Globecomm Reports Fiscal 2013 Second Quarter and Six Month Financial Results

Wed Feb 6, 2013 4:06pm EST

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HAUPPAUGE, N.Y.--(Business Wire)--
Globecomm Systems Inc. (NASDAQ:GCOM), a leading communications solutions
provider, today reported financial results for the fiscal 2013 second quarter
and six months ended December 31, 2012. 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 in
the attached tables. The following are highlights: 

Revenues($M)

                                                                                                                           
                               Q2 FY13         Q2 FY12         % Change      6 Months          6 Months          % Change  
                                                                             FY13              FY12                        
                                                                                                                           
 Service                       $     50.2      $     54.7      (8.2)         $      97.3       $      104.9      (7.2)     
 Infrastructure solutions      $     29.6      $     40.5      (27.1)        $      63.6       $      61.3       3.7       
 Consolidated                  $     79.7      $     95.2      (16.2)        $      160.9      $      166.2      (3.2)     
                                                                                                                           


GAAP Results($M except EPS)

                                                                                                              
                  Q2 FY13         Q2FY12          % Change      6 Months          6 Months          % Change  
                                                                FY13              FY12                        
                                                                                                              
 Net income       $     3.8       $     9.3       (58.6)        $      6.5        $      18.6       (65.0)    
 Diluted EPS      $     0.17      $     0.41      (58.5)        $      0.28       $      0.82       (65.9)    
                                                                                                              


Non-GAAP Results($M except EPS)

                                                                                                                       
                           Q2 FY13         Q2 FY12         % Change      6 Months          6 Months          % Change  
                                                                         FY13              FY12                        
                                                                                                                       
 Adjusted EBITDA           $     9.8       $     12.0      (18.3)        $      17.8       $      20.2       (11.9)    
 Adjusted Diluted EPS      $     0.17      $     0.23      (26.1)        $      0.28       $      0.35       (20.0)    
                                                                                                                       


Fiscal Year 2013 Second Quarter Results

Revenues for the Company`s fiscal 2013 second quarter were $79.7 million as
compared to $95.2 million in the same period last year, a decrease of 16.2%.
Revenues from services were $50.2 million as compared to $54.7 million in the
same period last year, a decrease of 8.2%. The decrease in service revenues
reflects a decrease in our access service offering in the government marketplace
due to the reduction of services in Iraq. Revenues from infrastructure solutions
were $29.6 million as compared to $40.5 million in the same period last year, a
decrease of 27.1%. The decrease in infrastructure revenues was due to reduction
in revenue milestones under a major government program, which contributed $7.2
million in the second quarter as compared to $14.1 million in the same period
last year. 

Net income for the Company`s fiscal 2013 second quarter was $3.8 million, or
$0.17 of diluted net income per common share, compared to net income of $9.3
million or $0.41 of diluted net income per common share in the same period last
year. During the second quarter of fiscal 2012, the Company recorded a gain for
the change in fair value of the ComSource earn-out as a result of a reduction in
ComSource`s actual results and forecasted performance. In accordance with GAAP,
this change in the fair value of the earn-out resulted in a $4.1 million ($0.18
per diluted share) gain to net income. Adjusted diluted net income per common
share for the second quarter of fiscal year 2013 was $0.17 compared to $0.23 in
the same period last year. The reduction in adjusted diluted net income per
common share was primarily driven by the reduction of revenues in both operating
segments, partially offset by reductions in other operating expenses based on
certain cost cutting initiatives. 

Adjusted EBITDA for the second quarter of 2013 was $9.8 million as compared to
$12.0 million in the same period last year. The Company`s operating cash flow
for the quarter was $8.0 million as compared to $8.8 million in the same period
last year. 

Fiscal Year 2013 Six Month Results

Revenues for the Company`s fiscal 2013 six months ended December 31, 2012 were
$160.9 million as compared to $166.2 million in the same period last year, a
decrease of 3.2%. Revenues from services were $97.3 million as compared to
$104.9 million in the same period last year, a decrease of 7.2%. The decrease in
service revenues reflects a decrease in our access service offering in the
government marketplace due to the reduction of services in Iraq. Revenues from
infrastructure solutions were $63.6 million as compared to $61.3 million in the
same period last year, an increase of 3.7%. The increase in infrastructure
revenues was primarily driven by the achievement of revenue milestones under a
major government program. 

Net income for the Company`s fiscal 2013 six months ended December 31, 2012 was
$6.5 million or $0.28 of diluted net income per common share compared to net
income of $18.6 million, or $0.82 of diluted net income per common share in the
same period last year. During the six months ended December 31, 2011, the
Company recorded a gain for the change in fair value of the ComSource earn-out
as a result of changes in ComSource`s actual results and forecasted performance.
In accordance with GAAP, this change in the fair value of the earn-out resulted
in a $10.6 million ($0.47 per diluted share) gain to net income. Adjusted
diluted net income per common share for the fiscal year 2013 six months ended
December 31, 2012 was $0.28 as compared to $0.35 in the same period last year.
The reduction in adjusted diluted net income per common share was primarily
driven by the reduction of service revenues, partially offset by reductions in
other operating expenses based on certain cost cutting initiatives. 

Adjusted EBITDA for the six months ended December 31, 2012 decreased to $17.8
million as compared to $20.2 million in the same period last year. The Company`s
operating cash flow for the six months ended December 31, 2012 was $14.7 million
as compared to $14.6 million in the same period last year. 

Management`s Review of Results and Expectations

David Hershberg, Chairman and CEO, said: "This has been a challenging year for
the Company due to a number of delays and uncertainties in awarding US
Government contracts. We believe that when the budget is passed at a reasonable
level that we will be in a good position moving forward. The Company`s
diversified portfolio is helping to mitigate the effects of the current
reduction in Government spending resulting from troop draw downs in Iraq and
Afghanistan. While we continue to face some U.S. Government budget and economic
headwinds, we remain focused on executing on our overall business plan and
vision as we explore strategic alternatives to maximize shareholder value." 

Keith Hall, President and COO, added: "The Company continues to invest in a
number of strategic initiatives including our Tempo Enterprise Media Platform
and our Hosted Switch platforms, as we continue to increase the value
proposition of our global network and our vision as an end to end data
management services company. We continue to leverage this value proposition to
enter new markets, as we diversify our customer base and build our recurring
revenue streams. Most recently we have begun to leverage our capabilities within
the Cyber Security arena. As Dave points out, this diversity continues to help
mitigate the contraction of our business in Iraq and Afghanistan. Looking
forward, I remain excited about our opportunities to grow." 

Management`s Current Expectations for the Fiscal Year Ending June 30, 2013

Globecomm currently expects the following financial results for the fiscal year
2013:

* Consolidated revenues to be between $320 and $340 million. 
* Services segment revenues to be between $200 and $210 million. 
* GAAP diluted net income per common share to be between $0.66 and $0.71. 
* Adjusted EBITDA to be between $40 and $42 million.

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, and earn-out fair
value adjustments. Globecomm believes this provides greater transparency by
helping illustrate comparability between current and prior periods. Under an
accounting pronouncement on business combinations, acquisition related costs 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
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
Company`s management regularly uses supplemental non-GAAP financial measures
internally to understand, manage and evaluate the Company`s 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 earn-out
fair value adjustments, which is. not in accordance with GAAP. However,
Globecomm believes this measure provides greater transparency by helping
illustrate comparability between current and prior periods. 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
Company`s consolidated financial statements prepared in accordance with GAAP.
The Company`s management regularly uses supplemental non-GAAP financial measures
internally to understand, manage and evaluate the Company`s business and make
operating decisions. 

About Globecomm Systems

Globecomm Systems Inc. ("we," "our," "us" or "Globecomm"), is a leading global
communications solutions provider. Employing our expertise in emerging
communication technologies, including satellite and other transport mediums, 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 focus this value
proposition in selective vertical markets, including government, wireless,
media, enterprise and maritime. As a communications solutions 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 these solutions 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 management's 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 and Quarterly Report on Form 10-Q, including
without limitation under the captions "Risk Factors" and "Management's
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.

                                                                                                                                                                   
 Globecomm Systems Inc.                                                                                                                                            
 Consolidated Statements of Operations                                                                                                                             
 (In thousands, except per share data)                                                                                                                             
 (Unaudited)                                                                                                                                                       
                                                                                                                                                                   
                                                                Three Months Ended                                  Six Months Ended                               
                                                                December 31,                  December 31,          December 31,                December 31,       
                                                                2012                          2011                  2012                        2011               
                                                                                                                                                                   
 Revenues from services                                         $        50,172               $        54,652       $        97,344             $        104,891   
 Revenues from infrastructure solutions                                  29,567                        40,538                63,558                      61,269    
 Total revenues                                                          79,739                        95,190                160,902                     166,160   
 Costs and operating expenses:                                                                                                                                     
                       Costs from services                               33,779                        35,821                65,783                      69,786    
                       Costs from infrastructure solutions               26,707                        36,370                58,779                      54,492    
                       Selling and marketing                             4,418                         4,855                 8,706                       9,448     
                       Research and development                          986                           1,748                 1,939                       3,504     
                       General and administrative                        7,911                         8,391                 15,606                      16,734    
                       Earn-out fair value adjustments                   -                             (4,100)               -                           (10,574)  
 Total costs and operating expenses                                      73,801                        83,085                150,813                     143,390   
 Income from operations                                                  5,938                         12,105                10,089                      22,770    
                                                                                                                                                                   
 Interest income                                                         82                            57                    167                         112       
 Interest (expense)                                                      (103)                         (157)                 (217)                       (322)     
 Income before income taxes                                              5,917                         12,005                10,039                      22,560    
                                                                                                                                                                   
 Provision for income taxes                                              2,088                         2,755                 3,534                       3,983     
 Net income                                                     $        3,829                $        9,250        $        6,505              $        18,577    
                                                                                                                                                                   
 Basic net income per common share                              $        0.17                 $        0.42         $        0.29               $        0.85      
 Diluted net income per common share                            $        0.17                 $        0.41         $        0.28               $        0.82      
                                                                                                                                                                   
 Weighted-average shares used in the                                     22,639                        22,038                22,530                      21,903    
 calculation of basic net income                                                                                                                                   
 
per common share                                                                                                                                                 
 Weighted-average shares used in the                                     22,987                        22,656                22,921                      22,594    
 calculation of diluted net income                                                                                                                                 
 
per common share                                                                                                                                                 
                                                                                                                                                                   


                                                                                                              
 Globecomm Systems Inc.                                                                                       
 
Condensed Consolidated Balance Sheets                                                                       
 (In thousands)                                                                                               
                                                                                                              
                                                                        December 31,          June 30,        
                                                                        2012                  2012            
                                                                        (Unaudited)                           
 Assets                                                                                                       
 Current assets:                                                                                              
                         Cash and cash equivalents                      $        73,551       $      72,196   
                         Accounts receivable, net                                55,955              59,224   
                         Inventories                                             36,378              30,664   
                         Prepaid expenses and other current assets               4,770               4,101    
                         Deferred income taxes                                   3,559               7,041    
 Total current assets                                                            174,213             173,226  
 Fixed assets, net                                                               49,376              47,712   
 Goodwill                                                                        68,999              68,463   
 Intangibles, net                                                                18,110              19,331   
 Other assets                                                                    1,388               1,335    
 Total assets                                                           $        312,086      $      310,067  
                                                                                                              
                                                                                                              
 Liabilities and Stockholders` Equity                                                                         
 Current liabilities                                                    $        58,982       $      63,389   
 Other liabilities                                                               164                 230      
 Long term debt                                                                  11,525              14,575   
 Deferred income taxes                                                           12,485              12,485   
 Total stockholders` equity                                                      228,930             219,388  
 Total liabilities and stockholders` equity                             $        312,086      $      310,067  
                                                                                                              


                                                                                                                                                   
 Globecomm Systems Inc.                                                                                                                            
 
Reconciliation of Net Income to adjusted EBITDA                                                                                                  
 (In thousands)                                                                                                                                    
 (Unaudited)                                                                                                                                       
                                                                                                                                                   
                                                Three Months Ended                                  Six Months Ended                               
                                                December 31,                  December 31,          December 31,                December 31,       
                                                2012                          2011                  2012                        2011               
                                                                                                                                                   
 Net income                                     $        3,829                $        9,250        $        6,505              $        18,577    
 Adjustments:                                                                                                                                      
           Interest (income)                             (82)                          (57)                  (167)                       (112)     
           Interest expense                              103                           157                   217                         322       
           Earn-out fair value adjustments               -                             (4,100)               -                           (10,574)  
           Provision for income taxes                    2,088                         2,755                 3,534                       3,983     
           Depreciation and amortization                 2,819                         3,049                 5,792                       6,196     
           Stock compensation expense                    1,017                         905                   1,886                       1,765     
 Adjusted EBITDA                                $        9,774                $        11,959       $        17,767             $        20,157    
                                                                                                                                                   


                                                                                                                                               
 Globecomm Systems Inc.                                                                                                                        
 
Reconciliation of adjusted diluted Net Income per common share                                                                               
 (Unaudited)                                                                                                                                   
                                                                                                                                               
                                             Three Months Ended                                  Six Months Ended                              
                                             December 31,                  December 31,          December 31,                December 31,      
                                             2012                          2011                  2012                        2011              
                                                                                                                                               
 Diluted net income per common share         $        0.17                 $        0.41         $        0.28               $        0.82     
 Earn-out fair value adjustments                      -                             (0.18)                -                           (0.47)   
 Adjusted diluted net income per common      $        0.17                 $        0.23         $        0.28               $        0.35     
 share                                                                                                                                         
                                                                                                                                               


For Globecomm Investor Relations information:
Matthew Byron, 631-457-1301
Senior Vice President, Corporate Office IR/M&A
ir@globecommsystems.com
or
Globecomm Systems Inc.
Phone: 631-231-9800; Fax: 631-231-1557
Web: http://www.globecommsystems.com

Copyright Business Wire 2013

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