Comtech shares results for fiscal 2021 1st quarter and updates its financial targets for fiscal 2021

Comtech Telecommunications Corp. today reported its operating results for the first fiscal quarter ended October 31, 2020 and updated its financial targets for fiscal 2021.

Fiscal 2021 First Quarter Highlights

• Consolidated net sales of $135.2 million and Adjusted EBITDA of $14.3 million (or 10.6% of consolidated net sales) exceeded Comtech's expectation for its first quarter of fiscal 2021. Adjusted EBITDA is a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure and is more fully defined below.

• With bookings of $123.2 million, the Company achieved a book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.91 during its first quarter of fiscal 2021. Backlog as of October 31, 2020 was $605.5 million. The total value of multi-year contracts that Comtech has received is substantially higher than its reported backlog. When adding Comtech’s backlog and the total unfunded value of multi-year contracts that Comtech has received and for which it expects future orders, its revenue visibility approximates $1.0 billion.

• The Company incurred an aggregate of $91.2 million of acquisition plan expenses. Approximately $88.3 million of that amount related to the previously announced litigation and merger termination with Gilat Satellite Networks, Ltd. ("Gilat"), including $70.0 million paid in cash to Gilat. The remaining costs primarily related to the pending acquisition of UHP and GD NG-911 acquisition-related litigation. No tax benefit was recorded for the $70.0 million. The Company also recorded $1.2 million of incremental interest expense for ticking fees related to a now terminated financing commitment letter.

• The Company's annual effective income tax rate was 13.75% and excludes a net discrete tax expense of $0.2 million, primarily related to stock-based awards that were settled during the quarter.

• Including all acquisition plan expenses and ticking fees incurred, Comtech reported a GAAP operating loss of $85.7 million, a GAAP net loss of $85.8 million and a GAAP net loss per diluted share ("EPS") of $3.39 for the first quarter of fiscal 2021. Excluding such costs, the net discrete tax expense and as reconciled to the most directly comparable GAAP financial measures in the table below, Non-GAAP operating income was $5.5 million, Non-GAAP net income was $3.7 million and Non-GAAP EPS was $0.15.

• As of October 31, 2020, Comtech had $32.5 million of cash and cash equivalents and total debt outstanding of $217.0 million.

In commenting on the Company's first quarter fiscal 2021 performance, Fred Kornberg, Chairman of the Board and Chief Executive Officer, noted, "Our first quarter net sales and Adjusted EBITDA exceeded our expectations. With our diversified customer base, product leadership positions and mounting prospects, we are clearly holding our own despite the second wave of the COVID-19 pandemic. Our second quarter of fiscal 2021 has started off strong with the receipt of a $111.6 million funded order to deploy Next-Generation 911 services to the Commonwealth of Pennsylvania. We believe this contract firmly puts us on pace to achieve a book-to-bill ratio in excess of 1.0 for fiscal 2021 and on track for a respectable fiscal year in light of everything that is going on in the world."

COMMENTS AND FINANCIAL TARGETS FOR EXPECTED FISCAL 2021 PERFORMANCE

• Excluding the impact of the pending UHP acquisition and although things could change depending on the ultimate impact of the COVID-19 pandemic, Comtech continues to expect that fiscal 2021 consolidated net sales to be in a range of $610.0 million to $630.0 million. As a result of slight changes in assumed product mix, we are now targeting Adjusted EBITDA in the range of $74.0 million to $76.0 million.

• Fiscal 2021 consolidated net sales are anticipated to reflect a similar percentage of total Commercial Solutions segment sales due to: (i) strong demand for its public safety technology solutions (including beginning work on its new contract to design, deploy, and operate next generation 911 (“NG 911”) services for the State of South Carolina); (ii) providing 5G virtual mobile location-based technology solutions for two U.S. tier-one mobile network operators; (iii) deliveries to support a critical U.S. Air Force and U.S. Army Anti-jam Modem (“A3M”) program under the U.S. Space Force’s Space and Missile Systems Center (“SMC”) agency; and (iv) a similar level of annual sales in its satellite earth station product line as compared to fiscal 2020. In addition, as announced in November 2020, the Company was awarded a statewide contract valued at up to $175.1 million to design, deploy, and operate NG-911 services for the Commonwealth of Pennsylvania, which resulted in the Company recording a booking in its second quarter of fiscal 2021 of $111.6 million. Based on its anticipated timing of performance, the Company expects meaningful revenue contribution from this contract to begin in fiscal 2022.

• Fiscal 2021 consolidated net sales are anticipated to reflect a similar percentage of total Government Solutions segment sales due to ongoing demand for: (i) Manpack Satellite Terminals, networking equipment and other advanced VSAT products by the U.S. Army; (ii) ongoing sustainment services to the U.S. Army for the AN/TSC-198A SNAP terminal; (iii) sustainment services for the U.S. Army's Project Manager Mission Command (“PM MC”) Blue Force Tracking (“BFT-1”) program; and (iv) Joint Cyber Analysis Course (“JCAC”) training solutions. Also, Comtech expects additional orders from the newly introduced Comtech COMET, the world's smallest deployable troposcatter terminal, and its next-generation troposcatter system used by the U.S. Marine Corps.

• Additional information about the pending UHP acquisition and other acquisition plan expenses can be found in the Company’s Form 10-Q as filed with the Securities and Exchange Commission. Because the amount of acquisition plan expenses remains largely unpredictable and given the pandemic's continued impact on global business conditions, the Company is not providing any GAAP operating income, GAAP net income or GAAP EPS guidance or a reconciliation of the Company’s projected results to the most comparable GAAP measure, as such a reconciliation cannot be prepared without unreasonable effort. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.