MELVILLE, N.Y.--(BUSINESS WIRE)--Comtech (NASDAQ: CMTL) (the “Company”) today announced that its Board of Directors has appointed John Ratigan, Chief Corporate Development Officer (“CCDO”), as interim Chief Executive Officer, effective immediately. Mr. Ratigan succeeds Ken Peterman, who has been terminated as President and CEO and will cease to serve on the Board. Mr. Peterman’s termination was for conduct unrelated to Comtech’s business strategy, financial results or previously filed financial statements. ...

MELVILLE, N.Y.--(BUSINESS WIRE)--February 7, 2024-- Comtech (NASDAQ: CMTL), a global technology leader, today announced its Canadian subsidiary was invited by Innovation Canada, a sector of Innovation, Science and Economic Development Canada, to join a select group of companies participating in the Accelerated Growth Service (AGS) program. The AGS program offers support to a number of high-growth, high-potential, qualifying businesses across Canada. As part of the program, Comtech will gain access to key ...

MELVILLE, N.Y.--(BUSINESS WIRE)--February 5, 2024-- Comtech (NASDAQ: CMTL) announced today that Washington State recently awarded the company a $48 million contract extension to continue providing Next Generation 911 (NG911) services over the next five years, with the option to extend through 2034. Washington State initially contracted Comtech to design, deploy and operate next generation public safety technologies and secure and reliable communications capabilities in 2016, making Washington a national ...

MELVILLE, N.Y.--(BUSINESS WIRE)--Feb. 1, 2024--Comtech (NASDAQ: CMTL) announced today it received approval from the U.S. Army Contracting Command to move forward on the Company’s previously announced $544 million Global Field Service Representative (GFSR) contract. Under this contract, Comtech will provide onsite professional engineering services, as well as supply and support the Company’s market leading satellite and terrestrial networking communications technologies for the Project Manager Tactical Netw ...

Comtech Telecommunications (CMTL) shares rallied 15.3% in the last trading session to close at $7.76. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 18.6% loss over the past four weeks.The uptrend in share prices is largely attributable to the fresh capital infusion in the company. Comtech recently secured a $45 million investment from its existing shareholders – White Hat Capital Partners LP and Magnetar.Th ...

MELVILLE, N.Y.--(BUSINESS WIRE)--January 22, 2024 -- Comtech Telecommunications Corp. (NASDAQ: CMTL) (“Comtech” or the “Company”), a leading global technology company providing terrestrial and wireless network solutions, next-generation 911 emergency services, satellite and space communications technologies, and cloud native capabilities, today announced a $45.0 million investment by current shareholders White Hat Capital Partners LP (“White Hat”), an investment firm focused on sustainable value creation in ...

Financial Data and Key Metrics Changes - The company reported consolidated net sales of $151.9 million for Q1 fiscal 2024, representing a 15.9% increase year-over-year and a 2.1% increase sequentially [119] - Adjusted EBITDA for Q1 fiscal 2024 was $18.4 million, a 72% increase from Q1 fiscal 2023, with an adjusted EBITDA margin of 12.1%, up from 8.2% in the prior year [120] - Operating income for Q1 fiscal 2024 was $2.1 million, compared to an operating loss of $9.7 million in the same quarter last year, marking the second consecutive quarter of positive GAAP operating income [97][10] Business Line Data and Key Metrics Changes - The Satellite and Space Communications segment generated $102 million in sales, while the Terrestrial and Wireless Network segment reported $49.5 million [119] - The company secured significant contract wins, including a $20 million order for portable troposcatter systems and a $9.6 million contract for anti-jam modem technologies [110][111] Market Data and Key Metrics Changes - The Canadian government has mandated the nationwide adoption of next-generation 911 services by March 2025, presenting a significant market opportunity for the company [90] - The company is positioned as a leader in providing Next Gen 911 capabilities, with recent wins indicating strong market demand [53] Company Strategy and Development Direction - The company is undergoing a transformation known as "One Comtech," aimed at improving operational performance and collaboration across its previously siloed businesses [3][4] - The focus is on delivering comprehensive solutions that enhance customer value and address complex challenges in network connectivity [4][26] - The company is actively managing its balance sheet and exploring refinancing options for its credit facility, which matures in October 2024 [14][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macro environment, including inflation, rising interest rates, and geopolitical tensions, but expressed confidence in the company's growth trajectory [36][122] - The company has visibility into approximately $1.7 billion of future revenue, bolstered by recent contract wins [96][106] Other Important Information - The company completed the divestiture of its Solid-State Power Amplifier product line on November 7, 2023, which will not be included in future net sales [18][121] - The implementation of lean manufacturing principles is expected to drive continuous improvement across the enterprise [12][11] Q&A Session Summary Question: Update on refinancing and timing - Management indicated that discussions with lenders are ongoing and that they are exploring various alternatives to achieve a favorable refinancing outcome [20][66] Question: Details on the Canadian E911 opportunity - Management confirmed that the recent win is part of a broader mandate for next-generation services and highlighted the similarities between the Canadian and U.S. markets [54][104] Question: Impact of divestiture on financials - Management stated that the guidance of 1% to 3% growth is based on figures that included the divested product line, suggesting that the actual growth could be higher [46][121] Question: Specifics on restructuring costs - Management noted that restructuring costs are expected to unwind over the course of the year, with minimal severance payments remaining [43][44] Question: Market size comparison between Canada and the U.S. - Management compared the Canadian market size to California's population, indicating a similar addressable market [54]

[Part I. Financial Information](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights a Q1 FY2024 financial turnaround with positive operating income and record bookings, despite substantial doubt about going concern due to liquidity and debt maturity [Fiscal 2024: First Quarter Highlights and Business Outlook](index=38&type=section&id=Fiscal%202024%3A%20First%20Quarter%20Highlights%20and%20Business%20Outlook) Q1 FY2024 saw positive GAAP operating income, record bookings, and significant contract wins, with Q2 FY2024 targeting modest sales growth and improved Adjusted EBITDA margin Q1 Fiscal 2024 Financial Highlights | Metric | Q1 FY2024 | Q4 FY2023 | Q1 FY2023 | | :--- | :--- | :--- | :--- | | Consolidated Net Sales | $151.9M | $148.8M | $131.1M | | GAAP Operating Income (Loss) | $2.1M | $1.1M | ($9.7M) | | Adjusted EBITDA | $18.4M | $18.9M | $10.7M | | New Bookings | $185.6M | - | - | | Book-to-Bill Ratio | 1.22x | - | - | | Backlog | $695.9M | $662.2M | $668.2M | - The company secured a large, multi-year GFSR contract from the U.S. Army with a potential value of **$544.0 million**, expected to significantly contribute to net sales in the second half of fiscal 2024[8](index=8&type=chunk) - For the second quarter of fiscal 2024, the company is targeting a **1.0% to 3.0%** increase in consolidated net sales and a consolidated Adjusted EBITDA margin between **11.0% and 13.0%**[10](index=10&type=chunk) - The Terrestrial and Wireless Networks segment extended enhanced 911 call routing services for a major U.S. wireless carrier, a contract valued at **over $30.0 million**[9](index=9&type=chunk) [Comparison of Results of Operations](index=41&type=section&id=Comparison%20of%20Results%20of%20Operations) Consolidated net sales increased 15.9% year-over-year to $151.9 million, driven by the Satellite segment, shifting to GAAP operating income despite a gross margin decline Net Sales by Segment (Three Months Ended Oct 31) | Segment | 2023 | 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Satellite and Space Communications | $102.4M | $80.9M | +$21.5M | +26.6% | | Terrestrial and Wireless Networks | $49.5M | $50.3M | -$0.8M | -1.6% | | **Consolidated Total** | **$151.9M** | **$131.1M** | **+$20.8M** | **+15.9%** | - The company achieved GAAP operating income of **$2.1 million**, a significant improvement from a **$9.7 million loss** in the prior-year quarter. Excluding special items, non-GAAP operating income was **$15.3 million**[7](index=7&type=chunk)[21](index=21&type=chunk)[366](index=366&type=chunk) - Gross profit margin decreased to **31.5%** from **35.7%** year-over-year, reflecting a shift in product and service mix, particularly higher sales of troposcatter and SATCOM solutions to U.S. government customers[360](index=360&type=chunk) - Research and development expenses decreased by **38.7%** to **$7.8 million**, driven by the 'One Comtech' initiative and prioritization of resources[18](index=18&type=chunk)[363](index=363&type=chunk) Adjusted EBITDA by Segment (Three Months Ended Oct 31) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Satellite and Space Communications | $15.1M | $9.9M | | Terrestrial and Wireless Networks | $9.6M | $6.0M | | Unallocated | ($6.4M) | ($5.2M) | | **Consolidated Total** | **$18.4M** | **$10.7M** | [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces significant liquidity challenges, raising substantial doubt about its going concern ability due to insufficient cash and upcoming debt maturity, actively pursuing mitigation strategies - The company has **substantial doubt** about its ability to continue as a going concern, as current cash and projected cash flows are deemed insufficient to fund operations and repay the Credit Facility maturing in October 2024[11](index=11&type=chunk)[31](index=31&type=chunk)[45](index=45&type=chunk) - Cash and cash equivalents decreased to **$18.1 million** at October 31, 2023, from **$19.0 million** at July 31, 2023. Net cash used in operating activities was **$14.5 million** for the quarter[28](index=28&type=chunk)[401](index=401&type=chunk) - Mitigation plans include implementing cost savings, reducing working capital, reevaluating capital expenditures, seeking new debt or equity financing, and exploring strategic transactions like asset divestitures[60](index=60&type=chunk)[121](index=121&type=chunk)[404](index=404&type=chunk) Contractual Cash Obligations (as of Oct 31, 2023) | Obligation | Total | Due Within 1 Year | | :--- | :--- | :--- | | Credit Facility - principal | $184.0M | $184.0M | | Credit Facility - interest | $17.1M | $17.1M | | Operating lease obligations | $48.5M | $8.7M | | **Total** | **$249.5M** | **$209.7M** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail substantial doubt about going concern due to liquidity and debt maturity, alongside the PST divestiture, revenue disaggregation, and Credit Facility terms [Note (1) General - Liquidity and Going Concern](index=9&type=section&id=Note%20(1)%20General%20-%20Liquidity%20and%20Going%20Concern) This note formally discloses substantial doubt about the company's ability to continue as a going concern due to insufficient liquidity and the upcoming Credit Facility maturity - The company has concluded that adverse conditions raise **substantial doubt** about its ability to continue as a going concern for the next twelve months[116](index=116&type=chunk)[146](index=146&type=chunk)[151](index=151&type=chunk) - The primary reasons for this doubt are **insufficient cash and expected liquidity** to fund operations and repay the outstanding borrowings under the Credit Facility, which matures on October 31, 2024[120](index=120&type=chunk)[149](index=149&type=chunk) Recent Operating Performance | Period | Metric | Value | | :--- | :--- | :--- | | Fiscal 2023, 2022, 2021 | Operating Losses | ($14.7M), ($33.8M), ($68.3M) | | Q1 FY2024 | Operating Income | $2.1M | | Q1 FY2024 | Net Cash Used in Operations | ($14.5M) | [Note (2) Business Divestiture](index=12&type=section&id=Note%20(2)%20Business%20Divestiture) The company completed the divestiture of its Power Systems Technology product line for $35.7 million cash plus contingent consideration, reclassifying related assets and liabilities as held for sale - The company completed the sale of its Power Systems Technology (PST) product line on November 7, 2023[181](index=181&type=chunk) PST Divestiture Details | Item | Value | | :--- | :--- | | Preliminary Sales Price | $35.7 million | | Contingent Consideration | Up to $5.0 million | | Assets Held for Sale | $44.9 million | | Liabilities Held for Sale | $10.6 million | [Note (4) Revenue Recognition](index=13&type=section&id=Note%20(4)%20Revenue%20Recognition) This note details Q1 FY2024 revenue disaggregation by segment, geography, and customer type, with total revenue of $151.9 million and a funded backlog of $695.9 million Revenue Disaggregation (Q1 FY2024) | Category | Satellite & Space | Terrestrial & Wireless | Total | | :--- | :--- | :--- | :--- | | **Net Sales** | **$102.4M** | **$49.5M** | **$151.9M** | | U.S. Government | $53.0M | $0.6M | $53.6M | | Domestic | $16.0M | $45.2M | $61.1M | | International | $33.4M | $3.7M | $37.2M | - As of October 31, 2023, the aggregate amount of remaining performance obligations (funded backlog) was **$695.9 million**, a substantial portion of which is expected to be recognized as revenue over the next 24 months[165](index=165&type=chunk) [Note (10) Credit Facility](index=20&type=section&id=Note%20(10)%20Credit%20Facility) The Credit Facility, with $183.5 million outstanding and maturing October 2024, is now a current liability, though the company was covenant compliant, with recent amendments impacting borrowing limits and amortization - The Credit Facility matures on October 31, 2024, and the outstanding balance of **$183.5 million** has been classified as a **current liability** as of October 31, 2023[237](index=237&type=chunk)[242](index=242&type=chunk) - As of October 31, 2023, the company was **in compliance** with all financial covenants, including its Secured Leverage Ratio and Minimum Liquidity requirements[148](index=148&type=chunk)[212](index=212&type=chunk) - On November 7, 2023, the company entered into a Third Amended and Restated Credit Agreement. Effective January 31, 2024, this amendment will reduce the revolving loan facility borrowing limit and increase quarterly term loan amortization payments[214](index=214&type=chunk)[216](index=216&type=chunk)[243](index=243&type=chunk) [Note (14) Segment Information](index=27&type=section&id=Note%20(14)%20Segment%20Information) The company operates two segments, Satellite and Space Communications and Terrestrial and Wireless Networks, with the Satellite segment contributing higher net sales and operating income in Q1 FY2024 Segment Performance (Three Months Ended Oct 31, 2023) | Metric | Satellite & Space | Terrestrial & Wireless | Unallocated | Total | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $102.4M | $49.5M | - | $151.9M | | Operating Income (Loss) | $10.1M | $4.0M | ($12.1M) | $2.1M | | Adjusted EBITDA | $15.1M | $9.6M | ($6.4M) | $18.4M | - The Satellite and Space Communications segment offers satellite ground station technologies, troposcatter solutions, and space components[290](index=290&type=chunk) - The Terrestrial and Wireless Networks segment provides next-generation 911, call handling, and trusted location and messaging solutions[266](index=266&type=chunk) [Part II. Other Information](index=53&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) The primary risk factor is substantial doubt about the company's going concern ability due to insufficient liquidity and upcoming debt maturity, potentially impacting business relationships and financing - The company's current cash and liquidity projections raise **substantial doubt** about its ability to continue as a going concern[45](index=45&type=chunk)[75](index=75&type=chunk) - Failure to remain compliant with financial covenants under the Credit Facility could trigger an **Event of Default**, leading to **immediate acceleration and repayment** of all outstanding debt[82](index=82&type=chunk) - The perception of going concern risk may cause customers and vendors to alter business relationships and could negatively impact the company's ability to obtain financing or its stock price[46](index=46&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net sales for fiscal 2023 were $550 million, with $337.8 million from the Satellite and Space Communication segment and $212.2 million from the Terrestrial and Wireless Network segment [37] - Consolidated gross margins for Q4 and fiscal year 2023 were 32.7% and 33.5%, respectively, compared to 35.9% and 37% in the prior year [19] - Operating income in Q4 of fiscal 2023 was $1.1 million, a significant improvement from an operating loss of $2.1 million in Q4 of fiscal 2022 [38] - Adjusted EBITDA for Q4 fiscal 2023 was $18.9 million, a 51.2% sequential increase from Q3 fiscal 2023, with an adjusted EBITDA margin of 12.7% [51] Business Line Data and Key Metrics Changes - The Satellite and Space Communications segment reported $94.2 million in Q4, while the Terrestrial and Wireless Network segment reported $54.6 million [50] - The increase in net sales was driven by higher sales of troposcatter and SATCOM solutions to U.S. government and international customers [19] Market Data and Key Metrics Changes - The company has been awarded significant contracts, including a $544 million contract for the U.S. Army, which is expected to contribute meaningfully to revenues in the second half of fiscal 2024 [14][28] - The EDIM modem contract from the U.S. Army is valued at $48.6 million, with potential for over $1 billion in full-rate production [28] Company Strategy and Development Direction - The company is focused on its "One Comtech" transformation, which aims to unify its operations and enhance customer engagement through innovative solutions [3][4] - A strategic decision was made to divest the solid state power amplifier product line to strengthen the balance sheet and focus on software-defined and solution-based offerings [26][27] - The company is positioning itself as a technology partner rather than just a vendor, aiming to address customer challenges proactively [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve double-digit sales growth over time, driven by operational efficiencies and strategic contract wins [49] - The company anticipates some variability in performance due to ongoing transformation efforts but remains optimistic about future growth [52] Other Important Information - The company is in discussions to refinance its credit facility, which expires in October 2024, and is exploring various capital sources [10] - The company has implemented a comprehensive People Strategy and established an innovation foundry called EVOKE to drive new solutions [7] Q&A Session Summary Question: What drove the fourth quarter outperformance? - Management attributed the outperformance to lean initiatives and a strong backlog, resulting in higher net sales and improved margins [45][46] Question: Is the GFSR contract included in the guidance for Q1? - Management indicated that the GFSR contract is not included in the Q1 guidance due to the ongoing protest but expects it to contribute significantly once resolved [63][64] Question: What impact will the divestiture of the power systems unit have? - Management did not disclose specific revenue or EBITDA figures related to the divestiture but indicated it would help reduce debt and improve financial metrics [65][66] Question: Can you provide an update on the LEO customer? - Management stated that progress is being made according to the expected timeline, but no specific details were provided [73][74] Question: What is the outlook for cash flow in fiscal '24? - Management expects stronger cash flow than in Q4, returning to pre-COVID levels, with CapEx targets around $15 million [91]

Financial Performance - Consolidated net sales for fiscal 2023 were $550.0 million, with an Adjusted EBITDA of $53.5 million[64]. - The backlog as of July 31, 2023, was $662.2 million, with $293.4 million attributed to Satellite and Space Communications and $368.8 million to Terrestrial and Wireless Networks[79]. - International sales for fiscal 2023 were $132.1 million, an increase from $121.4 million in fiscal 2022[77]. - Sales to U.S. government customers accounted for 49.9% of net sales in the Satellite and Space Communications segment for fiscal 2023[75]. - Verizon Communications Inc. represented 10.6% of consolidated net sales for fiscal 2023[76]. - The sales cycle for products has significantly increased, indicating a longer time frame for revenue recognition[74]. Business Segments - The Satellite and Space Communications segment accounted for approximately 61% of fiscal 2023 net sales, while the Terrestrial and Wireless Networks segment represented about 39%[23]. - The Terrestrial and Wireless Networks segment is organized into three product areas, focusing on Next Generation 911 & Call Delivery, Solacom Call Handling Solutions, and Trusted Location and Messaging Solutions[46]. - The company is focused on integrating its individual businesses into two segments to improve operational performance and streamline decision-making[21]. Growth Opportunities - The company anticipates growth driven by increasing global demand for voice, video, and data usage, as well as the launch of new LEO and MEO satellite constellations[19]. - The demand for satellite-based cellular backhaul services is anticipated to grow rapidly, driven by the increased penetration of smart cellular phones and network upgrades to 4G and 5G[44]. - The company is well-positioned to capitalize on the growth of 5G networks, which are expected to enhance business processes and user experiences across multiple industries[56]. - The expected expansion of 988 networks in fiscal 2024 is anticipated to positively impact Comtech's business by improving location services for crisis response[55]. Innovation and Technology - The company established EVOKE as its innovation foundry in fiscal 2023, focusing on cloud-native satellite ecosystems, 5G advanced services, and "as-a-service" business models[22]. - The introduction of ELEVATE™ in fiscal 2022 combines Heights Dynamic Network Access and TDMA technologies into a single VSAT platform, enhancing customer value and enabling private or shared networks[29]. - The company has announced partnerships with technology firms such as Aarna Networks and Descartes Labs to enhance its product offerings with AI and machine learning capabilities[22]. - Comtech's high power and reliable Gallium Nitride (GaN) amplifier technology is increasingly used for both updating existing radar systems and new radar applications[41]. Research and Development - In fiscal 2023, internal research and development expenses were $48.6 million, representing 8.8% of total consolidated net sales, while customer-funded R&D activities amounted to $14.0 million[87]. - The company incurred $3.8 million in strategic emerging technology costs for next-generation satellite technology in fiscal 2023, with expectations for additional costs in fiscal 2024[87]. - The company holds a portfolio of several hundred patents worldwide, focusing on wireless location services and emergency public safety data routing, and aims to avoid patent litigation while fostering partnerships[90]. Workforce and Diversity - As of July 31, 2023, the employee workforce included 22% women, 38% people of color, 10% veterans, and 5% people with disabilities[101]. - The company launched a robust internship program in fiscal 2023, partnering with local universities to provide impactful projects and mentorship for interns[103]. - The company has 1,718 employees, with 1,132 engaged in production, 305 in R&D, and 281 in marketing and administrative functions, and maintains good employee relations[104]. Sustainability and Compliance - The company is implementing a comprehensive sustainability strategy, including the selection of a carbon accounting software provider to manage its carbon footprint[108]. - The company encourages greener commuting options, including company-sponsored mass transit cards and rideshare programs[110]. - The company is developing a company-wide Environmental, Health, and Safety Management System to improve workplace safety and minimize environmental impacts[112]. - The company is subject to various local, state, and federal regulations, including compliance with the Sarbanes-Oxley Act and Dodd-Frank Act[120]. Challenges and Risks - The ongoing challenges include inflation, rising interest rates, and disruptions in component availability, impacting business operations[65]. - The company anticipates potential risks related to the integration of acquired businesses and the implementation of its "One Comtech" transformation strategy[17]. - The company faces increased competition for U.S. government contracts due to a shift towards multiple-award IDIQ contracts[116].