Comtech Telecommunications(CMTL) - 2025 Q3 - Quarterly Report

Financial Performance - Consolidated net sales for Q3 fiscal 2025 were $126.8 million, slightly up from$126.6 million in Q2 fiscal 2025 but down from $128.1 million in Q3 fiscal 2024[229]. - Consolidated net sales for the three months ended April 30, 2025, were$126.8 million, a decrease of $1.3 million, or 1.0$128.1 million in the same period of 2024[244]. - Consolidated net sales decreased by $45.0 million, or 10.9$369.2 million for the nine months ended April 30, 2025, compared to $414.2 million for the same period in 2024[289]. - The net loss attributable to common stockholders for the three months ended April 30, 2025, was$14.5 million, or $(0.49) per diluted common share[288]. - For the nine months ended April 30, 2025, the GAAP net loss attributable to common stockholders was$192.7 million, with a net loss per diluted common share of $6.56[337]. - The company incurred operating losses of$141.0 million for the nine months ended April 30, 2025, following previous losses of $79.9 million in fiscal 2024[342]. Segment Performance - Net sales in the Satellite and Space Communications segment were$67.6 million, down $3.8 million, or 5.3$71.4 million in the prior year, primarily due to lower sales to the U.S. Marine Corps and U.S. Army[245]. - The Terrestrial and Wireless Networks segment saw net sales increase to $59.2 million, up$2.6 million, or 4.6%, compared to $56.6 million in the same period of 2024, driven by higher sales of NG-911 services[246]. - Net sales in the Satellite and Space Communications segment fell by$52.2 million, or 20.7%, to $200.2 million for the nine months ended April 30, 2025, primarily due to lower sales of troposcatter solutions and high-power solid state amplifiers[290]. - The Terrestrial and Wireless Networks segment saw an increase in net sales of$7.1 million, or 4.4%, reaching $168.9 million for the nine months ended April 30, 2025, driven by higher sales of NG-911 services[291]. Expenses and Costs - Selling, general and administrative expenses increased to$30.2 million, or 23.8% of consolidated net sales, compared to $28.7 million, or 22.4$115.7 million for the nine months ended April 30, 2025, representing 31.3% of consolidated net sales, up from 22.1% in 2024[299]. - Research and development expenses decreased to $4.4 million, or 3.5$5.7 million, or 4.5% in the same period of 2024[257]. - Research and development expenses decreased by $7.9 million, or 38.8$12.5 million, accounting for 3.4% of consolidated net sales compared to 4.9% in the prior year[303]. - The company incurred $4.3 million in restructuring costs during the three months ended April 30, 2025, compared to$2.8 million in the same period of 2024[255]. - The company incurred $14.2 million in restructuring costs during the nine months ended April 30, 2025, compared to$9.2 million in the prior year[301]. Goodwill and Impairment - The company reported a total goodwill of $204.6 million as of April 30, 2025, with$30.5 million related to the Satellite and Space Communications segment and $174.1 million related to the Terrestrial and Wireless Networks segment[216]. - A non-cash impairment charge of$79.6 million was recorded in the Satellite and Space Communications segment during the first quarter of fiscal 2025[216]. - A non-cash goodwill impairment charge of $79.6 million was recognized in the first quarter of fiscal 2025 due to lower-than-expected financial performance in the Satellite and Space Communications segment[309]. - The Satellite and Space Communications segment experienced a non-cash goodwill impairment charge of$79.6 million, contributing to significantly lower net sales and gross profit[317]. Revenue and Contracts - Revenue recognition is based on FASB ASC 606, reflecting the consideration expected in exchange for goods or services promised to customers[211]. - The company anticipates future growth in end markets due to increasing demand for global voice, video, and data usage, as well as the growth of emergency communication networks[206]. - The company has experienced and expects ongoing risks related to contract revenue and cost estimates, particularly for fixed-price development contracts[214]. - The company faces risks related to government contracts, including unpredictable funding and the potential for contract termination at any time[208]. - Bookings for the quarter totaled $71.0 million, reflecting a book-to-bill ratio of 0.56x; excluding a$36.4 million debooking, gross bookings were $107.4 million with a ratio of 0.85x[229]. - Backlog as of April 30, 2025, was$708.1 million, down from $798.9 million as of July 31, 2024[229]. - Revenue visibility is approximately$1.2 billion, combining $708.1 million of funded backlog and the total unfunded value of multi-year contracts[229]. Financing and Debt - The company entered into a Second Amendment to the Credit Facility, reducing interest rates and waiving defaults, allowing for additional unsecured subordinated debt of$40.0 million[237]. - The company entered into an amendment to the Subordinated Credit Agreement, providing an incremental aggregate principal of $40.0 million[238]. - The company recorded$4.9 million of deferred financing fees and debt discounts as an immediate expense during the nine months ended April 30, 2025[322]. - Total outstanding borrowings under the credit facility were $168.0 million as of April 30, 2025[343]. - The credit facility was amended to decrease interest rate margins applicable to the term loan from 12.00$32.4 million on July 31, 2024, to $28.4 million on April 30, 2025[338]. - Net cash used in operating activities improved to$19.7 million for the nine months ended April 30, 2025, compared to $45.0 million for the same period in 2024[341]. - Net cash used in investing activities was$6.5 million for the nine months ended April 30, 2025, primarily for capital expenditures related to cloud-based networks[341]. - The company plans to raise additional funds through equity and debt financing to provide flexibility and pursue acquisitions[353]. - Material cash requirements include $168.0 million in principal payments and$69.5 million in interest payments due under the Credit Facility, with total contractual cash obligations amounting to $366.9 million[361]. Strategic Outlook - The company is exploring strategic alternatives for its businesses, which may impact future results of operations[292]. - The company is not providing forward-looking guidance due to uncertainties related to its transformation strategy and various external economic factors[242]. - The company faces uncertainties regarding its ability to continue as a going concern, with substantial doubt raised about its financial stability[349]. - Significant capital expenditures are being made to support cloud-based networks for NG-911 contract wins, expected to continue throughout fiscal 2025 and beyond[354]. Legal and Regulatory Matters - The company’s U.S. federal income tax returns for fiscal 2022 through 2024 are subject to potential IRS audit, which could materially affect consolidated results[220]. - The company is subject to ongoing legal proceedings that may materially affect its financial condition and results of operations[364].