Comtech Telecommunications Corp. (NASDAQ:CMTL) Q4 2023 Earnings Call Transcript

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Today, Comtech is preparing itself for a world where there is not only value in building platforms and services to handle the geometrically increasing amounts of information that the modern world creates, but also able to capture, analyze and act on the information they carry in the near real time, creating new insights, intelligence and smart networks that will change the way we think about connectivity, deliver substantially more customer value and empower a truly connected world. Everything we have done and are doing to create a One Comtech business machinery and culture is being done to put our company on a durable growth trajectory that I believe will sustain for years to come. We’re all looking forward to 2024. With that, let me take any questions you may have.

Operator: [Operator Instructions] We’ll move first to Joe Gomes with NOBLE Capital. Your line is open.

Joe Gomes: Good afternoon. Congrats on the quarter and thanks for taking my questions.

Ken Peterman: Good morning, Joe.

Mike Bondi: How are you doing, Joe?

Joe Gomes: Great. So, just maybe you could give us first off a little bit more details to what was behind the fourth quarter outperformance. As you mentioned, you guys had projected 2% to 4% sequential revenue growth. It came in over 9%. You projected adjusted EBITDA margin in 9.5% to 10.5% and it came at 12.7%, phenomenal results. And I’m just wondering if you give us a little more color as to what drove that.

Mike Bondi: Sure, Joe, I’ll take that first piece. Yeah, certainly coming into the quarter, we had our eye set on executing on our lean initiatives. So certainly, when we’re talking about adjusted EBITDA margins, clearly, I think you’re seeing the benefits of those actions taken now in the second half of the year. That’s definitely driving the bottom-line. In terms of also just the fielding schedules of our customers and the backlog we’ve been building throughout the year, giving us a nice foundation. We were able to draw upon that in the quarter. So, a lot of things clicked this quarter.

Joe Gomes: Okay, great. Thanks for that. And on the $544 million contract, again, congrats on winning that, even though it is currently under protest. You mentioned you thought it would start to contribute in the second half of fiscal 2024. Can you give us any kind of insight as to what — when you think meaningful, what that could possibly mean to the top-line? And on the margins on that contract, in line with higher or lower than the — kind of the corporate average margin?

Mike Bondi: Joe, on the revenue profile for the contract, as we were saying in our prepared remarks, certainly, we have to be mindful of the timing of getting started on that. So, when that thing gets fully up and ramped up with all the positions, it’s going to be a pretty sizable increase on an annual basis. Going back in time, we had a similar contract and I would say you can kind of use it as a proxy.

Ken Peterman: Joe, this is Ken. I would also say that while there’s a protest in play, that’s a pretty routine practice for this particular customer and this particular market segment. So, we’re not overly concerned about that. And this task order was awarded on an existing contract vehicle we have with the U.S. Army, which leverages a 10-year, $5.1 billion global tactical communications systems II, or GTACS II, IDIQ contract. The reason I mention that is because it’s one of the reasons we’re excited about the G2S IDIQ contract that we have with a ceiling of $3.2 billion, because these are the kind of contract vehicles that enable this kind of business to flow to us especially in a dynamic geopolitical environment with sudden and dynamic demand potential.

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