TeleCommunication Systems Nets US$ 96-M in Q3, Down 31 percent from 2012

Annapolis, Md., Nov. 1, 2013 — TeleCommunication Systems, Inc. (TCS), a leader in highly reliable and secure mobile communication technology, reported on Thursday revenue of $96 million, up 3 percent from $92.8 million in the previous quarter but down 31 percent from $140.1 million in the third quarter of 2012. 

Analysts were quick to point out the disappointing results, which missed consensus estimate by 12 percent. Government revenues declined 43 percent to $52 due primarily to a large pass-through contract in the year-ago quarter in addition to budget-related funding delays. Commercial segment revenues also dropped 10 percent y/y to $44 million due to lower carrier application revenue and unfavorable timing of commercial systems deployments.

But TCS remained optimistic saying it was awarded $58.3 million contract to supply managed satellite services to the U.S. Marine Corps, the first contract award to TCS under the $2.6 billion DISA CS2 IDIQ vehicle. It was also awarded another $6.9 million in funding for research and development of Intelligent Tutoring Authoring and Delivery System (ITADS) for U.S. Navy cyber security training.

During the quarter, TCS added 14 U.S. patents to company portfolio and sold six, bringing the company's total patent count to 336 worldwide, adding there are now about 25 monetization projects at various stages of execution.

The company said it also reduced total debt by $15.4 million and net debt by $3 million as it proceeded to use its new bank facility reported last quarter to refinance convertible debt due in 2014 and manage flexibility in the company's funding.

During the quarter, TCS said its Adjusted EBITDA rose 58 percent to $10.9 million from $6.9 million in the previous quarter, and down 28 percent from $15.1 million in the year-ago quarter. Its adjusted net income was $0.05 per diluted share, improving from $(0.01) per diluted share in the previous quarter and down from $0.12 per diluted share in the year-ago quarter.

"Our operating profit for the quarter was about as we expected," said Maurice B. Tose, TCS chairman and CEO. "Our commercial segment position in public safety and security communications continues to strengthen, as our backlog and pipeline for NextGen 9-1-1 work is growing,” he said.

"The scale and experience of our company makes us an appealing vendor to world-class customers in both government and commercial communication technology. We are carefully allocating resources as we navigate the turbulent government waters, while sustaining leadership in our areas of expertise,” Tose added.

Analyst Raymond James & Associates said it was maintaining a Market Perform rating on TCS following the company’s third consecutive quarter of weak results and downwardly-revised guidance. Although it admitted TCS management was proactively addressing factors within its control (i.e., cost-cutting, balance sheet), TCS still expects the stock “to remain under pressure until macro headwinds (primarily government-related) subside.”

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