COM DEV announces fourth quarter and year-end fiscal 2013 results

COM DEV International Ltd. has announced fourth quarter and year-end financial results for the three- and twelve-month periods ended Oct. 31, 2013.  All amounts are stated in Canadian dollars unless otherwise noted. 

• New order intake for the year was $243.3 million, growing by 9.3 per cent over 2012 order levels. 
• Backlog at Oct. 31, 2013 was $164.7 million, which is the highest backlog since early 2009, and is the highest year-end backlog for the Company since it began tracking it in 2006. An additional $35.3 million in follow-on orders expected from Authorities to Proceed (ATPs) already awarded, increases the backlog ultimately expected to be realized to $200.0 million, compared to an expected total backlog of $177.9 million a year earlier. 
• Revenue increased year over year by 3.3 per cent, to $215.5 million, up from $208.6 million in fiscal year 2012. 
• Gross margins averaged 26.8 per cent for the year, compared to 25.8 per cent in fiscal 2012, reflecting effective program execution during the year, and year over year growth in revenues from the Company’s exactEarth subsidiary.  
• Majority-owned subsidiary exactEarth achieved positive EBITDA of $0.4 million compared to negative EBITDA of $2.7 million in fiscal 2012, and had revenue of $11.4 million, compared to $9.3 million in 2012, a 22.6 per cent increase year over year. 
• Net income attributable to shareholders was $18.6 million or $0.24 per share, an increase of $2.2 million compared to $16.4 million or $0.22 per share 

• The Company booked $87.9 million in new orders, including the largest commercial order ever received by the Company, compared to $56.1 million in the fourth quarter of 2012 and $36.6 million in the third quarter of 2013. 
• Included in the total new orders for the quarter was $4.2 million in new orders for the Company’s exactEarth subsidiary, a 44.8 per cent increase over 2012 Q4 when $2.9 million in new orders were won. 
• Revenue was $53.8 million, a 5 per cent decline from $56.7 million in the fourth quarter of 2012, due to continuing federal government budget pressures in the United States and the impact of sequestration on the Company’s U.S. operation.   
• Gross margins averaged 27.3 per cent, compared to 27.1 per cent in fiscal Q4 2012. 
• The Company recorded a non-cash impairment loss on its U.S. operation in the amount of $3.5 million, resulting from the impact of government budget sequestration in the United States. 
• Net income attributable to shareholders was $4.1 million or $0.05 per share, compared to $3.0 million or $0.04 per share in the fourth quarter of 2012. 

“At the beginning of fiscal 2013 we stated that our objective was to continue our disciplined approach with a focus on profitability and lean operations.” stated Michael Pley, president and CEO. “We are very pleased that, despite the significant impact of U.S. sequestration, we achieved a 13 per cent increase in net income and an almost 60 per cent increase in cash from operations. Going forward into fiscal 2014 we will look at opportunities to deploy these resources to grow the Company and to deliver value to our shareholders.” 

COM DEV saw a 9 per cent increase in new orders, totaling $243.3 million during the year, of which 68 per cent were commercial, 26 per cent were civil, and 6 per cent were military. In fiscal 2012 the Company booked $222.7 million of new orders, with a commercial/civil/military split of 48/28/24. The growth in orders in 2013 is an indication of the strength of the commercial market, and came in the face of headwinds in the U.S. government market. 

COM DEV’s fiscal 2013 revenues of $215.5 million increased by $6.7 million or 3.3 per cent compared to $208.6 million the previous year. The revenue split between the three market segments was 48 per cent commercial, 35 per cent civil and 17 per cent military, compared to a 48/32/20 split in 2012. It is important to note that communication satellite programs are increasingly being seen in the civil segment as emerging country national governments use satellites as an efficient means to provide communications infrastructure. These programs draw on the Company’s same core equipment as the more traditional commercial market segments. In general, bidding and order activity remains robust. 

Order backlog at Oct. 31, 2013 was $164.7 million, compared to $131 million three months earlier, and $139 million at the end of fiscal 2012.  An additional $35.3 million of follow-on orders are expected to be realized from ATPs already received; COM DEV only includes these ATP amounts in orders and backlog once the final contracts are in place. Backlog was split between the Company’s commercial, civil and military sectors at a ratio of 58 per cent, 33 per cent and 9 per cent respectively, compared to 36 per cent, 36 per cent and 28 per cent at Oct. 31, 2012.  The Company expects to convert approximately 76 per cent of the total backlog into revenue during fiscal 2013. 

Consolidated gross margin was $54.3 million in fiscal 2013, representing 25.2 per cent of total revenues, compared to $53.7 million or 25.8 per cent of revenues in 2012. 

COM DEV recorded a net recovery of research and development of $3.9 million in 2013, compared to an expense of $2.6 million in 2012.  Gross R&D spending declined to $9.9 million from $12.9 million while R&D funding from external sources decreased to $2.1 million from $4.3 million. The Company also recognized $11.7 million of Investment Tax Credits (ITCs) in 2013, compared to $6.0 million in 2012. 

Selling expenses were $11.9 million in 2013, compared to $11.6 million in 2012. Selling expenses fluctuate from quarter to quarter depending on the bids and proposal work that is underway. General expenses are managed against the budgets set for the general and administrative functions, with a view to minimizing these costs, while not hindering the achievement of the Company’s business objectives. 

Net income attributable to shareholders was $18.6 million in 2013, an increase of $2.2 million from $16.4 million in 2012.  The increase in net income is the result of higher gross margin, net research and development recovery compared to a prior year expense, improved performance in exactEarth, and lower interest and other expense, offset by the previously noted impairment charge, higher selling and general expenses and a lower foreign exchange gain. 

COM DEV ended the year with $34.9 million of cash and equivalents, compared to $25.8 million at Oct. 31, 2013. Operating activities generated $31.9 million of cash for the year, compared to $20.7 million in fiscal 2012. For 2013, $9.1 million of cash was generated compared to $1.8 million invested in 2012. The Company generated $3.9 million of cash from working capital in 2013 which compares to the $19.4 million generated from working capital in 2012. This decrease in working capital was mainly due to decreases in accounts receivable and inventory plus an increase in current portion of loans payable offset by decreases in accounts payable and accrued liabilities and billings in excess of costs and earnings on contracts in progress. 

The Company’s operating credit line of $20 million was not drawn upon at the end of 2013, except for $2.8 million (2012: $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 76,486,125 on Jan. 9, 2014.