COM DEV Announces Second Quarter Fiscal 2014 Results

CAMBRIDGE, ON, June 5, 2014 /CNW/ - COM DEV International Ltd. (TSX: CDV) today announced second quarter results for the three-month period ended April 30, 2014. All amounts are stated in Canadian dollars unless otherwise noted.

Second Quarter Highlights

• Revenue was $54.3 million, a two percent decline from the $55.2 million realized in the second quarter of 2013, but 5 percent above the revenue reported in Q1 of this year.
• Commercial satellite component revenue was $34.5 million, a 33.2 percent increase from $25.9 million achieved in the second quarter of 2013. Civil and military/defence program revenue was impacted by the continuing government budget constraints, largely in the United States.
• Gross margin increased to $15.8 million, or 29.0 percent of revenue, compared to $14.7 million, or 26.5 percent of revenue in Q2 2013.
• Backlog was $130.1 million, a 12 percent decline from $149.1 million in Q2 2013, with additional Authority To Proceed (ATP) follow on work of $41.1 million expected at the end of Q2 this year, versus $4.1 million at the end of Q2 2013.
• COM DEV's exactEarth™ subsidiary had revenue of $4.4 million, up 51.7 percent from $2.9 million in Q2 2013.
• exactEarth™ received a record level of $9.6 million in orders for Q2 2014, comprised of both new customer subscriptions, and renewals from existing customers.
• exactEarth™ had EBITDA of $1.0 million in Q2 2014, compared to $0.3 million in Q2 2013.
• COM DEV announced its first ever quarterly dividend, in the amount of $0.03/share.

"We are very pleased with the continued growth in revenue and backlog from our commercial satellite business as well as our exactEarth™ subsidiary," said Michael Pley, CEO.  "exactEarth had record orders of $9.6 million in the quarter, a 70 percent increase over its previous orders record for a single quarter."

"Our results continue to strengthen," Mr. Pley added. "We have made the necessary adjustments at our U.S. division to balance our costs against the expected revenue, and as expected, the impact to our bottom line in Q2 improved significantly from the prior quarter.  With the continued strengthening of the Company's financial performance, coupled with the investment phase of exactEarth™ nearing completion, our Board of Directors made the decision to initiate our Company's first-ever quarterly dividend in the amount of $0.03 per share."  

Financial Review

COM DEV's second quarter 2014 revenues were $54.3 million, a 1.6 percent decline compared to $55.2 million in the previous year. The revenue split between the three market segments was 64 percent commercial, 25 percent civil and 11 percent military/defence, compared to a 47 percent, 35 percent, 18 percent split respectively in 2013. Revenues in the commercial sector increased 33.2 percent in the quarter while the civil and military/defence sectors declined by 27.7 percent and 41.2 percent respectively.

COM DEV received new orders totaling $35.3 million during the quarter, of which 63 percent were commercial, 25 percent were civil, and 12 percent were military/defence. In Q2 2013 the Company booked $57.0 million of new orders, with a commercial/civil/military split of 44 percent, 41 percent, 15 percent respectively.

Included in the $35.3 million of new orders received in the second quarter of 2014 are orders received under Authorities to Proceed (ATPs). As delivery schedules have become more critical, customers are increasingly using ATPs as a way to start a subcontractor working, under contract, on a program while the full contract negotiations are concluded. At the end of Q2 2014, the amount of potential order value in excess of ATP, which management expects to realize, stood at $41.1 million. This compares to $4.1 million at the end of Q2 2013. The expected full contract amounts are based on bid values, with a historically high percentage of ATPs being ultimately turned into full contract values.

Order backlog at April 30, 2014 was $130.1 million, compared to $149.1 million for the same period in 2013.  Backlog was split between the Company's commercial, civil and military/defence sectors at a ratio of 57 percent, 35 percent and 8 percent respectively, compared to 54 percent, 29 percent and 17 percent respectively at April 30, 2013.  The Company expects to convert approximately 60 percent of the total backlog into revenue during fiscal 2014.

Consolidated gross margin was $15.8 million in Q2 2014, representing 29 percent of total revenues, a 2.5 percent increase from Q2 2013 with gross margin of $14.7 million representing 26.5 percent of total revenues. The year over year increase came from improvements in both the data and equipment segments of the business. The increase in the data services segment gross margin percentage is due to higher revenue generated from exactEarth's™ fleet of on-orbit satellites. As exactEarth™ continues to ramp up its revenues, management expects gross margins to increase. The equipment segment increase quarter over quarter was primarily as a result of a change in the mix of contracts in progress, and efficiently advancing the work on customer projects.

COM DEV recorded a net research and development expense of $1.1 million in Q2 2014, compared to a net expense of $0.1 million in Q2 2013.  Gross R&D spending declined slightly to $2.4 million from $2.8 million while R&D funding from external sources decreased to $0.3 million from $0.7 million. The Company also recognized $1.0 million of Investment Tax Credits (ITCs) in Q2 2014, to offset Canadian Federal taxes, compared to $2.0 million in Q2 2013. The reduction in R&D spending is a result of the Company's efforts to focus on strategic R&D activities.

Selling expenses of $3.0 million were flat in Q2 2014 compared to Q2 of 2013.  General expenses grew by $0.7 million in Q2 2014 to $5.7 million compared to $4.9 million in Q2 2013. The increase in general expenses reflects the cost of Corporate Development activities, as well as increases in legal and finance organization costs.

The Company recorded a foreign exchange gain of $1.2 million in Q2 2014, compared to a gain of $0.1 million in the same quarter in the previous year. Of the gain, $1.6 million is the result of unrealized mark to market valuation reductions in the Company's hedge portfolio, partly offset by unrealized balance sheet translation losses.

EBITDA attributable to shareholders was $9.7 million in Q2 2014, compared to $9.6 million in Q2 2013. The quarter over quarter increase in EBITDA is the result of higher net income and lower interest and income tax expenses offset by an increase in amortization. The equipment segment EBITDA decreased compared to the same quarter last year, while the data services segment saw improved EBITDA attributable to shareholders over the prior year. The data services segment is EBITDA positive in Q2 2014 at $1.0 million compared to a Q2 2013 EBITDA of $0.3 million. The increase is the result of decreased net loss in exactEarth™, driven by continued revenue growth as exactEarth™ expands its global customer base.

COM DEV ended Q2 2014 with $44.4 million of cash and equivalents, compared to $33.1 million in Q2 2013. The Company generated $19.6 million of cash from operating activities in Q2 2014, compared with Q2 2013 when $11.9 million was generated. During Q2 2014, $14.4 million of cash was generated compared to $6.7 million generated in Q2 2013.

The Company's operating credit line of $20 million was not drawn upon at the end of Q2 2014, except for $2.8 million (Q2 2013: $2.8 million) in the form of guarantee letters issued to customers in the normal course of operations by the bank on behalf of the Company and to government agencies while certain tax objections are resolved.

The Company's basic share count stood at 76,570,236 on June 5, 2014.

Conference Call

A conference call will be held Thursday, June 5, 2014 at 5:00 pm 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.comdevintl.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.comdevintl.com) is a leading global provider of space hardware and services. The company has a staff of 1,200, annual revenues of $216 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 defense applications. The company has won contracts to supply its equipment on over 900 spacecraft. COM DEV's majority-owned subsidiary, exactEarth Ltd., provides satellite data services for global maritime surveillance.

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.

COM DEV International Ltd.
Consolidated Interim Statements of Financial Position
(Canadian dollars in thousands)
Unaudited
					As at April 30, 2014				As at October 31, 2013				As at November 1, 2012
Assets
Current assets
Cash and cash equivalents				$	44,419			$	34,897			$	25,794
Accounts receivable					35,196				37,460				41,722
Inventory					49,258				59,383				64,763
Prepaid expenses and other					3,518				2,716				3,214
Income taxes recoverable					2,212				2,245				2,266
Investment tax credits-current					2,961				2,961				2,162
Total current assets					137,564				139,662				139,921
Non-current assets
Property, plant and equipment					94,056				92,340				86,000
Intangible assets					17,815				16,416				14,600
Goodwill					-				-				2,205
Investment tax credits					10,439				9,933				2,124
Deferred income tax assets					8,337				9,552				14,728
Total non-current assets					130,647				128,241				119,657
Total assets				$	268,211			$	267,903			$	259,578
Liabilities
Current liabilities
Accounts payable and accrued liabilities				$	24,137			$	26,334			$	30,622
Income taxes payable					-				4				851
Provisions					978				1,215				430
Billings in excess of costs and earnings on contracts in progress					9,932				17,047				22,448
Current portion of loans payable					7,291				5,787				3,978
Total current liabilities					42,338				50,387				58,329
Non-current liabilites
Accounts payable and accrued liabilities					260				33				525
Loans payable					13,615				14,890				16,358
Employee future benefits					4,058				3,803				5,514
Total non-current liabilities					17,933				18,726				22,397
Total liabilities				$	60,271			$	69,113			$	80,726
Shareholders' equity
Share capital					177,053				346,572				345,876
Treasury stock					(1,488)				(1,051)				(432)
Contributed surplus					178,753				8,326				9,298
Accumulated other comprehensive income (loss)					3,948				1,981				(1,698)
Non-controlling interest					5,830				6,221				7,317
Deficit					(156,156)				(163,259)				(181,509)
Total shareholders' equity					207,940				198,790				178,852
Total liabilities and shareholders' equity				$	268,211			$	267,903			$	259,578

 

COM DEV International Ltd.
Consolidated Interim Statements of Changes in Equity
(Canadian dollars in thousands)
Unaudited
For the six months ended April 30, 2014				Total			Deficit		Accumulated Other Comprehensive Income (Loss)				Share Capital			Treasury Stock		Non-Controlling Interest				Contributed Surplus
Balance, October 31, 2013			$	198,790		$	(163,259)		$	1,981		$	346,572		$	(1,051)		$	6,221		$	8,326
Comprehensive income				8,679			7,103			1,967									(391)
Common stock issued				339			-			-			754			-			-			(415)
Common stock repurchased and cancelled				(344)			-			-			(273)			-			-			(71)
Expense recognized for ESOP awards				110			-			-			-			-			-			110
Treasury stock				(488)			-			-			-			(488)			-			-
Reduction in stated capital				-			-			-			(170,000)			-			-			170,000
Settlement of long-term incentive plans				(30)			-			-			-			51			-			(81)
Expense recognized for long-term incentive plans				686			-			-			-			-			-			686
Expense recognized for stock-based compensation				198			-			-			-			-			-			198
Balance, April 30, 2014			$	207,940		$	(156,156)		$	3,948		$	177,053		$	(1,488)		$	5,830		$	178,753
For the six months ended April 30, 2013
Balance, October 31, 2012			$	178,852		$	(181,509)		$	(1,698)		$	345,876		$	(432)		$	7,317		$	9,298
Comprehensive income				9,917			9,213			1,449									(745)
Common stock issued				6			-			-			386			-			-			(380)
Expense recognized for ESOP awards				110			-			-			-			-			-			110
Treasury stock				(1,136)			-			-			-			(1,136)			-			-
Settlement of long-term incentive plans				(33)			-			-			-			52			-			(85)
Expense recognized for long-term incentive plans				517			-			-			-			-			-			517
Expense recognized for stock-based compensation				156			-			-			-			-			-			156
Balance, April 30 2013			$	188,233		$	(172,296)		$	(249)		$	346,262		$	(1,516)		$	6,572		$	9,460

 

COM DEV International Ltd.
Consolidated Interim Statements of Comprehensive Income
(Canadian dollars in thousands, except for per share figures)
Unaudited
For the three months ended April 30														2014						2013
Revenue											$			54,332			$			55,229
Cost of revenue														38,569						40,572
Gross margin														15,763						14,657
Research and development costs														2,360						2,777
Research and development recovery														(263)						(658)
Investment tax credits recoverable														(1,001)						(2,011)
Net research and development expense														1,096						108
Selling expenses														3,002						2,977
General expenses														5,662						4,948
Operating income														6,003						6,624
Interest expense														134						169
Foreign exchange gain														(1,178)						(111)
Other expense														489						267
Income before income taxes														6,558						6,299
Income tax expense														1,702						1,932
Net income											$			4,856			$			4,367
Attributable to:
Shareholders														5,011						4,700
Non-controlling interest														(155)						(333)
											$			4,856			$			4,367
Other comprehensive income:
Foreign currency translation														(380)						234
Actuarial gain														-						530
Comprehensive income											$			4,476			$			5,131
Atributable to:
Shareholders														4,447						5,133
Non-controlling interest														29						(2)
											$			4,476			$			5,131
Earnings per share
Basic and diluted earnings per share											$			0.07			$			0.06

COM DEV International Ltd.
Consolidated Interim Statements of Cash Flows
(Canadian dollars in thousands)
Unaudited
For the three months ended April 30															2014						2013
Operating activities
Net income												$			4,856			$			4,367
Amortization															2,865						2,800
Loss (gain) on disposal of assets															9						-
Defined benefit plan expenses															384						218
Defined benefit plan contributions															(250)						(231)
Stock based compensation expense															423						204
Employee stock ownership plan awards															49						48
Non-cash loan adjustments															(120)						284
Investment tax credits recoverable															(1,001)						(2,011)
Deferred income tax expense															104						16
Unrealized foreign exchange (gain) loss on derivatives															(1,560)						159
Cash settlement of restricted stock units															(5)						-
															5,754						5,854
Net change in non-cash working capital items															13,873						6,085
Operating activities															19,627						11,939
Financing activities
Shares issued															76						-
Shares repurchased and cancelled															(344)						-
Purchase of treasury stock															(227)						(625)
Proceeds from advance of long-term debt															304						540
Repayment of long-term debt															(780)						(865)
Financing activities															(971)						(950)
Investing activities
Acquisition of property, plant and equipment															(2,491)						(3,787)
Acquisition of intangible assets															(1,654)						(480)
Investing activities															(4,145)						(4,267)
Effect of exchange rate changes on cash															(149)						(7)
Net increase in cash															14,362						6,715
Cash and cash equivalents, beginning of the period															30,057						26,386
Cash and cash equivalents, end of the period												$			44,419			$			33,101
Supplemental cashflow information
Interest paid												$			136			$			133
Taxes paid												$			-			$			45

 

SOURCE: Com Dev International Ltd.

Gary Calhoun
Chief Financial Officer
Tel:  [phone] ext. 2826
[email protected]

Craig MacPhail
TMX Equicom
Tel: [phone] ext. 290
[email protected]