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

February 11, 2013 | About:
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10qk

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Globecomm Systems Inc. (GCOM) filed Quarterly Report for the period ended 2012-12-31.

Globecomm Systems, Inc. has a market cap of $282.7 million; its shares were traded at around $12.16 with a P/E ratio of 12.7 and P/S ratio of 0.7. Globecomm Systems, Inc. had an annual average earning growth of 29.5% over the past 5 years.

Highlight of Business Operations:

Revenues from Infrastructure Solutions. Revenues decreased by $11.0 million, or 27.1%, to $29.6 million for the three months ended December 31, 2012 and increased by $2.3 million, or 3.7%, to $63.6 million for the six months ended December 31, 2012, compared to $40.5 million and $61.3 million for the three and six months ended December 31, 2011, respectively. The decrease in revenues in the three months ended December 31, 2012 was primarily driven by the decrease in achievement of revenue milestones under Contact A which was substantially complete as of December 31, 2012 with remaining backlog of approximately $1.1 million. The increase in revenue in the six months ended December 31, 2012 was due to increase in milestones achieved under Contract A in the three months ended September 30, 2012 as compared to September 30, 2011.

Costs from Services. Costs from services decreased by $2.0 million, or 5.7%, to $33.8 million for the three months ended December 31, 2012 and decreased by $4.0 million, or 5.7%, to $65.8 million for the six months ended December 31, 2012, compared to $35.8 million and $69.8 million for the three and six months ended December 31, 2011, respectively. Gross margin decreased to 32.7% of revenues for the three months ended December 31, 2012 and decreased to 32.4% of revenues for the six months ended December 31, 2012, compared to 34.5% and 33.5% for the three and six months ended December 31, 2011, respectively. The decrease in the gross margin was primarily driven by a decrease in revenue in the government marketplace due to a reduction of services in Iraq and a reduction in margin due to the customer change from Northrop to Inmarsat Government on a government program for which we provide subcontracting services. The gross margin in the services segment has been a key driver of 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 decreased by $9.7 million, or 26.6%, to $26.7 million for the three months ended December 31, 2012 and increased by $4.3 million, or 7.9%, to $58.8 million for the six months ended December 31, 2012, compared to $36.4 million and $54.5 million for the three and six months ended December 31, 2011, respectively. The gross margin decreased to 9.7% in the three months ended December 31, 2012 and decreased to 7.5% for the six months ended December 31, 2012, compared to 10.3% and 11.1% for the three and six months ended December 31, 2011, respectively. The decrease in gross margin was mainly attributable to significant proportion of revenue from Contract A, which has lower than normal margin. The Company expects a significant portion of previously delayed shipments on Contract B, which carries no margin to be made in the remainder of fiscal 2013 and fiscal 2014 which in each case will negatively impact our gross margin percentage in the remainder of fiscal 2013 and fiscal 2014 as milestones are reached under that contract.

Net cash provided by operating activities during the six months ended December 31, 2012 was $14.7 million. This primarily related to net income of $6.5 million, a non-cash item representing depreciation and amortization expense of $5.8 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 $3.5 million due to net income generated in the period, a decrease in accounts receivable of $3.4 million due to the timing of billings and collections from customers, an increase in deferred revenue of $2.0 million due to timing differences between project billings and revenue recognition milestones resulting from specific customer contracts and non-cash stock compensation expense of $1.9 million, offset by an increase in inventory of $5.7 million due to the timing of shipments and purchases of equipment for milestones to be reached in future periods and a decrease in accrued payroll and related fringe benefits of $2.2 million due to payment of awards under our management incentive plan.

Net cash provided by operating activities during the six months ended December 31, 2011 was $14.6 million. This primarily related to net income of $18.6 million, an increase in accounts payable of $11.2 million due to the increase in inventories and timing of payments to vendors, a non-cash item representing depreciation and amortization expense of $6.2 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 $3.7 million due to net income generated in the period, an increase in deferred revenue of $3.3 million due to timing differences between project billings and revenue recognition milestones resulting from specific customer contracts, and non-cash stock compensation expense of $1.8 million, partially offset by an increase in accounts receivable of $11.5 million due to the timing of billings and collections from customers, a non-cash earn-out fair value adjustments of $10.6 million and an increase in inventory of $7.3 million due to the timing of shipments and purchases of equipment for milestones to be reached in future periods.

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