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Globecomm Systems Inc. Reports Operating Results (10-Q)

May 10, 2012 | About:
10qk

10qk

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Globecomm Systems Inc. (GCOM) filed Quarterly Report for the period ended 2012-03-31.

Globecomm Systm has a market cap of $323.6 million; its shares were traded at around $11.63 with a P/E ratio of 19.9 and P/S ratio of 1.2. Globecomm Systm had an annual average earning growth of 14.8% over the past 5 years.

Highlight of Business Operations:

Revenues from Services. Revenues increased by $20.0 million, or 43.4%, to $65.9 million for the three months ended March 31, 2012 and increased by $34.7 million, or 25.5%, to $170.8 million for the nine months ended March 31, 2012, compared to $46.0 million and $136.2 million for the three and nine months ended March 31, 2011, respectively. The increase in revenues included $17.3 million and $27.9 million of revenue from ComSource in the three and nine months ended March 31, 2012, respectively, along with an increase in our access service offering primarily in the government marketplace.

Costs from Services. Costs from services increased by $15.5 million, or 48.9%, to $47.2 million for the three months ended March 31, 2012 and increased by $21.2 million, or 22.1%, to $117.0 million for the nine months ended March 31, 2012, compared to $31.7 million and $95.8 million for the three and nine months ended March 31, 2011, respectively. Gross margin decreased to 28.4% of revenues for the three months ended March 31, 2012 and increased to 31.5% of revenues for the nine months ended March 31, 2012, compared to 31.1% and 29.7% for the three and nine months ended March 31, 2011, respectively. The decrease in gross margin for the three months ended March 31, 2012, is due to a large equipment sale in ComSource at lower margin. The increase in the gross margin for the nine months ended March 31, 2012 was primarily driven by an increase in revenue in the government marketplace partially offset by the significant equipment sale in ComSource. The increase in gross margin in the services segment has been a key driver in the increase in our consolidated income from operations. The future relationship between the revenue and margin growth of our operating segments will depend on a variety of factors, including the timing of major contracts, which are difficult to predict.

Costs from Infrastructure Solutions. Costs from infrastructure solutions increased by $27.2 million, or 211.3%, to $40.0 million for the three months ended March 31, 2012 and increased by $54.5 million, or 135.9%, to $94.5 million for the nine months ended March 31, 2012, compared to $12.9 million and $40.1 million for the three and nine months ended March 31, 2011, respectively. The gross margin decreased to 11.0% in the three and nine months ended March 31, 2012, compared to 22.1% and 19.5% for the three and nine months ended March 31, 2011, respectively. The decrease in gross margin was mainly attributable to significant revenue from Contract A, which

Net cash provided by operating activities during the nine months ended March 31, 2012 was $33.0 million. This primarily related to net income of $21.5 million, a non-cash item representing depreciation and amortization expense of $9.4 million comprised of depreciation expense related to the network operations center and satellite earth station equipment and amortization expense related to acquisitions, an increase in accounts payable of $9.3 million due to the timing of payments to vendors, a decrease in deferred income taxes of $6.6 million due to net income generated in the period, and non-cash stock compensation expense of $2.6 million, offset by earn-out fair value adjustments of $7.7 million, a decrease in deferred revenue of $6.6 million due to timing differences between project billings and revenue recognition milestones resulting from specific customer contracts, and an increase in inventory of $3.8 million due to the timing of shipments and purchases of equipment for milestones to be reached in future periods.

Net cash provided by operating activities during the nine months ended March 31, 2011 was $4.0 million. This primarily related to a increase in deferred revenue of $7.1 million due to timing differences between project billings and revenue recognition milestones resulting from specific customer contracts, net income of $6.8 million, a non-cash item representing depreciation and amortization expense of $6.8 million comprised of depreciation expense related to the network operations center and satellite earth station equipment and amortization expense related to acquisitions, a decrease in deferred income taxes of $4.0 million due to net income generated in the period, earn-out fair value adjustments of $2.5 million and non-cash stock compensation expense of $2.5 million offset by an increase in inventory of $12.9 million due to the timing of shipments and purchases of equipment for milestones to be reached in future periods mainly attributable to one large long-term program, a decrease in accounts payable of $6.4 million due to the timing of inventory purchases and payments to vendors, and an increase in accounts receivable of $6.4 million due to the timing of billings and collections from customers.

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