Communications Systems, Inc. (NASDAQ:JCS) (“CSI” or the “Company”), a global provider of connectivity infrastructure and services for deployments of broadband networks, today announced financial results for the fourth quarter (“Q4”) and full year ended December 31, 2015, including a discussion of results of operations by segment.
Full Year 2015 Summary
-
2015 consolidated sales were $107.7 million compared to $119.1 million
in 2014.
- Suttle’s sales declined 26%.
- Transition Networks’ sales decreased 1%.
- JDL Technologies’ sales rose 83%.
- International sales grew to 17.5% of total sales.
-
2015 consolidated operating loss was $10.5 million compared to
operating income of $3.3 million in 2014.
- Suttle’s operating loss was $6.4 million versus operating income of $6.6 million in 2014.
- Transition Networks’ operating loss was $4.0 million versus an operating loss of $2.4 million in 2014.
- JDL Technologies’ operating income was $1.2 million versus an operating loss of $0.9 million in 2014.
- 2015 R&D investment was $8.3 million, or 7.7% of consolidated sales, compared to $7.4 million in 2014.
-
Full year 2015 results also reflect certain special items:
- $1.2 million of settlement costs for winding up the pension plan at CSI’s Austin Taylor subsidiary; and
- A $3.7 million additional valuation allowance that impacted income tax expense in Q4 2015.
- 2015 net loss was $9.6 million, or $(1.11) per diluted share, compared to net income of $2.0 million, or $0.23 per diluted share, in 2014.
- 2015 cash flow from operating activities totaled $0.7 million, and was favorably impacted by CSI’s focus on working capital management.
- Cash, cash equivalents, and investments totaled $21.3 million as of December 31, 2015.
Fourth Quarter 2015 Summary
-
Q4 2015 consolidated sales were $27.7 million compared to $27.2
million in Q4 2014.
- Suttle’s sales declined 19%.
- Transition Networks’ sales declined 4%.
- JDL Technologies’ sales rose 347%.
-
Q4 2015 consolidated operating loss was $3.5 million compared to an
operating loss of $1.5 million in Q4 2014.
- Suttle’s operating loss was $1.5 million versus operating income of $0.5 million in Q4 2014.
- Transition Networks’ operating loss was $1.7 million versus an operating loss of $1.5 million in Q4 2014.
- JDL Technologies’ operating income was $1.0 million versus an operating loss of $0.6 million in Q4 2014
- Q4 2015 net loss was $5.7 million, or $(0.66) per diluted share, compared to a net loss of $1.0 million, or $(0.12) per diluted share, in Q4 2014.
CSI’s Chief Executive Officer Roger H.D. Lacey commented, “Despite a very difficult trading year, 2015 was a period of substantial transformation for all of our businesses. We continued to invest aggressively in R&D (+12%), restaffed critical organizational positions, and focused on operational excellence starting with our new lean operations program and use of our ERP system, in which we invested more than $5 million over the last four years. With these investments in place we were able to sell $15 million in new products, which amounted to 14% of revenues, and substantially widened our market reach. We believe these actions will allow us to achieve stable, profitable growth in the coming years. The confidence the management team shares in this future, and the full funding of our growth initiatives to date, has allowed for us to continue the dividend at its present level, while maintaining a strong balance sheet.”
Q4 2015 Segment Financial Overview
Suttle
| Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Sales | $ 12,613 | $ 15,503 | $ 50,082 | $ 67,330 | ||||||||
Gross profit | 2,063 | 4,759 | 8,850 | 20,992 | ||||||||
Operating (loss) income | (1,542) | 510 | (6,435) | 6,603 | ||||||||
Suttle’s Q4 2015 sales decreased 19% to $12.6 million, from $15.5 million in Q4 2014, primarily due to increased pricing pressure and volume declines in its legacy product lines. Sales to the major communication service providers declined 17% to $10.4 million in Q4 2015, from $12.5 million in Q4 2014, and comprised 83% of total segment revenues. FTTx product sales as a group increased 10% from Q4 2014.
Mr. Lacey stated, “We continue to advance our fiber and active capabilities to ensure that Suttle benefits from our customers’ ongoing deployment of high-speed residential networks. We are encouraged by early client feedback on several of Suttle’s new product trials and believe the segment is well positioned for resumed growth.”
Transition Networks
| Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Sales | $ 10,211 | $ 10,585 | $ 42,570 | $ 43,174 | ||||||||
Gross profit | 3,933 | 4,117 | 18,482 | 19,199 | ||||||||
Operating loss | (1,733) | (1,455) | (4,013) | (2,432) | ||||||||
Transition Networks’ Q4 2015 sales decreased 4% to $10.2 million from $10.6 million in Q4 2014. Media converter sales represented 69% of total segment sales in Q4 2015, compared to 70% of total segment sales in Q4 2014.
Mr. Lacey noted, “Roughly 10% of Transition Networks’ 2015 sales came from new products and we believe our emphasis on media conversion solutions that help clients overcome bandwidth, security and distance limitations will deliver improved sales. We provide cutting-edge solutions for networks in transition, and are very excited about the January 2016 carve-out of Net2Edge Limited from Transition Networks. Net2Edge will be a focused platform for CSI to address the significant market opportunity in the Carrier Ethernet markets and the developing Network Function Virtualization industry, and it will be treated as a separate reporting segment starting in Q1 2016.”
JDL Technologies
| Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Sales | $ 5,107 | $ 1,141 | $ 15,672 | $ 8,567 | ||||||||
Gross profit | 1, 889 | 188 | 4,806 | 1,968 | ||||||||
Operating income (loss) | 976 | (574) | 1,171 | (878) | ||||||||
JDL Technologies’ Q4 2015 sales increased 347% to $5.1 million from $1.1 million in Q4 2014, primarily reflecting a $3.0 million increase in revenues earned from project work in the educational vertical. Sales to small- and medium-sized commercial businesses (SMBs) increased $0.9 million, or 236%, primarily due to the acquisition of several new clients.
Mr. Lacey concluded, “JDL Technologies’ sales and operating income increased significantly in 2015, driven by strong growth in recurring managed services revenues and new project work in the educational vertical. JDL Technologies’ expanding recurring revenue stream reflects the strength of our HIPAA-compliant IT services offering in Florida’s healthcare market, our expansion into new geographies, such as Minneapolis and Atlanta, and our success penetrating the financial, legal and commercial end markets.”
Financial Condition
CSI’s
balance sheet at December 31, 2015 included cash, cash equivalents, and
investments of $21.3 million, working capital of $46.5 million, and
stockholders’ equity of $72.2 million.
About Communications Systems
Communications
Systems, Inc. provides connectivity infrastructure and services for
global deployments of broadband networks. Focusing on innovative,
cost-effective solutions, CSI provides customers the ability to deliver,
manage, and optimize their broadband network services and architecture.
From the integration of fiber optics in any application and environment
to efficient home voice and data deployments to optimization of data and
application access, CSI provides tools for maximum utilization of the
network from the edge to the user. With partners and customers in over
50 countries, CSI has built a reputation as a reliable global innovator
focusing on quality and customer service.
Forward-Looking Statements
This
press release includes certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding future financial performance, future
growth and future acquisitions. These statements are based on
Communications Systems’ current expectations or beliefs and are subject
to uncertainty and changes in circumstances. Actual results may vary
materially from those expressed or implied by the statements herein due
to changes in economic, business, competitive or regulatory factors, and
other risks and uncertainties affecting the operation of Communications
Systems’ business. These risks, uncertainties and contingencies are
presented in the Company’s Annual Report on Form 10-K and, from time to
time, in the Company’s other filings with the Securities and Exchange
Commission. The information set forth herein should be read in light of
such risks. Further, investors should keep in mind that the Company’s
financial results in any particular period may not be indicative of
future results. Communications Systems is under no obligation to, and
expressly disclaims any obligation to, update or alter its
forward-looking statements, whether as a result of new information,
future events, changes in assumptions or otherwise.
CSI CONSOLIDATED SUMMARY OF EARNINGS | |||||||||||||||
Selected Income Statement Data | |||||||||||||||
Unaudited | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | ||||||||||||
Sales | $ | 27,680,761 | $ | 27,313,304 | $ | 107,669,524 | $ | 119,071,439 | |||||||
Gross profit | 7,696,521 | 9,064,273 | 31,546,162 | 42,158,558 | |||||||||||
Operating (loss) income | (3,528,352) | (1,518,570) | (10,505,869) | 3,292,919 | |||||||||||
(Loss) income before income taxes | (3,504,081) | (1,562,818) | (10,401,723) | 3,181,228 | |||||||||||
Income tax (benefit) expense | 2,236,536 | (532,888) | (753,415) | 1,219,355 | |||||||||||
Net (loss) income | $ | (5,740,617) | $ | (1,029,930) | $ | (9,648,308) | $ | 1,961,873 | |||||||
Basic net (loss) income per share | $ | (0.66) | $ | (0.12) | $ | (1.11) | $ | 0.23 | |||||||
Diluted net (loss) income per share | $ | (0.66) | $ | (0.12) | $ | (1.11) | $ | 0.23 | |||||||
Cash dividends per share | $ | 0.16 | $ | 0.16 | $ | 0.64 | $ | 0.64 | |||||||
Average basic shares outstanding | 8,752,180 | 8,653,191 | 8,720,225 | 8,622,032 | |||||||||||
Average dilutive shares outstanding | 8,752,180 | 8,653,191 | 8,720,225 | 8,640,416 | |||||||||||
Selected Balance Sheet Data | |||||||||||||||
Unaudited | |||||||||||||||
Dec. 31, 2015 | Dec. 31, 2014 | ||||||||||||||
Total assets | $ | 87,916,230 | $ | 100,286,235 | |||||||||||
Cash, cash equivalents & investments | 21,334,910 | 29,879,835 | |||||||||||||
Working capital | 46,448,294 | 56,910,880 | |||||||||||||
Property, plant and equipment, net | 17,468,420 | 18,153,152 | |||||||||||||
Long-term liabilities | 290,087 | 1,270,876 | |||||||||||||
Stockholders’ equity | 72,184,691 | 86,020,498 | |||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160309005767/en/
Contacts:
Edwin C. Freeman, 952-996-1674
Chief
Financial Officer
efreeman@commsysinc.com
or
Roger
H. D. Lacey, 952-996-1674
Chief Executive Officer
or
The
Equity Group Inc.
Devin Sullivan, 212-836-9608
Senior Vice
President
dsullivan@equityny.com
or
Kalle
Ahl, 212-836-9614
Senior Associate
kahl@equityny.com