Comtech Telecommunications (CMTL) 31 Oct 242024 Q4 Earnings call transcript

Welcome to Comtech's Fiscal Year Q4 2024 Earnings Conference Call.

As a reminder, this conference is being recorded today, Thursday, October 31, 2024. I would now like to turn the conference over to Mrs. Maria Ceriello with Comtech. Please go ahead, Maria.

Thank you, operator, and thanks to our investors for taking the time to dial in today. Corp.'s XXXX. for Telecommunications of Fourth Comtech Year Fiscal to conference the call Quarter Welcome here Comtech's I'm Today, with John Executive Ratigan. Officer, President and Chief joined also today Mike Comtech's We're by CFO. Bondi,

such a the future management. The our in shareholder information the be company, available assumptions and today, of are note statements plans, started business in plans, the get nature risks information differ website. contained objectives limited outlook their forward-looking performance and relating letter and in forward-looking qualified from Actual business are such condition of include, this of and the we by company's in we to, call on outlook information. the Before business Any uncertainties. cautionary company's involve will have and filings. objectives quarter statements significant financial could and company's the forward-looking detailed and company's Certain performance, please always SEC the presented our to entirety in discussion regarding not but results outlook plans materially

I'm President John John? and to Comtech's Now, Ratigan. CEO, introduce pleased

thanks, Comtech's and as I'm everyone us was yesterday, more quarter's on new time about I CEO. to role acknowledging Maria, I excited and this able as call began Directors filings our Thanks, again. for last be taking today. call President the not to saw relatively Board from I'll it me CEO. be like that, appointing line looks everyone, could And our to use of the join I of this sure

shareholder going the XX-K approach saying forward. to close. and filed after to calls our earnings a letter by taking today, going different Let start we're earlier me We released our yesterday our be

discussions a to key operating the our included there's about. in All financial and and those talk lot of know, materials. I financial metrics performance are surrounding

Comtech to on are of repeating course address available than important themes we That time Q&A extraordinary there want said, So I of for plan some we your been call open changes to more past the instead of acknowledge through being information, rather the the up has today year. an that remarks. over before spend already prepared questions. I'll series

vantage foundation. However, the see a my point, today Comtech strong on rests from I

technology, and large have growing What to we end on excited to drive the in We is discipline and company people, tremendous growth that a great profitable and I'm opportunity and need best-in-class focus, lead operational help our journey. execution, markets.

best team executing the For strategy leadership that have months, our the for and our people outcome shareholders. and the customers, against Board last few developing we transformation Comtech's and our deliver will been believe

is is and process this business a best strategic alternatives know, We you As while for capital underway the believe business. networks structure. this the unlock value terrestrial to to our way identify of simplifying wireless our

of businesses ensure at and and a We look are our we product meet simultaneously grow to the taking and lines top each best lines. have customers' portfolio protect bottom our needs to hard and our

blunt. so our with committed I and Comtech. I why communications in ahead as been end serve throughout their Looking I pure-play opportunity to our has ahead, It's am Comtech, that transformation current shareholders operating difficult markets the in may my our that been the career customers, space is is the I a and and cycles. This our company. be my joined tough focused themselves I've own these as which beginning as and on our conversations that be the people are I'll now at area Board and communications a markets company the reason Comtech shareholders the commitment technology-driven is to believe of to I be, made our satellite the clear the the direct IC, is represent want right shareholders ready dozens as too, of with challenges environment

for financial was fourth expectations. Our quarter below performance the

Importantly, me, our is that Comtech's customers, to by be and function $XXX direct million. reflection products position demand and critical or continue of to our has This, of customers from almost validated highly from market. missed opportunities. a in not Comtech a our were market in results technologies, solutions defensible, the our record a lost funded backlog competitive

number our factors in margins. fourth of However, fiscal combined put our quarter, pressure a to individual on

of margins. Several balance in deliveries that was from combined headwinds You will roughly with particular, our impacting sheet-related in and manufacturing cutting-edge Space, growth impacted. negatively completion, expectations, engineering-related experienced nearing are see EBITDA line programs in that performed a profitability filings our Satellite nonrecurring quarters both while of our revenue with decline and cost on businesses adjusted

amount timing experienced difficult a budgets. also including various often large sales of The a foreign of influences We of a to and order. such and timing to are due factors, spending delay receipt predict the orders political troposcatter-related defense military in

was Taken impact significant. together, the segment on profitability

for in past as much I done the Comtech want. With and build and be a the people company to as our more mentioned, there. our and the the our letter, our opportunity both shareholders well shareholder in and detail on we'll an customers, over you underway, progress our as the to on has XXXX reflect filings. Stepping SEC back fiscal I well close wrote remains As I fourth transformation encourage believe strategy provides to get year made place letter our shareholder of how to reminder this, quarter our I'd review defined of

to to but and from in We of most work have Time challenging position from perspective, communications strength. engaging to that solve turn do, a customers a lot their we're problems. again, Comtech my of work

your Now, questions. me operator to let turn to address the

question first with [Operator Instructions] We'll Burns our Sidoti Company. from Greg & take

bit the with expect run? debt be color with is of you the a expect little you like? and process balance maybe buy transaction when specific a can terrestrial strategic of you completed? that interested call Or do what for on business, to you are more dealing of us be And structure all kind open? business to stand-alone timing Is is sheet? left the Do the assuming directly you clean then satellite parties? preferreds capital completed, process the foresee some give back it The the What review looking being and

question. the for thanks Greg,

the process time. surrounding the sure the cost methodical been documents some So dictated part Difficulty I great public. in we've actually that we with whole will to a order structure smaller at think will ] quite public cost as divestiture. the been divestiture. be a that of It been process well It can ongoing like all that as in for structure that thing. be now. take will a we And proceed making the running for business, the the will It's this after [ Technical quite reduced through be We're anticipate while that loans. Certainly, look to business certainly, the look accommodate of time to we we of have divest be -- as has the the

part was? other The that third do question question the had what's of with -- to

able structure. to the be pay, your to capital expect Do is you back The goal or all preferreds? and down call to pay like, debt buy the

anticipated Yes. the with the do that certainly loans pay off and possible. we It the preferred, would would be if same thing

with of those Greg, look to we and balance liquidation we're things is add those what related and to simplify is sheet. matters. John on to certainly, But about going speculate our view to I point would transaction that a unbilled the of our our would valuation not like saying. -- Certainly, just too, that,

overruns little that a you issues this an perspective? margin talk like forward and just you driving that What quarter? to impacts cost And you're more was operational bit about into of doing these headwinds future? avoid these run where the in what the types from going this Could situations

probably, We're going to split the up Greg. answer

cutting-edge and QX to development right going did especially jobs the few that scrub it on estimates. that our as opening Satellite of quarter, hard way, jobs, the said, production. Those that for noise want the We of And we the get as technologies. In set behind these EACs is are the referring to our development Space segment, these believe the and we those, we in progressing. some adjustments that in will would through, sure lead NRE the up jobs. John cost the to that properly made along say, fourth are reflected John us I was future. production terms performance front. But And remarks, of his a we're to in are a

each did a we So in performance, took lumps. certainly, we And QX, be our scrub. quarter we'll end, looking say the quarter fourth terms hard of I'd But those. at

certainly will gross we're longer, into Where amplifiers anti-jam is I not EDMs we times, the especially well, Army comes also of projects. Greg, intrinsically, the would we've are is over margin. got of a development hopeful that to various Force part right modem like with Yes. back be where move we've in those we've a the modems production. And occur into call going production are percentage things play -- should high amount of and the from now the that add, And our sooner. development with they probably that when that would projects Army coming we substantial the Air revenue what other that the our move AXM highest in Chandler got at into got but margin have -- business, jobs, I

stage as the improve. we'll -- of off margins we those the we development -- those see of the cycle projects, margins So will

to quarter. I bridge then some And this financing through looking forward, to Okay. guess, guess, take had you you I get

to But unbilled line satisfy with on maybe additional the You or I done, able And receivables? kind going depend guess, it's first are is ability nothing Like have -- of be converting obligations into on without transaction a your -- some to if movement receivables. enough on going going of taking to the business. to on quarter those unbilled generate the cash to financing? what's sight your terrestrial your you

footnote I level, build we are you as our on our on arena. the can at shift a the receivables, an commercial total and reduction programs, a you but in Greg, government know, in the elevated Yes, nice front, the unbilled. both very see saw into that did receivables have for still

receive we're reduction. we see need customer off So do did clicking our task invoice and payment. We to to the a that

that as the Marines' throes deliveries speak. in next-gen Army to We're the to triple continue expect see the as We making complete we the reduction those of we and programs. deliveries on

expect provide a decrease, that we no to in expect thinking situation. yes, we that. on cadence that and do So do to But further the continue our change liquidity

question Capital. take Gomes NOBLE from our next We'll with Joe

prepared it your shareholder in fourth start I wondering the guess you briefly or and Mike, out complete just how say, I scrubbed different you touched estimates remarks about talk And these do about wanted you -- in should quarter, I'm letter, in -- change of products. this how mean, how I like big much to to in I to some the estimates. change was of I'm what had to complete was some what there? -- a color pretty scrub, it from what big it get on now after as more originally you a the that. your sounds or estimated is the because And trying just delta about

the prepared [ Technical his overseas, to were in fairly mentioned a ] predict. destined order very tracking remarks Difficulty customer for shareholder are also we end letter, large an in those difficult troposcatter and and

sight came It that. So shifted we of to line out, the of quarter. had out

of trying up as to a were hitting quarter to in top -- us reviews. we're that these about impact quarter. fourth the on making, significant that, through estimates and the We're we working pretty in complete going getting sizable, also also said, the added So done. late John to through to adjustments think the But the to they

job team getting behind a the in good did hopefully, that So us. all

had was under reading is finally ahead, that, I the K impression it contract, protest. TFSR got last appears you night, the the go but still approval that contract that under the through to And

where the just seeing get on actually color that of impact maybe us results little stands? fulfilling a you're and going opportunity that more do on that can give here? start think contract the to you to When we start the So

that but great is file you, it's it's but GAO in. been been And protest. I you new it is then I I'd it a a And time the protest filed. to better I through there Yes, extended on has that. answer clearly involved be don't. are us. we protest, time new We're That that I I a to better a beyond had And hopeful, goes I not because that -- full I've you not it end are answer see biweekly, final we there's protest Every yet determination protested. ever on almost the Every way -- got for but it. something on been Joe, wish any have guarantees for an had on it, wish remain no previously answer has and a right? re-awarded, for hopeful update is soon,

And at then we've this was that just, this programs the if is underinvesting down R&D we're pretty was a is 'XX. from X.X% past completed expenses, were 'XX, which that revenue R&D which in here substantial XX.X% X.X% level? is related in Or years R&D from in a of point as down X.X% amount this are revenues, and at your I'm 'XX, being looking big in we of of X percent in big Are comfortable time? R&D in some terms over of decline it Because spent. the at you

Joe, part Yes, I'll and the John. it off take first hand then to

to is P&L expense R&D stated note is also the I line. think on that what's one the important just

you But up coming cost almost in the we R&D going of to $XX the course over from of sits about the have last million the trend K, same our X that down. time, million the R&D $XX We And substantially upfront have funded in talk also you sales. point at customer the I'd in to years.

it's think for of the of help the our some to initiatives I customer part have So pay development.

legacy customer. And So focus but it. see potential as year these you on to generally had it footed the add. and margins, ROI you part know this to maybe on highest getting jobs the lower resources also reported the think of don't if sales by I we we're John some of anything opposed to revenues our right to transformation the cost R&D, and of inherently that part sales. you spent mentioned, unlock as as don't prioritizing that that margin don't else will bill And our have trying through it time have programs see ones have going there's we now want the programs feed also,

Yes.

Mike with concur obviously that. I So on

those So projects now, indicated development that operating we've I customer few as certainly got facilities remarks our my of funded. way in and quite during are a we're and underway the many

that resources phase, dramatically the to ground can. course recently bring utilize in trying with So you out as or don't how want may remember, satellite talent, doing digital of the I series that increasing us, the digital R&D of the we project may cost that we the engineering And not of to into And instead introduced know undergoing of both is we're building, year. move we replace project rid modems next projects best way those so. I'm closely total a which as That have to follow valuable to production that the fully our we're or one major obviously, you we'll expense, have that common what similar along. is of Especially, the phase I but over trying we're a engineering development we're don't now. the to modems. be get Army from are modem comfortable

got We know So balance. is. spending money. we the how are I think that important we've But right

Mike from with next [Operator take Securities. our Instructions] question We'll Crawford Riley

and quarterly expect in type today? gross ends of for range ends revenue of this a Securities Riley period EACs, should absent that what terms margin given B. QX that So further today, we

Yes.

we QX So it had are is have about We're achieved that, for we're we're give EBITDA QX, to to the was range certainly EBITDA as stay say not greater on a to but revenue -- greater we that what to we in prepared going the QX. than we and expecting than expect we in QX. prepared expect same in

a is and had would business the keeping that -- EACs, Mike, in nicely John just strategy transform but mind, still we to also and according to that's line. on bottom add with few And And things a while to to announced announced those the we our aside, is put substantially referenced I uncertainty get things create some more very also what Basingstoke. done, wind the tracking we just yes, saying you plan. But have done, our that's down of

restructuring I But right through to of and we top have in of that's that line, decent bottom as think, non-Basingstoke kind visibility a to there. we line talk an as bit said, just through process. want terms go John of because our it We I have books I unknown go the on to when now. comes little think the close certainly, still performance,

million $XXX for so this look ends remain today? should software those at of these unbilled level cetera? those is period what to composition et carriers, with that or versus we of that wireless in to decline like And what the to July, And troposcatter maybe versus rough delivered

Yes, I'll take that.

to nature bit probably paying And payment this of be will with the up, timely up order, we're in delivery terms also just advanced the contracts U.S. making it the Marines I of So is all get so that footnote you larger acceptance systems continue versus Marines that are is which thing deliveries discussed see the program. And that if space, the liquidation contract. typical majority in out ramping development well and prime the large breaks let's the was be. in terms our the deliveries, think than the the and invoiced a our Certainly, we to I satellite and And more in and Tropo unbilled. first to delivered, $XX which project, out point we're about you next-gen would satellite milestone. in more one. the of typical which distribution well the and we of falling state we with the between and could for where expect like past, space, our customer faster then and it time, Army, plan, support can to the those we Marine on the little is invoice which software Corps Same the T&W, this products in million, we've U.S. at with programs into Army now that deliveries point given

in within they It's as extended to in right? XX-day or like steady well contracts, capability pay. that there's roll-off unbilled. But terms a payment was saw put And some XX- we what those that there, a QX Yes. of

That’s getting a it is delivered. the key great job doing thing --

regarding review, these going to getting then it's the development production more customers. digital proxy any margin your And with close develop you're costs the just come out there the of paid additional other that the strategic associated think these kind down by fight. where to margin, you the one to exit experience? But not when modem modem, all decision into I of of be side have But get to reason programs these legal them and that to know similar when you consulting just you to past business, is that

the No, the the production what margins. and worried margins better. I'm saying not just into steady factory. machine, and moving becomes into mount got production. where kind write-down we've we development moves right? That's we margins move it shine. not we've us, for of and the once are that's margins are the is development we're than EAC and better business that, had about it surface much when certainly the quarter, -- margins We go volume the production, fourth where the into for a The it we much We're start So through, not

look And second quarter And we of I occur? -- to expect could AXM in when first. you for we fiscal the that Or something ended January? think occurring start is that said that this production transformation should maybe to

Yes.

and the substantial a and get think the in the certainly on in should years. bit second that. winding the 'XX And third. the in for But Actually, of down of go part a believe expect I quite more quarters number in year, I some I third little beyond. we're and we'll it that second, revenue have we'll development of more

on topics. end I'll final just different with question one

do a by So statute, that expect AGM? your is And to for the need when to when you set filed, date XX-K hold you, that? now would

Yes.

meeting appropriate be to the If setting it you're to not and time. a we'll on the time. I'm this out information going any putting referring comments date, shareholder at at make

next George with We'll take from our Notter Jefferies. question

management guess that of selling think, progress business. to any likelihood wireless these looked fresh a terrestrial in also, the making I marketplace. there I'm I'm asset back successful and you if prior on handicap the I think make just can from comments how the on at memory, potential to were of wondering go you're assets. teams is I'm sale If I the I trying sale. And getting this wondering the

guys margins. a It that is attractive We're that value can, are we shareholders. hope trying it's there. continuing market. But on we has certainly but you unlock great a when feel or the anticipate whether on the in we business the or of They're of asset incredibly know, only that. lot and all certainty with is to successful we'll not, What So be improve come speculate management great well the the an to ongoing. performing that comment market. the the as the a way really certainly for very business. we process where is we their well is us. We've as of in been to can't we to it out comment a that to on It all that in great process business, do for certainly business great where business a process and further received We clearly, I things extraordinary our I got They in would conclusion. -- to. business the know team undervalued is can't see are an is way do Their backlog strong. the drive T&W

to and And structure will how business? that with I coming for then would like? much sense revenue Basingstoke a Obviously, financials, associated the that much can of the but us one look facility, out -- was how the what other wanted give you cost be that

heavy get won't unit. and invest from probably a to business enough -- in specific Yes. it number, Again, that but George, size to was management focus scale certainly, and give

that reduction We going our to impact the will point our loss it to fruition. a year, segment. I'm in on forward. it. put wasn't a for on improve But curtailing specific results this significant a expenditures number and definitely is significantly not meaningful coming in bottom be time, line in going at Just it it think that that will

people in Can tell us you many how it. business line? Got that are

Under in George. X at point this time,

in Under that X employees business.

around It's down.

question? your that Was

in And what of in that us tell employment terms business? you can the the -- was

think a on little I John gave color that.

to want about was it XXX. I say

instructions] this will program closing or at no questions further for to And speakers turn time. remarks. [Operator there line on additional the are I our the any

don't the further happy comments. has appreciate have I Yes. us everybody another to everyone time taking any again And hope and this talk Halloween, to I we a afternoon. listen in quarter. I will

program. conclude participation, does for you may now and you your This disconnect. today's Thank