Comtech Telecommunications Corp. today reported its operating results for the fourth quarter and fiscal year ended July 31, 2017. The Company also announced financial targets for its 2018 fiscal year.
2017 Fourth Quarter Highlights
Net sales for the three months ended July 31, 2017 were $147.8 million as compared to $152.4 million for the three months ended July 31, 2016.
Comtech achieved a company-wide book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.90. As of July 31, 2017, the Company had backlog of $446.2 million.
GAAP operating income was $14.8 million and GAAP net income was $7.3 million, or $0.31 per diluted share, for the three months ended July 31, 2017, as compared to GAAP operating income of $7.5 million and a GAAP net income of $2.7 million, or $0.14 per diluted share, for the three months ended July 31, 2016.
Adjusted EBITDA was $29.1 million for the three months ended July 31, 2017. Adjusted EBITDA is a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure and is more fully defined in the below table.
As of July 31, 2017, the Company had $41.8 million of cash and cash equivalents. During the fourth quarter of fiscal 2017, the Company generated cash flows from operating activities of $23.0 million.
2017 Fiscal Year Highlights
Net sales for the fiscal year ended July 31, 2017 were $550.4 million as compared to $411.0 million for the fiscal year ended July 31, 2016. The year-over-year increase in net sales reflects a full year of TCS operations, which contributed incremental net sales of $147.1 million for fiscal 2017.
Comtech achieved a company-wide book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.93.
GAAP operating income was $37.0 million and GAAP net income was $15.8 million, or $0.67 per diluted share, for the fiscal year ended July 31, 2017, as compared to a GAAP operating loss of $0.6 million and a GAAP net loss of $7.7 million, or $(0.46) per diluted share, for the fiscal year ended July 31, 2016.
Adjusted EBITDA was $70.7 million for the fiscal year ended July 31, 2017, which reflects $6.7 million of benefit associated with a fee paid by the U.S. Army to use our BFT-1 intellectual property. Effective April 1, 2017, the U.S. Army retains a limited non-exclusive right to use this intellectual property for no additional payment.
During the fiscal year ended July 31, 2017, the Company generated cash flows from operating activities of $66.7 million and reduced the level of its total indebtedness by $63.7 million.
In commenting on the Company's performance during the fourth quarter of fiscal 2017, Fred Kornberg, President and Chief Executive Officer, noted "Fiscal 2017 was a very busy year for our Company. With our fourth quarter fiscal 2017 performance, we solidified a strong finish to what turned out to be a successful year for Comtech. I am extremely optimistic about our growth prospects and believe that fiscal 2018 will be even better."
2018 Fiscal Year Financial Targets
Revenue goal with a range of approximately $550.0 million to $575.0 million.
GAAP diluted EPS goal with a range of approximately $0.41 to $0.44.
Despite the absence of BFT-1 intellectual property license fees in fiscal 2018, adjusted EBITDA goal in a range of approximately $68.0 million to $72.0 million.
Total annual amortization of intangibles of approximately $21.0 million.
Total depreciation expense is expected to range from $14.0 million to $16.0 million.
Total amortization of stock-based compensation is expected to range from approximately $9.0 million to $10.0 million.
Interest expense is expected to reflect a rate (including amortization of deferred financing costs) of 5.0%.
The Company's effective income tax rate (excluding discrete tax items in fiscal 2018) is expected to approximate 34.75%.
Based on the anticipated timing of shipments and performance related to orders currently in the Company's backlog and the timing of expected new orders, net sales and Adjusted EBITDA for its first and second quarters of fiscal 2018 are expected to be lower than the comparable operating quarters in fiscal 2017. Given the straight-line amortization expense associated with intangible assets with finite lives, the Company expects to report an operating loss in both the first and second quarters of fiscal 2018, with each of the third and fourth fiscal 2018 quarters achieving operating profits. The Company's fourth quarter of fiscal 2018 is expected to be the peak quarter for both net sales and Adjusted EBITDA.
Comtech Telecommunications Corp. has also announced that its Board of Directors declared a quarterly cash dividend of $0.10 per share, payable on November 17, 2017, to stockholders of record at the close of business on October 18, 2017. The dividend is the Company's twenty-ninth consecutive quarterly dividend. The Board of Directors is currently targeting fiscal 2018 quarterly dividend payments of $0.10 per common share. Future dividends remain subject to compliance with financial covenants under the Company's Secured Credit Facility, as amended, as well as Board approval.