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8-K - FORM 8-K - GLOBECOMM SYSTEMS INC | y04846e8vk.htm |
Exhibit 99.1
Globecomm Systems Reports Fiscal 2011 Third Quarter and
Record Nine-Month Financial Results
Record Nine-Month Financial Results
HAUPPAUGE, N.Y.(BUSINESS WIRE)May 9, 2011 Globecomm Systems Inc. (NASDAQ:GCOM), a
leading global provider of communications solutions and services, today announced financial results
for the fiscal 2011 third quarter and nine months ended March 31, 2011. Globecomm is reporting its
financial results on a generally accepted accounting principles (GAAP) basis as well as adjusted
EBITDA and adjusted diluted net income per common share, both non-GAAP financial measures, for
which the Company provides detailed reconciliations on the attached tables. The following are
highlights:
| Service revenues for the quarter increased 35.1% to $46.0 million as compared to $34.0 million in the same period last year. For the nine months ended March 31, 2011, service revenue increased 41.5% to a record $136.2 million as compared to $96.2 million in the same period last year. | ||
| Consolidated revenues for the quarter increased 18.3% to $62.5 million as compared to $52.8 million in the same period last year. | ||
| GAAP earnings per diluted share for the quarter increased 133% to $0.14 as compared to $0.06 in the same period last year. Adjusted diluted net income per common share increased 89% to $0.17 as compared to $0.09 in the same period last year. | ||
| Adjusted EBITDA for the quarter increased 66.9% to a record $9.2 million as compared to $5.5 million in the same period last year. |
Fiscal Year 2011 Third Quarter Results
Revenues for the Companys fiscal 2011 third quarter increased 18.3% to $62.5 million as compared
to $52.8 million in the same period last year. Revenues from service increased 35.1% to $46.0
million, as compared to $34.0 million in the same period last year. The increase in service
revenue was primarily driven by organic growth in the access service offering in the government
marketplace, coupled with the Companys acquisition of C2C and Evocomm, which combined contributed
net $3.2 million. Revenue from infrastructure solutions decreased 12.0% to $16.5 million as
compared to $18.8 million in the same period last year. The Company is experiencing a shift in its
infrastructure business from numerous smaller orders to ones that are larger and include various
milestones which affect revenue recognition. This may result in more significant
quarter-to-quarter shifts in revenues from this segment in the future. The Company expects an
increase in revenues from this segment in the fiscal 2011 fourth quarter as a result of this shift.
Net income for the Companys fiscal 2011 third quarter increased to $3.0 million or $0.14 per
diluted share as compared to net income of $1.2 million, or $0.06 per diluted share in the same
period last year. During the fiscal 2011 third quarter, the Company recorded the following
adjustments:
| Non-recurring acquisition expenses of $0.5 million ($0.02 per share) relating to the acquisition of ComSource announced on April 8, 2011. | ||
| A $0.4 million ($0.02 per share) charge for the change in fair value of the earn-out as a result of the better than anticipated performance of the previously announced acquisition of C2C and Evocomm. | ||
| A non-recurring tax credit of $0.3 million ($0.01 per share) related to research and development tax credits for fiscal years 2005 and 2010. |
Excluding these net charges, the Companys adjusted diluted net income per common share increased
89% to $0.17 as compared to $0.09 in the same period last year.
Adjusted EBITDA for the third quarter of fiscal 2011 increased 66.9% to $9.2 million compared to
$5.5 million in the same period last year.
Fiscal Year 2011 Nine Month Results
Revenues for the Companys fiscal 2011 nine months ended March 31, 2011 increased 18.0% to a record
$185.9 million as compared to $157.6 million in the same period last year. Revenues from services
increased 41.5% to a record $136.2 million as compared to $96.2 million in the same period last
year. The increase in service revenue was primarily driven by organic growth in the access service
offering in the government marketplace, coupled with the Companys acquisition of C2C and Evocomm,
which combined contributed net $12.6 million. Revenues from infrastructure solutions decreased
18.9% to $49.8 million as compared to $61.4 million in the same period last year. The decrease in
infrastructure solution revenues was primarily caused by the timing of revenue milestones and by
the global economic slowdown resulting in government and commercial customers and prospects
delaying projects. The Company expects a significant increase in fourth quarter infrastructure
segment revenues as compared to the third quarter due to the timing of revenue milestones.
Net income for the Companys first nine months of fiscal 2011 increased 75.7% to $6.8 million, or
$0.31 per diluted share, compared to net income of $3.9 million, or $0.19 per diluted share, in the
same period last year. During the fiscal 2011 nine months ended March 31, 2011 the Company
recorded the following adjustments:
| Non-recurring acquisition expenses of $0.5 million ($0.02 per share) relating to the acquisition of ComSource announced on April 8, 2011. | ||
| A $2.5 million ($0.12) charge for the change in fair value of the earn-out as a result of the better than anticipated performance of the previously announced acquisition of C2C and Evocomm. C2C and Evocomm are reaching higher earnings results than the Companys original forecasts, therefore the Companys expectations for reaching future earn-out targets have been adjusted accordingly. | ||
| Non-recurring tax credit of $0.7 million ($0.03 per share) related to research and development tax credits for fiscal years 2005 and 2010. |
Excluding these net charges, the Companys adjusted diluted net income per common share increased
90.9% to $0.42 as compared to $0.22 in the same period last year.
Adjusted EBITDA for the first nine months of fiscal 2011 increased 70.5% to $23.7 million compared
to $13.9 million in the same period past year.
Managements Review of Results and Expectations
David Hershberg, Chairman and CEO, said A strong third quarter was followed by the acquisition of
ComSource, the largest acquisition in the Companys history, in early April. We are very excited
about adding ComSource to the Globecomm family as the Company continues to position itself to
capitalize on explosive trends in the wireless marketplace. The proliferation of 4G and LTE
networks, coupled with the rapid adoption rates of smart phones and tablets are driving trends such
as advanced switch programming, software compliance solutions, network extension and security.
ComSource will complement Globecomms existing wireless capabilities and we are excited about the
potential to address some of the industrys needs. Mr. Hershberg continued, Globecomm anticipates
a strong finish to fiscal 2011 and the Companys existing and growing service base positions the
Company for continued growth for the forseeable future. The balance sheet remains strong and
provides ample liquidity.
Keith Hall, President and COO, added I am very pleased with our teams execution and our overall
financial performance. These results are highlighted by our services segment which continues to
exceed expectations, driving both our top and bottom lines. Our wireless and media market
initiatives are gaining traction and we continue to add strong revenue diversity to complement our
robust Government sector. The ComSource acquisition, completed in Q4, was an important milestone
as Globecomm continues its expansion outside satellite-centric applications. Globecomm intends to
continue to utilize acquisitions to help diversify our capability portfolio, including developing
new market verticals, further expanding our global reach and building breadth to our technology
capabilities. I look forward to a strong closing of the year with improving infrastructure
revenues which will set the stage for fiscal 2012.
Managements Current Expectations for the Fiscal Year Ending June 30, 2011
Globecomm currently expects the following financial results for the fiscal year 2011:
| Consolidated revenues to be between $270 and $280 million, down from $280 to $295 million. | ||
| Service segment revenues to be between $185 and $190 million, up from $180 to $185 million. | ||
| GAAP diluted net income per common share to be between $0.43 and $0.47, down from $0.50 to $0.55. We continue to expect adjusted diluted net income per common share to be between $0.57 and $0.62 for fiscal 2011. | ||
| We continue to expect adjusted EBITDA to be between $31 and $33 million. |
The reduction in GAAP income per share is primarily due to closing costs and amortization of
intangibles expenses related to acquisition of ComSource closed in early April. The reduction in
consolidated revenue guidance is primarily due to further delays in achieving revenue milestones on
a major infrastructure contract. The increase in service guidance is primarily related to a full
quarter of financial results from Comsource.
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP measure which represents net income before interest income, interest
expense, provision for income taxes, depreciation, amortization expense, non-cash stock
compensation expense, acquisition costs and earn-out fair value adjustments. Globecomm believes
this provides greater transparency by helping illustrate comparability between current and prior
periods. Under a new accounting pronouncement on business combinations, effective in fiscal 2010
for the Company, acquisition-related transaction expenses are required to be expensed rather than
capitalized, and changes to the fair value of earn-out payments must be recognized in earnings.
Therefore, the exclusion of acquisition costs and the earn-out fair value adjustments in the
Adjusted EBITDA calculation provides better comparability.
Adjusted EBITDA does not represent cash flows as defined by GAAP. Globecomm discloses adjusted
EBITDA since it is a financial measure commonly used in its industry. Because adjusted EBITDA
facilitates internal comparisons of our historical financial position and operating performance on
a more consistent basis, the Company also uses adjusted EBITDA in measuring performance relative to
that of our competitors and in evaluating acquisition opportunities. The Companys management
regularly uses supplemental non-GAAP financial measures internally to understand, manage and
evaluate the Companys business and make operating decisions. Adjusted EBITDA is not meant to be
considered a substitute or replacement for net income as prepared in accordance with GAAP. Adjusted
EBITDA may not be comparable to other similarly titled measures of other companies. Reconciliation
between GAAP net income and adjusted EBITDA is provided in a table immediately following the
Condensed Consolidated Balance Sheets.
Reconciliation of adjusted diluted net income per common share excludes acquisition related
transaction expenses, earn-out fair value adjustments and non-recurring tax adjustments. These
amounts are not in accordance with GAAP. However, Globecomm believes this measure provides greater
transparency by helping illustrate comparability between current and prior periods. Under the new
accounting pronouncement on business combinations, effective in fiscal 2010 for the Company,
acquisition related transaction expenses are required to be expenses rather than capitalized, and
changes to the earn-out fair value adjustments are required to be expensed rather than capitalized
and therefore the exclusion of the earn-out fair value adjustments is a non-GAAP measure that
provides better comparability of results. The non-recurring tax adjustment relates to research and
development tax credits for fiscal 2005 and 2010, therefore they have been excluded as a non-GAAP
measure to provide better comparability of results.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for
comparable GAAP measures, and should be read only in conjunction with the Companys consolidated
financial statements prepared in accordance with GAAP. The Companys management regularly uses
supplemental non-GAAP financial measures internally to understand, manage and evaluate the
Companys business and make operating decisions.
About Globecomm Systems
Globecomm Systems Inc., or Globecomm, is a leading global provider of satellite-based managed
network solutions. Employing our expertise in emerging communication technologies we are able to
offer a comprehensive suite of system integration, system products, and network services enabling a
complete end-to-end solution for our customers. We believe our integrated approach of in-house
design and engineering
expertise combined with a world-class global network and our 24 by 7 network operating centers
provides us a unique competitive advantage. We are now taking this value proposition to selective
vertical markets, including government, wireless, media, enterprise, and maritime. As a network
solution provider we leverage our global network to provide customers managed access services to
the United States Internet backbone, video content, the public switched telephone
network or their corporate headquarters, or government offices. We currently have customers
for which we are providing such services in the United States, Europe, South America, Africa, the
Middle East, and Asia.
Based in Hauppauge, New York, Globecomm also maintains offices in Maryland, New Jersey, Virginia,
the Netherlands, South Africa, Hong Kong, Germany, Singapore, the United Arab Emirates and
Afghanistan.
This press release contains forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based
on managements current expectations and observations. You should not place undue reliance on our
forward-looking statements because the matters they describe are subject to certain risks,
uncertainties and assumptions that are difficult to predict. Our forward-looking statements are
based on the information currently available to us and speak only as of the date of this press
release. Over time, our actual results, performance or achievements may differ from those expressed
or implied by our forward-looking statements, and such differences might be significant and
materially adverse to our security holders.
We have identified some of the important factors that could cause future events to differ from our
current expectations and they are described in our most recent Annual Report on Form 10-K,
including without limitation under the captions ''Risk Factors and ''Managements Discussion and
Analysis of Financial Condition and Results of Operations, and in other documents that we may
file with the SEC, all of which you should review carefully. Please consider our forward-looking
statements in light of those risks as you read this press release.
CONTACT: Globecomm Systems Inc.
David Hershberg, 631-231-9800
Investor Relations:
Matthew Byron, 631-457-1301
Fax: 631-231-1557
info@globecommsystems.com
www.globecommsystems.com.
SOURCE: Globecomm Systems Inc.
David Hershberg, 631-231-9800
Investor Relations:
Matthew Byron, 631-457-1301
Fax: 631-231-1557
info@globecommsystems.com
www.globecommsystems.com.
SOURCE: Globecomm Systems Inc.
-Financial tables follow-
Globecomm Systems Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | March 31, | March 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues from services |
$ | 45,963 | $ | 34,018 | $ | 136,159 | $ | 96,196 | ||||||||
Revenues from infrastructure solutions |
16,520 | 18,782 | 49,771 | 61,362 | ||||||||||||
Total revenues |
62,483 | 52,800 | 185,930 | 157,558 | ||||||||||||
Costs and operating expenses: |
||||||||||||||||
Costs from services |
31,691 | 24,822 | 95,768 | 70,907 | ||||||||||||
Costs from infrastructure solutions |
12,866 | 14,853 | 40,073 | 50,486 | ||||||||||||
Selling and marketing |
4,251 | 3,943 | 12,928 | 10,817 | ||||||||||||
Research and development |
723 | 760 | 2,732 | 2,272 | ||||||||||||
General and administrative |
7,547 | 6,478 | 20,533 | 17,209 | ||||||||||||
Earn-out fair value adjustments |
400 | 23 | 2,549 | 23 | ||||||||||||
Total costs and operating expenses |
57,478 | 50,879 | 174,583 | 151,714 | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | March 31, | March 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Income from operations |
5,005 | 1,921 | 11,347 | 5,844 | ||||||||||||
Interest income |
44 | 58 | 144 | 326 | ||||||||||||
Interest (expense) |
(69 | ) | (27 | ) | (218 | ) | (27 | ) | ||||||||
Income before income taxes |
4,980 | 1,952 | 11,273 | 6,143 | ||||||||||||
Provision for income taxes |
1,992 | 707 | 4,443 | 2,256 | ||||||||||||
Net income |
$ | 2,988 | $ | 1,245 | $ | 6,830 | $ | 3,887 | ||||||||
Basic net income per common share |
$ | 0.14 | $ | 0.06 | $ | 0.32 | $ | 0.19 | ||||||||
Diluted net income per common share |
$ | 0.14 | $ | 0.06 | $ | 0.31 | $ | 0.19 | ||||||||
Weighted-average shares used in the
calculation of basic net income
per common share |
21,442 | 20,601 | 21,230 | 20,466 | ||||||||||||
Weighted-average shares used in the
calculation of diluted net income
per common share |
22,104 | 21,030 | 21,830 | 20,884 | ||||||||||||
Globecomm Systems Inc.
Condensed Consolidated Balance Sheets
(In thousands)
Condensed Consolidated Balance Sheets
(In thousands)
March 31, | June 30, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 39,521 | $ | 42,863 | ||||
Restricted cash |
5,028 | 5,025 | ||||||
Accounts receivable, net |
55,515 | 49,222 | ||||||
Inventories |
47,445 | 34,486 | ||||||
Prepaid expenses and other current assets |
5,372 | 3,100 | ||||||
Deferred income taxes |
1,603 | 1,602 | ||||||
Total current assets |
154,484 | 136,298 | ||||||
Fixed assets, net |
39,447 | 37,839 | ||||||
Goodwill |
40,594 | 40,594 | ||||||
Intangibles, net |
14,542 | 16,196 | ||||||
Deferred income taxes |
3,679 | 7,635 | ||||||
Other assets |
2,232 | 2,148 | ||||||
Total assets |
$ | 254,978 | $ | 240,710 | ||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities |
$ | 64,696 | $ | 59,586 | ||||
Other liabilities |
801 | 2,443 | ||||||
Long term debt |
7,500 | 9,375 | ||||||
Deferred income taxes |
2,203 | 2,203 | ||||||
Total stockholders equity |
179,778 | 167,103 | ||||||
Total liabilities and stockholders equity |
$ | 254,978 | $ | 240,710 | ||||
Reconciliation of Net Income to adjusted EBITDA
(In thousands)
(Unaudited)
(In thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | March 31, | March 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income |
$ | 2,988 | $ | 1,245 | $ | 6,830 | $ | 3,887 | ||||||||
Adjustments: |
||||||||||||||||
Interest (income) |
(44 | ) | (58 | ) | (144 | ) | (326 | ) | ||||||||
Interest expense |
69 | 27 | 218 | 27 | ||||||||||||
Earn-out fair value
adjustments |
400 | 23 | 2,549 | 23 | ||||||||||||
Provision for income taxes |
1,992 | 707 | 4,443 | 2,256 | ||||||||||||
Depreciation and amortization |
2,505 | 1,970 | 6,832 | 5,391 | ||||||||||||
Stock compensation expense |
797 | 640 | 2,513 | 1,704 | ||||||||||||
Acquisition related costs |
462 | 940 | 462 | 940 | ||||||||||||
Adjusted EBITDA |
$ | 9,169 | 5,494 | $ | 23,703 | $ | 13,902 | |||||||||
Globecomm Systems Inc.
Reconciliation of adjusted diluted Net Income per common share
(Unaudited)
Reconciliation of adjusted diluted Net Income per common share
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | March 31, | March 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Diluted net income per common share |
$ | 0.14 | $ | 0.06 | $ | 0.31 | $ | 0.19 | ||||||||
Acquisition related costs (A) |
0.02 | 0.03 | 0.02 | 0.03 | ||||||||||||
Earn-out fair value adjustments (B) |
0.02 | | 0.12 | | ||||||||||||
Non-recurring tax adjustments (C) |
(0.01 | ) | | (0.03 | ) | | ||||||||||
Adjusted diluted net income per common share |
$ | 0.17 | $ | 0.09 | $ | 0.42 | $ | 0.22 | ||||||||
(A) | Amount represents acquisition costs thru March 31, 2011 of approximately $0.5 million related to the Companys acquisition of ComSource (announced on April 8, 2011) for the three and nine months ended March 31, 2011 and acquisition costs of approximately $0.9 million related to the Companys acquisition of C2C/Evocomm for the three and nine months ended March 31, 2010. | |
(B) | Amount represents an increase in fair value of the earn-out of the C2C/Evocomm acquisition. This increase is primarily due to C2C/Evocomm performing better than our original forecasts based on current and future anticipated results. | |
(C) | Amount represents non-recurring tax adjustment related to research and development tax credits for fiscal years 2005 and 2010. |