Comtech Telecommunications (CMTL) 9 Mar 232023 Q2 Earnings call transcript

Welcome to Comtech's Fiscal Q2 2023 Earnings Conference Call.

As a reminder, this conference is being recorded, Thursday, March 9, 2023.

I would now like to turn the conference over to Mr. Robert Samuels of Comtech. Please go ahead, sir.

thanks the and today. to everyone, afternoon, for time taking dial-in Good Rob Investor of Comtech's I'm Head Relations. Samuels, to Welcome Comtech XXXX. quarter Telecommunications for call the Corp.'s second fiscal of conference year

Officer, Chairman, Bondi, Mike CFO. and Comtech joined our with here We're also I'm Chief Today, Executive Ken Peterman. by President

talk Ken investors if get we to may strategy. results, a please in touch and have, want our I'll available to to meeting that both also so the Before always say answer you or organize today, myself started Company, are about questions our get our

blog, in a shareholder and We discussion working our quarters also have Comtech detailed also our our have available of to website Signals. the our and quarter directly about between business our on communicate been letter market we in

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Comtech, Ken am introduce Chief Ken? to Officer the Peterman. pleased I of and Now, President Executive

thanks and everyone us Hello joining today. for

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so us I from expect little CFO, Before Bondi, a about turn talk forward, you he the Mike? this performance through walk more our can going can our Mike call quarter. me over to what let

Ken. Thanks,

and in we For fiscal XX, Wireless segment. Networks in of segment net and were our QX which recorded Terrestrial our million of Communication recorded and $XXX.X Space Satellite million million $XX.X consolidated $XX.X sales, XX were recorded

XX%, quarterly quarter second net both year ago of or increased sales QX Ken increase sales our reflecting fiscal compared segments. our as increase Our over net mentioned, in higher represented quarter, fifth sales last sequential quarter, to X% a net million our and $XX.X XXXX consecutive the

QX Our fiscal for XX.X% XXXX XXXX, XX.X% consolidated QX fiscal was as and to and gross profit respectively. QX percentage compared XXXX, XX.X% fiscal for

QX for in net reflects Our profit increase gross sales an mix product XXXX primarily overall and fiscal changes.

solution year wireless recorded our our segment, which compared Space For gross communication revenues. and and to of the Satellite sales in and historically lower prior example, segment, more a achieved sold software recurring percentage profit more than quarter, includes we fiscal QX which consolidated net our terrestrial generally based as in XXXX by the network

Ukrainian our government. generation the from of sales increased Troposcatter profit benefited solutions our in XXXX fiscal gross period that QX Also, support of during percentage next

XX-Q referred million to as QX non-GAAP was compared to XX.X we X.X% of that QX EBITDA EBITDA. X.X% reconciled in fiscal adjusted in XXXX utilize or more adjusted as detail filed Form explained a today, fiscal X.X As consolidated sales in or XXXX. measure net our we million and earlier

dollars increase part is in a transformation. a our exceeded to QX for fiscal quarter investing simultaneously in percentage sales in in QX as Comtech net a primarily our the all The represented was attributable One of increase offset adjusted fiscal increase gross sequential XXXX, profit QX the while EBITDA both lower and by XXXX sales from XXXX fiscal percentage. expectations and

the increase, of ratio As previously during year-over-year quarter Ken total a bookings X.XX quarterly million and book-to-bill a XX.X% mentioned, representing XXX.X times.

which of is expect backlog funded the unfunded received contracts approximately million sum certain $X.X the of future equal we multiyear to that our and $XXX Our current revenue and is visibility plus total orders. have of billion we from value

our Overall, challenging. pleased and XXXX, adjusted EBITDA increased QX that to sales have line an we consolidated guidance particularly backlog light net were environment from with last in quarter, than October are our in continues or to and better be provided funded more economic of

Ken?

going of we from what talk Mike. everyone's us But to do, I'm all the to where context a guidance I now you want get right more shortly finish and about and can to bit up are expect Thanks next questions. little quarter. in for I before

success managing growth. simultaneously And believe our to on margin are growth. will of intensely accelerate so that earlier, working. focused we and efficiencies investments in As realize I it's that Thanks accelerating so we profile, performance operational our the innovation our far, improving operational improve costs, our while that said work our we can funding we and

achieve move range as variability anticipate we of to time some while fiscal to we adjusted consolidated sequential in QX for X% change, time the expect growth consolidated from XX%. X.X% speaking, to the through X% we to in of with revenue margins important transformational Practically this EBITDA range XXXX,

philosophy example partners connectivity investments infrastructures. Comtech One right them suppliers, to EVOKE, foster accelerate extends recent in made our the in innovation collaboration global to EVOKE structure clear the One the A of our or our customers, innovation a bringing designed is foundry. and initiatives and launch together by of possible Comtech

pioneer it opportunities, diverse new only of the allow our perspectives, offerings, and entirely Not EVOKE and believe ideas of technology enhance combining we also and with backgrounds, industry will us expertise. existing will different to areas service multiple benefit

innovation. announced tech call pioneer Smart to based with of partnership on first Seattle working Sirqul. what speaks Operations directly we Our the spirit publicly We're

Comtech from insight, management and location Operations, and and advanced time respond to has time implications dynamic. Smart the leverage Internet to provided applications ability heavy and and to a and everything the business education, enterprises retail, connectivity of actionable tracking, defense Using environmental office space real for industry, global to scale. logistics, more, by This real manufacturing, operations allow instantly develop are expertise devices, anticipated on data vast market agriculture, to Things and changing

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Before are us time your by expanding that me dramatically. I ahead an of Comtech let I take exciting saying for questions, is the this believe close opportunities because

global enhance to our is and collaborative grow, be company shareholder striving commitment drive and Our value, in continue focused future to long-term markets. continually to profitability, the current customer improved innovative, by most

Rob Arizona. Finally, out June in which state-of-the-art more formal we'd our learn for love XXst, be Wednesday, invitation. at our and invite us at hosting Chandler, Day, with everyone on to meet a reach Investor will to to facility Please

have a great time other. learn from a to I each and think going we're lot

that, get With to let's question.

[Operator to Instructions] first NOBLE Gomes Capital. with And we'll Joe go

open. Your line is

the to us a color. gross wanted margin. could little you start mean, more out give I on I

whole growth, we satellite Satellite I may business. businesses? of down because out So outpace figure where a is Terrestrial about see, we those that's continued margins talked satellite gross do between it's the be You the delta increase revenues if How where going? from to and feel of as big of kind the can the

Yes, take Joe. I'll that

is is margins each that of recurring that in that the disclose edge would don't terrestrial developed and of we also the that software when at have creating. terms house this the looking gross side we're I in based revenue software always that technologies the on the terms is services. location There In It's XXX but revenues mix wireless offer segments, based. and of cutting we of

premium So, do. we're getting that a the work we for

there more selling. of are there's we solution that a So

we are margin of and In and the other that's selling Space product from things perspective. and gross on that Satellite to more akin a modems side, amplifiers the terms

But as as a just or tier think customer. to looking it providing of the move but a product, offer that we not up more forward, a could in what trying service we terms particular and are we of are the box to as

then think terms in today margin I of a in segments in the start the of and and margins probably run are two historical exceed convergence those for doing we we see Space. gross will to Satellite what rates

one of within XXX Terrestrial have change we it's more is, deployment. So more did transited has the I here the in PSAPs our software returning think last current year, That in the sales story LBS to and NG on period Wireless as mix there. in XXX sales within now

change So mix there there. is going a on

Satellite also for increase that the At the the in the off seen and there. government we had half same of Space first sold efforts to with time, their Ukrainian in some had support we comments

So we did QX but in of in it bulk was out a QX. have and go the good in QX, product of it dose some of

profile, are from at looking sequentially. you quarter-to-quarter in Space EBITDA terms their when you impact could the Satellite see of So and

the are terms going Thanks of PSAPs -- are you for two terms In we in the that over the mentioned and that. where of numbers quarters live of year year? And those first of

Yes.

focus specific on South of I terms Carolina Pennsylvania Arizona. a large would customer and think like in I In numbers, and

certain the phase of within those are deployment the progress, I regions think and out getting states. making on contracts turning of each of they good

going In that able PSAPs, a I'm quantify for number of you terms of specific to today. not to be

and because is fixed on period put But those that that into making are one. have each moving revenue and that phase you were we that you are day like, bring we recurring progress deployments, reporting. place get on, the on good more it in revenue They more on schedule of costs growing that those recurring

margin better a see side. on will leverage we model so And the

that initiatives of lot potential milestones a forward, success looking Comtech Okay. program? lot looking what One to about But there. you of And the Ken, are of you near-term and at the are some talked are the a of as judge the we the

Sure, Joe.

business short-term, the our assimilate redundancy, we perform individual are we we into have to segments, we collaboratively agilely make collectively and are identifying the wherein clarity, as course, more operations, Of can able a streamlining as actually two business. on businesses more decisions how informed operate in to we and better

to supply speak amplified an to in We able are chain the voice.

are you why we That's move efficiency. increase EBITDA guidance us to seeing able increase are we So QX. adjusted as into the

Okay.

that Now innovation have with two immediate it has purposes respect and value. foundry, our to EVOKE

technologies across a as are the that, can our first you enterprise. together various The is And toolbox as of bringing we blocks. or thing those think from building

we value for collectively blocks building compound are comprehensive. So to create value and then is those in together, then more bring technology of terms their customers. able individual leadership That

So we a our able up those to can calculate And services. to value subsystems and proposition level comprehensive together, systems putting is quantified, building we're customer. blocks what move into even in demonstrate or a by

satellite on for a channel in additional terms satellite So in to of amplifier, channel, operator. in that the able given in for of, a produce can a instead jargon, value of revenue raise DBs about proposition customer a talking for example, example, that that order technical to of be advantage talking that might or subscribers modem an instead to or we're technology supported quantify

of amplifier, creation. we customers ongoing. value with Because antenna the with the that we potential terms have. modem, over of is by some in excitement our with compound encouraged our very the by of equipments feedback That And that dialogue we're technology of we're our our getting other advantage

we So value two or those the develop will the that proposition what what over viable we the quarters that products, first call MVPs, milestones and and and we have customer are move is I minimally and is the forecast. we forecast conceptualize developed to out to to call next in us funds help concepts, would we customer a creation the then currency. run game, where in some pilot, excited, us value to where that can prove put a skin would the quantify and it a the they pilot with customer We quantify move developed

you I MVPs we is And yet, exciting, announcements, this as vacation then go tell actually while finally, want let's are the quickly have that I to can And live, me to made customer possible. created. not we've say as be come that would that to any

near gotten into We have we'll awards excitement. customer see the a couple forward moving great that And future. we're contracts some in where have pilots small of move those to in the

is like toward as news the to So you're pleased going and our are say, the about we place that we're performance those far. I'm team then managing in in seeing our move into with hear fourth to milestones And June, I quarter, investor so day that.

Sidoti. And we'll move Burns Greg next with to

is open. line Your

businesses defensive seems company it of dividend dividend ago. as about you cut recovering a usually, a from some terms In year the but see a measure, like your

towards you can process about so, thought the where to just capital? the you're debt? And that eliminating behind Is talk it and the down dividend go going to reallocate paying going

a to respond from I'll a that from philosophy level.

Our course and highest greatest return the value. to of deploy will the is get capital responsibility, create

invest that does. use better that's should of board fact, then CEO and capital, capital, we when responsible responsible a In And what see a of stewards as it we accordingly.

our and question which Joe in vision expanding our set, Gomes Our strategy, to response opportunity a given minutes I ago. few described

it if appropriately. We capital have invest really compound ability to the we

progress some excited and informed future the to now we've extent in we're So, we made see. about the

to implement stewards strategies the is and be believe most that we're responsible we appropriate. So, choosing

the terms top And needed to that and in you're guidance, then improvements the and are range versus puts One up seeing take to takes range? from XX%, end the we're of might benefits much projecting that at you you're there. that margin EBITDA Okay. of Comtech the that How that of is that looking what range the

just we're the profile as But today, Hi, we're about EVOKE terms with for mindful challenging. an of Ken we certainly initiatives. some progress the environment We are taking. quarters, very as actions that's other announced other Greg, mentioned, that QX, making about thinking the and still, we're economic margin of in same the excited next time, we're being at two

in that and to one systems secure look I And still that's think that at and we're terms we do, takes, executing processes streamlining, work announced have but have the we to The that things initiatives some the still making. that going today today, when our workforce, time. we're definitely think I have we're that of higher we take think on element, that's puts I forward in still investments to end, we implementing just we some we move trying

book So as of about will, you we if and business, takes, nice with funded backlog. certainly of puts think million over we have $XXX a

is accomplishment level. Company haven't that which at been a back going several nice Now, the we for years,

So a it's function with us on backlog, of that new the these executing excited opportunities. pursuing EVOKE, endeavors very these growth see emerging to

trying into it's now, I As the Company chapter. next invest story, growth thinking to think of appropriately capture more to of forward we're we're that and ourselves the growth a move

the visibility And more guess Okay. on One maybe little you're some of Comtech a bit I initiatives. getting

have like you're would in couple you margin anything quantify what, years? of that for So the you target have or or go over a might do range do next that there for is terms shooting where target you a us maybe of

Yes.

First of Thanks. all, question. this a good It's is Ken.

practice, of responsibility, assimilating So enhancing redundancy now eliminating is that chain business in toward our teams, that leadership units, common areas okay. so we've our It's in business moving contracts, platform of restructured operations, the centralized moved collaboration. supply we've common And performance, holistically set re-segmenting and tools, same functional like management, the and the streamlined running fact improving operations. of business our and and

we so indicators, are have of a internally, metrics and established basis. set key in and monthly we a working to on then milestones And performance managing that weekly

improved and to And into you XX% third X.X% so, us margin that we're And competence quarter. the that's what's to. EBITDA seeing EBITDA the the suggested, adjusted hitting move insight you adjusted and those giving we're alluded we forecast, that as to why that's

our were to EBITDA back path range. on historical do pre-COVID we we're the XX% which get in Now, believe that a to levels,

the we we be get see then, and going where excited that sales. those of the And there. we're services equipment margins are initiatives and there, at software more are than favorable systems as EVOKE business to that to models traditionally many So, look are the profit solutions, the about ability to

So, going future we north are looking forward to the of that. in

And we next with will Merchant Asiya from take Citigroup. question our

open. line Your is

opportunity. for Thank you Great. any

better? both just segment And more kind of thing as one any So to expecting same? little same or we otherwise to guidance, still do guys should in shift segments be terrestrial well, there on like you around tempered? margins your expect a expect bit should mix do are to the margin we the Or

wants did QX the could take I'll Ken on is thinking and what % and book that quarter we some Yes. so ramp continue We certainly growth to business still doing. as or to continue The to that top-line a you X% and up. PSAPs, I about been yet if then are see that we orders quarter. has way it. turn on add Terrestrial those ago would to the say, And see each would to you to Wireless are

the of secured, that terms dollar and release the Satellite in opportunities we very But we excited I more have of In that and just come. won contract are terms think just will a have we to press about. we announced we Space, some in multimillion just soon details

greenfield, a long new at a before a it's least at or it's new seen we us, For a time. relationship haven't size with the customer, for

some the second believe for And give half uplift will that year. we the nice us of

go I same want far ahead X% quarter only like the time, opportunity at the an good get consolidated. will and we this and one juncture of with some we so, growth to in at we the think don't to out in business. Satellite ourselves will probably But and And total too Space X% with and that see others,

-- ahead. the on then And Okay. go

Sorry.

are these and such going and innovation things create Ken. are implement and regarding private our and computing, leaders have to ones our incubator value customer of I some cloud that comprehensive venue using propositions Well, value. more the EVOKE, can say oriented as ingredients, tiered learning, for AI, on innovation this beginning integration other EVOKE foundry just and was we are serve conceptualize that foundry identified the a with machine they strategizing up to other is more those the blockchain, technology key customers networks to of and as us that entrepreneurially minded growth we

know publicly announced we first announced a You Sirqul as our partner. that technology

we And promise hold, so, us. those opportunities enormous think for

release, with are this somebody dividend quarter dividend? next asked the the going that dividend, -- flow EVOKE? cash And cash on clarity dividend earlier from to then, on the quarter in understand maybe into cash outlay just, question it Is even this some and before that this is much press from -- relationship to from the to trying it is comparable but what to I the involved are what put the resulted just that perhaps more exactly about that? you you substantially get this foregoing amount? How planning in Is the

you into it domain. all This location individual enterprise are based is terrestrial in it's businesses I'll I'll leadership technology take across and were segments, and technology and that. tell Ken. astounding. touches these services that, is our leadership now two different And comprehensive, the wireless our broad what the our and of aggregated points

on So salt That pepper significant that a create to solution. blended that frankly, sprinkled takes order when value. and customer it offers we pull in a just together, little

So military that technology of need these our commercial that the solved. launched, critical we've domains partners, third be are engaged understand that in and problems with some as advisory and a EVOKE, experts we established to parties group involves strategic

to don't that customer an then are put much. accelerated extremely we capability to And find they a timeline, terms that envision We finding product minimally and we invest that them. we how we aggregated that of don't, very for work can also them to in a to to with demonstrate develop need weeks viable it's work believe can

technologies So bringing perspective, we're integrating mature ways. from new in and forward, we're them our just together

technologies and them companion partners the to technology integrate us Our bring enable tour rapidly.

cost more looking high than We're much cycles. now agile long-term, moving much and quickly at more we're development So that.

It's the all head exists a little and why a bit for guys the you investment after to scratcher, talk I'll of significant. call. that dividend

sooner that see things can growth. doing. get initiatives that I growth into out into in think, And ahead the to the we're Asiya, we we cash accelerate that sooner in our that $XX of We terms tap through flexibility of us. transformation, million redeploy financial the we we the of can get easily the that

interest where going rates about you leverage next three where rhetoric us start with is of it, on flexibility on quarters two And the know, it, us we they just being you more downs or for look back gives initiatives. about facility. more rate hikes. to top and interest are, where think when getting When and at our into and to is these the faster with on step the the leverage our move This

our This is Ken. consuming it penetration the that to I cash want that says accelerate see. like on dividend want growth money can that new the to EVOKE. leave After to is to to apply this flexibility opportunities capitalize we be we that to that. I our markets, don't to that ready the want better impression it we get customer able from preserving fund in and yes, to EVOKE want so value. that the create anything we customer poised and a with so we be moving we're ability we're It's go. preserve not We're

And we'll Jefferies. George with next move Notter to

open. is Your line

the of Looks me dividend. where I wondering cash just $XX on guess, I you But now? about some curious floating what move context, with I sequentially. is? that about Could tell the right the statement the just rate. revolver. the that guess, understand yet. revolver is I kind I there's believe I'm cost the in certainly that's cash the flow you haven't million burn here. I was like seen grew definitely revolver

non one X.X% financing you if I'll metrics, is rate That's roughly quote about with now. it amortization portion And the the costs. two deferred is there's borrowing of cash cash not, the Yes, right that strip X.X%. the of

something guys structure are worth guys in? then right see permanent here? you you chatting about on I about you needling to that options now, mean, And here, then and cap to that is do more thought any have try kind financing of some on the get trying Anything that guys

coordinated plans. Without our I doing idle. would getting plan, our we're to too Everything is not about specific say that internal sitting we're

we on pretty but focused is, year the to two growth soon. faster, are it the ready reality to we be November. a in We facility negotiating sign and will move be extension was address to When that back our you'll need

So and of ease the with bit. hopefully direction, regard. in mind, mindful be to up that the we're not we starts a going little the that woods, market in our and in out But would seeing certainly right that trajectory

time that initiatives next appropriately top to into for from that try sitting But putting to new so are on initiatives. are address we're ready of One idle, well some that stage Comtech of the thought to growth we type transformational going these Ken. we as We're not

the a the you some lifting just you then some know And about systems. you guys headcount anything there's looking I Is then reductions. target on annual and cost there. guys think if that of I structure guys in know of But consolidating there are earlier, into, can you And you bunch structure? cost or give that of that Company, at benefit? talk about mentioned what ERP there were are that translates you us savings in terms terms can improved of a heavy

We've little key targets. clearly you performance insight. Well, we've clearly set to internal bit indicators. a give Michael, managing those

workforce, that or number when trying context, disclosures. mindful of you point ask, we business to but percentage specific our to time, XX%. be We're still XXXX guys at the a reduced investments put didn't give in to we're we figured about it our in had We heads that Sure. you was you would some making would

for move soldier about the seeing action it reduction contribution large it as right to that. took meaningful a today guidance. in as now. in a was so talking our not we we that about It that EBITDA And is think the here we're That's how

them you about about, when we're versus talking QX, undertaking that we're think QX Certainly, actions the now.

benefit going them. So I would a see not of say to full quarters you're

ERP in So said, you things that the and just plus looking looking full like our that would improved facilities, the other getting streamlining see magnitude and of we're systems, you our processes action, QX, efficiencies. at at, likely

Yes, the Ken upcoming into and weeks. channels be is mentioning, also facility moved will our we in

building. one closing, us. So see be behind a move nice can to It's chapter also in that all we will forward,

our we'll Research. with take Chris next And Sakai IDR question from

line Your open. is

Research. Hi, yes. Singular It's

Just had you times are lead a How chain. are How on it? there? seeing the supply question

Hi, This Mike. Chris. is

supply now of don't times terms In to seem long. chain, that have the right we Lead be I problem. the determined part shortages think, seem still to be certainly

We a of do lot We are that. of mindful backlog. have

at backlog reason we purchase looking use the are why those are we orders the placing that of you sure timely, cash. and part making that of see So,

we building above million As level, also that receivables. the inventory to you support backlog also with and procurement are $XXX have

don't I So think from perspective, supply a yet. chain out woods we're of the

me also that. I agree with on think would Maria

we still things eye not that. fully are have think getting I but an better, behind to I on, we think keep but it's

Ken. say I'll is This too.

think it's core because we are getting better look manage learning we to how business, I at that. when our

able now into the and excited that, questions the in to all are We are tiered an little of we bit of in speak voice services, to still some systems new businesses. business when a about. are up move addition But chain think as that open, amplified across we those we with supply those markets

say have into little some So because time-to-time We what that some things we cautious. done. traditionally are stretching than we that's see still may from why we variability we a are are different

the then can And how more? U.S. you orders more Okay. you government? much your expect VSAT recent for from and that. Do talk Thanks about

always contract of some we know and quite a unpredictable in doing. with very always is the don't what army they the for they And have schedule with a VSAT, exactly say, are Chris, terms sometimes had this funding the they have we army time.

it up bit orders be it'd will quarter the shows versa. sometimes a in we up later where thought little vice earlier and show and maybe And

shipping have selling lease army, think here variability contract or good dollar over that it's will hard the amount we in a nothing them but but shortly, more out that, to relationship equipment our we a it's and would The are put see to have years. some talk from sometimes on. to we be of predict, a come, have just function disclosures The the So to I expect yes, about vehicle. today, we with specific that we time-to-time. And things the sold

because are that. working Yes. in, And we just I'll aggressively chip

VSAT the like Our technology scatter in is state-of-the-art things well as triple as terminals.

upward. trending it's come out budget President's and the saw You today

to fiscal that sweep end we approaching funds didn't else In they benefit on with this, in get that. up are and we something the spent from contract addition for vehicles that and year our sometimes place, are government

not opportunities. forecasting of those are right take of So working we are while aggressively we kinds that advantage to

orders Okay, same light you Ukrainian how or government? they there? talk continuing you the Are about great. in the some on before are shed from can coming as off. Can And tapering pace

in feel comfortable in they're with marketing at have you there tell before, a pure don't I'll that tough equipment are the the we said the in better than fight I But world time. that, buying and is as that testimony that to that adversary, sophisticated this us environment. no speaking works folks directly from

strong a And us that position. in very so, that anticipate we puts

to to are And I appear does there questions like would Robert now it no further for I'd remarks. turn this time. it any closing at back Samuels

Thanks, operator. for today. in And dialing thanks, Ken and everyone Mike, and

ongoing SEC And insights As filings. there about investor details we'll said, our in letter in provide and are blog. additional Ken and available strategy our signals our performance

responsive reminder, we we be a investors can forward. as with as going intend And to as

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thank all your We you for support. continued

This your for does Thank today's program. conclude you participation.

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