Comtech Telecommunications Corp. (NASDAQ:CMTL) Q1 2024 Earnings Call Transcript

Comtech Telecommunications Corp. (NASDAQ:CMTL) Q1 2024 Earnings Call Transcript December 7, 2023

Comtech Telecommunications Corp. misses on earnings expectations. Reported EPS is $0.24 EPS, expectations were $0.26.

Operator: Welcome to Comtech’s Fiscal Q1 2024 Earnings Conference Call. As a reminder, this conference is being recorded today, Thursday, December 7, 2023. I would now like to turn the conference over to Ms. Maria Ceriello of Comtech. Please go ahead, Maria.

Maria Ceriello: Thank you, operator. Good afternoon, everyone, and thanks for taking the time to dial in today. Welcome to the Comtech Telecommunications Corp.’s conference call for the first quarter of fiscal year 2024. Today, I’m here with Comtech’s Chairman, President and Chief Executive Officer, Ken Peterman. We’re also joined today by Maria Hedden, Comtech’s Chief Operating Officer; and Mike Bondi, Comtech’s CFO. Before we get started today, please note we have a detailed discussion for the quarter in our Shareholder Letter available on our website and we have also been working to communicate directly about our business and our market on our blog, Comtech: Signals. Certain information presented in this call will include, but not be limited to information relating to the future performance and financial condition of the company, the company’s plans, objectives and business outlook and the plans, objectives and business outlook of the company’s management.

The company’s assumptions regarding such performance, business outlook and plans are forward-looking in nature and always involve significant risks and uncertainties. Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statements contained in the company’s SEC filings. Now, I’m pleased to introduce the President and Chief Executive Officer of Comtech, Ken Peterman. Ken?

Ken Peterman: Thank you, Maria. Hello, everyone, and thanks for joining us today. This call represents the fifth quarter of our One Comtech transformation, our fifth sequential quarter of incremental revenue growth and our second consecutive quarter with positive GAAP operating income, clearly demonstrating the positive momentum we are building as One Comtech. As we finished the first quarter of our new fiscal year, the One Comtech transformational change is well underway, including the collaborative culture of innovation we’re building, our steadily improving sequential performance and the promising strategic trajectory we are on. While there remains much to do, we believe more than ever before that we have a very exciting future ahead.

Since I took on the role of CEO a little over a year ago, I have consistently expressed how critical it is for us to fully embrace the need for change and work together to drive a near total transformation of our organization and together, we’re doing that. Having brought 14 historically siloed businesses together, we are collaborating better than ever before, utilizing common practices, tools and processes across our unified enterprise to steadily improve operational performance. We’re leveraging our people strategy to reveal and address emerging skill gaps and we’re harvesting synergies among our programs and our product roadmap. As One Comtech, we are collaborating with customers in new ways to deliver more customer value than ever before, developing more comprehensive solutions aligned with our vision for smart networks and unique technology convergences that provide our global customers with new forms of connectivity, insights and actionable intelligence that have the potential to fundamentally transform network connectivity infrastructures around the world.

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Q&A Session

As I shared before, our customers need us to be more than a vendor. They need a technology partner. We are becoming that partner who listens and solves the challenges they’re facing every day with the foresight to proactively position and address the challenges moving on their horizon. Recent strategic contract wins such as EDIM, DoD’s next-generation 8-channel satellite modem and GFSR are clear proof that as One Comtech we are succeeding. Our global customers ranging from emergency service providers, commercial mobile network operators, satellite service providers and the Department of Defense continue to place their trust in Comtech. More importantly, these customers recognize that our comprehensive solutions will deliver greater value than ever before in addressing their toughest challenges.

As we launched our FY ’24, we have remained focused on the crucial daily work of steadily improving our operations, balance sheet and financial performance. When necessary, we’ve made bold decisions to empower our teams on the front line with both the resources and the authority they require to address our customers’ needs. Importantly, we’re seeing the results of these efforts every single day. Together, we are working to assure our culture of collaboration and innovation. In conjunction with our differentiated expertise, technology leadership and unique understanding of our customers’ needs, Comtech will continue to be positioned to lead the way in delivering the blended hybrid, smart-enabled solutions and services that will bring forward smart networks and new technology convergences that can power a truly connected planet.

While Michael speak to this quarter’s results in a moment, I’d like to steal just a little bit of his thunder and highlight some numbers we’re proud of. First, I’m pleased to report that Comtech continues to deliver on our commitment to growth. Our net sales rose about 16% year-over-year to $151.9 million with new bookings of $185.6 million, which is the highest they’ve been since I assumed the role of CEO. We’re also consistently meeting or exceeding our financial projections, delivering sequential revenue growth in each and every quarter since our One Comtech transformation began. Our revenues this quarter are, in my view, a direct reflection of the multiple year-long initiatives that we’ve implemented to transform our company, reinvigorate our sales and aggressively turn for delivering more comprehensive innovative solutions that exploit the emerging opportunities of a complex communications landscape.

Let me emphasize again that our transformation to One Comtech is working. Simply put, the improvements to our business processes and the increased attention to risk management and process discipline as we implement common systems and platforms across our enterprise have significantly enhanced our ability to identify and exploit synergies, increase cross collaboration and optimize business execution across the entire organization. Allow me also to highlight a couple of key wins this quarter that I think highlight a competitive advantage that our technology leadership gives us right now and that I think will extend going forward. Our Satellite and Space segment had an especially strong quarter. On the heels of multiple significant contract wins, we recently announced the receipt of a $20 million-plus order from U.K.-based Spectra Group for our COMET portable troposcatter systems.

For our international allies, network agnostic, secure and interoperable communications capabilities comprise a crucial component of any and every national defense and security strategy. We believe this COMET order is another clear indicator that this increasing global market demand. For our troposcatter family of systems, every additional win further validates our position as the provider of the best troposcatter solution in the market. Other parts of our satellite space portfolio are also contributing to our growth. In October, Comtech was awarded a $9.6 million sole source contract by a division of L3Harris Technologies. The contract calls for the delivery of Comtech’s highly regarded modem technologies and platforms, supporting the Air Force and Army Anti-Jam Modem or A3M program.

This provides cutting-edge anti-jam satellite communications capabilities to military personnel across diverse operational environments and geographies. This contract vehicle also allows the DoD to place production order requests for A3M modems for years to come. At the same time, our terrestrial and wireless business also secured a key win this quarter with significant upside potential. The Canadian government at the federal level has mandated countrywide adoption of next-generation 911 services by March of 2025 to ensure a national 911 infrastructure that is future-proof, utilizing the best of modern communications technologies, including voice, text, video, location-based services in both terrestrial and satellite-based networks. Comtech is at the forefront of this emerging opportunity.

When Strathcona County in Alberta recently became the first municipality in the country to introduce these services, it was Comtech’s recognized expertise as a service provider that got them there. This win for Comtech is particularly exciting because we are only at the very beginning of a nationwide implementation. We expect Comtech to be extremely competitive as communities in Canada and across North America migrate to new emergency response technology. In fact, in October, members of the Pennsylvania Emergency Management Agency, a Comtech customer received the Pennsylvania Governor’s Award for Excellence in recognition of their efforts in the PEMA Next Generation 911 project. Increasingly sophisticated first response technologies and services collect and integrate data from multiple sources to direct and optimize responses.