© Reuters.
Comtech Telecommunications Corp. (NASDAQ:) has revealed a slight improve in web gross sales and vital development in adjusted EBITDA for the second quarter of fiscal yr 2024. CEO John Ratigan emphasised the corporate’s refinancing plans as a high precedence, with strategic investments bolstering the stability sheet.
The corporate is participating with lenders to interchange its present credit score facility, aiming to enhance monetary flexibility. CFO Mike Bondi acknowledged difficult enterprise situations however projected improved gross sales and EBITDA for fiscal 2024, backed by a robust backlog and income visibility.
Comtech additionally highlighted its next-generation troposcatter options and success in securing key contracts, together with a $48 million extension from the State of Washington.
Key Takeaways
- Comtech Telecommunications Corp. studies a slight improve in web gross sales and a 33% development in adjusted EBITDA for Q2 fiscal 2024.
- CEO John Ratigan prioritizes refinancing the present credit score facility, with a $45 million funding from White Hat Capital and Magnetar to strengthen the stability sheet.
- The corporate is down-selecting potential lenders for a time period mortgage and asset-based revolving mortgage.
- Comtech’s next-generation Modular Transportable Transmission System (MTTS) is being evaluated by militaries, indicating potential future alternatives.
- The Terrestrial and Wi-fi Networks section noticed elevated web gross sales, with a book-to-bill ratio of 1.33 occasions.
- Gross margin stood at 32.2%, with GAAP working revenue at $3 million for the third consecutive optimistic quarter.
- Comtech anticipates higher monetary efficiency in fiscal 2024 in comparison with fiscal 2023, with a backlog of $680 million and income visibility of roughly $1.6 billion.
Firm Outlook
- Comtech tasks an enchancment in web gross sales and adjusted EBITDA for fiscal yr 2024.
- The corporate has a robust backlog of $680 million and income visibility of round $1.6 billion.
- Refinancing efforts are ongoing to boost monetary stability and suppleness.
Bearish Highlights
- Difficult enterprise situations have impacted web gross sales through the quarter.
- Latest occasions have disrupted the momentum of refinancing efforts.
Bullish Highlights
- Strategic investments and refinancing initiatives are anticipated to strengthen the corporate’s stability sheet.
- Important contract wins and extensions, such because the $48 million contract from the State of Washington, enhance the corporate’s prospects.
- Optimistic tendencies within the Terrestrial and Wi-fi Networks section, together with elevated web gross sales and a robust book-to-bill ratio.
Misses
- Decrease gross sales of location-based options partially offset the elevated web gross sales within the Terrestrial and Wi-fi Networks section.
- A low gross revenue share because of product combine modifications and lowered gross sales exercise.
Q&A Highlights
- The earnings name didn’t specify any Q&A highlights.
Comtech Telecommunications Corp. has demonstrated resilience within the face of difficult market situations, with its deal with development and strategic refinancing poised to boost its monetary outlook.
The corporate’s progress in growing cutting-edge expertise and securing invaluable contracts supplies a strong basis for future success. As Comtech continues its refinancing efforts, buyers and stakeholders can be carefully monitoring the corporate’s means to navigate the complexities of the present financial panorama.
InvestingPro Insights
Comtech Telecommunications Corp. (CMTL) has proven tenacity in its monetary technique and product growth, as mirrored in its latest quarterly outcomes. To offer a extra detailed monetary perspective, let’s delve into some key metrics and insights from InvestingPro:
- The corporate’s market capitalization stands at a modest $130.98 million, suggesting a smaller participant throughout the trade. This measurement might probably make it extra agile but additionally extra inclined to market volatility.
- Comtech is buying and selling at a low Value / E book a number of of 0.3 as of the final twelve months as much as Q1 2024, which might point out that the inventory is undervalued relative to its belongings. This metric is especially related for buyers on the lookout for potential worth investments.
- Regardless of the optimistic gross sales and EBITDA development reported, the corporate’s P/E Ratio is at present adverse at -5.26, reflecting challenges in producing constant earnings over the latest interval.
InvestingPro Ideas for Comtech spotlight some considerations and potential areas of curiosity for buyers:
1. The corporate operates with a big debt burden, which is a vital consideration for these assessing the corporate’s monetary well being.
2. Comtech has maintained dividend funds for 14 consecutive years, which can attraction to income-focused buyers.
For these trying to discover additional, there are extra suggestions out there on InvestingPro. In actual fact, there are 12 extra InvestingPro Ideas for Comtech, providing a complete evaluation for subscribers. To entry these insights and make knowledgeable funding choices, use the unique coupon code PRONEWS24 to get a further 10% off a yearly or biyearly Professional and Professional+ subscription. Try the total checklist of suggestions and in-depth metrics at https://www.investing.com/professional/CMTL.
The reported successes and future outlook of Comtech, paired with the InvestingPro information and suggestions, present a multifaceted view of the corporate’s present standing and future potential within the telecommunications sector.
Full transcript – Comtech Telecommunications Corp (CMTL) Q2 2024:
Operator: Welcome to Comtech’s Fiscal Q2 2024 Earnings Convention Name. As a reminder, this convention is being recorded immediately, Monday, March 18, 2024. I might now like to show the convention over to Ms. Maria Ceriello of Comtech. Please go forward, Maria.
Maria Ceriello: Thanks, operator, and because of our buyers for taking the time to dial in immediately. Welcome to Comtech Telecommunications Corp.’s convention name for the second quarter of fiscal yr 2024. At the moment, I am right here with Comtech’s Chief Govt Officer, John Ratigan. We’re additionally joined immediately by Mike Bondi, Comtech’s CFO. Earlier than we get began immediately, please word we’ve got an in depth dialogue for the quarter in our shareholder letter out there on our web site. Sure info offered on this name will embody, however not be restricted to, info referring to the long run efficiency and monetary situation of the corporate, the corporate’s plans, goals, and enterprise outlook, and the plans, goals, and enterprise outlook of the corporate’s administration. The corporate’s assumptions concerning such efficiency, enterprise outlook, and plans are forward-looking in nature and all the time contain vital dangers and uncertainties. Precise outcomes might differ materially from such forward-looking info. Any forward-looking statements are certified of their entirety by cautionary statements contained within the firm’s SEC filings. Attributable to quite a few components, together with our ongoing refinancing efforts and modifications in management, we’ll restrict immediately’s name to ready remarks from administration. Now, I am happy to introduce Comtech’s CEO, John Ratigan. John?
John Ratigan: Thanks, Maria, and thanks, everybody, for dialing in. At the moment’s format can be extra compact than standard, which I believe everybody can recognize on condition that I’ve solely been in my new function since Wednesday of final week. At the moment, I wish to accomplish two issues. First, I wish to correctly introduce myself. Second, and earlier than Mike discusses our monetary efficiency in additional element, I wish to present some context for our buyers, prospects, workers and distributors because it pertains to what I anticipate is the market’s single greatest focus concerning the corporate, strengthening our stability sheet by refinancing our present credit score facility, which matures in October 2024. As I mentioned in our investor letter, whereas I am new within the function of Comtech’s CEO, I am not new to Comtech, our technique, our markets, or our prospects, and I am not new to being a CEO. Earlier than Comtech, I served as CEO and President of iDirect Authorities for 20 years, an organization delivering safe satellite-based voice, video and information functions with anytime and wherever connectivity within the air, at sea, and on land. At iDirect Authorities, I led the group that constructed the enterprise from the bottom as much as over $100 million in annual income and led the acquisition of GlowLink Communications. I’ve been concerned in community applied sciences and satellite tv for pc communications for almost all of my profession, and I do know what it takes to each lead and develop a enterprise. And whereas I joined as Comtech’s Chief Company Growth Officer final fall, my roots right here run deeper. I spent 10 years at EF Information Company previous to its acquisition by Comtech in July of 2000. It is honest to say lots has modified at Comtech since then, and that is precisely why I selected to return. As Chief Company Growth Officer, I’ve already spent months touring to go to our websites and dealing carefully with leaders throughout all our companies, targeted on the shared aim of rising our group in each means. I additionally imagine that as CEO, it is best observe to be direct with the folks you could have made commitments to, prospects, your workers, distributors, and definitely your shareholders. Because it pertains to this quarter, I perceive that foremost in folks’s minds is our refinancing. You must know that it’s and can stay my single highest precedence till it’s full. All through the quarter, the group has been working arduous to strengthen our stability sheet. This is the place we’re proper now. First, in January, two of our greatest present shareholders, White Hat Capital and Magnetar, agreed to make a further $45 million strategic funding in Comtech. Each know Comtech very nicely following an preliminary funding of $100 million in October of 2021. White Hat’s Co-Founder, Mark Quinlan, joined our Board and has been lively in serving to promote and speed up our One Comtech transformation, one thing he is now doing as our not too long ago appointed Board Chair. The continued help of Mark, White Hat and Magnetar, significantly given their deep understanding of our firm, our markets and our strategic imaginative and prescient, isn’t solely appreciated, however we additionally take it as a validation of the underlying energy and long-term potential of our enterprise. Second, we have been participating with potential lenders to refinance our present credit score facility, and have superior into what we imagine are productive negotiations. We anticipate to interchange our present credit score facility and look ahead to sharing extra particulars as soon as we’ve got finalized our essential work right here. Mike will talk about our leads to extra element, however let me provide the headline numbers right here. Our consolidated web gross sales elevated barely year-over-year to $134.2 million in comparison with $133.7 million within the second quarter of fiscal 2023. Gross margin was 32.2% in comparison with 31.5% in our first quarter of fiscal 2024. And our adjusted EBITDA was $15.1 million as in comparison with $11.3 million within the second quarter of fiscal 2023. What this exhibits is that regardless of web gross sales coming in roughly flat year-over-year, our adjusted EBITDA grew 33% over the identical time interval attaining an 11% adjusted EBITDA margin. This general improve in profitability is a mirrored image of the operational enhancements we’ve got undertaken by the One Comtech lean initiatives over the previous yr. We imagine the sequential decline in web gross sales and, in flip, adjusted EBITDA is attributable, largely, to non permanent uncertainties created by the refinancing overhang. And as a reminder, that is the primary quarter we had been reporting after finishing the sale of PST in early November 2023. However, as I look ahead, I imagine we’ll win again any floor loss through the first half of our fiscal yr. Total demand for our merchandise stays wholesome because the Comtech group continues to safe key wins for our enterprise with backlog reaching $680 million. Our beforehand introduced multi-year International Discipline Providers Consultant contract with the U.S. Military with a complete potential worth of $544 million was protested by the incumbent in November 2023. The protest was dismissed in January in Comtech’s favor. Nonetheless, the incumbent has protested once more, however I’m assured that we’ll see one other favorable end result and anticipate this contract to contribute considerably to our top-line shortly thereafter. We additionally secured a big win from our Terrestrial and Wi-fi Networks section, which prolonged essential next-generation 911 companies for the state of Washington. Comtech has had a longstanding partnership with the state of Washington for over eight years to deploy one of the vital sturdy and superior next-generation 911 programs in the USA. This contract extension is valued at $48 million over the following 5 years with the choice to increase additional by 2034. We had different name dealing with wins in Australia, Canada and the U.S. as our Solacom product line continues to develop its market share inside these areas. Our satellite tv for pc and house group continues to promote our market main troposcatter communications tools to our allies around the globe with the group securing notable bookings from two overseas militaries this quarter. Extra broadly, we’ve got roughly $1.6 billion in seen income, a robust place to be in with significant alternatives forward for future development. Earlier than I flip to Mike, let me step again and make a bigger remark. Roughly 18 months in the past, Comtech launched into a journey to drive significant development with improved profitability. It concerned the execution of probably the most vital transformation in Comtech’s historical past and a path we stay dedicated to. Accordingly, we’re targeted on guaranteeing that Comtech isn’t solely a secure mixture of the proper folks and processes in place that our enterprise operations relaxation upon a strong basis that features an revolutionary tradition, expertise management, an intense deal with the client, and importantly a steadily bettering stability sheet. As I mentioned earlier, I am nicely conscious of how essential our stability sheet is. We’ve got accomplished and can proceed to place within the arduous work essential to construct a much bigger, stronger, extra worthwhile enterprise. We proceed to draw distinctive expertise to the corporate and add to our high-quality administration group, and we proceed so as to add impactful members to our senior management group exactly as a result of we anticipate to develop. With that mentioned, let me flip the mic over to Mike Bondi, our CFO, to debate our financials. Mike?
Mike Bondi: Thanks, John. Earlier than discussing the standing of our refinancing efforts, let me cowl our latest outcomes for Q2. Consolidated web gross sales had been $134.2 million in comparison with $151.9 million within the first quarter of fiscal 2024 and $133.7 million within the second quarter of fiscal 2023. Though increased than final yr, web gross sales throughout our second quarter of fiscal 2024, primarily in our Satellite tv for pc and House Communications section, mirror delays within the timing of our receipt of and efficiency on orders, principally a results of the difficult enterprise situations, which we imagine briefly slowed down our receipt of orders from prospects in addition to elements from suppliers. Whereas we’ve got labored to resolve such situations, for instance, by considerably decreasing the extent of accounts payable round quarter-end, such difficult enterprise situations throughout December 2023 and January of 2024 resulted in our efficiency on orders shifting to the third quarter and, in some circumstances, fourth quarter of fiscal 2024. Additionally, as John referenced, web gross sales in our Satellite tv for pc and House Communications section for the second quarter of fiscal 2024 mirror the PST divestiture accomplished on November seventh, principally the beginning of our second quarter. For the three months ended January 31, 2024, web gross sales in our Satellite tv for pc and House Communications section primarily mirror increased web gross sales of our troposcatter and SATCOM options to U.S. Authorities and prospects, together with progress towards delivering next-generation troposcatter terminals to each the Marine Corps and Military, greater than offset by decrease web gross sales ensuing from the PST divestiture and of satellite tv for pc floor station options, together with our X/Y steerable antennas. Our book-to-bill ratio, a measure outlined as bookings divided by web gross sales, on this section for the three months ended January 31, 2024 was 0.86 occasions. Within the second quarter of fiscal 2024, this section was awarded over $7 million of funded orders from two overseas militaries, who’re evaluating our next-generation Modular Transportable Transmission System, or MTTS, troposcatter options. We imagine that these two new prospects might result in bigger scale troposcatter alternatives sooner or later. In comparison with Q2 final yr, web gross sales in our Terrestrial and Wi-fi Networks section mirror increased web gross sales of our NG-911 and name dealing with companies, offset partially by decrease web gross sales of our location-based options. Our book-to-bill ratio on this section for the three months ended January 31, 2024 was 1.33 occasions, led by the $48 million State of Washington NG-911 contract extension John mentioned earlier. Additionally, we prolonged essential name dealing with companies offered to public security answering factors, or PSAPs, throughout Australia by our partnership with Telstra (OTC:). These companies, valued at roughly $6 million over the following a number of years, help Australia’s 000, or 911 equal, emergency communications. Gross margin was 32.2% in comparison with 31.5% in our first quarter of fiscal 2024 and 34.3% in our second quarter of fiscal 2023. GAAP working revenue in Q2 fiscal 2024 was $3 million in comparison with an working lack of $0.8 million in Q2 of fiscal 2023. Whereas each quarters embody restructuring prices, GAAP working revenue within the more moderen quarter consists of an estimated acquire on the PST divestiture in addition to the advantages from revenue enchancment initiatives that we actioned within the second half of fiscal 2023. Importantly, Q2 fiscal 2024 marks our third consecutive quarter of GAAP working revenue since This fall of fiscal 2021. As defined in additional element and reconciled in our Kind 10-Q filed earlier immediately, we make the most of the non-GAAP measure that we check with as adjusted EBITDA. For Q2 fiscal 2024, adjusted EBITDA was $15.1 million. As a share of web gross sales, adjusted EBITDA was 11.3%, an enchancment from the $11.3 million, or 8.5%, we achieved in Q2 of fiscal 2023. The rise in adjusted EBITDA, each in {dollars} and as a share of web gross sales, displays decrease analysis and growth bills in each of our reportable working segments and the good thing about our One Comtech lean initiatives, all set partially by a low gross revenue share through the quarter because of general product combine modifications and decrease web gross sales exercise. As we enter the third quarter of fiscal 2024, enterprise situations proceed to be difficult and the working surroundings is basically unpredictable. Regardless of these enterprise situations and ensuing challenges, and though we anticipate some variability sometimes, as disclosed immediately in our 10-Q, we anticipate web gross sales and adjusted EBITDA for fiscal 2024 to be higher than fiscal 2023. Such expectation considers our robust backlog of $680 million as of January 31, 2024, and income visibility of roughly $1.6 billion. Now, earlier than turning the decision again over to John to wrap up, I will present an replace on our refinancing efforts. The group has been arduous at work evaluating options and supporting intensive due diligence with potential new lenders. We have made super progress on this entrance through the second quarter. As talked about, we cleared the divestiture of PST in November, we addressed the restructuring of our convertible most popular inventory in late January by upsizing the funding and amongst different modifications, transferring the non-compulsory redemption date out two years to October of 2028. And on the heels of that, urgent forward with our refinancing efforts, we down chosen from a pool of well-known lenders and centered across the debt capital construction consisting of a time period mortgage coupled with an asset-based revolving mortgage. Clearly, the occasions of final week have interrupted the momentum gained with respect to our refinancing efforts, however I and the remainder of the manager administration group stay assured that we are going to get this resolved as certainly one of our highest priorities. Now, let me flip the decision again over to John.
John Ratigan: Thanks, Mike. Earlier than we finish the decision and get again to work, I will provide a remaining thought. As I mentioned on the high of the decision, I take critically my dedication to the corporate, workers, prospects, distributors, and buyers. You’ll be able to anticipate me to be direct in my communications and clear about my priorities. Our high precedence proper now could be strengthening our stability sheet. We accomplished step one towards this goal with a strategic development funding introduced in January. We’re working diligently to finish the ultimate step of refinancing within the close to time period. After I joined Comtech, I used to be enthusiastic concerning the alternatives that lay forward for the corporate. At the moment, I’m proud to guide this proficient group. We’ve got finish markets which are altering and rising, the perfect folks and merchandise within the trade and in our rising gross sales and visual revenues, a vote of confidence and appreciation from our prospects that Comtech is the proper companion to assist them navigate a difficult panorama. Thanks once more in your time immediately. I look ahead to attending to know lots of you within the days and weeks forward. And operator, that ends our name for immediately.
Operator: Thanks, sir. This does conclude immediately’s program. Thanks in your participation. It’s possible you’ll disconnect at any time.
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