September 29, 2020-- Comtech Telecommunications Corp. (NASDAQ: CMTL) today 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
2020 Fiscal Year Highlights
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:
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."
Conference Call
The Company has scheduled an investor conference call for 4:30 PM (ET) on Tuesday, September 29, 2020. Investors and the public are invited to access a live webcast of the conference call from the Investor Relations section of the Comtech website at www.comtechtel.com. Alternatively, investors can access the conference call by dialing (800) 895-3367 (domestic), or (785) 424-1063 (international) and using the conference I.D. "Comtech." A replay of the conference call will be available for seven days by dialing (888) 219-1263 or (402) 220-4943. In addition, an updated investor presentation, including earnings guidance, is available on the Company's website.
About Comtech
Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. The Company sells products to a diverse customer base in the global commercial and government communications markets.
Additional Information and Where to Find It
This filing is being made in respect of a proposed business combination involving Comtech and Gilat Satellite Networks Ltd. ("Gilat"). This document does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities or a solicitation of any vote or approval nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
In connection with the proposed business combination involving Comtech and Gilat, a Registration Statement on Form S-4 (File No. 333-236840) has been filed with and declared effective by the SEC. This document is not a substitute for the prospectus / proxy statement included in the Registration Statement or any other document that Comtech or Gilat may file with the SEC in connection with the proposed transaction. Investors and security holders of Comtech and Gilat are urged to read the definitive proxy statement/final prospectus contained in the Registration Statement and any other relevant documents that will be filed with the SEC carefully and in their entirety when they become available because they will contain important information about the proposed transaction.
You may obtain copies of all documents filed with the SEC regarding the proposed transaction, free of charge, at the SEC's website (www.sec.gov). In addition, investors and security holders will be able to obtain a free copy of the proxy statement/prospectus (when they become available) and other documents filed with the SEC by Comtech on Comtech's Investor Relations page on Comtech's web site at www.comtechtel.com or by writing to Comtech, Investor Relations, (for documents filed with the SEC by Comtech), or by Gilat on Gilat's Investor Relations page on Gilat's web site at www.Gilat.com or by writing to Gilat, Investor Relations, (for documents filed with the SEC by Gilat).
Cautionary Statement Regarding Forward-Looking Statements
Certain information in this press release contains forward-looking statements, including but not limited to, information relating to the Company's future performance and financial condition, pending litigation, potential transactions, plans and objectives of the Company's management and the Company's assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under the Company's control which may cause its actual results, future performance and financial condition, and achievement of plans and objectives of the Company's management to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, among other things: the risk that the acquisitions of Gilat and UHP may not be consummated for reasons including that the conditions precedent to the completion of these acquisitions may not be satisfied or the occurrence of any event, change or circumstance could give rise to the termination of the agreements; the risk that the regulatory approvals will not be obtained; the possibility that the expected synergies from recent or pending acquisitions will not be fully realized, or will not be realized within the anticipated time periods; the risk that the acquired businesses and pending acquisitions will not be integrated with Comtech successfully; the possibility of disruption from the recent or pending acquisitions, making it more difficult to maintain business and operational relationships or retain key personnel; the risk that the Company will be unsuccessful in implementing a tactical shift in its Government Solutions segment away from bidding on large commodity service contracts and toward pursuing contracts for its niche products with higher margins; the nature and timing of receipt of, and the Company's performance on, new or existing orders that can cause significant fluctuations in net sales and operating results; the timing and funding of government contracts; adjustments to gross profits on long-term contracts; risks associated with international sales; rapid technological change; evolving industry standards; new product announcements and enhancements, including the risks associated with expanding the sales of the Company's HeightsTM Network Platform ("HEIGHTS"); changing customer demands and or procurement strategies; changes in prevailing economic and political conditions; changes in the price of oil in global markets; changes in foreign currency exchange rates; risks associated with the Company's legal proceedings, customer claims for indemnification, and other similar matters; risks associated with the Company's obligations under its Credit Facility; risks associated with the Company's large contracts; risks associated with the COVID-19 pandemic; and other factors described in this and the Company's other filings with the Securities and Exchange Commission.
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Operations |
||||||||||||||||||
|
(Unaudited) |
|
(Audited) |
|||||||||||||||
|
Three months ended July 31, |
|
Twelve months ended July 31, |
|||||||||||||||
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net sales |
$ |
149,673,000 |
|
|
|
$ |
176,372,000 |
|
|
$ |
616,715,000 |
|
|
|
$ |
671,797,000 |
|
|
Cost of sales |
100,010,000 |
|
|
|
112,362,000 |
|
|
389,882,000 |
|
|
|
424,357,000 |
|
|
||||
Gross profit |
49,663,000 |
|
|
|
64,010,000 |
|
|
226,833,000 |
|
|
|
247,440,000 |
|
|
||||
|
|
|
|
|
|
|
|
|||||||||||
Expenses: |
|
|
|
|
|
|
|
|||||||||||
Selling, general and administrative |
23,592,000 |
|
|
|
31,396,000 |
|
|
117,130,000 |
|
|
|
128,639,000 |
|
|
||||
Research and development |
11,255,000 |
|
|
|
15,743,000 |
|
|
52,180,000 |
|
|
|
56,407,000 |
|
|
||||
Amortization of intangibles |
5,643,000 |
|
|
|
5,207,000 |
|
|
21,595,000 |
|
|
|
18,320,000 |
|
|
||||
Settlement of intellectual property litigation |
? |
|
|
|
? |
|
|
? |
|
|
|
(3,204,000 |
) |
|
||||
Acquisition plan expenses |
6,357,000 |
|
|
|
1,259,000 |
|
|
20,754,000 |
|
|
|
5,871,000 |
|
|
||||
|
46,847,000 |
|
|
|
53,605,000 |
|
|
211,659,000 |
|
|
|
206,033,000 |
|
|
||||
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
2,816,000 |
|
|
|
10,405,000 |
|
|
15,174,000 |
|
|
|
41,407,000 |
|
|
||||
|
|
|
|
|
|
|
|
|||||||||||
Other expenses (income): |
|
|
|
|
|
|
|
|||||||||||
Interest expense |
1,130,000 |
|
|
|
2,150,000 |
|
|
6,054,000 |
|
|
|
9,245,000 |
|
|
||||
Write-off of deferred financing costs |
? |
|
|
|
? |
|
|
? |
|
|
|
3,217,000 |
|
|
||||
Interest (income) and other |
(227,000 |
) |
|
|
42,000 |
|
|
(190,000 |
) |
|
|
35,000 |
|
|
||||
|
|
|
|
|
|
|
|
|||||||||||
Income before provision for income taxes |
1,913,000 |
|
|
|
8,213,000 |
|
|
9,310,000 |
|
|
|
28,910,000 |
|
|
||||
Provision for income taxes |
787,000 |
|
|
|
2,078,000 |
|
|
2,290,000 |
|
|
|
3,869,000 |
|
|
||||
|
|
|
|
|
|
|
|
|||||||||||
Net income |
$ |
1,126,000 |
|
|
|
$ |
6,135,000 |
|
|
$ |
7,020,000 |
|
|
|
$ |
25,041,000 |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income per share: |
|
|
|
|
|
|
|
|||||||||||
Basic |
$ |
0.05 |
|
|
|
$ |
0.25 |
|
|
$ |
0.28 |
|
|
|
$ |
1.04 |
|
|
Diluted |
$ |
0.04 |
|
|
|
$ |
0.25 |
|
|
$ |
0.28 |
|
|
|
$ |
1.03 |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Weighted average number of common shares outstanding ? basic |
25,001,000 |
|
|
|
24,270,000 |
|
|
24,798,000 |
|
|
|
24,124,000 |
|
|
||||
|
|
|
|
|
|
|
|
|||||||||||
Weighted average number of common and common equivalent shares outstanding ? diluted |
25,060,000 |
|
|
|
24,428,000 |
|
|
24,899,000 |
|
|
|
24,302,000 |
|
|
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Balance Sheets (Audited) |
|||||||||
|
July 31, 2020 |
|
July 31, 2019 |
||||||
Assets |
|
|
|
||||||
Current assets: |
|
|
|
||||||
Cash and cash equivalents |
$ |
47,878,000 |
|
|
|
$ |
45,576,000 |
|
|
Accounts receivable, net |
126,816,000 |
|
|
|
145,032,000 |
|
|
||
Inventories, net |
82,302,000 |
|
|
|
74,839,000 |
|
|
||
Prepaid expenses and other current assets |
20,101,000 |
|
|
|
14,867,000 |
|
|
||
Total current assets |
277,097,000 |
|
|
|
280,314,000 |
|
|
||
Property, plant and equipment, net |
27,037,000 |
|
|
|
28,026,000 |
|
|
||
Operating lease right-of-use assets, net |
30,033,000 |
|
|
|
? |
|
|
||
Goodwill |
330,519,000 |
|
|
|
310,489,000 |
|
|
||
Intangibles with finite lives, net |
258,019,000 |
|
|
|
261,890,000 |
|
|
||
Deferred financing costs, net |
2,391,000 |
|
|
|
3,128,000 |
|
|
||
Other assets, net |
4,551,000 |
|
|
|
3,864,000 |
|
|
||
Total assets |
$ |
929,647,000 |
|
|
|
$ |
887,711,000 |
|
|
Liabilities and Stockholders' Equity |
|
|
|
||||||
Current liabilities: |
|
|
|
||||||
Accounts payable |
$ |
23,423,000 |
|
|
|
$ |
24,330,000 |
|
|
Accrued expenses and other current liabilities |
85,104,000 |
|
|
|
78,584,000 |
|
|
||
Operating lease liabilities, current |
8,247,000 |
|
|
|
? |
|
|
||
Finance lease and other obligations, current |
57,000 |
|
|
|
757,000 |
|
|
||
Dividends payable |
2,468,000 |
|
|
|
2,406,000 |
|
|
||
Contract liabilities |
40,250,000 |
|
|
|
38,682,000 |
|
|
||
Interest payable |
163,000 |
|
|
|
588,000 |
|
|
||
Total current liabilities |
159,712,000 |
|
|
|
145,347,000 |
|
|
||
Non-current portion of long-term debt, net |
149,500,000 |
|
|
|
165,000,000 |
|
|
||
Operating lease liabilities, non-current |
24,109,000 |
|
|
|
? |
|
|
||
Income taxes payable |
1,963,000 |
|
|
|
325,000 |
|
|
||
Deferred tax liability, net |
17,637,000 |
|
|
|
12,481,000 |
|
|
||
Long-term contract liabilities |
9,596,000 |
|
|
|
10,654,000 |
|
|
||
Other liabilities |
17,831,000 |
|
|
|
18,822,000 |
|
|
||
Total liabilities |
380,348,000 |
|
|
|
352,629,000 |
|
|
||
Commitments and contingencies |
|
|
|
||||||
Stockholders' equity: |
|
|
|
||||||
Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000 |
? |
|
|
|
? |
|
|
||
Common stock, par value $0.10 per share; authorized 100,000,000 shares; issued 39,924,439 shares and 39,276,161 shares at July 31, 2020 and 2019, respectively |
3,992,000 |
|
|
|
3,928,000 |
|
|
||
Additional paid-in capital |
569,891,000 |
|
|
|
552,670,000 |
|
|
||
Retained earnings |
417,265,000 |
|
|
|
420,333,000 |
|
|
||
|
991,148,000 |
|
|
|
976,931,000 |
|
|
||
Less: |
|
|
|
||||||
Treasury stock, at cost (15,033,317 shares at July 31, 2020 and 2019) |
(441,849,000 |
) |
|
|
(441,849,000 |
) |
|
||
Total stockholders' equity |
549,299,000 |
|
|
|
535,082,000 |
|
|
||
Total liabilities and stockholders' equity |
$ |
929,647,000 |
|
|
|
$ |
887,711,000 |
|
|
COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
(Unaudited)
Use of Non-GAAP Financial Measures
In order to provide investors with additional information regarding its financial results, this press release contains "Non-GAAP financial measures" under the rules of the SEC. The Company's Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before income taxes, interest (income) and other, write-off of deferred financing costs, interest expense, amortization of stock-based compensation, amortization of intangible assets, depreciation expense, estimated contract settlement costs, settlement of intellectual property litigation, acquisition plan expenses, facility exit costs and strategic alternatives analysis expenses and other. The Company's definition of Adjusted EBITDA may differ from the definition of EBITDA used by other companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is also a measure frequently requested by the Company's investors and analysts. The Company believes that investors and analysts may use Adjusted EBITDA, along with other information contained in its SEC filings, in assessing the Company's performance and comparability of its results with other companies. The Company's Non-GAAP measures for consolidated operating income, net income and net income per diluted share reflect the GAAP measures as reported, adjusted for certain items as discussed below. These Non-GAAP financial measures have limitations as an analytical tool as they exclude the financial impact of transactions necessary to conduct the Company's business, such as the granting of equity compensation awards, and are not intended to be an alternative to financial measures prepared in accordance with GAAP. These measures are adjusted as described in the reconciliation of GAAP to Non-GAAP in the below tables, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP. Investors are advised to carefully review the GAAP financial results that are disclosed in the Company's SEC filings. The Company has not quantitatively reconciled its fiscal 2021 Adjusted EBITDA target to the most directly comparable GAAP measure because items such as stock-based compensation, adjustments to the provision for income taxes, amortization of intangibles and interest expense, which are specific items that impact these measures, have not yet occurred, are out of the Company's control, or cannot be predicted. For example, quantification of stock-based compensation expense requires inputs such as the number of shares granted and market price that are not currently ascertainable. Accordingly, reconciliations to the Non-GAAP forward looking metrics are not available without unreasonable effort and such unavailable reconciling items could significantly impact the Company's financial results.
|
Three months ended July 31, |
|
Twelve months ended July 31, |
|||||||||||||
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Reconciliation of GAAP Net Income to Adjusted EBITDA: |
|
|
|
|
|
|
|
|||||||||
Net income |
$ |
1,126,000 |
|
|
|
6,135,000 |
|
|
$ |
7,020,000 |
|
|
|
25,041,000 |
|
|
Provision for income taxes |
787,000 |
|
|
|
2,078,000 |
|
|
2,290,000 |
|
|
|
3,869,000 |
|
|
||
Interest (income) and other |
(227,000 |
) |
|
|
42,000 |
|
|
(190,000 |
) |
|
|
35,000 |
|
|
||
Write-off of deferred financing costs |
? |
|
|
|
? |
|
|
? |
|
|
|
3,217,000 |
|
|
||
Interest expense |
1,130,000 |
|
|
|
2,150,000 |
|
|
6,054,000 |
|
|
|
9,245,000 |
|
|
||
Amortization of stock-based compensation |
6,177,000 |
|
|
|
8,071,000 |
|
|
9,275,000 |
|
|
|
11,427,000 |
|
|
||
Amortization of intangibles |
5,643,000 |
|
|
|
5,207,000 |
|
|
21,595,000 |
|
|
|
18,320,000 |
|
|
||
Depreciation |
2,539,000 |
|
|
|
3,309,000 |
|
|
10,561,000 |
|
|
|
11,927,000 |
|
|
||
Estimated contract settlement costs |
? |
|
|
|
? |
|
|
444,000 |
|
|
|
6,351,000 |
|
|
||
Settlement of intellectual property litigation |
? |
|
|
|
? |
|
|
? |
|
|
|
(3,204,000 |
) |
|
||
Acquisition plan expenses |
6,357,000 |
|
|
|
1,259,000 |
|
|
20,754,000 |
|
|
|
5,871,000 |
|
|
||
Facility exit costs |
? |
|
|
|
? |
|
|
? |
|
|
|
1,373,000 |
|
|
||
Adjusted EBITDA |
$ |
23,532,000 |
|
|
|
28,251,000 |
|
|
$ |
77,803,000 |
|
|
|
93,472,000 |
|
|
In addition, a reconciliation of Comtech's GAAP consolidated operating income, net income and net income per diluted share to the corresponding non-GAAP measures is shown in the tables below for the three and twelve months ended July 31, 2020 and 2019:
|
July 31, 2020 |
|||||||||||||||||||||||||
|
Three months ended |
|
Twelve months ended |
|||||||||||||||||||||||
|
Operating
|
|
Net Income |
|
Net Income per Diluted Share* |
|
Operating Income |
|
Net Income |
|
Net Income per Diluted Share* |
|||||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
GAAP measures, as reported |
$ |
2,816,000 |
|
|
$ |
1,126,000 |
|
|
$ |
0.04 |
|
|
$ |
15,174,000 |
|
|
|
$ |
7,020,000 |
|
|
|
$ |
0.28 |
|
|
Estimated contract settlement costs |
? |
|
|
? |
|
|
? |
|
|
444,000 |
|
|
|
280,000 |
|
|
|
0.01 |
|
|
||||||
Acquisition plan expenses |
6,357,000 |
|
|
4,005,000 |
|
|
0.16 |
|
|
20,754,000 |
|
|
|
13,075,000 |
|
|
|
0.53 |
|
|
||||||
Net discrete tax expense (benefit) |
? |
|
|
79,000 |
|
|
? |
|
|
? |
|
|
|
(1,155,000 |
) |
|
|
(0.05 |
) |
|
||||||
Non-GAAP measures |
$ |
9,173,000 |
|
|
$ |
5,210,000 |
|
|
$ |
0.21 |
|
|
$ |
36,372,000 |
|
|
|
$ |
19,220,000 |
|
|
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
July 31, 2019 |
|||||||||||||||||||||||||
|
Three months ended |
|
Twelve months ended |
|||||||||||||||||||||||
|
Operating
|
|
Net Income |
|
Net Income per
|
|
Operating
|
|
Net Income |
|
Net Income per
|
|||||||||||||||
Reconciliation of GAAP to Non-GAAP Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
GAAP measures, as reported |
$ |
10,405,000 |
|
|
$ |
6,135,000 |
|
|
$ |
0.25 |
|
|
$ |
41,407,000 |
|
|
|
$ |
25,041,000 |
|
|
|
$ |
1.03 |
|
|
Estimated contract settlement costs |
? |
|
|
? |
|
|
? |
|
|
6,351,000 |
|
|
|
4,874,000 |
|
|
|
0.20 |
|
|
||||||
Settlement of intellectual property litigation |
? |
|
|
? |
|
|
? |
|
|
(3,204,000 |
) |
|
|
(2,459,000 |
) |
|
|
(0.10 |
) |
|
||||||
Facility exit costs |
? |
|
|
? |
|
|
? |
|
|
1,373,000 |
|
|
|
1,054,000 |
|
|
|
0.04 |
|
|
||||||
Acquisition plan expenses |
1,259,000 |
|
|
966,000 |
|
|
0.04 |
|
|
5,871,000 |
|
|
|
4,506,000 |
|
|
|
0.19 |
|
|
||||||
Write-off of deferred financing costs |
? |
|
|
? |
|
|
? |
|
|
? |
|
|
|
2,469,000 |
|
|
|
0.10 |
|
|
||||||
Net discrete tax expense (benefit) |
? |
|
|
116,000 |
|
|
? |
|
|
? |
|
|
|
(2,875,000 |
) |
|
|
(0.12 |
) |
|
||||||
Non-GAAP measures |
$ |
11,664,000 |
|
|
$ |
7,217,000 |
|
|
$ |
0.29 |
|
|
$ |
51,798,000 |
|
|
|
$ |
32,610,000 |
|
|
|
$ |
1.34 |
|
|
* Per share amounts may not foot due to rounding.
ECMTL
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