Q1 2021 Comtech Telecommunications Corp Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to contact Telecommunications Corp, first quarter fiscal 2021 earnings conference call at this.
Time, all participants are in a listen only mode. Later, we will conduct a question and answer session.
Hi.
You want me to press the star and one on your push buttons and.
As a reminder, this conference is being recorded Wednesday December nights Twentytwenty I would now like to turn the conference over to Mr. Jason.
De Lorenzo of contact Telecommunications. Please go ahead Sir.
Thank you and good afternoon, and welcome to the Comtech Telecommunications Corp Conference call for the first quarter of fiscal year 2021.
With us on the call today are Fred Kornberg, Chairman of the board and and Chief Executive Officer of Comtech, Michael D. porcelain, President and Chief operating Officer, and Michael bonding Chief Financial Officer.
Before we proceed and I need to remind you of the company's safe Harbor language.
Certain information presented on 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 on companies management.
The companys assumptions regarding such performance and business outlook and plans are forward looking in nature and 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 Securities and Exchange Commission filings I'm pleased now to introduce the chairman and Chief Executive Officer of Comtech, Fred Kornberg, Fred Thanks.
Thank you, Jason and good afternoon, everyone and thank you for joining us on this call.
Today, we will be discussing the results from our first quarter of fiscal 2021, and our outlook for the full fiscal year.
As you see from on our announcement. This afternoon Cisco's 2021, it's off to a great start on that.
Net sales and adjusted EBITDA from the first quarter exceeded.
Expectations are first quarter net sales were 135.2 million <unk>, adjusted EBITDA or a 14.3 million.
As everyone knows COVID-19 is still in the front forefront of news.
And although by no means is it over we believe that the pandemics worst impact on our business is largely behind us.
As announced earlier today without diversified customer base product leadership positions and mounting prospects and we are targeting fiscal 2021 net sales to be in the range of approximately 610.
630 million.
And our targeted adjusted EBITDA to now be in the range of $74 million to $76 million and.
As you can see our strategic.
Dziedzic initiatives are paying off and we're clearly clearly holding our own despite the second wave and that caused the 19 pandemic.
Our pipeline of large order deals remains strong and its momentum continues growth should achieve a book to bill ratio in excess of 1.0 from fiscal 2021.
Now, let me turn over the call to Michael Bondi, Our CFO, who will provide additional commentary by the financials after that Michael porcelain, our president and CEO and provide an update on our business and pending acquisition.
And I will come back and before opening the line to questions and answers. Thank you Mike [noise].
Thank you Fred and good afternoon, everyone.
As mentioned net sales for the first quarter of fiscal 2021, well $135.2 million. This is a decrease from the 170.3 million reported in Q on a fiscal 2020.
Net sales and the first quarter two U.S. based customers were 74.4% of total net sales were 25.6% to international customers.
Bookings for the first quarter were $123.2 million and our consolidated book to Bill ratio was <unk> 0.91.
We finished the quarter with healthy backlog of 605.5 million and when you factor in the total unfunded value a certain multiyear contracts that have been awarded to us, but which are not yet in our backlog, we have visibility into approximately $1 billion of total potential future revenue.
Now, let me give you some financial metrics and commentary with respect to the rest of the income statement.
Our gross profit percentage.
And Q1 on fiscal 2021.
Well, its 37.1% as compared to the 37.3% achieved and the first quarter of fiscal 2020.
[noise], how gross profit during the first quarter of fiscal 2021 reflects minor increases in cost due to order delays production delays minor supply chain disruptions lower levels of factory utilization and higher logistics and operational costs, resulting from the COVID-19 pandemic.
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These were partially offset by lower travel costs.
Given our expectations for the level and mix of net sales in fiscal 2021 and on going higher production logistics and safety related costs, resulting from COVID-19, we are targeting a 35% gross profit margin for fiscal 2021.
However, if product mix shifts favorably, we could reasonably achieve 37% like we just did in Q1.
That's true NAV for the first quarter of fiscal 2021 was 27, and a half million dollars or 20.3% of consolidated net sales as compared to 31.9 million or 18.7% and Q1 of fiscal 2020.
Turning to R&D, we spent 11.6 million and the first quarter or 8.6% of net sales.
Consistent with historical trends the majority was spent and our commercial solutions segment.
Total stock based compensation for the first quarter was point 7 million and amortization of intangibles was 5.6 million.
Looking forward, we continue to expect stock based compensation to approximate 11 million to $13 million and excluding the impact of the pending U.S.P. acquisition amortization of intangibles to approximate 21.1 million.
Now, let me address the acquisition plan expenses, which obviously had a big impact on our reported results.
During the first quarter of fiscal 2021, we incurred $91.2 million of such expenses.
Oh this amount approximately 88.3 million related to the previously announced litigation settlement and merger termination with a lot of which $70 million was paid and cash to go a lot during the quarter.
The remaining cost primarily related to the pending acquisition of U.H.P. and G. and gene I'm on one acquisition related litigation.
These items are discussed further and more detail on our 10-Q filed with the EPS is safe.
Including these costs.
Our consolidated GAAP operating loss for the first quarter of fiscal 2021 was 85.7 million.
Excluding these costs non-GAAP operating income would have been $5.5 million or 4% of consolidated net sales.
Our adjusted EBITDA was 14.3 million or 10.6% of consolidated net sales for the first quarter of fiscal 2021.
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On a segment basis, adjusted EBITDA and our commercial solutions segment was 14 million or 17.1% of related net sales and.
And then our government solutions segment was 4.3 million or 8.1 per cent of related sales.
For fiscal 2021, we anticipate consolidated adjusted EBITDA to approximate 12% when using the $620 million mid point of our 2021 targeted range net sales.
Now, let me talk about interest taxes E. P S cash flows and our balance sheet.
Interest expense was $2.3 million and the first quarter and includes 1.2 million of incremental interest expense poor ticking fees related to me now terminated financing commitment letter.
For fiscal 2021, excluding the impact of our pending acquisition of you HP. We now expect total interest expense to approximate seven and a half million dollars.
Our estimated annual effective tax rate was 13.75% and excludes a net discrete tax expense of 8.2 million and this in the first quarter of 2021.
On the bottom line, our GAAP net loss in the first quarter of fiscal 2021 was $85.8 million or a $3.39 loss per diluted share.
Excluding acquisition plan expenses incremental interest expense for ticking fees and a net discrete tax expense and the first quarter non-GAAP net income was $3.7 million or 15 cents per diluted share.
Cash used for operating activities was $74.2 million for the first quarter.
This included the $70 million payment took a lot.
Excluding the $70 million payment took a lot net cash used in operating activities would have been $4.2 million weeks.
We expect to generate a significant amount of positive operating cash flows during the remainder of fiscal 2021.
Our balance sheet as of October 31st 2020 includes 32, and a half million dollars of cash and cash equivalents and our total debt outstanding was $217 million.
Our current secured leverage ratio as defined and our credit facility was 3.31 times as compared to a maximum ratio allowed of 3.75 times.
Before turning it over to Mike for a business update let me provide some additional color on ARX <unk> on our expected fiscal 2021 performance.
Based on anticipated product mix and timing assumptions, we expect second quarter net sales to range from approximately 135 million to 140 million with adjusted EBITDA in the range of approximately 12, and a half million to 14 and a half million.
For the remaining quarters in fiscal 2021, we expect sequential growth with our fourth quarter targeted to be the peak.
Now I will hand, it over to Mike force them like.
[music].
Thanks, Mike.
And as far as mentioned earlier cold and 19 is still impacting our business. We continue to conduct most of our non production related operations using remote working arrangements have controlled most business travel and have established social distancing shave cars.
These precautions and business practices are expected to remain in effect. So long as government advisories recommend despite dish and was a great quarter and let me talk about the team's success in terms of business performance contract wins and the direction and where we think these efforts will lead us.
Well first discuss our commercial solutions segment here net sales were 81.8 million this quarter as compared to 94.3 million and Q1 of last year, a decrease of about 13%, which is not bad considering the impact of Cove and 19 on our international sales.
Bookings in this segment were 66.3 million for the quarter, resulting in a book to Bill ratio 0.8, what bookings were mainly affected by Cove, and 19, which caused many international bookings to shift to the right.
Period to period fluctuation and bookings and just normal for this segment and although we have seen a recent spike and cold and 19 cases, and many of the geographic markets, where we sell our satellite ground station technologies. It was a relatively good quarter and we believe there was a light at the end of the tunnel booking.
Bookings this past quarter were higher than the bookings achieved and each of our prior two quarters. In fact, we were awarded a number of important orders, including a 1.7 million dollar order from a large government entity and Asia, who selected on equipment to support significant network upgrade and 1.5 million dollar on <unk>.
For single channel per carrier for S.G.P.. She satellite photos from a tier one defense contractor to upgrade and expand and existing network with RCD M 625 day advanced satellite modems.
We received $1 million and delivery orders from the U.S. and evil information warfare systems come and for our latest generation. So on 50 650 be satellite modems as well as from more upgrades and we also received a million dollar order for satellite ground station equipment from the largest telecommunications company and Africa, who specify.
And our heights networking platform to enhance and improve its mobile backhaul capabilities.
Now onto our public safety and location technology product lines.
First quarter of fiscal 2021, net sales were lower as compared to last year. This decline was expected and mostly timely timing related as previously disclosed we anticipated that 80 and she would she is purchasing certain of our 911 wireless call routing solutions as a result of all receipt of a large contract a few years ago.
Go from another large U.S. mobile network operator.
Our first quarter of fiscal 2021 reflected the absence of such sales to wait you can say, but they were offset in part by increased sales of our Fiveg virtual mobile location based technology solutions.
Also during the most recent quarter, we commenced work related to our recently awarded 54 million dollar contract to design and deploy and operate and gene Nineone on services for the state of South Carolina.
Two day, the business impact of Cold and 19 on our public safety and location technology solutions has been relatively muted and long term demand for our products appear strong.
Although cove and 19 has resulted in the cancellation of several key public safety trade shows and some states and municipalities announced budget constraints. We believe other customers are increasing their funding for next generation 911 solutions recognizing the critical importance of upgrading their nine one on systems [noise].
In fact, our second quarter of fiscal 21, I started off with a bank in November 2020, we announced that we were awarded a state wide contract valued up to 175.1 million to design deploy and operate next generation 911 services for the Commonwealth of Pennsylvania.
The total contract value includes multi year contract extension options and the Commonwealth Initially funded the contract at 137.4 million of which we have book 111.6 million during our second quarter bookings.
Based on oriented anticipated time and go performance, we expect meaningful revenue contribution from this contract to begin in earnest in fiscal 2022.
This was really a great win for us coming on the heels of the 54 million dollar contract award with the state of South Carolina, which we announced on July 2020.
And not to be overlooked. We also received a number of other important orders during the first quarter.
We received a contract renewal for location and mapping technology is worth 4.2 million with a tier one mobile network. Operator, we received the contract value to up to 2.4 million to provide next generation nine on one services, including are sold come Guardian, intelligent 911 workstations to the city of Edmonton Police fire and rescue Sir.
Service.
We received a large five year up good contract to provide a cheer on mobile operator, and Saudi Arabia with both active and passive location services supporting their two G threeg and Fourg networks.
We received a contract renewal for location based services with Telefonica digital image rid based research and development company, which uses our global location services solution for it and to EM or machine to machine communication requirements and other customer use cases and were received contracts with the Indian motorcycle company.
And to expand coverage free ride command feature in Europe, the Middle East and Africa, which provides maps and points of interest data and support for Doppler radar system for its customers and the U.S. and Canada.
In aggregate, we remain optimistic that 2021 net sales for the segment will be higher than the amount we achieved in fiscal 2020.
Now, let me turn to our government solutions segment sales force. Your net sales were 53.4 million in Q1 of fiscal 2021.
[noise] bookings and our government solutions segment for Q1 of fiscal 2021 came in at 56.9 million with a book to Bill ratio in excess of one at 1.07.
Period to period of fluctuation and bookings is normal for this segment as well.
Net sales of our mission critical technologies during the first quarter of fiscal 2021 were lower as compared to the first quarter last year, primarily due to the timing of and performance on orders related to our global tactical advanced communication systems, or G. tax contract and high reliability, electrical and electronic and electromechanical.
Or commonly known as Tripoli satellite based space components.
Q on a fiscal 21 does reflect a nominal amount of shell supermarket January 2020 acquisition well she shape.
Rashid of new orders for our mission critical technologies during the quarter included the following a 5.9 million of additional funding on our contract to provide the U.S. Army with global field support services from military satellite communication terminals around the world It.
It included 5.4 million of additional orders from the U.S. government for our joint cyber analysis coarse ore Jake and training solutions.
We received $3 million of additional funding for a 12 month extension on an existing contract to provide merlins department of human services, which statewide I teach services.
We also received 2.7 million of orders to provide ongoing Sustainment services to do you wish on me for snap and 2.6 million of orders to supply manpack satellite terminals networking equipment and other advanced vitia products to the U.S. Army.
And finally, it included 1.9 million of additional funding to continue to provide other critical I T staffing to multiple agencies within the city of Baltimore.
During the first quarter, we continue to make progress to ship initial orders on our 10 year $211 million contract awarded to us by a prime contractor to provide next generation Troposcatter systems and support of the U.S. Marines. We believe this multiyear opportunity validates comtechs market leading true.
Let's go to the technologies and expertise.
At the same time, we continue to see strong interest from both the U.S. military and foreign governments for our recently introduced Comtech comment terminals.
With respect to COVID-19, and this segment as I previously mentioned, we have seen some of our international customers delaying potential order awards and we are also seeing fielding and order delays from U.S. military customers.
In fact in December 2020, we temporarily closed on 10 or production facility in the UK due to a spike and Cove is 19 cases in that area. Obviously this has impacted cost and our ability to deliver certain orders, but all of that is reflected in the guidance that Fred and Mike spoke about earlier. In addition, we believe these issues are tempered.
Larry and long term demand for our government solution products and technologies remain strong.
As such looking forward, we believe fiscal 2021 net sales for this segment will be similar or slightly higher and the amount we achieved in fiscal 2020.
Now I have one quick comment before turning it back to Fred.
On the U.H.B. acquisition from here, we remain focused on the ongoing regulatory review process and in Russia.
We acknowledge that December 30, Onest 2020, and prior FCC filings was a critical milestone and if we do not get regulatory approval by that date, either party may terminate the acquisition, but that said we continue to have discussions with U.H.B. and hopes of finding a solution that works for all parties now let me turn it back to Fred.
Who will provide some closing remarks from [noise] on.
Thank you Mike.
As I mentioned before and as you heard from both Mikes here.
We're all very pleased with the business and performing particularly results.
Performing in the first quarter.
Without a diversified customer base product leadership positions and mining prospects, we are clearly holding our own. Despite the second wave of the cold and 19 fund and.
Given out by business outlook, our board of directors continue to declare a dividend for the first quarter of fiscal 220 21 of 10 cents per common share payable on February 19th 2021 to share holders of record at the close of business on January 20 2021.
We continue to believe that our dividend program is a great way to return capital to our shareholders as we look to grow our business.
Now I'd like to proceed to the question and answer part of the conference call operator.
At this time, and if you would like to and ask.
Good question.
Star and one on your Touchtone phone again.
That is star and one.
Good question.
We are going to take our first question from Joe Gomes from Noble capital. Your line is open.
Good evening and congratulations on the quarter.
Thank you.
So I just wanted to talk a little bit here first on the next generation 911, and you guys seem to be having some fantastic success there.
And just trying to get a bigger picture of what what do you guys really sees driving you know these wins I think the last call. You said there you were working on two large state one day soon one is Pennsylvania.
The other one is still available what's the competitive environment are you pretty I guess kind of like what's the win rate year for you guys and the business at this point in time.
Sure well, yeah, we're really pleased with the contract win that we got from the Commonwealth of Pennsylvania, and the way I would categorize it is its extremely competitive in the marketplace and.
And we think we're winning more than our fair share in fact, we're we're moving most if not all of the large contracts and we've done so in the past with Commonwealth and Massachusetts. The state of Washington on the West Coast, and South Carolina, and now, Pennsylvania, and so were taken and state by state and yes. There is a really large office.
During the day that's out there.
And and you know, we'll we'll probably see some activity on that you know in calendar year next year and not all fiscal year, but the calendar year and 2021, and we'll see how that develops but we're extremely optimistic day, we will be awarded.
A very significant and contract there and you know it is low.
Although it is competitive we like to think it's our our prior experience and and technology that is a winning the states and we're demonstrating excellence on how we do our on products and more we're winning so technology and our experience and it's competitive but we're we're doing great.
Okay. Thanks, Thanks for that and.
Right.
On the U.H.P. acquisition.
Talk a little bit I mean, what seems to be the whole Bob and getting this thing to the finish line.
What are the Russian authorities I guess you know.
Focused on that that the deal has not come to fruition yet.
Well the best way I could describe it is typically the Russian government normally has you know four to five meetings a year, where they you know they cut and make these decisions related to the acquisitions.
And because of Cove. It we only know that they've had on meeting since February so.
These are and sort of behind the door meetings that the Russian government has but we certainly think COVID-19, those impacted the speed of which the Russian government has.
Has had to work through the process were not well.
Well, we're not really aware of anything specific that the Russian government has stated that they would be opposing that they haven't told us and he specific reason are opposing it we think were somewhat caught up and the impact of cove, it and the lengthy delays or just general bureaucracy, not and they're not going away, but that's just what we're dealing with and both parties understand that.
We're not aware of any specific reason that the Russian government would oppose this transaction that I can tell you Oh without any question.
Okay. Thank you and one last one from me I'll jump back in queue. So s. DNA expense and seem to have been a little elevated here sequentially and then also five and look quarter over quarter.
Our year over year on as a percent of sales anything going on and there is that the 27 price for the quarter and good runway going forward or do you think those will be range in some.
Hi, Joe This is Mike in terms of the comparative.
Comparative that you were doing to Q4 to Q1 I just keep in mind that in the fourth quarter. We had a issue. They are non equity bonuses and share units. So you get a little bit of a from a bump there.
Okay and year over year as a percent of sale they were off when I think about 200 basis points.
Yeah, and the run rate for <unk>.
Yeah. The run rate for Q1, I would expect you know in terms of our historical percentages and we.
We had done some cost saving measures back and Q3 of low.
Last year and be mindful of the level of business, yeah, we'd expect to try to hold our historical relationship there.
Okay got it thanks, I'll get back in queue.
Our next question comes from Chris Quilty from Quilty analytics.
Your line and you guys just.
Thanks, guys just wanted to follow up I think in the the guidance you provided it.
So you expect the Earth station business to be flat and 21 is that correct and can you talk about what trends you're seeing there either by and.
And market demand or trends in your specific product line, where you're seeing you know either uptake or slowdown by product or technology.
Oh, you know look on the international market and we're seeing you could call and sluggishness and you know if you will I mean, we certainly seen and experienced order delays on on what I would categorize as these small orders you know and in terms of their vertical markets that we participated I mean the cash.
His line market for US is you know dead in the water to use that phrase were not we don't see any activity there, but on the other hand and despite despite you know on our categorization of a flat I can tell you that there are a number of large multimillion dollar opportunities that we are working and the satellite ground.
Station business that you know I don't want to use the word transformational but did you know that.
Yes.
Multimillion dollar contracts that have we.
We believe that we have a good shot.
Winning either the whole contract or a portion of those contracts and we don't want to talk too much about that from a competitive perspective on which ones. There are but there are multiple contracts of multiple opportunities that exist in the marketplace and so we're seeing extensive activity there and a lot of interest in on.
Products.
And on some of these low.
We are on broadband related projects.
Yeah.
And are there anything outside of that where you're seeing you know.
Major customer upgrades due to technology refresh or or other issues on the supply side in terms of.
Satellite capacity with new very high throughput satellites coming on line.
Yeah. The short answer is yes, although the sales and although the sales cycle.
You know, we've always talked about it being long and its probably longer now because of gold and you know the Q on Q1.
On a quarter, which I think I mentioned at least a million dollar order we called out we're seeing good activity on our ice products are still so it's pretty broad based but you know on the smaller side. You know we're seeing you know we are seeing a slowdown and slow a smaller orders that we see but on the other and the bigger customers are pretty active and.
And we'll see how the year plays out, but it's it's sluggishness, you know and and it Scott's its fits and fits and stops if you will it starts and starts and stops and we haven't really seen consistency, yet and order flow to say that it's going to you know.
Jump up and start to increase and and sales like it was about a year ago. It was probably a little bit more time needs to work its way through.
Great and shifting to the government outlook per.
Assumably your forecast assumes that.
We get something beyond a a short term budget that gets put in place and in the next couple of months and were not stuck and another sequester for some period of time.
Or or other budget morass.
There's a question yeah, I mean, I I mean look we got pretty pretty healthy backlog, you know and our government segment took on a hold us through what would we obviously will see a change and administration, but you know I think the budget will be the budget, we'll get our fair share and we'll see how it plays out but.
You know, we're not we're not really nervous about it but I think you know they just passed a something to yesterday and the day before in terms of some some budget compromise or whatever and I can't I can't speak specifically because it just happened I haven't had a chance to digest it but we're not we're not concerned internally about what what happens with the actions.
The budget, we have like I said good good backlog, we know the opportunities that we're working on for the rest of the year and and we feel pretty good about the programs that we're participating on.
Got you and I think you did mention you've experienced some delays in building the equipment and I've I've heard you know sporadic reports from other companies around that same issue.
Is it your sense that it's getting better or worse have you worked through you know the COVID-19ien type procedures in order to be more effective at deploying with government customers.
Or is the biggest issue governor.
Government policy in terms of what they allow to happen in terms of deployments.
It's a little bit of both <unk> I would characterize it as not getting better and but it's not getting worse. You know so I think it's something that we've been dealing with for the last few months and ER.
I guess, our hope is with the vaccines coming to the marketplace. So we'll continue to see.
See a rebound and that stuff and the orders that were delayed or not placed will will come through the channel.
Okay and final question on the 911 business Congrats on the Big win I think you had implied that there may be more than one of those that you think are a possibility this year.
Well, we had two large opportunities that we talked about and we know we we've we definitively have on very large opportunity, but yeah. You are right. There are there are other nine on what opportunities, we haven't really alluded oriented to them, but there are out there and I can't say, whether or not the second opportunity would come and this film.
School year, but there are other opportunities on the loans that were talking about and that stirrings things progress through the sales channel or opportunity. Obviously, we're going to be mindful of the competition and we're not going to talk too much about them, but no on when we say we feel pretty comfortable were going to win we feel pretty comfortable were going away and and that one on the right.
Opportunity, we feel pretty good about.
Great and the funding environment.
You know the cares Act I'm sure provided some money, but have you had a chance.
To see I can't imagine what's in the next package, that's coming through and whether that would be supportive of some of these government spending programs because obviously a lot of the states and municipalities are way down on tax revenue.
Well I think well I think as it relates to the U.S. market no impact to us I'm on the other and Chris we have seen the in particularly on Canadian government recently launched some some funding out there specifically on the satellite to one of our favorite customers. That's based on Canada. So we you know.
We we feel were going to get some orders from from there and.
And we think all are international governments are going to start funding the infrastructure and since day, you satellite as a form and communication infrastructure, we think will benefit from them, but those things need to happen, but we've only seen one instance of the very specific impact to US day, we haven't received the orders yet but were pretty optimistic based on the funding that will go on.
Very good thank you gentlemen.
Our next question comes from Asia, and merchant from Citigroup. Your line is open.
Hi, Thank you gentlemen, and congratulations on a good quarter, you know just and you guys sound pretty optimistic there.
There is obviously the macro to consider but maybe Mike referred to gross margin could be closer to 37% and EBITDA adjusted EBITDA margin paying here around 12.
Per cent, the mid point, which is lower than that and you know what I should say relative to where you guys were last year and and can you walk on system.
And take to that and and I also have a follow up question on cash flow. How should we think about you know cash flow per day here, knowing that the first quarter with RBC and large payment out and.
And gilad. Thank you.
Hi, sorry, this is Mike so.
So in terms of your first question you know in terms of the guide for the midpoint for the year. Yeah. We're trying to be mindful of what's you know and the news and as Mike referred to some delays and I was referring to some disruptions here and there. It was just wanted to be mindful of that when thinking about the full year for EBITDA, but you know and.
Terms of gross margins themselves.
We have some very large lumpy government orders that we had no and were timed for the fiscal 2021 period. So as those clear out that will obviously affect the gross profit margins in the quarter, but yeah. We had thought you know for Q1, we were going to be around 35%. We ended up doing like 37%. So you know.
As we work through these you know deliveries, it's going to be in that range.
And in terms of cash flows from operations for the year.
For the remainder of the year, we do expect to see significant positive cash flows.
And in terms of free cash flow itself, yes, as Mike mentioned, we had won the Commonwealth and Pennsylvania contract and we also recently as a reminder, won the state of South Carolina contracts and there.
When you think about free cash flows.
We'll probably see an uptick from our historical levels of Capex.
To support the deployments are those very large programs.
Again, if you would like to ask a question. Please press star and one on your Touchtone phone.
Now on the question from Kyle Mcnally from Jefferies. Your line is open.
Hi, Thanks, a lot for the question I wanted to ask if you could tell us or the revenue in the quarter for satellite ground station products and a with a year over year growth was for that product critical.
Yes, Hi, how are you.
We just we generally as you know we don't breakout on product line for our segments book, We have made comments in the past that you know that business line as a whole is probably about 50% or so plus or minus so that's the way I would tell you to think about it but obviously for competitive reasons.
I just don't want to put a number on there.
Okay can you give us any kind of sense for their growth rate year over year, it's kind of a yardstick or a range of growth rate.
Just trying to get it right.
<unk>.
Right.
Sure well I think from for for the year looking at the year and being mindful of the fact that we're not going to have the 18 89, one on routing services in our.
And our commercial segment, you can think about it being similar or relatively flat. It's in aggregate for both the public safety business and our commercial segment, but you know, it's it's a plus or minus on each of the segments. A few million dollars could change that relationship. So if you want to talk big picture and that's the way I would tell you to think about it.
Okay, and you know going forward do you kind of expect now that you're past the bulk of the Cove and impact and the satellite ground station business do you expect it to be a slow grind recovery or is there potential for snap back on a previous previously said that you know the biggest impact is coming from the fact that you can't do face to face meetings and.
And go to trade shows and things like that you know once you can do a little more of that or you get the benefit of doing a virtual and meetings could there be a snap back or do you think it's going to take some time.
Well, we we were thinking its going to be a slow grind for the rest of the year bought these large opportunities that I mentioned earlier in the conference call and and there's more than one they relate to the Leo market and and the meal market and in fact, the the geo market as well so there is.
There's we do I don't want to use the word game changer, but it's these are really large contracts and and it's possible that we will get awarded them. This year.
They are not really in our revenue guidance on our EBITDA thinking because we're you know we're being mindful of how long and binary some of these program awards could could be but day.
Those are the ones that were really jettisoned on our business on a on an upward trajectory and it would not just be for one quarter. It would be you know a multiyear type of a situation, but the regular business that we're seeing now yeah, sluggish and and that's the way we see it you know well, let's see how people get the vaccines, let's see help you.
Well good on planes, let's see.
Our money is being spent it's and we don't subscribe to the belief that things are going to turn over night, but maybe it won't be wrong and things will come back faster, but we're thinking it's going to be sluggish.
And and in the longer term do you think the underlying growth rate in that market and it has changed at all versus pre Cove. It or you know once you know.
I never mind, and how long the recovery takes but once yeah, we kind of get the escape velocity do you think it's the same you know growth rate versus pre covered or is there any kind of long term lasting impact it from covered that kind of weighs on on the growth rate for satellite Earth station.
You know there is a possibility and our thinking that it could possibly have increased the long term demand for the product in on and we say that version and surely because theres not what's been happening is right people have been using video across the world and using up there and capacity and many states and countries.
Have banned the upgrades right now right you can't go out to the field. They don't want don't want anybody doing any upgrades on the system. So people or increased capacity. So if people are going to work from home or from their offices remotely and do less traveling that's going to result in an increased need to communicate video over satellite and and it's going to result in and.
Increased need tobacco video and mobile communications on the cellular network. So you can make a really strong compelling argument as I am that is going to actually result, and an increase in demand and the long term and a faster growth rate and maybe what we would have thought you know nine months ago, but we're not there yet at the peak to see it but.
Time will tell what will happen, but it certainly didn't result in a negative change and our view.
And in fact, some of these large big programs that we're talking about.
On the Cold and crisis has shown is the bigger the company you are the year, so you're a survivor and these leos and Joe's are being supported by very large companies and the marketplace and.
We think those programs are going to happen.
Okay, Great. That's helpful and one last one on the Tropo scatter contract with the Marines or do you have any more visibility into level of services that you might provide within that contract and know that previously you had said that its not certain yet and it may you know you may deliver 30% to 50% of the total contract.
Value, but it's really dependent on how much the prime CAC contractor you know either allocates you to you or asks you to do is there any more visibility now that we're a couple of quarters.
You know past when and when the contract was awarded.
Yeah, there's really been no change in our thinking on that program, we need to kind of do the initial deliveries and get them out there and.
There is opportunities for us to get design changes within the program with the and customer and as well as the our prime but and nothing really to talk about yet.
Okay, all right great. Thanks, a lot.
At this time there are no further questions I will now turn pro.
And back over to our presenters for closing remarks.
Actually I do have one more question and just.
We will take our next question.
Yes.
Hi. This is on just the on behalf of from Mike Latimore could you hear me.
Yes, yes, you just from.
Alright and.
Hi, good seem to you and others.
Do you face city supply chain difficulties due to the global situation.
Well, we have seen some minor supply chain issues nothing that we would categorize as material, but we certainly have seen them and we know we deal with them and they've caused some order delays and obviously some incremental expenses, but nothing that I would describe as material.
All right on it and do you foresee a lot more hirings and the next few quarters.
Well, if we win some of these big contracts, Yeah, [laughter] I'm sure, but hey.
Hey, we're always looking for a great people to work for Comtech Engineers software developers production people accounts. If you are a good person they want to come to work for a contact give us a range.
[laughter] fine fine all right. That's it that's it from me Thank you and bus.
Okay now at this time, we do not have any further questions I will now turn the program back over to our presenters for final closing remarks.
Okay. Yeah, I guess, that's the end of today's call. Thank you again for joining us today, and we look forward to speak with you again, thank you very much.
Yes.
This does conclude todays program. Thank you for your participation you may disconnect at anytime.
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