Comtech Telecommunications(US:CMTL)2024-03-18 21:20Financial Performance - Consolidated net sales for Q2 fiscal 2024 were $134.2 million, down from $151.9 million in Q1 fiscal 2024 and $143.9 million in Q2 fiscal 2023[194]. - In Q2 fiscal 2024, consolidated net sales were $134.2 million, a slight increase of $0.5 million or 0.4% compared to $133.7 million in Q2 fiscal 2023[204]. - Consolidated net sales increased by $21.2 million, or 8.0%, to $286.1 million for the six months ended January 31, 2024, compared to $264.9 million for the same period in 2023[246]. - Net sales in the Satellite and Space Communications segment rose by $19.7 million, or 12.2%, to $181.0 million for the six months ended January 31, 2024[247]. - The Terrestrial and Wireless Networks segment reported net sales of $105.1 million, an increase of $1.5 million, or 1.4%, compared to $103.6 million for the same period in 2023[249]. - The Satellite and Space Communications segment accounted for 63.3% of consolidated net sales for the six months ended January 31, 2024, up from 60.9% in the same period of 2023[247]. Profitability Metrics - Gross margin improved to 32.2% in Q2 fiscal 2024, compared to 31.5% in Q1 fiscal 2024 but decreased from 34.3% in Q2 fiscal 2023[194]. - Gross profit for Q2 fiscal 2024 was $43.2 million, representing 32.2% of consolidated net sales, down from 34.3% in Q2 fiscal 2023[213]. - The gross profit for the six months ended January 31, 2024, was $91.1 million, a decrease of $1.6 million from $92.7 million in the same period of 2023, with a gross profit margin of 31.8% compared to 35.0%[255]. - Adjusted EBITDA for the three months ended January 31, 2024 was $15.1 million (11.3% of net sales), compared to $15.1 million (11.3%) in the same period of 2023[238]. - Adjusted EBITDA for the six months ended January 31, 2024, was $33.5 million, reflecting an increase from $18.1 million in 2023, with a percentage of related net sales rising from 11.7% to 12.3%[279]. Operating Income and Loss - GAAP operating income was $3.0 million in Q2 fiscal 2024, up from $2.1 million in Q1 fiscal 2024 and a loss of $0.8 million in Q2 fiscal 2023[194]. - Operating income for the three months ended January 31, 2024 was $3.0 million, compared to an operating loss of $0.8 million in the same period of 2023[226]. - The company recorded a net loss attributable to common stockholders of $33.8 million for the six months ended January 31, 2024, compared to a loss of $19.3 million in the same period of 2023[278]. - Net loss attributable to common stockholders increased to $30.5 million for the three months ended January 31, 2024, compared to $6.5 million in 2023, influenced by $17.9 million in charges related to stock exchange[236]. Cash Flow and Liquidity - Operating cash activities resulted in an outflow of $26.7 million, primarily due to the reduction of accounts payable[194]. - Net cash used in operating activities was $41.2 million for the six months ended January 31, 2024, compared to $16.8 million for the same period in 2023[285]. - Cash and cash equivalents increased to $40.0 million as of January 31, 2024, compared to $19.0 million on July 31, 2023[283]. - The company reported a net cash provided by financing activities of $37.3 million for the six months ended January 31, 2024, compared to $26.6 million in the same period of 2023[285]. - The company has a Credit Facility with borrowings of $166.2 million as of the issuance date, with $136.8 million related to the Revolving Loan Facility[287]. Expenses - Selling, general and administrative expenses increased to $30.3 million (22.6% of net sales) for the three months ended January 31, 2024, compared to $27.4 million (21.6%) in the same period of 2023[218]. - Selling, general and administrative expenses were $63.0 million for the six months ended January 31, 2024, maintaining 22.0% of consolidated net sales, consistent with the same period in 2023[260]. - Research and development expenses decreased to $6.8 million (5.1% of net sales) for the three months ended January 31, 2024, down from $12.4 million (9.3%) in 2023[221]. - Research and development expenses decreased by $10.5 million, or 41.8%, to $14.7 million for the six months ended January 31, 2024, representing 5.1% of consolidated net sales[262]. Contracts and Bookings - New bookings totaled $141.8 million, resulting in a book-to-bill ratio of 1.1, driven by a $48.0 million contract extension for NG-911 with the State of Washington[194]. - The company was awarded a multi-year contract by the U.S. Army with a total potential value of $544.0 million, expected to contribute significantly to net sales in late fiscal 2024[195]. - The Terrestrial and Wireless Networks segment extended NG-911 services in Washington valued at $48.0 million over five years, with an option to extend through 2034[196]. - The book-to-bill ratio for the Satellite and Space Communications segment was 0.86x, while the Terrestrial and Wireless Networks segment had a ratio of 1.33x for Q2 fiscal 2024[206][208]. - The book-to-bill ratio for the Satellite and Space Communications segment was 1.13x for the six months ended January 31, 2024[247]. Restructuring and Strategic Initiatives - The company incurred $2.7 million in restructuring costs during the three months ended January 31, 2024, aimed at streamlining operations[219]. - For the six months ended January 31, 2024, the company incurred $6.4 million in restructuring costs, compared to $2.9 million in the same period of 2023, primarily to streamline operations and improve efficiency[261]. - The company plans to engage financial advisors to discuss refinancing options for the Credit Facility and restructuring the Series B Convertible Preferred Stock[289]. - The company plans to refinance its Credit Facility and secure new sources of credit or outside capital while implementing cost savings and restructuring activities to reduce cash used in operations[291]. Tax and Interest - The effective tax rate for the three months ended January 31, 2024 was (52.0)%, a significant change from 11.0% in 2023, due to changes in expected product and geographic mix[232]. - The effective tax rate for the six months ended January 31, 2024, was (52.0)%, a significant change from 11.0% in the prior year, primarily due to changes in expected product and geographic mix[274]. - Interest expense rose to $5.3 million for the three months ended January 31, 2024, up from $3.8 million in 2023, primarily due to higher average debt and interest rates[230]. - Interest expense increased to $10.2 million for the six months ended January 31, 2024, from $6.0 million in the prior year, due to a higher average debt balance and rising interest rates[272]. Divestitures and Investments - The company completed the divestiture of its solid-state microwave high power amplifiers product line, applying $16.2 million of proceeds to repay debt[201]. - The estimated gain on the PST Divestiture was $2.2 million, recorded in the second quarter of fiscal 2024, with no similar gain in the prior year[266]. - The company has made significant capital expenditures for new high-volume manufacturing centers and cloud-based computer networks, with continued investments expected in fiscal 2024[293]. - The company filed a $200 million shelf registration statement with the SEC for the sale of various types of securities, including debt securities, effective until July 25, 2025[295]. - The company has a $100 million stock repurchase program authorized by the Board of Directors, with no repurchases made during the six months ended January 31, 2024[296].