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Comtech Telecommunications Corp. EBITDA dropped on 19.0% and Revenue decreased on 8.2%

09/29/2020 • About Comtech Telecommunications Corp. ($CMTL) • By InTwits

Comtech Telecommunications Corp. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • Comtech Telecommunications Corp. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.4%. At the same time it's in pair with industry average of 18.8%
  • CAPEX is quite volatile: $12m in FY2020, $15m in FY2019, $488m in FY2018, $5m in FY2017, $8m in FY2016
  • The company has potentially unprofitable business model: ROIC is 2.3%
  • It operates with medium-size leverage: Net Debt/EBITDA is 2.3x while industry average is -0.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


The company's Revenue decreased on 8.2%. Revenue decline showed acceleration in FY20Q4 - it was 15.1% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.4 pp from 3.3% to 12.7% in FY2020. During FY2016-FY2020 EBITDA Margin topped in FY2017 at 13.5% and was declining since that time.

Gross Margin showed almost no change in FY2020. Gross Margin followed a declining trend at -1.3 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in FY2020. SG&A as a % of Revenue followed a declining trend at -1.0 pp per annum in the last 5 years.

Net Income margin decreased on 2.6 pp from 3.7% to 1.1% in FY2020. During FY2016-FY2020 Net Income margin topped in FY2018 at 5.2% and was declining since that time.

Investments (CAPEX, working capital and M&A)


The company's CAPEX/Revenue was 1.2% in FY2020. CAPEX/Revenue showed almost no change from FY2017 to FY2020. It's average CAPEX/Revenue for the last three years was 1.3%. During the last 5 years CAPEX as a % of Revenue topped in FY2018 at 1.5% and was declining since that time.

Return on investment


The company operates at low ROIC (2.3%) and ROE (1.3%). ROIC decreased on 3.7 pp from 5.9% to 2.3% in FY2020. ROE decreased on 3.5 pp from 4.8% to 1.3% in FY2020. During FY2016-FY2020 ROE topped in FY2018 at 6.0% and was declining since that time.

Leverage (Debt)


Debt level is 2.3x Net Debt / EBITDA and 3.1x Debt / EBITDA. Net Debt / EBITDA surged on 0.6x from 1.7x to 2.3x in FY2020. Debt increased on 9.7% while cash increased on 5.1%. During the last 5 years Net Debt/EBITDA bottomed in FY2019 at 1.7x.

Comtech Telecommunications Corp. has no short term refinancing risk: cash is higher than short term debt (576.6%).

Valuation and dividends


Comtech Telecommunications Corp.'s trades at EV/EBITDA 8.9x and P/E 54.7x.

Management team


The company's CEO is Fred Kornberg. Fred Kornberg has 5 years tenure with the company. The company's CFO Michael A Bondi has spent 2 years with the company.

Financial and operational results


FY ended 07/31/2020

Comtech Telecommunications Corp. ($CMTL) key annual financial indicators

mln. $201620172018201920202020/2019
P&L
Revenue411.0550.4570.6671.8616.7-8.2%
Gross Profit171.2218.2223.9247.4226.8-8.3%
SG&A94.9116.1113.9128.6117.1-8.9%
EBITDA22.774.269.871.758.0-19.0%
Net Income-7.715.829.825.07.0-72.0%
Balance Sheet
Cash66.841.843.545.647.95.1%
Short Term Debt14.717.819.00.88.3997.0%
Long Term Debt244.0178.0148.9165.0173.65.2%
Cash flow
Capex5.78.28.68.87.2-17.8%
Ratios
Revenue growth33.8%33.9%3.7%17.7%-8.2%
EBITDA growth-51.6%227.4%-5.9%2.6%-19.0%

Gross Margin41.7%39.6%39.2%36.8%36.8%-0.1%
EBITDA Margin5.5%13.5%12.2%10.7%9.4%-1.3%
SG&A, % of revenue23.1%21.1%20.0%19.1%19.0%-0.2%
Net Income Margin-1.9%2.9%5.2%3.7%1.1%-2.6%
CAPEX, % of revenue1.4%1.5%1.5%1.3%1.2%-0.1%

ROIC-0.1%5.2%5.1%5.9%2.3%-3.7%
ROE-1.8%3.3%6.0%4.8%1.3%-3.5%
Net Debt/EBITDA8.5x2.1x1.8x1.7x2.3x0.6x

Comtech Telecommunications Corp. ($CMTL) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
P&L
Revenue170162135150 5.9%-1.5%-20.7%-15.1%
EBITDA2017814 36.9%-13.6%-58.6%-27.9%
Net Income63-41 84.2%-55.3%-152.4%-81.6%
Balance Sheet
Cash47465148 9.2%1.0%12.1%5.1%
Short Term Debt101088 521.6%657.2%723.3%997.0%
Long Term Debt197184185174 1.4%5.4%6.5%5.2%
Ratios
Gross Margin37.3%37.5%39.2%33.2% 1.4%0.2%1.4%-3.1%
EBITDA Margin 11.6% 10.4% 5.7% 9.1% 2.6%-1.5%-5.3%-1.6%
Net Income Margin 3.8% 2.2% -3.0% 0.8% 1.6%-2.6%-7.4%-2.7%

Peers in Communications Equipment


Below we provide Comtech Telecommunications Corp. benchmarking against other companies in Communications Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Franklin Wireless Corp ($FKWL)--18.8%-38.1%21.3%105.9%
Lantronix, Inc. ($LTRX)-10.2%1.9%2.9%27.7%
Radcom Ltd. ($RDCM)58.0%26.2%-8.5%-3.1%-
Ceragon Networks Ltd. ($CRNT)-16.0%13.1%3.6%-17.0%-
UTStarcom Holdings Corp ($UTSI)-26.1%13.6%18.0%-43.4%-
 
Median (5 companies)7.3%5.1%2.8%-3.1%66.8%
Comtech Telecommunications Corp. ($CMTL)-33.9%3.7%17.7%-8.2%


Top companies by Gross margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Radcom Ltd. ($RDCM)69.6%71.8%74.0%70.0%-
Lantronix, Inc. ($LTRX)47.7%52.7%55.7%56.0%44.9%
UTStarcom Holdings Corp ($UTSI)32.8%33.7%27.8%36.8%-
Ceragon Networks Ltd. ($CRNT)33.8%32.3%33.8%33.9%-
Franklin Wireless Corp ($FKWL)16.6%19.0%17.3%15.7%19.3%
 
Median (5 companies)43.9%41.7%41.2%36.8%32.1%
Comtech Telecommunications Corp. ($CMTL)41.7%39.6%39.2%36.8%36.8%


Top companies by EBITDA margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Ceragon Networks Ltd. ($CRNT)10.1%9.7%9.9%7.9%-
Lantronix, Inc. ($LTRX)-2.9%0.9%2.7%-0.1%-9.9%
Franklin Wireless Corp ($FKWL)5.2%3.1%-6.9%-4.4%10.8%
UTStarcom Holdings Corp ($UTSI)3.4%7.3%4.4%-5.5%-
Radcom Ltd. ($RDCM)4.8%8.4%-8.3%-17.4%-
 
Median (5 companies)5.9%6.0%4.6%-4.4%0.5%
Comtech Telecommunications Corp. ($CMTL)5.5%13.5%12.2%10.7%9.4%


Top companies by CAPEX/Revenue, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Ceragon Networks Ltd. ($CRNT)2.8%2.6%3.0%4.1%-
Radcom Ltd. ($RDCM)4.5%2.1%1.9%2.1%-
Lantronix, Inc. ($LTRX)1.4%0.5%0.5%1.9%1.0%
UTStarcom Holdings Corp ($UTSI)1.8%0.7%0.2%0.8%-
Franklin Wireless Corp ($FKWL)0.3%0.1%0.1%0.3%0.2%
 
Median (5 companies)2.0%1.9%1.7%1.9%0.6%
Comtech Telecommunications Corp. ($CMTL)1.4%1.5%1.5%1.3%1.2%


Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Ceragon Networks Ltd. ($CRNT)13.2%16.2%17.6%4.6%-
Lantronix, Inc. ($LTRX)-9.6%-0.9%3.5%-1.6%-22.2%
UTStarcom Holdings Corp ($UTSI)1.7%6.7%4.1%-5.3%-
Radcom Ltd. ($RDCM)4.5%4.5%-4.5%-9.6%-
Franklin Wireless Corp ($FKWL)12.2%4.7%-14.9%-13.0%37.5%
 
Median (5 companies)2.4%2.1%0.3%-5.3%7.7%
Comtech Telecommunications Corp. ($CMTL)-0.1%5.2%5.1%5.9%2.3%


Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Franklin Wireless Corp ($FKWL)-4.3x-9.6x---3.3x
 
Median (1 company)-0.9x-0.8x-0.3x0.0x-3.3x
Comtech Telecommunications Corp. ($CMTL)8.5x2.1x1.8x1.7x2.3x