Comtech Telecommunications Corp. announces results for fiscal 2018 third quarter and updates its fis
Comtech Telecommunications Corp. today reported its operating results for the third fiscal quarter ended April 30, 2018 and updated its fiscal 2018 guidance.
Fiscal 2018 Third Quarter Highlights
Net sales were $147.9 million.
Bookings were $164.3 million, with a book-to-bill ratio (a measure defined as bookings divided by net sales) of 1.11.
Backlog increased from the level reported as of the second quarter of fiscal 2018 and is a near record $583.7 million. This amount does not include the portions of multi-year contracts that have not been funded. As such, the total value of multi-year contracts that Comtech has received is substantially higher.
Comtech received a number of strategic contracts and orders, including: (i) a $59.0 million contract to provide the U.S. Navy with SLM-5650B satellite modems, upgrade kits and related services; (ii) $16.9 million of orders to provide ongoing sustainment services for the U.S. Army's "SNAP" mobile satellite communications program; (iii) $14.2 million of orders to supply the U.S. Army with advanced VSAT equipment; (iv) a $10.1 million multi-year contract to provide one of the largest wireless carriers in the U.S. with a hosted, advanced location services platform; (v) $8.5 million in contracts to supply Modular Transportable Transmission System troposcatter terminals to two international customers; and (vi) a $3.7 million contract modification from the Consortium Management Group to support the U.S. Army Project Manager Mission Command and the Blue Force Tracking-2 ("BFT-2") program to port additional waveforms onto the current BFT-2 transceivers.
GAAP operating income was $14.0 million and GAAP net income was $8.2 million, or $0.34 per diluted share.
Adjusted EBITDA was $23.5 million. 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.
Cash flows from operating activities were $21.4 million.
Cash dividends of $2.4 million were paid to common stockholders.
$44.2 million of cash and cash equivalents as of April 30, 2018.
In commenting on Comtech's performance during the third quarter of fiscal 2018 and Comtech's updated fiscal 2018 guidance, Fred Kornberg, President and Chief Executive Officer, stated, "Our results for the third quarter exceeded our expectations and our pipeline of opportunities remains strong. Based on our strong year-to-date performance and positive business momentum, we are increasing our fiscal 2018 operating income and Adjusted EBITDA targets, and expect fiscal 2018 to be a successful year. As we begin to look to fiscal 2019, we believe that we are firmly positioned for growth."
Updated 2018 Fiscal Year Financial Targets
Comtech is maintaining its revenue target of approximately $570.0 million to $585.0 million. Despite the absence of $6.7 million of BFT-1 intellectual property license fees that Comtech earned in fiscal 2017 supporting the U.S. Army's Blue Force Tracking Program, the mid-point of Comtech's fiscal 2018 revenue target range represents a year-over-year growth rate of close to 5.0%.
Comtech is increasing its Adjusted EBITDA target to a new range of $73.5 million to $76.5 million, as compared to a prior range of $72.0 million to $76.0 million. Despite the absence of the $6.7 million of BFT-1 intellectual property license fees, the mid-point of the new fiscal 2018 Adjusted EBITDA target range represents an annual growth rate of close to 6.0%. Adjusted EBITDA, as a percentage of net sales, is expected to be close to 13.0%.
From a timing perspective, Comtech's fourth quarter of fiscal 2018 is still expected to be the peak quarter for both net sales and Adjusted EBITDA, but its third quarter of fiscal 2018 is now expected to be the peak quarter of operating income. Comtech's operating income for the third quarter reflects the benefit of shipments of satellite earth station equipment to the U.S. Navy that were previously expected to occur in its fourth quarter of fiscal 2018. Comtech's fourth quarter net sales assumptions now reflect this and other changes in product mix (including lower expected sales of higher margin cyber training software solutions).
Comtech's fourth quarter net sales and Adjusted EBITDA are expected to be higher than the related amounts achieved in its third quarter of fiscal 2018 by approximately 15.0%. Comtech's GAAP operating income and Adjusted EBITDA, as a percentage of its consolidated fourth quarter fiscal 2018 net sales, are expected to approximate 6.0% and 15.0%, respectively.
Comtech's new estimated effective tax rate of 27.0% for fiscal 2018 reflects seven months of benefit related to Tax Reform. Although Comtech continues to perform an analysis of Tax Reform and its impact, Comtech's assessment is that its effective tax rate in fiscal 2019, before any discrete items, will now range from 23.5% to 25.0%. During the nine months ended April 30, 2018, Comtech recorded an estimated net discrete tax benefit of $14.1 million, primarily due to the remeasurement of deferred tax liabilities associated with non-deductible amortization related to intangible assets that was required as a result of Tax Reform.
Comtech is updating its GAAP diluted EPS target to a new range of $1.17 to $1.23, as compared to a prior range of $1.08 to $1.23. The new target range includes the benefit of $0.59 per diluted share primarily due to the remeasurement of deferred tax assets and liabilities as a result of Tax Reform. GAAP diluted EPS for Comtech's fourth quarter of fiscal 2018 is expected to approximate a range of $0.24 to $0.30 per diluted share.
If order flow remains strong and Comtech is able to achieve all of its fiscal 2018 business goals, it is possible that Comtech's fiscal 2018 consolidated net sales, GAAP diluted EPS and Adjusted EBITDA could be higher than its targeted amounts.