Anaheim Firm Wins Navy Deal That Could Bring in $121 Million
Comarco Inc., which provides defense engineering and management services, said Friday that it won a contract worth up to $121 million to provide engineering services for a Navy missile test center in Point Mugu.
The Navy contract is the fourth-largest in the company’s history and boosts Comarco’s backlog to more than $600 million, said Don M. Bailey, president and chief executive officer.
As a result, the 1,400-employee company will hire 100 more employees this year in Point Mugu and Anaheim, he said.
“This clearly is a very important contract in an area that is a high-budget priority for the Navy,” Bailey said.
Comarco stock closed at $3.75 in over-the-counter trading on Friday, up 37.5 cents.
Under the contract, Comarco will run weapons tests for the Pacific Missile Test Center for one year for $5 million. But the contract amount will increase in value to $121 million if the Navy exercises its option to extend the contract for four more years.
Michael Murphy, editor of the California Technology Stock Letter in San Francisco, said the Navy testing contract gives the company a backlog that will keep it comfortable in a period of difficulty for many defense contractors.
“They’ve done well at keeping focused on cost control, securing new business and paying down their debt,” he said. “The future is bright for them.”
Bailey said the contract will strengthen Comarco’s core military engineering business and make it easier for the firm to gradually diversify into its non-defense businesses.
Bailey’s goal is to reach an equal balance of defense and non-defense revenue. But he isn’t complaining about the new naval contract.
“Diversification isn’t the primary goal,” Bailey said. “Growing the company is the main goal.”
About 75% of the company’s revenues are military-related, while 25% come from non-defense work. Five years ago, all its work was in defense, mainly in testing and evaluating weapons under development and managing military bases.
Last month, the company also won a non-defense contract worth $8 million a year to manage general aviation airports in Los Angeles County for two decades.
For the nine months ended last Oct. 21, the company reported a profit of $1.2 million on revenue of $53.5 million, compared to a profit of $1 million on revenue of $60.5 million in the same period a year ago.
In a letter to shareholders on Friday, Bailey said earnings for the current fiscal year are expected to increase 25% compared to a year ago. In addition, he noted the company has reduced its debt to zero.
Bailey said he will make presentations to investors in New York, Boston and San Francisco in coming months to educate the public about the company’s strategy.
