Comtech Telecommunications Corp. Announces Results for Fiscal 2017 Fourth Quarter and Full Year and Provides Fiscal 2018 Guidance

September 27, 2017 4:16 PM

MELVILLE, N.Y.--(BUSINESS WIRE)-- September 27, 2017-- Comtech Telecommunications Corp. (NASDAQ: CMTL) 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

2017 Fiscal Year Highlights

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

Additional information about the Company’s fiscal 2018 guidance is included in the Company’s fourth quarter investor presentation which is located on the Company’s website at www.comtechtel.com.

Conference Call

The Company has scheduled an investor conference call for 8:30 AM (ET) on Thursday, September 28, 2017. 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 (866) 831-8713 (domestic), or (203) 518-9713 (international) and using the conference I.D. "Comtech." A replay of the conference call will be available for seven days by dialing (800) 839-2385 or (402) 220-7203. 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.

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, 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 possibility that the expected synergies from the acquisition of TeleCommunication Systems, Inc. ("TCS") will not be fully realized, or will not be realized within the anticipated time period; the possibility of disruption from the acquisition, 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 the Company's recent launch of HEIGHTSTM Dynamic Network Access Technology ("HEIGHTS"); changing customer demands; 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 and TCS's legacy legal proceedings, customer claims for indemnification and other similar matters; risks associated with the Company’s obligations under its Secured Credit Facility, as amended; risks associated with the Company's large contracts; and other factors described in this and the Company's other filings with the SEC.

COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited) (Audited)
Three months ended July 31, Twelve months ended July 31,
2017 2016 2017 2016
Net sales $ 147,762,000 $ 152,377,000 $ 550,368,000 $ 411,004,000
Cost of sales 87,350,000 90,171,000 332,183,000 239,767,000
Gross profit 60,412,000 62,206,000 218,185,000 171,237,000
Expenses:
Selling, general and administrative 26,484,000 34,114,000 116,080,000 94,932,000
Research and development 13,889,000 13,974,000 54,260,000 42,190,000
Amortization of intangibles 5,268,000 6,067,000 22,823,000 13,415,000
Settlement of intellectual property litigation (12,020,000 )
Acquisition plan expenses 587,000 21,276,000
45,641,000 54,742,000 181,143,000 171,813,000
Operating income (loss) 14,771,000 7,464,000 37,042,000 (576,000 )
Other expenses (income):
Interest expense and other 2,691,000 4,129,000 11,629,000 7,750,000
Interest income and other (80,000 ) 93,000 (68,000 ) (134,000 )

Income (loss) before provision for(benefit from) income taxes

12,160,000 3,242,000 25,481,000 (8,192,000 )
Provision for (benefit from) income taxes 4,846,000 540,000 9,654,000 (454,000 )
Net income (loss) $ 7,314,000 $ 2,702,000 $ 15,827,000 $ (7,738,000 )
Net income (loss) per share:
Basic $ 0.31 $ 0.14 $ 0.68 $ (0.46 )
Diluted $ 0.31 $ 0.14 $ 0.67 $ (0.46 )

Weighted average number of commonshares outstanding – basic

23,470,000 19,318,000 23,433,000 16,972,000

Weighted average number of commonand common equivalent sharesoutstanding – diluted

23,566,000 19,341,000 23,489,000 16,972,000

Dividends declared per issued andoutstanding common share as of theapplicable dividend record date

$ 0.10 $ 0.30 $ 0.60 $ 1.20

COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Consolidated Balance Sheets

(Audited)

July 31, 2017 July 31, 2016
Assets
Current assets:
Cash and cash equivalents $ 41,844,000 $ 66,805,000
Accounts receivable, net 124,962,000 150,967,000
Inventories, net 60,603,000 71,354,000
Prepaid expenses and other current assets 13,635,000 14,513,000
Total current assets 241,044,000 303,639,000
Property, plant and equipment, net 32,847,000 38,667,000
Goodwill 290,633,000 287,618,000
Intangibles with finite lives, net 261,871,000 284,694,000
Deferred financing costs, net 3,065,000 3,309,000
Other assets, net 2,603,000 3,269,000
Total assets $ 832,063,000 $ 921,196,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 29,402,000 $ 33,462,000
Accrued expenses and other current liabilities 68,610,000 98,034,000
Dividends payable 2,343,000 7,005,000
Customer advances and deposits, current 25,771,000 29,665,000
Current portion of long-term debt 15,494,000 11,067,000
Current portion of capital lease obligations 2,309,000 3,592,000
Interest payable 282,000 1,321,000
Total current liabilities 144,211,000 184,146,000
Non-current portion of long-term debt, net 176,228,000 239,969,000
Non-current portion of capital lease obligations 1,771,000 4,021,000
Income taxes payable 2,515,000 2,992,000
Deferred tax liability, net 17,306,000 9,798,000
Customer advances and deposits, non-current 7,227,000 5,764,000
Other liabilities 2,655,000 4,105,000
Total liabilities 351,913,000 450,795,000
Commitments and contingencies
Stockholders’ equity:

Preferred stock, par value $.10 per share; shares authorized and unissued2,000,000

Common stock, par value $.10 per share; authorized 100,000,000 shares;issued 38,619,467 shares and 38,367,997 shares at July 31, 2017 and2016, respectively

3,862,000 3,837,000
Additional paid-in capital 533,001,000 524,797,000
Retained earnings 385,136,000 383,616,000
921,999,000 912,250,000
Less:
Treasury stock, at cost (15,033,317 shares at July 31, 2017 and 2016) (441,849,000 ) (441,849,000 )
Total stockholders’ equity 480,150,000 470,401,000
Total liabilities and stockholders’ equity $ 832,063,000 $ 921,196,000

COMTECH TELECOMMUNICATIONS CORP.AND SUBSIDIARIESReconciliation 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 before income taxes, interest (income) and other expense, interest expense, amortization of stock-based compensation, amortization of intangibles, depreciation expense, acquisition plan expenses and settlement of intellectual property litigation. 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, including a similarly titled measure previously utilized by TCS. 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 our performance and comparability of our results with other companies. 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 table, 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 2018 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, costs related to its acquisition plan, settlement of intellectual property litigation and interest expense 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,
2017 2016 2017 2016

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA:

Net income (loss) $ 7,314,000 2,702,000 15,827,000 (7,738,000 )
Provision for (benefit from) income taxes 4,846,000 540,000 9,654,000 (454,000 )
Interest (income) and other expense (80,000 ) 93,000 (68,000 ) (134,000 )
Interest expense 2,691,000 4,129,000 11,629,000 7,750,000
Amortization of stock-based compensation 5,526,000 951,000 8,506,000 4,117,000
Amortization of intangibles 5,268,000 6,067,000 22,823,000 13,415,000
Depreciation 3,505,000 3,752,000 14,354,000 9,830,000
Acquisition plan expenses 587,000 21,276,000
Settlement of intellectual property litigation (12,020,000 )
Adjusted EBITDA $ 29,070,000 18,821,000 70,705,000 48,062,000

ECMTL

Media Contact:

Michael D. Porcelain, Senior Vice President and Chief Financial Officer

(631) 962-7103

Info@comtechtel.com

Source: Comtech Telecommunications Corp.

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