COM DEV Announces Fourth Quarter and Year End Fiscal 2010 Results
CAMBRIDGE - COM DEV International Ltd. announced fourth quarter and year end financial results for the three- and twelve-month periods ended October 31, 2010. All amounts are stated in Canadian dollars unless otherwise noted.
Commenting on the results for Q4, and the year, Mike Pley, COM DEV's CEO noted, in particular, the strength of the new order book in Q4, the reduced impact in the quarter from several problematic programs, and the continued reduction in the Company's operating expenses.
"I am pleased to see the realization of $80 million in new orders in the quarter, which is both a solid foundation for us for 2011, and a validation of the continued robustness of the commercial satellite market," said Mr. Pley. "While timing issues pushed some anticipated revenues into fiscal 2011, in Q4 we demonstrated effective control of operating expenses.
"We continued to focus our efforts, as promised, on completing the five troublesome programs that have plagued the Company for the past year. We did see some cost growth during the quarter on the programs, but at a lower level than previously experienced. At the end of Q4 these programs ranged between 79% and 100% complete, with the average at 90%. That number continues to be driven towards 100%. Achieving 20% gross margin in the quarter is a reflection of the reduced impact these programs are having on our performance, and is right in line with our previously stated expectations for the quarter.
Fiscal Year 2010 Highlights
· Revenue was $220.9 million, an 8% decrease from fiscal 2009 revenue of $240.4 million.
· Gross margin was 20%, compared to 27% in 2009.
· Net income attributable to shareholders was $2.7 million, or $0.04 per share, compared to a net income of $15.3 million or $0.21 per share the previous year.
· New orders totaled $210 million in the fiscal year, compared to $249 million in 2009.
· exactEarth Ltd, originally a wholly-owned COM DEV subsidiary, sold a 27% equity interest for $15 million to Madrid-based satellite operator and service provider HISDESAT Servicios Estratégicos S.A.
Fourth Quarter 2010 Highlights
· Q4 2010 revenue was $51.5 million, compared to $58.3 million recorded a year earlier.
· Gross margin was 20%, compared to 25% in the fourth quarter of 2009.
· Net loss attributable to shareholders was $1.9 million, or $(0.02) per share, and included approximately $3 million of restructuring costs resulting from a 5% workforce reduction. Net income in Q4 2009 was $0.9 million or $0.01 per share.
· New orders won in the fourth quarter totaled $80 million, compared to $67 million a year earlier and $47 million in Q3 2010.
· Backlog at October 31, 2010 was $149 million, compared to $123 million at the end of Q3 2010.
COM DEV's fiscal 2010 revenues of $220.9 million decreased by $19.5 million or 8% compared to the previous year. Revenue fell short of management's expectations due primarily to cost growth and resulting revenue delays on five customer programs. The revenue split between the three market segments was 65% commercial, 23% civil and 12% military, compared to a 58/26/16 split in 2009. Commercial revenues grew by 4% to $143.8 million, while civil and military revenues declined by 20% and 31%, respectively. The Company's fourth quarter 2010 revenues of $51.5 million were 12% below Q4 2009 revenues of $58.3 million.
COM DEV received new orders totaling $210 million during the year, of which 79% were commercial, 10% were civil, and 11% were military. In fiscal 2009 the Company booked $249 million of new orders, with a commercial/civil/military split of 55/23/22.
Order backlog at year-end was $149 million, up from $123 million on July 31, 2010, but down from $163 million at the end of fiscal 2009. These variations in backlog are consistent with historical patterns as order profiles are typically lumpy in nature. An additional $10 million of follow-on orders are expected to be realized from Authorities to Proceed 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 65%, 19% and 16% respectively, compared to 51%, 27% and 22% three months earlier. The Company expects to convert approximately 80% of the total backlog into revenue during fiscal 2011.
Gross margin was $45.1 million in fiscal 2010, representing 20% of revenues, compared to $64.9 million or 27% of revenues in 2009. As described above, the decrease in gross margin percentage in the year was primarily the result of cost increases on a small number of programs. The ongoing effects of earlier write-downs, and some cost increases had the expected effect of suppressing margins, which were 20% in Q4 2010, compared to 25% in Q4 2009.
Net research and development expense decreased 51% to $6.6 million in 2010 from $13.6 million in 2009. The decrease was due primarily to a reduction in gross R&D spending from $17.5 million to $12.4 million, as the Company was more stringent in evaluating R&D project proposals. In addition, external R&D funding grew from $3.9 million in 2009 to $5.7 million in 2010. The 2010 funding includes a $2.1 million Investment Tax Credit recognized in order to offset the income tax expense incurred for the year.
Selling expenses were $11.8 million in 2010, compared to $10.0 million in 2009. The increase was due to higher business development and sales and marketing costs in the exactEarth division and an increase in commission costs. General and administrative expenses were $20.7 million, compared with $23.1 million in 2009, as the Company continued to rationalize G&A spending throughout the organization.
Fiscal 2010 net income attributable to shareholders of $2.7 million decreased by $12.6 million compared to 2009 net income of $15.3 million. Net income was favourably impacted by a $2.6 million foreign exchange gain in 2010, which compared to a $2.0 million foreign exchange loss in 2009.
COM DEV ended the year with $17.4 million of cash and equivalents, compared to $21.4 million at October 31, 2009. Operating activities generated $13.4 million of cash for the year. Financing activities generated $10.3 million of cash, notably due to a $12.3 million cash investment by HISDESAT and $4.7 million of funding received from the Southern Ontario Development Program. Investing activities used $26.9 million of cash. At October 31, 2010, COM DEV had outstanding debt of $16.5 million including the current portion, and the Company's $32 million credit facility was not drawn upon.
The Company's basic share count stood at 76,156,127 on October 31, 2010.