Comtech Telecommunications Corp. Net Sales Rise 15.2% to US$ 170.4 M in 3Q
Melville, N.Y., June 5, 2019 — Comtech Telecommunications Corp.’s (NASDAQ: CMTL) net sales for the third quarter of fiscal 2019 rose to $170.4 million compared to the US$ 147.9 million achieved during the third quarter of fiscal 2018, representing an increase of US$ 22.5 million, or 15.2%.
Net sales for the first nine months of fiscal 2019 were US$ 495.4 million compared to the US$ 403.2 million achieved during the first nine months of fiscal 2018, representing an increase of US$ 92.2 million, or 22.9%.
Comtech said bookings during the third quarter of fiscal 2019 were US$ 331.2 million, with a company-wide book-to-bill ratio (a measure defined as bookings divided by net sales) of 1.94 with both its Commercial and Government Solutions Segments achieving book-to-bill ratios in excess of 1.00. Bookings this quarter reflect strength in almost all of Comtech’s product lines, especially its safety and security technology solutions and Heights satellite earth station technology solutions.
Backlog as of April 30, 2019 reflected a record high of US$ 747.1 million. When including the total value of multi-year contracts that Comtech has actually received, its revenue visibility is over US$1.0 billion, the company said.
Adjusted EBITDA for the third quarter of fiscal 2019 was US$ 24.0 million. Adjusted EBITDA for the first nine months of fiscal 2019 was $65.2 million as compared to the US$ 47.7 million achieved during the first nine months of fiscal 2018, representing an increase of US$ 17.5 million, or 36.7%.
Comtech said it took several strategic steps to enhance its business including: (i) closed on the acquisition of Solacom Technologies Inc. on February 28, 2019; (ii) closed on the acquisition of the state and local government next-generation 911 business from General Dynamics Information Technology, Inc. on April 29, 2019; (iii) initiated efforts to acquire a small technology company with complimentary solution offering; and (iv) continued its ongoing evaluation and repositioning of its enterprise technology product solution line.
In connection with these steps, Comtech incurred US$ 1.7 million of acquisition plan expenses and US$ 2.5 million of estimated contract settlement costs. It also recorded $0.6 million of discrete tax benefit. Including all of these expenses, GAAP operating income was US$ 11.3 million, GAAP net income was US$ 7.6 million and GAAP earnings per diluted share was $0.31.
Cash flows from operating activities during the third quarter of fiscal 2019 were US$ 40.8 million. Cash flows from operating activities during the nine months ended April 30, 2019 were US$ 53.8 million.
In commenting on Comtech’s performance for the third quarter of fiscal 2019, Fred Kornberg, president and chief executive officer, noted, "The third quarter was yet another strong showing of outstanding business performance by Comtech. Our business excelled on many fronts. We expect the positive business momentum we are experiencing to continue into fiscal 2020.”
Kornberg added, “The company’s strategic acquisitions of Solacom and the GD NG-911 business significantly enhanced Comtech’s ability to deliver innovative market-leading products and services to public safety agencies around the world. Anchored by our strong backlog, recent acquisitions and expected strong fiscal 2019 finish, fiscal 2020 is looking like it will be a terrific year.”
Updated 2019 Fiscal Year Financial Targets
Comtech’s fiscal 2019 consolidated net sales are now expected to be $660.0 million which is higher than the mid-point of its prior expected range of US$ 645.0 million to US$ 660.0 million. Fourth quarter consolidated net sales are estimated to approximate $164.6 million. Comtech’s updated fiscal 2019 net sales target of US$ 660.0 million reflects an anticipated growth rate of 15.7% from the $570.6 million it achieved in fiscal 2018.
Comtech fiscal 2019 consolidated Adjusted EBITDA is now expected to be US$ 90.0 million which is better than the high-point of its prior expected range of US$ 85.0 million to US$ 89.0 million. Fourth quarter consolidated Adjusted EBITDA is expected to approximate US$ 24.8 million. Comtech’s updated fiscal 2019 Adjusted EBITDA target of US$ 90.0 million reflects an anticipated growth rate of 14.8% from the US$ 78.4 million it achieved in fiscal 2018.
Total amortization of intangible assets is expected to approximate US$ 18.3 million in fiscal 2019 with the fourth quarter approximating US$ 5.2 million. Total amortization of stock-based compensation expense is expected to approximate US$12.0 million in fiscal 2019 with the fourth quarter approximating US$ 8.6 million.
Comtech's estimated effective income tax rate for fiscal 2019 (excluding net discrete items) is expected to approximate 23.0%.
Comtech expects its fourth quarter of fiscal 2019 to be impacted by a charge of approximately US$ 2.2 million or $0.07 GAAP EPS primarily related to ongoing efforts for a small targeted acquisition and its enterprise technology product solutions repositioning. Including the impact of such charge, Comtech's updated GAAP EPS target for fiscal 2019 is now $0.88 with its fourth quarter GAAP EPS approximating $0.10.
Excluding the net charges of $0.27 GAAP EPS during the nine months ended April 30, 2019 (as described in the below table) and the aforementioned fiscal 2019 fourth quarter charge of $0.07 GAAP EPS, Non-GAAP EPS for fiscal 2019 is expected to approximate $1.22 with fourth quarter Non-GAAP EPS of $0.17. Comtech's fiscal 2019 Non-GAAP EPS target of $1.22 represents a 62.7% increase from the $0.75 Non-GAAP EPS it achieved in fiscal 2018.
The company's board of directors declared a quarterly cash dividend of $0.10 per share, payable on August 16, 2019, to shareholders of record at the close of business on July 17, 2019.
The dividend is the company’s thirty-sixth consecutive quarterly dividend. Future dividends remain subject to compliance with financial covenants under the company's secured credit facility as well as board approval.
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