COM DEV International Ltd. (TSX:CDV) today announced second quarter results for the three-month period ended April 30, 2013. All amounts are stated in Canadian dollars unless otherwise noted.

Second Quarter Highlights

– Revenue was $55.2 million, up 10.2 percent over second quarter 2012 revenues of $50.1 million.
– Solid order performance with $57.0 million in new business in the quarter resulted in a book to bill ratio of 1.03 – the fifth consecutive quarter with a ratio greater than 1.0.
– 28% gross margin in the core space equipment business, up from 25% in Q2 2012, reflected the quality of the Company’s underlying backlog, as well as solid engineering, manufacturing, and program management performance.
– Net income attributable to shareholders was $4.8 million, or $0.06 per share compared to Q2 2012, where the benefit of a one-time gain of $2.2 million from the sale of underutilized assets, boosted net income to $5.5 million, or $0.07.
– Increase in exactEarth subscription customer base to 70 from 41 in Q2 2012. In addition to subscription customers there are 60 customer trials currently underway, up from 16 in Q2 2012.
– Backlog grew by 11.8% to $149.1 million at April 30, 2013, up from $133.5 million at the end of Q2 2012.

“The second quarter of 2013 delivered solid results, with continued strong gross margins in our equipment business, and a book-to-bill ratio that stayed above 1.0 for the fifth consecutive quarter,” stated Michael Pley, CEO of COM DEV. “Subsequent to our quarter-end we have seen a significant pick-up in announcements for new satellite orders and we maintain our outlook for growth in revenue in fiscal 2013.”

Financial Review

COM DEV’s fiscal 2013 second quarter revenues of $55.2 million increased by $5.1 million or 10.2 percent compared to $50.1 million the previous year. The revenue split between the three market segments was 47 percent commercial, 34 percent civil and 19 percent military, compared to a 54/28/18 split in 2012. It is important to note that communication satellite programs are increasingly being seen in the civil segment as emerging country national governments use satellites as an efficient means to provide communications infrastructure. These programs draw on the Company’s same products as the more traditional commercial market segments. In general, bidding and order activity remains robust.

COM DEV received new orders totaling $57.0 million during the quarter, of which 44 percent were commercial, 41 percent were civil, and 15 percent were military. In the second quarter of 2012 the Company booked $59.3 million of new orders, with a commercial/civil/military split of 73/01/26.

Order backlog at April 30, 2013 was $149.1 million compared to $133.5 million at the end of the second quarter of fiscal 2012. Backlog was split between the Company’s commercial, civil and military sectors at a ratio of 54 percent, 29 percent and 17 percent respectively, compared to 55 percent 21 percent and 24 percent at April 30, 2012. The Company expects to convert approximately 61 percent of the total backlog into revenue during the balance of fiscal 2013.

Consolidated gross margin was $14.7 million in fiscal Q2 2013, representing 27 percent of total revenues, compared to $12.4 million or 25 percent of revenues in Q2 2012. The improvement was primarily the result of an increase in the Space Segment gross margin percentage to 28 percent (2012: 25 percent), slightly offset by a decrease in the Data Services Segment gross margin percentage due to higher depreciation from the successful commissioning of two exactEarth satellites and the higher operations costs of the expanded constellation to service exactEarth’s growing customer base.

COM DEV recorded a net research and development expense of $0.1 million in Q2 2013, compared to $0.1 million in Q2 2012. Gross R&D spending declined to $2.8 million from $3.9 million while R&D funding from external sources decreased to $0.7 million from $1.0 million. The Company also recognized $2.0 million of Investment Tax Credits (ITCs) in Q2 2013, compared to $2.8 million in Q2 2012, which helped to offset income tax expense.

General expenses in Q2 2013 at $4.9 million were unchanged from the same quarter in the prior year, and selling expenses at $3.0 million were marginally higher than the $2.9 million from Q2 2012. In general, selling expenses fluctuate from quarter to quarter and year to year depending on the volume of bids and proposal work that is underway.

Net income attributable to shareholders was $4.8 million in Q2 2013, compared to $5.5 million in 2012. While that net income figure is lower year over year by $0.7 million, current quarter gross margin percentage strength generated $2.3 million more in gross margin versus Q2 2012. The comparative prior year’s net income contained a $2.2 million one-time gain from the sale of underutilized Intellectual Property, as well as a $1.0 million higher valuation gain on the Company’s foreign exchange hedge portfolio due to the strengthening of the Canadian dollar in Q2 of 2012.

The Company generated $11.9 million of cash from operating activities in Q2 2013, compared with 2012 when $1.8 million was generated. The Company generated $6.1 million in working capital in Q2 2013, which compares to $0.7 million generated in working capital in Q2 2012. This increase in working capital was mainly due to a decrease in accounts receivable, inventory and contracts in progress, offset by an increase in prepaid and decreases in accounts payable and billings in excess of costs and earnings on contracts in progress.

During the quarter the Company received a settlement proposal from the Canada Revenue Agency related to a dispute over Corporate Minimum Tax, and Capital Tax reassessments. The terms of that proposal have been reflected in the Q2 financial statements, including comparative figures.

The Company’s basic share count stood at 76,397,656 on June 6, 2013.