amounts are stated in Canadian dollars
unless otherwise noted.
"Both our equipment and data service businesses performed
well in the first quarter, but as expected, our U.S.
operations were negatively impacted as we adjusted our
capacity in line with reduced U.S. government demand",
stated Michael Pley, CEO. "Our new commercial business
pipeline remains strong and this is bolstered by the
continued strong growth of exactEarth."
Financial Review
COM DEV's first quarter 2014 revenues were $51.8
million, a 1.0 percent decline compared to $52.3
million in
the previous year. The revenue split between the three
market segments was 64 percent commercial, 24 percent civil
and 12 percent military, compared to a 44%/34%/22% split in
2013. It is important to note that communication satellite
programs are increasingly in the civil segment as emerging
country national governments use satellites as efficient
means to provide communications infrastructure. These civil
satcom satellite programs draw on the Company's same core
equipment as the more traditional commercial market
segments. Bidding and order activity remains robust.
COM DEV received new orders totaling $36.6
million during
the quarter, of which 69 percent were commercial, 28 percent
were civil, and 3 percent were military. In Q1 2013 the
Company booked $61.8
million of
new orders, with a commercial/civil/military split of
58%/41%/1%. Included in the $36.6
million of
new orders received in the first quarter of 2014 are orders
received under Authorities to Proceed (ATPs). As delivery
schedules have become more critical, customers are
increasingly using ATPs as a way to start a subcontractor
working, under contract, on a program while the full
contract negotiations are concluded. At the end of Q1 2014,
the amount of potential order value in excess of ATP, which
management expects to realize, stood at $38.1
million. This compares to $20.7
million at
the end of Q1 2013. The expected full contract amounts are
based on bid values, with a historically high percentage of
ATPs being ultimately turned into full contract values.
Order backlog at January
31, 2014 was $149.3
million, compared to $148
million for
the same period in 2013. Backlog was split between the
Company's commercial, civil and military sectors at a ratio
of 58 percent, 35 percent and 7 percent respectively,
compared to 43%/39%/18% at January
31, 2013. The Company expects to convert
approximately 70 percent of the total backlog into revenue
during fiscal 2014.
Consolidated gross margin was $13.5
million in
Q1 2014, representing 26 percent of total revenues, the same
as Q1 2013 with gross margin of $13.5
million representing
25.9 percent or total revenues. The increase in revenue
generated from exactEarth™, offset by a decline in the
equipment segment, contributed to the increase in gross
margin.
COM DEV recorded a net research and development expense of $0.4
million in
Q1 2014, compared to a recovery of$0.5
million in
Q1 2013. Gross R&D spending declined to $1.8
million from $2.6
million while
R&D funding from external sources decreased to $0.1
million from $0.5
million. The Company also recognized $1.3
million of
Investment Tax Credits (ITCs) in Q1 2013, compared to $1.6
million in
Q1 2013. The reduction in R&D spending is a result of the
Company's efforts to focus on strategic R&D activities.
Selling and general expenses increased in Q1 2014 compared
to Q1 2013. In general, selling expenses fluctuate from
quarter to quarter and year to year depending on the volume
of bids and proposal work that is underway. General expenses
are managed against the budgets set for the general and
administrative functions, with a view to minimizing these
costs, while not hindering the achievement of the Company's
business objectives.
The strengthening of the U.S. dollar relative to the
Canadian dollar resulted in a foreign exchange loss of $1.5
millionin the quarter. Of this loss, $0.9
million is
the result of unrealized mark to market valuation reductions
in the Company's hedge portfolio, partly offset by
unrealized balance sheet translation gains. Revenues
and gross margins were positively impacted by the shift in
currency.
EBITDA attributable to shareholders was $6.7
million in
Q1 2014, compared to $9.6
million in
Q1 2013. The quarter over quarter decrease in EBITDA is the
result of lower net income from the Company's U.S. division,
offset by a decrease in income tax expense. The equipment
segment EBITDA decreased compared to the same quarter last
year due to the impact of lower gross margins and foreign
exchange losses. The data services segment saw improved
EBITDA attributable to shareholders over the prior year. The
data services segment is EBITDA positive in 2014 at $0.4
million compared
to a 2013 negative EBITDA of $0.1
million. The increase is the result of decreased net
loss, interest and amortization expense in exactEarth™.
COM DEV ended Q1 2014 with $30.1
million of
cash and equivalents, compared to $26.4
million in
Q1 2013. The Company invested $2.5
million of
cash from operating activities in Q1 2014, compared with
2013 when $4.1
millionwas generated. For Q1 2014, $4.8
million of
cash was invested compared to $0.6
million generated
in Q1 2013.
The Company's operating credit line of $20
million was
not drawn upon at the end of Q1 2014, except for $2.8
million(Q1 2013: $2.8
million) in the form of guarantee letters issued to
customers in the normal course of operations by the bank on
behalf of the Company and to government agencies while
certain tax objections are resolved.
