Globecomm Systems Reports Fiscal 2010 Second Quarter and Six-Month Financial Results

Globecomm Systems Inc. (NASDAQ: GCOM | Quote | Chart | News | PowerRating), a leading provider of satellite-based communications infrastructure solutions and services on a global basis, today announced financial results for the fiscal 2010 second quarter and six months ended December 31, 2009. Globecomm is reporting its financial results on a generally accepted accounting principles (GAAP) basis as well as adjusted EBITDA, a non-GAAP financial measure. In the attached table the Company provides a detailed reconciliation of GAAP earnings to adjusted EBITDA. A summary of the Company's results are:

-- Service revenues increased 80.1% to a record $33.6 million as compared to $18.6 million in the same period last year.

-- Revenues from infrastructure solutions increased 10.2% to $23.5 million as compared to $21.3 million in the same period last year.

-- Consolidated revenues were a record $57.1 million in the fiscal 2010 second quarter as compared to $40.0 million in the same period last year.

-- GAAP earnings per diluted share increased 40.0% to $0.07 in the second quarter of fiscal 2010 as compared to GAAP earnings per diluted share of $0.05 in the same period last year.

-- Adjusted EBITDA increased 42.9% to $4.4 million in the second quarter of fiscal 2010 as compared to $3.1 million in the same period last year.

Fiscal Year 2010 Second Quarter Results

Revenues for the Company's fiscal 2010 second quarter increased 42.8% to a record $57.1 million as compared to $40.0 million in the same period last year. Revenues from infrastructure solutions increased 10.2% to $23.5 million as compared to $21.3 million in the same period last year. Revenues from services increased 80.1% to a record $33.6 million as compared to $18.6 million in the same period last year. The increase in service revenue was driven by the Company's acquisitions of Mach 6 and Telaurus, which combined contributed $8.3 million, along with an increase in the access services offering primarily due to the government marketplace. The increase in infrastructure solutions revenues was primarily driven by the timing of revenue milestones reached in the systems design and integration offering. Bookings and revenue in the infrastructure solutions segment continue to be adversely impacted by the global economic slowdown.

Net income for the Company's fiscal 2010 second quarter increased 47.8% to $1.4 million, or $0.07 per diluted share, as compared to net income of $0.9 million, or $0.05 per diluted share, in the second quarter of fiscal 2009 on a GAAP basis. Adjusted EBITDA for the second quarter of 2010 increased 42.9% to $4.4 million compared to $3.1 million in the second quarter of 2009. The increase in net income and adjusted EBITDA was primarily driven by an increase in revenues offset by lower infrastructure gross margins.

Fiscal Year 2010 Six Month Results

Revenues for the Company's fiscal 2010 six months ended December 31, 2009 increased 27.2% to a record $104.8 million as compared to $82.3 million in the same period last year. Revenues from infrastructure solutions decreased 5.1% to $42.6 million as compared to $44.9 million in the same period last year. Revenues from services increased 66.0% to a record $62.2 million as compared to $37.5 million in the same period last year. The increase in service revenue was primarily driven by the Company's acquisitions of Mach 6 and Telaurus, which combined contributed $16.5 million, coupled by an increase in access services in the government marketplace. The decrease in infrastructure solution revenues was primarily caused by the global economic slowdown resulting in government and commercial customers and prospects delaying projects, which in particular affected pre-engineered systems.

Net income for the Company's first six months of fiscal 2010 increased 48.8% to $2.6 million, or $0.13 per diluted share, compared to net income of $1.8 million, or $0.09 per diluted share, in the same period last year on a GAAP basis. Adjusted EBITDA for the first six months of fiscal 2010 increased 38.1% to $8.4 million compared to $6.1 million in the same period past year. The increase in net income and adjusted EBITDA was primarily driven by an increase in service revenues offset by lower infrastructure gross margins.

Management's Review of Results and Expectations

David Hershberg, Chairman and CEO of the Company, said, "The Company continues to execute as planned and looks forward to a strong second half of the current fiscal year. The service segment continues to be robust providing stability, predictability and visibility. We are more excited than ever about our future and despite the current economic backdrop that has plagued our infrastructure segment, we look forward to record revenues for the full year. With nearly $50 million of cash and zero debt, we have a balance sheet that affords the Company with financial flexibility to carry out our business plan."

Keith Hall, President and COO of the Company said, "I am very proud of our team's execution in meeting the Q2 fiscal results. We remain focused on the growth of our service offerings and have increased our services revenue guidance to $130 million as we explore new market verticals and expand our presence in existing ones. The second quarter was highlighted by the launch of our IP Based cellular switch as we continue to add capability to our Hosted platform in support of the wireless market. We also added X-Band service capability to our Global Network and received initial orders for our X-Band Man-Pack solution, TOM-CAT. Our presence in Afghanistan continues to expand and we are well positioned to support the expansion of troops in the region."

Management's Current Expectations for the Fiscal Year Ending June 30, 2010

Globecomm currently expects the following financial results for the fiscal year 2010:

-- Consolidated revenues to be between $215 million and $225 million.

-- Service segment revenues to be approximately $130 million.

-- GAAP earnings per diluted share to be between $0.30 and $0.35.

-- Adjusted EBITDA to be approximately $20 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 and non-cash stock compensation expense. 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. 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. 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 adjusted EBITDA and GAAP net income is provided in a table immediately following the Condensed Consolidated Balance Sheets.

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.

About Globecomm Systems

Globecomm Systems Inc. provides end-to-end value-added satellite-based communication products, services and solutions by leveraging its core satellite ground segment systems and network capabilities, with its satellite communication services capabilities. The products and services Globecomm offers include pre-engineered systems, systems design and integration services, access services, hosted services and lifecycle support services. Globecomm's customers include government and government-related entities, communications service providers, commercial enterprises and broadcast and other media and content providers.

Based in Hauppauge, New York, Globecomm Systems also maintains offices in Maryland, New Jersey, the Netherlands, Hong Kong, Germany, Singapore, the United Arab Emirates and Afghanistan.

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on management's current expectations and observations. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to certain risks, uncertainties and assumptions that are difficult to predict. Our forward-looking statements are based on the information currently available to us and speak only as of the date of this press release. Over time, our actual results, performance or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our security holders. In particular, the impact of the current economic downturn and the unpredictability of government spending programs make assessment of future performance extremely difficult. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

We have identified some of the important factors that could cause future events to differ from our current expectations and they are described in our most recent Annual Report on Form 10-K, including without limitation under the captions ''Risk Factors'' and ''Management's Discussion and Analysis of Financial Condition and Results of Operations,'' and in other documents that we may file with the SEC, including our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which you should review carefully. Please consider our forward-looking statements in light of those risks as you read this press release.

-Financial tables follow-

Globecomm Systems Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

                                          Three Months Ended            Six Months Ended

                                          December 31,   December 31,   December 31,    December 31,

                                          2009           2008           2009            2008

Revenues from infrastructure solutions    $      23,512  $      21,334  $      42,580   $      44,873

Revenues from services                           33,570         18,643         62,178          37,459

Total revenues                                   57,082         39,977         104,758         82,332

Costs and operating expenses:

Costs from infrastructure solutions              19,838         17,009         35,633          37,309

Costs from services                              25,483         14,185         46,085          28,390

Selling and marketing                            3,671          3,216          6,873           6,329

Research and development                         762            509            1,513           820

General and administrative                       5,216          3,703          10,731          7,364

Total costs and operating expenses               54,970         38,622         100,835         80,212

Income from operations                           2,112          1,355          3,923           2,120

Interest income                                  133            214            268             478

Income before income taxes                       2,245          1,569          4,191           2,598

Provision for income taxes                       844            621            1,549           822

Net income                                $      1,401   $      948     $      2,642    $      1,776

Basic net income per common share         $      0.07    $      0.05    $      0.13     $      0.09

Diluted net income per common share       $      0.07    $      0.05    $      0.13     $      0.09

Weighted-average shares used in the              20,437         20,193         20,400          20,172

calculation of basic net income

per common share

Weighted-average shares used in the              20,840         20,416         20,812          20,568

calculation of diluted net income

per common share

Globecomm Systems Inc.

Condensed Consolidated Balance Sheets

(In thousands)

                                              December 31,    June 30,

                                              2009            2009

                                              (Unaudited)

Assets

Current assets:

Cash and cash equivalents                     $      49,694   $    44,034

Accounts receivable, net                             38,849        45,438

Inventories                                          25,001        17,043

Prepaid expenses and other current assets            2,149         2,292

Deferred income taxes                                1,058         1,058

Total current assets                                 116,751       109,865

Fixed assets, net                                    36,552        33,379

Goodwill                                             26,728        25,613

Intangibles, net                                     10,317        11,020

Deferred income taxes                                8,749         10,214

Other assets                                         1,444         1,448

Total assets                                  $      200,541  $    191,539

Liabilities and Stockholders' Equity

Current liabilities                           $      40,614   $    35,221

Other liabilities                                    784           924

Deferred income taxes                                582           582

Total stockholders' equity                           158,561       154,812

Total liabilities and stockholders' equity    $      200,541  $    191,539

Globecomm Systems Inc.

Reconciliation of Net Income to adjusted EBITDA

(In thousands)

(Unaudited)

                                  Three Months Ended            Six Months Ended

                                  December 31,   December 31,   December 31,   December 31,

                                  2009           2008           2009           2008

Net income                        $      1,401   $      948     $      2,642   $      1,776

Adjustments:

Interest (income)                        (133)          (214)          (268)          (478)

Provision for income taxes               844            621            1,549          822

Depreciation and amortization            1,643          1,376          3,421          2,747

Stock compensation expense (A)           632            339            1,064          1,220

Adjusted EBITDA                   $      4,387          3,070          8,408          6,087

(A) Includes one-time charge of $675 in the three and six months ended December 31, 2008 related to accelerating vesting of the restricted stock of the Company's former President, who passed away on July 20, 2008.

SOURCE: Globecomm Systems Inc.

Globecomm Systems Inc. 

David Hershberg, 631-231-9800 

or 

Investor Relations: 

Matthew Byron, 631-457-1301 

Fax: 631-231-1557 

info@globecommsystems.com 

www.globecommsystems.com

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