Communications Systems, Inc. Reports Third Quarter 2016 Financial Results

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 third quarter ("Q3") ended September 30, 2016, including a discussion of results of operations by segment.

Third Quarter 2016 Summary
  • Q3 2016 consolidated sales were $25.6 million, compared to $32.2 million in Q3 2015, primarily due to lower legacy product sales at Suttle.
  • CSI's manufacturing business units registered strong new product sales 1 growth in Q3 2016.
    • Suttle's new product sales increased 36% year over year to $3.4 million.
    • Transition Networks' new product sales rose 118% year over year to $3.0 million.
  • Q3 2016 consolidated operating loss was $1.2 million compared to operating income of $0.4 million in Q3 2015, primarily driven by a $2.6 million operating loss at Suttle as a result of declining legacy product sales volumes and pricing.
  • Transition Networks recorded a significant improvement in operating income, which grew 80% to $1.6 million from $0.9 million in Q3 2015, reflecting the favorable impact of cost reduction initiatives. JDL Technologies also contributed $0.5 million to consolidated operating income in Q3 2016.
  • Q3 2016 net loss was $1.3 million, or $(0.14) per diluted share, compared to net income of $1.3 million, or $0.15 per diluted share, in Q3 2015. The 2015 third quarter benefited from a $1.1 million, or $0.13 per diluted share, R&D tax credit related to years 2011-2014. Due to losses sustained in 2015 and 2016, a tax valuation allowance has been applied to the 2016 tax provision resulting in no tax benefit being booked in the current year.
  • Net cash, cash equivalents, and investments totaled $12.8 million as of September 30, 2016.

CSI's Chief Executive Officer Roger H.D. Lacey commented, "In Q3 2016, we continued to grow new product sales at our manufacturing businesses, implemented corporate and business unit cost reductions and achieved company-wide operational improvements through our Lean Six Sigma initiative, "OneCSI." This quarter Transition Networks demonstrated the significant potential of our cost-reduction efforts, reporting an 80% year-over-year increase in operating income on roughly flat year-over-year revenue growth. We remain optimistic that the right-sizing initiatives we implemented at Suttle similarly will lead to operating improvement in 2017.

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