Comtech Reports Operating Results for Fiscal Third Quarter
Thursday, June 04, 2020 | Comments

Comtech Telecommunications reported operating results for its third fiscal quarter ended April 30 and provided an update on business developments.

Net sales for the third quarter of fiscal 2020 were $135.1 million. Bookings during the third quarter of fiscal 2020 were $137.5 million, with a companywide book-to-bill ratio of 1.02. Backlog as of April 30 was $640.7 million. When adding Comtech's backlog and the total unfunded value of certain multiyear contracts that Comtech has received and for which it expects future orders, its revenue visibility approximates $1 billion.

On a GAAP basis, the company reported an operating loss of $3.1 million and a net loss of $4 million. Comtech's operating loss was impacted by $6 million of acquisition plan expenses and $500,000 of estimated contract settlement costs. Comtech generated GAAP operating cash flows of $7.7 million during the quarter and had $50.6 million of cash and cash equivalents at April 30.

Comtech’s third quarter of fiscal 2020, running from Feb. 1 through April 30, corresponded precisely with the period in which worldwide restrictions on business activities were in force because of the COVID-19 pandemic. As a result, Comtech experienced significant order delays and lower net sales. During the quarter, in response to lower levels of business activity, Comtech implemented a variety of cost-saving measures, including reducing global headcount by about 10%, reducing salaries, suspending merit increases and eliminating certain discretionary expenses. Severance costs relating to these actions were not material and cost reduction efforts continue.

Although the COVID-19 pandemic is by no means over and a second wave of COVID-19 could again alter the business landscape, Comtech believes that the pandemic’s worst impact on its business is largely behind it. Comtech’s long-term fundamentals remain strong as Comtech continues to believe it is well-positioned for growth as business conditions meaningfully improve.

Although it has ceased during the current environment to provide specific financial targets for fiscal 2020 and it remains difficult to predict the timing of customer awards and related shipments, Comtech does expect fiscal 2020 fourth quarter consolidated net sales and net income to be somewhat better than the results it achieved during the third fiscal quarter. Comtech expects to incur acquisition plan expenses of about $3.5 million during the fourth quarter of fiscal 2020.

Comtech’s acquisition of Gilat Satellite Networks remains subject to certain conditions to closing, including regulatory approval in Russia. In May 2020, Comtech received notification from the Federal Antimonopoly Service of the Russian Federation that it was extending the review period for Comtech’s application pending a decision under the Foreign Investment Law to determine whether approval is required from the chairman of the Russian Government Commission for Supervising Foreign Investments.

Comtech said its May acquisition of NG-911 allows Comtech to cost effectively expand sales of its Solacom Guardian call management solutions for public safety. The financial impact of the acquisition was not material.

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