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Globecomm Reports Fiscal 2012 First Quarter Financial Results



8 November 2011

 

Globecomm Systems Inc. announced financial results for the fiscal 2012 first quarter ended September 30, 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:

 

Fiscal Year 2012 First Quarter Results

Revenues for the Company’s fiscal 2012 first quarter increased 33.4% to $71.0 million compared to $53.2 million in the same period last year. Revenues from services increased 17.0% to $50.2 million as compared to $42.9 million in the same period last year. The increase in service revenue was primarily driven by an increase in our access service offering in the government marketplace, coupled with the Company’s acquisition of ComSource, which contributed $4.2 million. Revenues from infrastructure solutions increased by 101.8% to $20.7 million compared to $10.3 million in the same period last year. The increase in infrastructure solutions revenues was primarily driven by milestones achieved on a U.S. Government Agency contract announced on August 4 2011.

 

Net income for the Company’s fiscal 2012 first quarter increased to $9.3 million or $0.41 of diluted net income per common share compared to net income of $2.1 million, or $0.10 of diluted net income per common share in the same period last year. During the first quarter of 2012, the Company recorded a gain for the change in fair value of the earn-out as a result of recent changes in the forecasted performance of the previously announced acquisition of ComSource. In accordance with GAAP, this change in the fair value of the earn-out resulted in a $6.5 million ($0.29 per diluted share) gain to net income. Globecomm will maintain its adjusted diluted net income per common share guidance, which excludes this gain. Excluding this gain, the Company’s adjusted diluted net income per common share for the first quarter of 2012 increased 9.1% to $0.12 from $0.11 in the same period last year. Adjusted EBITDA for the first quarter of 2012 increased to $8.2 million as compared to $6.4 million in the first quarter of 2011. The increases in net income and adjusted EBITDA are primarily attributable to the operating leverage the Company is currently experiencing in the service segment as economies of scale are being recognized on a higher revenue base.

 

Management’s Review of Results and Expectations

David Hershberg, Chairman and CEO, said “The first quarter of fiscal 2012 was in line with internal expectations as we expected some softness in the infrastructure segment as a result of the U.S. Government Agency contract revenues containing lower than normal gross margin due to the competitive landscape of the program. We have reiterated the company’s previously issued financial guidance and look forward to record revenues and adjusted EBITDA for fiscal 2012. The Company continues to provide financial growth and predictability for our shareholders, while the Company invests in new products, services, personnel and back office infrastructure to support our continued growth.”

 

Keith Hall, President and COO, added “Globecomm continues to build upon our value proposition as a global managed communication solutions provider. Our recurring revenue streams continue to grow and mature, in spite of continued economic pressure. Despite tightening government budgets and unexpected funding delays we have maintained our fiscal 2012 expectations. First quarter results were in line with our overall expectations and we expect continued improvement throughout the fiscal year. Our recent acquisition of ComSource has contributed to our overall value proposition and we remain excited about their future. Despite the ComSource EBITDA forecast being lower than original expectations, ComSource contributed to our quarter-over-quarter adjusted EBITDA growth and we are maintaining our fiscal 2012 consolidated adjusted EBITDA guidance. We continue to focus on some key strategic opportunities within the Maritime and Enterprise market verticals.”

 

Management’s Current Expectations for the Fiscal Year Ending June 30, 2012

Globecomm continues to expect the following financial results for the fiscal year 2012:

  • Consolidated revenues to be between $370 and $400 million.
  • Service segment revenues to be between $220 and $230 million.
  • GAAP diluted net income per common share to be between $0.94 and $1.04 (updated for the gain for the adjustment of the fair value of the earn-out).
  • Adjusted diluted net income per common share to be between $0.73 and $0.83.
  • Adjusted EBITDA to be between $42.5 and $46.0 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, acquisition costs and earn-out fair value adjustments. Globecomm believes this provides greater transparency by helping illustrate comparability between current and prior periods. Under the accounting pronouncement on business combinations, effective in fiscal 2010 for the Company, 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 acquisition related 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 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. 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. 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.