COM DEV Announces Third Quarter Fiscal 2015 Results

CAMBRIDGE, ON, Sept. 11, 2015 /CNW/ - COM DEV International Ltd. (TSX:CDV) today announced third quarter financial results for the three- and nine-month periods ended July 31, 2015. All amounts are stated in Canadian dollars unless otherwise noted.

Third Quarter Highlights

  • Revenue was $58.4 million, a 15.0% increase over $50.8 million in the third quarter of 2014.
  • New orders totalled $53.1 million, up 45.9% from $36.4 million in Q3 2014.
  • Backlog closed at $151.2 million, a 30.9% increase over $115.5 million at the end of Q3 2014.
  • Gross margin was 28.9%, up from 26.1% in Q3 2014.
  • Adjusted EBITDA was $7.9 million, compared to $7.8 million in Q3 2014.  (A definition and reconciliation are provided below.)
  • COM DEV's exactEarth™ subsidiary doubled its revenue to $7.7 million, and significantly grew its EBITDA to $2.0 million and its adjusted EBITDA to $3.3 million.  Both EBITDA figures compare to $0.0 million in Q3 2014.
  • Net income attributable to shareholders was $2.9 million or $0.04 per share, compared to $3.5 million or $0.05 per share in Q3 2014.
  • Made a US$500,000 strategic investment in RF integrated circuit designer Anokiwave Inc. to secure access to key technology.

"With the wind-down of our El Segundo facility behind us we delivered solid performance in our core business in the third quarter," said Michael Pley, CEO.  "Integration of our two recent acquisitions is proceeding as planned, and in addition we are pursuing a number of compelling organic growth opportunities.  These factors, combined with the ongoing strength of our traditional business, position us to maintain and accelerate our recent momentum into 2016."

Progress on Growth Initiatives

On June 1, COM DEV completed the US$22.6 million acquisition of leading waveguide manufacturer Pacific Wave Systems (PWS).  The transaction strengthens COM DEV's equipment portfolio with a complementary space product that is expected to benefit from market trends including the growth in high-throughput satellites.

On June 8, exactEarth™ announced a strategic alliance with Harris Corporation that will provide exactEarth with exclusive access to 58 satellites on the forthcoming Iridium NEXT satellite constellation.  The alliance will enable exactEarth to enhance its system performance with real-time global coverage which, combined with its superior detection technology, creates an overwhelming competitive advantage.  The alliance is also designed to allow exactEarth to significantly expand its range of maritime services and broaden its customer base.  The establishment of Harris as exactEarth's partner provider of AIS data services to all U.S. Government customers is expected to increase penetration in that key market.

Financial Review

COM DEV's third quarter 2015 revenue was $58.4 million, a 15.0% increase compared to $50.8 million in Q3 2014.  The largest component of total revenue, SatCom equipment revenue, was $38.2 million compared to $37.4 million in Q3 2014.  The breakdown of SatCom equipment revenue by sector during Q3 2015 was 98% commercial (2014: 86%), 1% civil (2014: 5%) and 1% military (2014: 9%).

The two companies acquired in 2015, MESL Microwave and PWS, generated a total of $5.9 million of revenue in the third quarter.  The Data Services segment contributed $4.1 million of revenue growth, driven by an increased subscriber base and by a sale of historic ship tracking data to Harris Corporation carried out in accordance with exactEarth's agreement with that company.  Growth in these areas helped offset a $2.6 million revenue decrease at the Company's El Segundo facility, which contributed minimal revenue after being wound down in the second quarter of 2015.

The Company received new orders totalling $53.1 million during the quarter, an increase of 45.1% compared to $36.4 million of orders booked in Q3 2014.  Order activity increased company-wide, led by the UK operations including MESL.  The sector split for SatCom equipment orders of $35.6 million was 97% commercial and 3% civil.  

Total backlog at July 31, 2015 was $151.2 million, compared to $115.5 million a year earlier.  The SatCom equipment backlog of $88.8 million was split between the Company's commercial, civil and military sectors at a ratio of 80%, 19% and 1% respectively, compared to a split of 85%, 11% and 4% applicable to SatCom equipment backlog of $68.6 million at July 31, 2014. The Company expects to convert approximately 62% of the total backlog into revenue beyond the end of fiscal 2015. 

An additional $56.2 million of follow-on orders are expected to be realized from Authorities to Proceed (ATPs) already received, as well as highly probable unexercised options on contracts awarded during the current and previous quarters which management expects to realize. This compares to $37.1 million at the end of Q3 2014. COM DEV only includes amounts in orders and backlog once the final contracts are in place.

Consolidated gross margin was $16.9 million in the third quarter of 2015, representing 28.9% of total revenues, compared to gross margin of $13.3 million or 26.1% of total revenues in Q3 2014. Consolidated gross margin was positively impacted by a historic data sale in the Data Services segment, but negatively impacted by a one-time depreciation charge.

Selling expenses of $3.9 million increased by $1.0 million due to an increased volume of bids and proposal work. This level of bids and proposal work is consistent with the volume of opportunities the Company is seeing in the Space market.  General expenses of $8.8 million were up by $3.7 million from the previous year, reflecting the inclusion of expenses for MESL and PWS, as well as $2.5 million of IPO and other one-time strategic corporate development costs recognized in the quarter.

Net research and development expense of $2.9 million was up from $1.4 million in Q3 2014.  Increased investments designed to favourably position the Company to participate in "new space" initiatives and a reduction in investment tax credits recoverable were only partially offset by higher R&D funding recoveries.

The Company recorded an income tax recovery of $8.7 million in the third quarter.  This was primarily a result of the PWS acquisition which led to the recognition of deferred tax assets relating to U.S. loss carryforwards that were previously unrecognized as it was not considered probable that these assets would be realized.

COM DEV recognized a foreign exchange loss of $4.5 million in Q3 2015 primarily due to a decrease in the value of the Canadian dollar relative to the U.S. dollar during the quarter, compared with a gain of $0.3 million a year earlier.  The foreign exchange loss is the result of three factors: (i) an unrealized loss of $3.0 million (which must be recognized immediately for accounting purposes) on the mark-to-market valuation of the Company's forward currency derivative instruments; (ii) a realized loss of $2.4 million on the settlement of foreign currency derivatives maturing in the quarter; and (iii) a realized gain of $0.9 million related to the translation of balance sheet accounts and settlements during the quarter.  Offsetting this foreign exchange loss was a $2.0 million increase in revenue and gross margin relating to U.S. dollar-denominated contracts, which increased in value during the third quarter as a result of the weakening Canadian dollar.

EBITDA attributable to shareholders was $(0.5) million in the third quarter, compared to $7.0 million in Q3 2014. The decrease in EBITDA is primarily related to increased operating expenses as described above. Adjusted EBITDA attributable to shareholders, which adjusts for a foreign exchange loss and IPO and one-time strategic corporate development costs, among other items, was $7.9 million, compared to $7.8 million in Q3 2014. (A definition and reconciliation of adjusted EBITDA are provided below.)

Net income attributable to shareholders was $2.9 million in the third quarter, compared to $3.5 million a year earlier.  Increased gross margin and the income tax recovery were offset by higher operating expenses, including IPO and corporate costs and acquisition-related costs, and by the foreign exchange loss.

COM DEV had $17.2 million of cash and equivalents at July 31, 2015, compared to $33.6 million at the end of fiscal 2014. The Company used $4.0 million of cash in operating activities in Q3 2015, compared to Q3 2014 when $1.1 million was used.  During the third quarter the Company borrowed $20 million under its acquisition facility to finance the PWS acquisition.  An operating credit line of $20 million was not drawn upon at the end of Q3 2015.

The Company's basic share count stood at 76,554,352 on September 10, 2015.

Dividend

The Board of Directors has declared a quarterly dividend of $0.03 per share, to be paid on October 5, 2015, to shareholders of record on September 21, 2015.

Conference Call

A conference call will be held Friday, September 11, 2015 at 10:00 am EDT to discuss this announcement.  To access the call, dial 647-427-7450 or 1-888-231-8191.  To access the live webcast, please visit the Company's website at www.comdevinternational.com or www.newswire.ca for directions.  Participants will require Windows Media Player™ to listen to the webcast. 

About COM DEV

COM DEV International Ltd. (www.comdevinternational.com) is a leading global provider of space hardware and services. The company has a staff of more than 1,250, annual revenues of over $200 million, and facilities in Canada, the United Kingdom, the United States, India and China. COM DEV designs, manufactures and integrates advanced products, subsystems and microsatellites that are sold to major satellite prime contractors, government agencies and satellite operators, for use in communications, space science, remote sensing and defence applications. The company has won contracts to supply its equipment on over 950 spacecraft. COM DEV's majority-owned subsidiary, exactEarth Ltd., provides satellite data services for global maritime surveillance.

Forward-Looking Statements

This news release contains statements that, to the extent they are not recitations of historical fact, may constitute "forward-looking statements" within the meaning of applicable Canadian securities laws. Forward-looking statements may include financial and other projections, as well as statements regarding COM DEV's future plans, objectives or economic performance, or the assumptions underlying any of the foregoing. COM DEV uses words such as "may", "would", "could", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "forecast", "project", "estimate" and similar expressions to identify forward-looking statements. Any such forward-looking statements are based on assumptions and analyses made by COM DEV in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors COM DEV believes are appropriate under the relevant circumstances. However, whether actual results and developments will conform to COM DEV's expectations and predictions is subject to any number of risks, assumptions and uncertainties.  Many factors could cause COM DEV's actual results, historical financial statements, or future events to differ materially from those expressed or implied by the forward-looking statements contained in this news release.  These factors include, without limitation: uncertainty in the global economic environment; fluctuations in currency exchange rates; delays in the purchasing decisions of COM DEV's customers; the competition COM DEV faces in its industry and/or marketplace; and the possibility of technical, logistical or planning issues in connection with the deployment of COM DEV's products or services.

The triangular logo and the word COM DEV are each registered trademarks and the property of COM DEV Ltd. All rights reserved.

Non-IFRS Measures

In this news release, the Company provides information about orders, contract backlog and earnings before interest, taxes, depreciation and amortization ("EBITDA"), as well as adjusted EBITDA. Orders, backlog, EBITDA and adjusted EBITDA measures are not defined by International Financial Reporting Standards ("IFRS") and the Company's measurement of them may vary from that used by others.  For additional information, please see the "Use of Non-IFRS Measures" section in the Company's Management's Discussion and Analysis for the third quarter ended July 31, 2015.

The Company measures EBITDA as net income attributable to shareholders plus interest, taxes, other financial costs, depreciation and amortization.  The Company defines adjusted EBITDA as EBITDA adjusted for acquisition-related costs, IPO and one-time strategic corporate development costs, restructuring and termination benefits (recovery), losses related to the wind down of the Company's El Segundo, California operation, impairment loss (reversal) and foreign currency exchange gain or loss.  The Company believes that adjusted EBITDA is useful supplemental information as it provides an indication of the income generated by the Company's main business activities before taking into consideration how they are financed or taxed, and excludes the impact of items that are considered by management to be outside of COM DEV's ongoing operational results.  Readers should be cautioned, however, that adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of the Company's performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows.

A reconciliation of adjusted EBITDA to net income determined in accordance with IFRS, is provided below.




For the three months ended July 31,

In millions of dollars


2015


2014

Net income attributable to shareholders

$

2.9

$

3.5

Interest expense


0.5


0.1

Other financial expense


0.3


0.1

Income taxes


(8.7)


0.7

Depreciation and amortization


4.2


2.9

Depreciation and amortization on acquisition related assets


0.8


-

Non-controlling interest adjustment for items above


(0.5)


(0.3)

EBITDA attributable to shareholders


(0.5)


7.0

Adjustments:





Acquisition related costs


0.8


-

IPO and one-time strategic corporate development costs


2.5


-

Restructuring and termination benefits


0.8


-

Loss from El Segundo operation (see note)


0.2


1.1

Foreign currency exchange loss (gain)


4.5


(0.3)

Non-controlling interest adjustment for items above


(0.4)


-

Adjusted EBITDA attributable to shareholders

$

7.9

$

7.8

Note: Loss from El Segundo operation excludes restructuring and termination benefits, depreciation and amortization, and impairment loss.


 COM DEV International Ltd. 

 Consolidated Statements of Financial Position 

 (Canadian dollars in thousands) 

 Unaudited 









As at July 31,

2015



As at October 31,

2014







Assets







Current assets








Cash and cash equivalents

$

17,194


$

33,570



Accounts receivable


33,765



35,613



Inventory


61,857



61,934



Prepaid expenses and other


5,286



3,701



Income taxes recoverable


1,271



1,002



Investment tax credits


2,735



3,195



Assets held for sale


13,812



-


Total current assets


135,920



139,015








Non-current assets








Investment


653



-



Property, plant and equipment


89,437



97,499



Intangible assets


62,293



22,110



Goodwill


25,389



-



Investment tax credits


11,628



12,571



Deferred income tax assets


5,505



4,032



Total non-current assets


194,905



136,212


Total assets

$

330,825


$

275,227







Liabilities







Current liabilities








Accounts payable and accrued liabilities

$

46,365


$

31,492



Income taxes payable


70



296



Provisions


1,619



417



Billings in excess of costs and earnings on contracts in progress


13,175



12,790



Current portion of loans payable


56,015



7,677


Total current liabilities


117,244



52,672








Non-current liabilities








Accounts payable and accrued liabilities


9,357



283



Loans payable


2,013



11,649



Employee future benefits


5,889



6,207



Deferred income tax liabilities


1,981



-



Total non-current liabilities


19,240



18,139


Total liabilities

$

136,484


$

70,811







Equity








Share capital

$

177,361


$

177,100



Treasury stock


(952)



(912)



Contributed surplus


178,309



178,439



Accumulated other comprehensive income


11,639



2,357



Deficit


(176,813)



(157,792)


Equity attributable to shareholders


189,544



199,192



Non-controlling interest


4,797



5,224


Total equity


194,341



204,416

Total liabilities and equity

$

330,825


$

275,227













See accompanying notes to the interim condensed consolidated financial statements

COM DEV International Ltd.

Consolidated Statements of Changes in Equity

(Canadian dollars in thousands)

Unaudited

























For the nine months ended July 31, 2015

Deficit


Accumulated

Other

Comprehensive

Income


Share Capital


Treasury Stock


Contributed

Surplus


Total Equity

Attributable to

Shareholders


Non-Controlling

Interest


Total Equity

























Balance, October 31, 2014

$

(157,792)


$

2,357


$

177,100


$

(912)


$

178,439


$

199,192


$

5,224


$

204,416

Net loss


(12,155)



-



-



-



-



(12,155)



(359)



(12,514)

Other comprehensive income (loss)


-



9,282



-



-



-



9,282



(68)



9,214

Common shares issued


-



-



261



-



(228)



33



-



33

Expense recognized for ESOP awards


-



-



-



-



161



161



-



161

Treasury stock


-



-



-



(1,148)



-



(1,148)



-



(1,148)

Dividends


(6,866)



-



-



-



-



(6,866)



-



(6,866)

Settlement of long-term incentive plans, net of tax


-



-



-



1,108



(1,859)



(751)



-



(751)

Expense recognized for long-term incentive plans


-



-



-



-



1,518



1,518



-



1,518

Expense recognized for stock-based compensation


-



-



-



-



278



278



-



278

Balance, July 31, 2015

$

(176,813)


$

11,639


$

177,361


$

(952)


$

178,309


$

189,544


$

4,797


$

194,341

















































For the nine months ended July 31, 2014
















































Balance, October 31, 2013

$

(163,259)


$

1,982


$

346,572


$

(1,051)


$

8,326


$

192,570


$

6,220


$

198,790

Net income (loss)


10,650



-



-



-



-



10,650



(772)



9,878

Other comprehensive income (loss)


-



1,819



-



-



-



1,819



(23)



1,796

Common shares issued


-



-



1,261



-



(574)



687



-



687

Common stock repurchased and cancelled


-



-



(273)



-



(71)



(344)



-



(344)

Expense recognized for ESOP awards


-



-



-



-



155



155



-



155

Treasury stock


-



-



-



(675)



-



(675)



-



(675)

Reduction in stated capital


-



-



(170,000)



-



170,000



-



-



-

Dividends


(2,293)



-



-



-



-



(2,293)



-



(2,293)

Settlement of long-term incentive plans, net of tax


-



-



-



1,588



(1,828)



(240)



-



(240)

Expense recognized for long-term incentive plans


-



-



-



-



1,010



1,010



-



1,010

Expense recognized for stock-based compensation


-



-



-



-



302



302



-



302

Balance, July 31, 2014

$

(154,902)


$

3,801


$

177,560


$

(138)


$

177,320


$

203,641


$

5,425


$

209,066

























See accompanying notes to the interim condensed consolidated financial statements

COM DEV International Ltd.

Consolidated Statements of Income

(Canadian dollars in thousands, except for per share figures)

Unaudited






For the three months ended July 31,


For the nine months ended July 31,



2015



2014



2015



2014














Revenue

$

58,400


$

50,814


$

168,397


$

156,967


Cost of revenue


41,468



37,555



125,874



114,478


Gross margin


16,932



13,259



42,523



42,489














Selling expenses


3,924



2,913



11,483



8,751


General expenses


8,807



5,140



20,962



15,785


Acquisition related costs


771



-



2,983



-


Net research and development expenses


2,886



1,381



5,804



2,891


Impairment loss


-



-



1,731



-


Restructuring and termination benefits expense


755



30



3,774



221


Operating expenses


17,143



9,464



46,737



27,648













Operating (loss) income


(211)



3,795



(4,214)



14,841














Interest expense


450



130



685



381


Foreign exchange loss (gain)


4,461



(326)



13,093



8


Other expense


503



80



914



260

(Loss) income before income taxes


(5,625)



3,911



(18,906)



14,192














Income tax (recovery) expense


(8,696)



745



(6,392)



4,314

Net income (loss)

$

3,071


$

3,166


$

(12,514)


$

9,878













Attributable to:













Shareholders


2,935



3,547



(12,155)



10,650


Non-controlling interest


136



(381)



(359)



(772)


$

3,071


$

3,166


$

(12,514)


$

9,878













Earnings (loss) per share













Basic and diluted earnings (loss) per share

$

0.04


$

0.05


$

(0.16)


$

0.14













See accompanying notes to the interim condensed consolidated financial statements

COM DEV International Ltd.

Consolidated Statements of Comprehensive Income

(Canadian dollars in thousands)

Unaudited






For the three months ended July 31,


For the nine months ended July 31,



2015



2014



2015



2014













Net income (loss)

$

3,071


$

3,166


$

(12,514)


$

9,878













Other comprehensive income (loss):












Items that may be subsequently reclassified to net income:













Foreign currency translation, net of income tax expense


4,672



(171)



8,579



1,796













Items that will not be subsequently reclassified to net income:













Actuarial gains on defined benefit pension plans and other post-retirement plans,

net of income tax expense


644



-



635



-













Other comprehensive income (loss); net of income taxes


5,316



(171)



9,214



1,796













Comprehensive income (loss)

$

8,387


$

2,995


$

(3,300)


$

11,674













Attributable to:













Shareholders

$

8,304


$

3,374


$

(2,873)


$

12,469


Non-controlling interest


83



(379)



(427)



(795)


$

8,387


$

2,995


$

(3,300)


$

11,674













See accompanying notes to the interim condensed consolidated financial statements

 COM DEV International Ltd. 

 Consolidated Statements of Cash Flows 

 (Canadian dollars in thousands) 

 Unaudited 


For the three months ended July 31,


For the nine months ended July 31,




2015



2014



2015



2014














Operating activities















Net income (loss)


$

3,071


$

3,166


$

(12,514)


$

9,878



Depreciation and amortization



5,012



2,907



13,988



8,424



Impairment loss



-



-



1,731



-



Loss on disposal of assets



279



27



258



45



Defined benefit plan expenses (gains)



122



168



(190)



718



Defined benefit plan contributions



(257)



(245)



(508)



(743)



Stock-based compensation expense



663



428



1,796



1,312



Employee stock ownership plan awards



46



45



161



155



Non-cash loan adjustments



2,063



(2)



3,961



950



Investment tax credits recoverable



232



(910)



(1,297)



(3,178)



Deferred income tax (recovery) expense



(9,142)



908



(9,046)



2,284



Unrealized fair value loss (gain) on foreign exchange derivatives



2,971



(577)



8,585



845



Withholding tax remittance on stock units settlement



(944)



(645)



(944)



(676)




4,116



5,270



5,981



20,014



Net change in non-cash working capital balances



(8,161)



(6,366)



9,752



(3,632)


Operating activities



(4,045)



(1,096)



15,733



16,382














Financing activities















Common shares issued



-



348



33



687



Common stock repurchased and cancelled



-



-



-



(344)



Purchase of treasury stock



(379)



(187)



(1,148)



(675)



Proceeds from advances of long-term debt



20,000



-



41,871



838



Repayments of long-term debt and debt issue costs



(2,373)



(1,127)



(7,130)



(2,687)



Dividends paid



(2,298)



(2,293)



(6,866)



(2,293)


Financing activities



14,950



(3,259)



26,760



(4,474)














Investing activities















Acquisition of property, plant and equipment



(2,693)



(2,254)



(7,937)



(6,959)



Proceeds on disposal of property, plant and equipment



1,457



23



1,566



23



Acquisition of intangible assets



(7,129)



(1,423)



(8,383)



(4,029)



Investment in Anokiwave



(617)



-



(617)



-



Business acquisitions, net of cash acquired



(22,501)



-



(45,902)



-


Investing activities



(31,483)



(3,654)



(61,273)



(10,965)














Effect of exchange rate changes on cash and cash equivalents



917



(11)



2,404



559














Net (decrease) increase in cash and cash equivalents



(19,661)



(8,020)



(16,376)



1,502

Cash and cash equivalents, beginning of the period



36,855



44,419



33,570



34,897

Cash and cash equivalents, end of the period


$

17,194


$

36,399


$

17,194


$

36,399














Supplemental cash flow information














Interest received


$

28


$

38


$

125


$

116


Interest paid



413



128



822



386


Income taxes paid



249



1,307



901



1,308














See accompanying notes to the interim condensed consolidated financial statements














 

SOURCE Com Dev International Ltd.

For further information: Gary Calhoun, Chief Financial Officer, Tel: (519) 622-2300 ext. 2826, gary.calhoun@comdev.ca; Jeff Codispodi, Director, Investor Relations & Communications, Tel: (519) 622-2300 ext. 2844, jeff.codispodi@comdev.ca

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