Q4 2023 Comtech Telecommunications Corporation Earnings Call

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[music] stand by your program is about to begin.

Speaker 1: Please stand by. Your program is about to begin.

Speaker 1: Welcome to Comtech's Fiscal Q4 2023 Earnings Conference Call. As a reminder, this conference is being recorded today, Thursday, October 12, 2023.

Welcome to Comtech fiscal Q4, 'twenty twenty-three earnings conference call.

As a reminder, this conference is being recorded today Thursday October 12 2023.

Speaker 1: I would now like to turn the conference over to Mr. Robert Samuels of Comtech.

I would now like to turn the conference over to Mr. Robert Samuels of Com check. Please go ahead Sir.

Speaker 2: Thanks operator. Good afternoon everyone and thanks for taking the time to dial in today. I'm Rob Samuels, Comtech's Head of Investor Relations. Welcome to the Comtech Telecommunication Corps conference call for the fourth quarter fiscal year 2023.

Thanks, operator.

Good afternoon, everyone and thanks for taking the time to dial in today.

Rob Samuels complex head of Investor Relations welcome to the Comtech Telecommunication Corp's conference call for the fourth quarter fiscal year 2023.

Speaker 2: Today, I'm here with Comtech Chairman, President, and Chief Executive Officer, Ken Peterman. We're also joined by Mike Bondi, our CFO .

Today, I'm here with contact Chairman, President and Chief Executive Officer, Ken Peterman.

Also joined by Mike Bondi, our CFO .

Speaker 2: Before we get started today, I'll say that both myself and Ken are always available to answer questions our investors may have. So please get in touch if you want to organize a meeting to talk about the company, our results, or our strategy.

Before we get started today I will say that both myself and Ken are always available to answer questions. Our investors may have so please get in touch if you want to organize the meeting to talk about the company our results or our strategy.

Speaker 2: We also have a detailed discussion of 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 between quarters in our blog, Comtech Signals.

We also have a detailed discussion of the quarter in our shareholder letter available on our website and we have also been working to communicate directly about our business in that market between quarters and our blog contact signals.

Speaker 2: Finally, let me remind you of the company's safe harbor language. 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.

Finally, let me remind you of the company's Safe Harbor language 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.

Speaker 2: 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? Thank you, Rob.

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 Companys SEC filings now I'm pleased to introduce the President and Chief Executive Officer of Comtech 10, P M and Ken.

Thank you Rob.

Hello, everyone. Thanks for joining us today.

Speaker 3: This call and this quarter represent a significant inflection point for Comtech. It not only marks the close of our FY 2023 fiscal year, but also demonstrates the success and substantial positive momentum we are seeing as a result of our one-context transformation.

This call and this quarter represent a significant inflection point for Comtech did not only marks the close of our FY 2023 fiscal year, but also demonstrates the success and substantial positive momentum we are seeing as a result of our one context transformation.

Speaker 3: In fiscal 2023, we brought 14 historically siloed businesses together and successfully instituted common practices, tools and processes across our new unified enterprise. We implemented our first ever company.

Fiscal 2023, we brought 14, historically siloed businesses, together and successfully instituted common practices tools and processes across our new unified enterprise.

We implemented our first ever comprehensive people strategy. We established evoke are innovation foundry and brought on strategic partners, who are continuing to work with us to develop and deliver new comprehensive solutions aligned with our vision for smart networks and unique technology convergence is to provide our global customers with new.

Speaker 3: We established Evoke, our innovation foundry, and brought on strategic partners who are continuing to work with us to develop and deliver new 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 technology landscapes across the globe.

Forms of connectivity insights and actionable intelligence that have the potential to fundamentally transform technology landscapes across the globe.

Speaker 3: As I shared during our investor day in June , our customers need more than a vendor. They need a technology partner. One who listens and solves the challenges they are facing every day with the foresight to simultaneously position proactively to address the challenges that are looming on their horizon.

As I shared during our Investor day in June our customers need more than a vendor they need a technology partner, one who listens and solves the challenges they're facing every day with the foresight to simultaneously positioned proactively to address the challenges that are looming on the horizon.

Speaker 3: Over the past 12 months, we streamlined our business to better align with emerging market convergences and technology trajectories, which as you've seen over the past few months alone is driving hundreds of millions of dollars in new business opportunities for Comte.

Over the past 12 months, we've streamlined our business to better align with the emerging market Convergences and technology trajectories, which as you've seen over the past few months alone is driving hundreds of millions of dollars in new business opportunities for Comtech a.

Speaker 3: Our global customers, ranging from the Department of Defense and Emergency Service providers to commercial mobile network operators and new satellite service providers. They continue to place their trust in contact. And these customers are also recognizing that tremendous value our solutions can deliver to address their toughest challenges.

Our global customers ranging from the department of Defense and emergency service providers to commercial mobile network operators and new satellite service providers. They continue to place their trust in Comtech and these customers are also recognizing the tremendous value our solutions can deliver to address their toughest challenges.

Speaker 3: This year we moved proactively, thoughtfully and quickly, as a unified enterprise to effectively respond to the increasing pace of change in our end markets. To build on our existing products and bring forward new technologies that underpin modern communications and to deliver the kinds of solutions and services our customers really need for us.

This year, we moved proactively thoughtfully and quickly as a unified enterprise to effectively respond to the increasing pace of change in our end markets to build on our existing products and bring forward new technologies that underpin modern communications and to deliver the kinds of solutions and services, our customers really need from us.

Speaker 3: Based on our accomplishments in fiscal 2023, I believe we have excelled at overcoming the challenges posed by that kind of transformational change. Our progress is reflected in both our financial performance and our positioning within the market for growth next year and beyond.

Based on our accomplishments in fiscal 2023, I believe we have excelled at overcoming the challenges posed by that kind of transformational change our progress is reflected in both our financial performance and our positioning within the market for growth next year and beyond.

Speaker 3: Since the start of our one-comptet journey, we have focused on delivering exceptional results for cuts.

Since the start of our one contact journey, we are focused on delivering exceptional results for customers today through our renewed and unified customer centric approach. We are leveraging our culture of innovation differentiated expertise technology leadership and unique understanding of our customers' needs to position contact to lead the way in delivering that.

Speaker 3: Today, through our renewed and unified customer-centric approach, we are leveraging our culture of innovation, differentiated expertise, technology leadership, and unique understanding of our customers' needs, the position-comptek 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 empower a truly connected planet.

Blended hybrid smart enabled solutions and services that will bring forward smart networks and new technology convergence is that can empower a truly connected planet.

Speaker 3: As we have pursued these strategic goals over the past fiscal year, we have remained focused on the crucial daily work of improving our operations, balance sheet, and financial performance. We've made difficult decisions where necessary to empower our teams on the front line with both the resources they require and the authorities to address our customers needs. Importantly, we're seeing the results of these efforts every single day.

As we have pursued these strategic goals over the past fiscal year. We have remained focused on the crucial daily work of improving our operations balance sheet and financial performance. We've made difficult decisions were necessary to empower our teams on the front line with both the resources they require in the authorities to address our customers' needs.

Importantly, we're seeing the results of these efforts every single day.

Speaker 3: Our teams are empowered to develop new business capture strategies that align with and address our customers most difficult challenges. And we're winning large and strategically important contracts that accentuate our technology and thought leaders.

Our teams are empowered to develop new business capture strategies that align with and address our customers' most difficult challenges and we're winning large and strategically important contracts that accentuate our technology and thought leadership we.

Speaker 3: We are still providing the products and services that ComTEG is known for, and our customers are seeing that we can now be relied upon to bring even more comprehensive value, solve their toughest challenges, and apply technology in innovative ways that truly change the game. The updated technology in our next generation triple-scatter family of systems is a great example, which I'll talk more in depth about in just a few minutes.

We are still providing the products and services. The comtech is known for and our customers are seeing that we can now be relied upon to bring even more comprehensive value solve their toughest challenges and apply technology in innovative ways that truly changed the game the updated technology in our next generation Triple scatter family of systems is a great example, which I'll talk more in depth about.

And just a few minutes.

Speaker 3: Our relentless attention to performance improvement has not only expanded adjusted EBITDA margins sequentially every quarter of this fiscal year, but also has given us the space we needed to address strategic questions about the composition of our portfolio and the strength of our balance.

Our relentless attention to performance improvement has not only expanded adjusted EBITDA margins sequentially every quarter. This fiscal year, but also has given us the space we needed to address strategic questions about the composition of our portfolio and the strength of our balance sheet.

Speaker 3: importantly, following a careful review of our current business and product lines and considering the kind of software defined and solution-based enterprise our customers need us to be in the future. We identified opportunities to rebalance our segments and ultimately choose to divest our solid state power amplifier product.

Importantly, following a careful review of our current business and product lines and considering the kind of software defined and solution based enterprise our customers need us to be in the future we identified opportunities to rebalance our segments and ultimately choose to divest our solid state power amplifier product line.

Speaker 3: Upon completing this transaction in the short term, we anticipate using some or all of the net proceeds from this divesture, the meaningfully reduced our outstanding debt, leverage ratio and interest pain.

Upon completing this transaction in the short term, we anticipate using some or all of the net proceeds from this divestiture to meaningfully reduce our outstanding debt leverage ratio and interest payments.

Speaker 3: We're also simultaneously addressing the need to refinance our credit facility, which expires in October 2024. This process is moving forward and we believe we're headed toward a solution. We have engaged in productive discussions with various potential sources of capital, including our existing preferred shareholders regarding alternative investment structures.

We're also simultaneously addressing the need to refinance our credit facility, which expires in October 2020 for this process is moving forward and we believe we're headed toward a solution. We are engaged in productive discussions with various potential sources of capital, including our existing preferred shareholders regarding alternative investment structures were.

Speaker 3: We are also in discussions with our existing lenders regarding a short term amendment and extension of our credit facility if needed in the interim while we move toward completion of a longer term solution.

Also in discussions with our existing lenders regarding a short term amendment and extension of our credit facility if needed in the interim while we moved towards completion of a longer term solution.

Speaker 3: We anticipate having more to share prior to announcing our first quarter fiscal 2024 result.

We anticipate having more to share prior to announcing our first quarter fiscal 2024 results.

Speaker 3: Overall, I am pleased with the significant progress being made with respect to strengthening our balance sheet. Such efforts combined with optimizing our cost structure and improving business operations provide a solid foundation as we look ahead to our ongoing transformation in fiscal 2024.

Overall I am pleased with the significant progress being made with respect to strengthening our balance sheet.

Such efforts combined with optimizing our cost structure and improving business operations provide a solid foundation as we look ahead to our ongoing transformation in fiscal 2024.

Speaker 3: Let me emphasize that the initiatives we have launched and the actions we are taking are 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.

Let me emphasize that the initiatives, we have launched and the actions we are taking are 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 increased cross collaboration and optimize business execution across the entire organization.

Speaker 3: Meanwhile, as I shared moments ago, focusing on the differentiated expertise and the diversity of perspective of our people, collaborating with our customers like never before, and leveraging our unique culture of innovation and technology leadership is resulting in our winning significance, strategic new business, and strengthening our core market positions, and enabling us to expand into new market adjacencies in ways that validate that our one-comptech transformation is truly worth.

Meanwhile, as I shared moments ago, focusing on the differentiated expertise and the diversity of perspective of our people collaborating with our customers like never before and leveraging our unique culture of innovation and technology leadership is resulting in our winning significant strategic new business and strengthening our core market positions and enabling us to expand.

It's a new market adjacencies and ways that validates that our one top tech transformation is truly working.

Speaker 3: Simply put, we're securing significant strategic enduring wins. And I think there's more coming. But for now, let me highlight a few.

Simply put we're securing significant strategic enduring wins and I think there's more coming but for now let me highlight a few.

Speaker 3: The award of the Global Field Service Representative Contract from the US Army with an expected value of $544 million.

The award of the Global Field service representative contract from the U S Army with an expected value of $544 million.

Speaker 3: the award of the enterprise digital intermediate frequency multi-carrier or edam modem contract from the u.s. army for four hundred eighty six for forty eight point six million plus what we believe could be full rate production potential of over a billion dollars based on the u.s. government's prior fielding of the legacy e-bem modem

The award of the enterprise digital intermediate frequency multi carrier or eat them modem contract from the U S. Army for 486 for $48 6 million plus what we believe could be full rate production potential of over $1 billion based on the U S. Government's prior fielding of the legacy E them none of them.

Speaker 3: and award from the US Army for our next generation triple scatter systems with an initial contract value of $30 million.

And award from the U S Army for a next generation Triple scatter systems with an initial contract value of $30 million.

Speaker 3: Building upon our March 2020 contract award, the design, deploy, and operate a next generation 911 system for the state of Ohio, $21 million of initial funding on this contract that we believe could be worth approximately $85 million over its lifespan.

Building upon our March 2020 contract award to design deploy and operate our next generation 911 system for the state of Ohio $21 million of initial funding on this contract that we believe could be worth approximately $85 million over its lifespan.

Speaker 3: being named one of multiple awardees on a defense logistics agency or d.l.a. gateway to sustainment indefinite delivery and indefinite quantity multiple award contract with the ceiling value of 3.2 billion

And.

Being named one of multiple Awardees on a defense logistics agency or DLA gateway to Sustainment indefinite delivery indefinite quantity multiple award contract with a ceiling value of $3 2 billion.

Speaker 3: These are very significant wins. They're a direct result of our business optimization initiatives, our improved enterprise wide synergy and collaboration, our improving business processes discipline, and the focus on our strategic growth priorities.

These are very significant wins are a direct result of our business optimization initiatives, our improved enterprise wide synergy and collaboration are improving business processes discipline and the focus on our strategic growth priorities.

Speaker 3: These winds also validate our progress to becoming one contact, an industry leader in technology, innovation, and listening to our customers to create the solutions they most value.

These wins also validate our progress toward becoming one context, an industry leader in technology innovation and listening to our customers to create the solutions they most value.

Speaker 3: Through our GFFR Award with an expected value of $544 million, we have been selected to provide critical ongoing communications and IT infrastructure support for the Army, Air Force, Navy, Marine Corps, and NATO. Enabling U.S. and coalition forces to maintain robust resilient and secure connectivity of a global all-domain operation.

Through our GFS Our award.

With an expected value of $544 million, we have been selected to provide critical ongoing communications and infrastructure support for the Army Air Force Navy Marine Corps, and NATO, enabling U S and coalition forces to maintain maintained robust resilient and secure connectivity for global all domain operations.

Speaker 3: Comtext Professional Engineering Services, our innovation and our extensive portfolio of blended software defined smart and able technologies were critical to our success in winning this business, which will help the DOD and coalition partners maintain information advantage in virtually any environment.

Text professional engineering surfaces, our innovation and our extensive portfolio of blended software defined smart enabled technologies were critical to our success in winning this business, which will help the Dod and coalition partners maintain information advantage in virtually any environment.

Speaker 3: Well, currently under protest by the former incumbent, we believe such protests will be resolved in our favor and we expect the contract to meaningfully contribute to our second half of this from 2024 and beyond.

While currently under protest by the former incumbents, we believe such protests will be resolved in our favor and we expect the contract to meaningfully contribute to our second half of fiscal 2024 and beyond.

Speaker 3: Separately, we awarded a $48.6 million contract by the United States Army to deliver, design and deliver new Eden modems that support US-DOD satellite communications, digitization and modernization program.

Separately, we are awarded a $48 $6 million contract by the United States Army to deliver design and deliver new EDA modems that support U S. Dod satellite communications Digitization and modernization programs Comtech.

Speaker 3: Compact will design, develop, test and deliver, item modems and provide hardware, software and sustainment services to support performance enhancements for item solutions over time. Our item modems are designed to support unique US Army and Tri-Service requirements, meaning they can also be used for other branches of the Department of Defense, looking to leverage next generation SAP ComCatability.

Contact will design develop test and deliver eat them modems and provide hardware software and Sustainment services to support performance enhancements for EDAM solutions overtime. Our Eaton modems are designed to support unique U S Army and Tri service requirements, meaning they can also be used for other branches of the department of defense looking to leverage next generation Z.

<unk> com capabilities.

Speaker 3: Contest even modems are expected to replace the enhanced bandwidth efficient modem or e-bem, currently supporting Army Navy and Air Force SADCOM users, and it will replace it with an advanced digital and software defined plan.

Context modems are expected to replace the enhanced bandwidth deficient modem or EBIT currently supporting Army Navy and Air Force Satcom users and it'll replacement with an advanced digital and software defined platform.

Speaker 3: There are currently tens of thousands of these legacy e-bem modems fielded today, and we expect to see replaced as part of this and related efforts. And we feel that the transition to digital fat-com architectures offers a meaningful advantage that will encourage our customers to expand e-bem adoption well beyond the current e-bem foot.

There are currently tens of thousands of these legacy E. M modems fielded today and we expect to see replaced as part of this and related efforts and we feel that the transition to digital Satcom architectures offers a meaningful advantage that will encourage our customers to expand eat them adoption well beyond the current EBIT footprint.

Speaker 3: We believe the item ward also means that context modems are at the heart. The Department of Defense has moved to digitized hybrid satellite network services in Stockholm.

We believe this eat them Ward also means that context modems are at the heart of the Department of Defense has moved to digitized hybrid satellite network architectures and it puts us in an advantaged competitive position as D O D and coalition forces communications capabilities are upgraded and modernized.

Speaker 3: and it puts us in an advanced competitive position as DOD and Coalition Force communications capabilities are upgraded and modernized.

Speaker 3: In July , we announced that our market-leading next-generation Kroposkatter systems were selected by the US Army to support tattooed communications and modernization needs. In a contract award worth $30 million.

Okay.

In July we announced that our market leading next generation Triple scatter systems were selected by the U S Army to support tactical communications and modernization needs and the contract award worth $30 million.

Speaker 3: Here again, our commitment to innovation and technology leadership drove our success. We believe that our next generation, software-defined triple-scatter family of systems represent up to a thousand-fold performance improvement over prior generations. And with the most trooper-scatter systems deployed in the world today, we have a clear market leader in a technology with a rapidly expanding set of defense and commercial global market applications.

Again, our commitment to innovation and technology leadership drove our success, we believe that our next generation software defined trouble scatter family of systems represent up to a 1000 fold performance improvement over prior generations and with the most troper scatter systems deployed in the world today, we are clear market leader in the technology with a rapidly expanding.

Defense and commercial global market applications.

Speaker 3: Let me take a minute to share just one example of the potential for expanded applications of our next generation troublesketter system.

Let me take a minute to share just one example of the potential for expanded applications of our next generation Triple scatter systems.

Speaker 3: Following broad scale natural disasters such as hurricanes, communications infrastructure is often heavily impact.

Following broad scale natural disasters, such as Hurricanes communications infrastructure is often heavily impacted.

Speaker 3: As Hurricane Ian, a category four storm, made landfall in Southwestern Florida in September 2022. The Federal Communications Commission noted close to 18% of cell sites in Florida were out of service with some counties seeing over 82% of cell sites out of service. This means millions of Floridians lost access to their cell phones, landlines, home internet, cable, or a combination of those, both during and in the aftermath of the storm. Not to mention access to 911 emergency life-saving service.

As hurricane in a category four storm made landfall in southwestern Florida in September 2020 to the Federal Communications Commission noted close to 18% of cell sites in Florida were out of service with some counties seeing over 82% of cell sites out of service. This means millions of Floridians lost access to their cell phones.

Lyons home Internet cable or a combination of those both during and in the aftermath of the storm not to mentioned access to 911 emergency life saving services.

Speaker 3: because of these outages emergency responders could not communicate with their residents in life-threatening situations.

Because of these outages emergency responders could not communicate with our residents in life threatening situations.

Speaker 3: Copa scatters unique in that it doesn't rely on the purchase of felick and past

No.

Copa scatter is unique in that it doesn't rely on the purchase of satellite capacity.

Speaker 3: and implement weather which can interfere with satellite and microwave signals doesn't have a negative impact on propyl scatter signals at all. In fact, bad weather actually enables propyl scatter to perform better.

And inclement weather, which can interfere with satellite and microwave signals doesn't have a negative impact on trouble scattered signals at all in fact bad weather actually enables trouble scatter to perform better.

Speaker 3: In natural disaster scenarios like Hurricane Ian, our next generation Troposkatter systems hold the potential to provide a new mechanism for states, emergency service providers, and global communities to sustain resilient and reliable communications infrastructures when it matters most.

Natural disaster scenarios like Hurricane in our next generation Turbo scatter systems hold the potential to provide a new mechanism for states emergency service providers and global communities to sustain resilient and reliable communications infrastructures when it matters most.

Speaker 3: This is just an application we're excited about and we see other potential commercial opportunities for our triple scatter systems as we continue to integrate and expand our capabilities within the portfolio.

This is just one application we're excited about and we see other potential commercial opportunities for our triple scatter systems as we continued to integrate and expand our capabilities within the portfolio.

Speaker 3: Finally, the US Army Triple Scatter win also validates our recently instituted capture and pricing process Process improvements and underpins the value of our cost reduction actions and improved program measurement discipline

Finally.

The U S Army Triple scatter win also validates our recently instituted capture and pricing process process improvements and underpins the value of our cost reduction actions and improved program management discipline.

Speaker 3: in July 2023. We were very excited to finally have received a long-awaited initial funding of $21 million under our next generation 911 contract with the State of Ohio.

In July 2023, we are very excited to finally have received a long awaited initial funding of $21 million under our next generation 911 contract with the state of Ohio.

Speaker 3: This contract originally awarded to us in March of 2020 has a total expected value of approximately $85 million. It has anticipated to start contributing meaningfully to our net sales in fiscal 2025 and beyond.

This contract originally awarded to US in March of 2020, as a total expected value of approximately $85 million and is anticipated to start contributing meaningfully to our net sales in fiscal 2025 and beyond.

Speaker 3: And finally, in April 2023, contact was selected as one of multiple awardees under the Defense Logistics Agency Gateway to Sustainment, in-definite delivery, in-definite quantity, multiple award contract with the ceiling value of $3.2 billion.

And finally in April 2023 contact was selected as one of multiple Awardees under the defense Logistics agency gateway to Sustainment indefinite delivery indefinite quantity multiple award contract with a ceiling value of $3 $2 billion. This award enables the U S Department of defense and other U S government customers purchase a wide <unk>.

Speaker 3: This award enables the U.S. Department of Defense and other U.S. government customers purchase a wide range of our capabilities and services in support of the Command, Control, Computers, Communications, Fiber, Intelligence, Surveillance and Reconnaissance or C5 ISR operations.

Range of our capabilities and services in support of the command control computers communication cyber intelligence surveillance and reconnaissance or <unk> ISR operations.

Speaker 3: Taking together we believe these significant strategic contracts demonstrate context steadily improving performance across every facet of our business. And we intend to continue winning more strategic and enduring contracts that validate our ability to continue uptearing our solutions and services to solve some of the toughest networking and communication challenges that we'll be facing today. As well as addressing the many challenges we anticipate in the future.

Taken together, we believe these significant strategic contracts demonstrate comtech steadily improving performance across every facet of our business and we intend to continue winning more strategic and enduring contracts that validate our ability to continue up tearing our solutions and services to solve some of the toughest networking and communications.

Challenges the world is facing today.

As well as addressing the main challenges we anticipate in the future.

Speaker 3: The changes my leadership team has implemented, Comptech, over the 2023 fiscal year, are creating significant competitive advantage for us. Today we're competing on the value we are delivering to our customers in a currency they understand. These recent contracts, I believe, represent only the beginnings of new customer engagements and it is clear we are establishing valuable, long-term partnerships that we intend to continue to expand upon as we look to the future.

The change is my leadership team has implemented comtech over the 2023 fiscal year are creating significant competitive advantage for us today, we're competing on the value we are delivering to our customers and a currency they understand.

These recent contracts I believe represent only the beginnings of new customer engagements and it is clear we are establishing a valuable long term partnerships that we intend to continue to expand upon as we look to the future.

Speaker 3: For our shareholders, it means that ComTEX investments in optimizing operational performance, improving process discipline, and applying technology innovation are delivering revenues that create value today. Before I turn to Mike to talk about our results in detail, let me make one last observation about this quarter's financial performance.

For our shareholders. It means the comtex investments and optimizing operational performance improving process discipline and applying technology innovation are delivering revenues to create value today.

Before I turn to Mike to talk about our results in detail, let me make one last observation about this quarter's financial performance.

Speaker 3: When I first started at CEO a year or so ago, it was clear the maintaining the status quo was not enough.

When I first started as CEO , a year or so ago. It was clear to maintaining the status quo is not an option.

Speaker 3: Jonas was on Com Tech and his leadership to regain the confidence of our investors and the only way to do that was through accelerating the decisive and total transformation of the organization.

<unk> was on Comtech and leadership to regain the confidence of our investors and the only way to do that was through accelerating a decisive and total transformation of the organization.

Speaker 3: For our investors, this transformation is already translating into improved financial performance.

For our investors. This transformation is already translating into improved financial performance.

Speaker 3: I want to be sure to highlight the following as a clear indication we're on the right path. Over the course of the past four quarters, the work we've done at Comtec has resulted in our consolidated net sales, increasing sequentially every quarter of the fiscal year. Adjusted EBIT down margins have also increased sequentially every quarter of the fiscal year.

I wanted to be sure to highlight the following as a clear indication that we're on the right path over the course of the past four quarters. The work we've done at Comtech has resulted in our consolidated net sales increasing sequentially every quarter of the fiscal year.

Our adjusted EBITDA margins have also increased sequentially every quarter of the fiscal year.

Speaker 3: Structurally, Com Tech has undergone a series of thoughtful strategic changes that are beginning to manifest in margin improvement and growth.

Structurally comtech has undergone a series of thoughtful strategic changes that are beginning to manifest in margin improvement and growth.

Speaker 3: These encompass all aspects of our business, from identifying redundancies within the organization, to supply chain management, and implementing key performance indicators to ensure we're meeting our customer commitments, all of which I've spoken about over the past three quarters, and we delved into much deeper during our investor day in June .

These encompass all aspects of our business from identifying redundancies within the organization to supply chain management and implementing key performance indicators to ensure we're meeting our customer commitments all of which I've spoken about over the past three quarters and we delved into much deeper during our Investor day in June .

Speaker 3: During our investor day, both Maria Heden, our COO, and Mike Bondi, our CFO , detailed multiple initiatives that we are implementing to drive operational efficiencies wherever we can.

During our Investor day, both Maria hidden our COO and Mike Bondi, our CFO detailed multiple initiatives that we are implementing to drive operational efficiencies wherever we can.

Speaker 3: For those of you that may have missed investor day, you can find the full presentation and video on the investor page of our web.

For those of you that may have missed Investor day, you can find the full presentation in video on the Investor page of our website.

Speaker 3: And we noted that not only did we identify opportunities ahead of us that would benefit our top line, we believe we can achieve annual double digit sales growth over time, with significant opportunities to simultaneously drive enduring margin.

And we noted that not only do we identify opportunities ahead of us that would benefit our top line. We believe we can achieve annual double digit sales growth over time with significant opportunities to simultaneously drive enduring margin improvement.

Speaker 3: We have confident that while sales will grow, our margins will grow faster. Now let me turn to Mike to talk about our results in detail. Mike?

We are confident that while sales will grow margins will grow faster now, let me turn to Mike to talk about our results in detail Mike.

Speaker 3: Thanks Ken. For Q4 fiscal 2023, we recorded $148.8 million of consolidated net sales of which 94.2 million were reported in our satellite and space communications segment. And 54.6 million were reported in our terrestrial and wireless network segment.

Thanks, Ken for Q4 fiscal 2023, we recorded $148 $8 million of consolidated net sales of which $94 $2 million were reported in our satellite and space Communications segment, and 54.6 million were reported in our terrestrial and wireless networks segment.

Operator: Please stand by. Your program is about to begin. Welcome to Comtech's fiscal Q4 2023 Earnings Conference Call. As a reminder, this conference is being recorded today, Thursday, October 12, 2023. I would request of Comtech.

Speaker 3: Consolidated fourth quarter sales represented a 9.2% increase over last quarter and our seventh consecutive quarterly increase.

Consolidated fourth quarter sales represented a nine 2% increase over last quarter and our seventh consecutive quarterly increase.

Speaker 3: Compared to the year ago quarter, our consolidated Q4 fiscal 2022 net sales increased 21.8 million or 17.2% reflecting higher net sales in both of our segments.

Paired to the year ago quarter, our consolidated Q4 fiscal 2022, net sales increased $21 8 million or 17, 2%, reflecting higher net sales in both of our segments.

Operator: Please go ahead, sir. Thanks, operator.

Speaker 3: Consolidated net sales for fiscal 2023 were $550 million, of which $337.8 million were related to our satellite and space communications segment, and $212.2 million were reported in our terrestrial and wireless network segment.

Consolidated net sales for fiscal 2023 were $550 million of which $337 8 million were related to our satellite and space Communications segment and $212 2 million.

Rob Samuels: Good afternoon, everyone, and thanks for taking the time to dial in today. I'm Rob Samuels, Comtech's Head of Investor Relations. Welcome to the Comtech Telecommunication Corp Conference Call for the fourth quarter fiscal year 2023. Today, I'm here with Comtech Chairman, President and Chief Executive Officer, Ken Peterman. We're also joined by Mike Bondi, our CFL. Before we get started today, I'll say that both myself and Ken are always available to answer questions our investors may have.

Ported in our terrestrial and wireless networks segment.

Speaker 3: Consolidated gross margins for Q4 and the Fiscal Year 2023, where 32.7% and 33.5% respect.

Consolidated gross margins for Q4, and the fiscal year 2023 were 32, 7% and 33, 5% respectively.

Speaker 3: and 35.9% and 37% in the comparable periods of the prior year.

And 35, 9% and 37% in the comparable periods of the prior year.

Rob Samuels: So please get in touch if you want to organize a meeting to talk about the company, our results, or our strategy. We also have a detailed discussion of 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 between quarters in our blog, Comtech Signals. Finally, let me remind you of the company's safe harbor language. 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 plans, objectives and business outlook, and the plans, objectives and business outlook of the company's management.

Speaker 3: The 32.7% we achieved this past quarter reflects a sequential increase from the 31.7% reported in the third quarter of fiscal 2023.

The 32, 7% we achieved this past quarter reflects a sequential increase from the 31, 7% reported in the third quarter of fiscal 2023.

Speaker 3: Such changes reflect an increase in net sales in overall product mix changes, primarily driven by higher net sales of our Troposcatter and SACOM solutions to US government and international customers in our satellite and space communication segment, including performance on our next-generation Troposcatter terminals for the US Marine Corps and V-SAT equipment for the US Army.

Such changes reflect an increase in net sales and overall product mix changes, primarily driven by higher net sales of our troper scatter and satcom solutions to U S government and international customers and our satellite and space Communications segment <unk>.

Rob Samuels: 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.

Including performance on our next generation Triple scatter terminals for the U S Marine Corps and VSAT equipment for the U S Army.

Speaker 3: Operating income in Q4 fiscal 2023 was $1.1 million compared to an operating loss of 2.1 million in Q4 of fiscal 2022.

Operating income in Q4 fiscal 2023 was $1 1 million compared.

Compared to an operating loss of $2 1 million in Q4 of fiscal 2022.

Speaker 3: such operating income reflects higher net sales reported during the quarter, as well as the benefits from profit improvement and lean initiatives implemented during the second half of fiscal 2023.

Such operating income reflects higher net sales reported during the quarter as well as the benefits from profit improvement and lean initiatives implemented during the second half of fiscal 2023.

Speaker 3: This marks our first quarter of Gap operating income since Q4 of fiscal 2021.

Ken Peterman: Now I'm pleased to introduce the President and Chief Executive Officer of Comtech, Ken Peterman. Ken? Thank you, Rob. Hello, everyone. Thanks for joining us today.

This marks our first quarter of GAAP operating income since Q4 of fiscal 2021.

Speaker 3: And the more impressive part is that we achieved this all while still incurring incremental expenses associated with our one-contact transformation and restructuring activity.

And the more impressive part is that we achieved this all while still incurring incremental expenses associated with our one contact transformation and restructuring activities.

Ken Peterman: This call and this quarter represent a significant inflection point for Comtech. It not only marks the close of our FY 2023 fiscal year, but also demonstrates the success and substantial positive momentum we are seeing as a result of our one-comtech transformation. In fiscal 2023, we brought 14 historically siloed businesses together and successfully instituted common practices, tools and processes across our new unifying enterprise. We implemented our first ever comprehensive people strategy. We established evoke our innovation foundry and brought on strategic partners who are continuing to work with us to develop and deliver new 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 technology landscapes across the globe.

Speaker 3: We think it is important to take a quick second out to thank all of our customers, suppliers, and most importantly, employees who made this happen.

We think it is important to take a quick second out to thank all of our customers suppliers and most importantly employees who made this happen.

Speaker 3: As explained in more detail and reconciled in our Form 10K filed earlier today, we utilize a non-GAP measure that we refer to as adjusted EBITDA.

As explained in more detail and reconciled in our Form 10-K filed earlier today, we utilize a non-GAAP measure that we referred to as adjusted EBITDA.

Speaker 3: During Q4 fiscal 2023, adjusted EBITDA was $18.9 million, a 51.2% sequential increase from Q3 fiscal 2023.

During Q4 fiscal 2023, adjusted EBITDA was $18 9 million, a 51, 2% sequential increase from Q3 fiscal 2023.

Speaker 3: As a percentage of net sales adjusted EBITDA was 12.7% and improvement from the 9.2% we achieved in Q3 fiscal 2023.

As a percentage of net sales adjusted EBITDA was 12, 7% an improvement from the nine 2% we achieved in Q3 fiscal 2023.

Speaker 3: For the full year, adjusted EBITDA was 9.7% and increased from the 8.1% we achieved last year.

For the full year adjusted EBITDA was nine 7% an increase from the eight 1% we achieved last year.

Speaker 3: Adjusted EBITDAB margin in the more recent period reflects higher net sales and the benefit of our one-contact lean initiatives implemented in the second half of fiscal 2023. Well, I've said in part by a lower gross profit percentage due to shifts in the mix of solutions delivered in 2023.

Adjusted EBITDA margin in the more recent period reflects higher net sales and the benefit of our one comtech lean initiatives implemented in the second half of fiscal 2020, the rate offset in part by a lower gross profit percentage due to shifts in the mix of solutions delivered in 2023.

Ken Peterman: As I shared during our investor day in June, our customers need more than a vendor. They need a technology partner. One who listens and solves the challenges they are facing every day with the foresight to simultaneously position proactively to address the challenges that are looming on their rights. Over the past 12 months, we streamlined our business to better align with emerging market convergences and technology trajectories, which as you've seen over the past few months alone is driving hundreds of millions of dollars in new business opportunities for Comtech.

Speaker 3: Overall, our consolidated Q4 net sales and adjusted EBITDA were ahead of our guidance provided last quarter and were pleased to have well exceeded our targets, particularly in light of a macro environment that remains challenging and all while undergoing one of the most comprehensive transformations in this company's history.

Overall, our consolidated Q4 net sales and adjusted EBITDA were ahead of our guidance provided last quarter and we're pleased to have well exceeded our targets, particularly in light of a macro environment that remains challenging and all while undergoing one of the most comprehensive transformations in this company's history.

Ken Peterman: Our global customers, ranging from the Department of Defense and Emergency Service providers to commercial mobile network operators and new satellite service providers, they continue to place their trust in Comtech, and these customers are also recognizing the tremendous value our solutions can deliver to address their toughest challenges. This year we moved proactively, thoughtfully and quickly, as a unified enterprise to effectively respond to the increasing pace of change in our end markets, to build on our existing products and bring forward new technologies that underpin modern communications and to deliver the kinds of solutions and services our customers really need for us.

Speaker 3: despite these business conditions and resulting challenges. And although we anticipate some variability from time to time, as we move through all one contact transformational change.

Despite these business conditions, and resulting challenges and although we anticipate some variability from time to time as we move through our one contact transformational change.

Speaker 3: For our first quarter of fiscal 2024, we are targeting consolidated net sales to sequentially increase approximately 1% to 4% and for our consolidated adjusted EBITDA margin to range between 11% and 13%.

For our first quarter of fiscal 2024, we are targeting consolidated net sales to sequentially increase approximately 1% to 4% and for our consolidated adjusted EBITDA margin to range between 11% and 13%.

Speaker 3: Such targets reflect our assumptions regarding the timing of and performance on orders from the US Army for V-SAT equipment, as well as the timing of and our performance on how recently awarded $544 million of GFSR contract, which as Ken mentioned earlier, has been protested by the prior service provider. And while we expect a near-term close, such targets also do not assume any divestiture at this time due to the uncertain closing date of the transaction. Now, let me return the call back over to Ken.

Such targets reflect our assumptions regarding the timing of and performance on orders from the U S Army for VSAT equipment as well as the timing of and our performance on our recently awarded $544 million GSR contract, which as Ken mentioned earlier has been protested by the prior service provider and.

Ken Peterman: Based on our accomplishments in fiscal 2023, I believe we have excelled at overcoming the challenges posed by that kind of transformational change. Our progress is reflected in both our financial performance and our positioning within the market for growth next year and beyond. Since the start of our one Comtech journey, we have focused on delivering exceptional results for customers. Today, through our renewed and unified customer-centric approach, we are leveraging our culture of innovation, differentiated expertise, technology leadership, and unique understanding of our customers needs, the position Comtech 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 empower a truly connected planet.

While we expect a near term close such targets also do not assume any divestiture at this time due to the uncertain closing date of the transaction now let me return the call back over to Ken Ken.

Speaker 4: Thanks, Mike.

Thanks, Mike.

Speaker 3: Before we take your questions, I want to say that I'm excited about the momentum we are building as we progress on our one-comptech journey. Going forward, I'm excited that we're already realizing significant strategic wins in material results that stem directly from our actions.

Before we take your questions I want to say that I'm excited about the momentum we are building as we progressed on our one comtech journey.

Forward I'm excited that we're already realizing significant strategic wins and material results that stem directly from our actions.

Speaker 3: Our implementation of standard tools, procedures, and process discipline across the enterprise have been a key driving factor in the improvements we are seeing in our balance sheet and our performance. We have examined everything from supply chains to contract terms and the outcomes are evident in the results you're seeing today.

Our implementation of standard tools procedures and process discipline across the enterprise have been a key driving factor in the improvements we are seeing in our balance sheet and our performance. We have examined everything from supply chains to contract terms and the outcomes are evident in the results youre seeing today.

Ken Peterman: As we have pursued these strategic goals over the past fiscal year, we have remained focused on the crucial daily work of improving our operations, balance sheet, and financial performance. We have made difficult decisions where necessary to empower our teams on the front line with both the resources they require and the authorities to address our customers needs. Importantly, we are seeing the results of these efforts every single day. Our teams are empowered to develop new business capture strategies that align with and address our customers' most difficult challenges, and we are winning large and strategically important contracts that accentuate our technology and thought leadership.

Speaker 3: The impact of our cost reduction actions cannot be over emphasized and as difficult as those actions were. They have resulted in a leaner, more agile organization where we are able to identify opportunities and prosecute them in a much faster and more efficient manner than ever before. Our ability to draw from all parts of the business to gather talent and expertise is one of the many advantages of our one-comptech transformation. Advances that will further increase shareholder value as we hone these abilities over the coming months and years.

The impact of our cost reduction actions cannot be overemphasized and as difficult as those actions where they have resulted in a leaner more agile organization, where we are able to identify opportunities and prosecute them in a much faster and more efficient manner than ever before our ability to draw from all parts of the business together talent expertise is one of them.

Many advantages of our one comtech transformation advantages that will further increase shareholder value as we hone these abilities over the coming months and years.

Ken Peterman: We are still providing the products and services that Comtech is known for, and our customers are seeing that we can now be relied upon to bring even more comprehensive value, solve their toughest challenges, and apply technology in innovative ways that truly change the game. The updated technology in our next generation triple-scatter family of systems is a great example, which I'll talk more in depth about in just a few minutes. Our relentless attention to performance improvement has not only expanded adjusted EBITDA margins sequentially every quarter of this fiscal year, but also has given us the space we needed to address strategic questions about the composition of our portfolio and the strength of our balance sheet.

Speaker 3: customers as well are also already benefiting from these actions as we are increasingly able to turn our attention to more thoughtful and comprehensive customer engagement and collaboration strategies to win new business as valued partners with innovative more comprehensive solution.

Customers as well are also already benefiting from these actions as we are increasingly able to turn our attention to more thoughtful and comprehensive customer engagement and collaboration strategies to win new business as valued partners with innovative more comprehensive solutions.

Speaker 3: Our new business capture processes will continue to improve and enable us to enter new markets by combining technologies from within our existing portfolio, as well as engaging with evoke partners to create truly cutting-edge innovative capabilities where the end solution is a far greater customer value than any of the individual parts.

Our new business capture processes will continue to improve and enable us to enter new markets by combining technologies from within our existing portfolio.

As well as engaging with evoke partners to create truly cutting edge innovative capabilities, where the end solution is a far greater customer value than any of the individual parts.

Ken Peterman: Importantly, following a careful review of our current business and product lines and considering the kind of software defined and solution-based enterprise our customers need us to be in the future. We identified opportunities to rebalance our segments and ultimately choose to divest our solid-state power amplifier product line. Upon completing this transaction in the short term we anticipate using some or all of the net proceeds from this divesture that meaningfully reduce our outstanding depth, leverage ratio, and interest pain.

Speaker 3: Today, contact 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.

Today <unk> 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.

Speaker 3: 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.

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.

Ken Peterman: We're also simultaneously addressing the need to refinance our credit facility, which expires in October 2024. This process is moving forward and we believe we're headed toward a solution. We have engaged in productive discussions with various potential sources of capital, including our existing preferred shareholders, regarding alternative investment structures. We're also in discussions with our existing lenders, regarding a short-term amendment and extension of our credit facility, if needed in the interim, while we move toward completion of a longer-term solution.

Speaker 3: Everything we have done and are doing to create a one-compteck business machinery and culture being done to put our company on a durable growth trajectory that I believe will sustain for years to come.

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.

Speaker 3: We're all looking forward to 2024. With that, let me take any questions you may have.

We're all looking forward to 2024.

With that let me take any questions you may have.

Okay.

Speaker 1: You may withdraw yourself from the queue at any time by pressing star 2.

At this time, if you would like to ask a question. Please press the star and one on your telephone keypad.

Ken Peterman: We anticipate having more to share prior to announcing our first quarter fiscal 2024 results. Overall, I am pleased with the significant progress being made with respect to strengthening our balance sheet. Such efforts combined with optimizing our cost structure and improving business operations provide a solid foundation as we look ahead to our ongoing transformation in fiscal 2024. Let me emphasize that the initiatives we have launched and the actions we are taking are working.

Draw yourself from the queue at any time by pressing star two.

And once more that is star one.

Speaker 1: We'll move first to Joe Gomes with Noble Capital. Your line is open.

We'll go first to Joe Gomes with Noble capital Your line is open.

Yeah.

Speaker 5: Good afternoon. Congrats on the quarter. And thanks for taking my questions.

Good afternoon, congrats on the quarter and thanks for taking my questions.

Good morning, Joe how are you doing Joe.

Speaker 5: Great, so it just maybe you could give us first off a little bit more details to what was behind the fourth quarter out performance. You know, as you mentioned, you guys said...

Great. So just maybe you could give us a first off a little bit more detail as to what was behind the fourth.

Ken Peterman: 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. Meanwhile, as I shared moments ago, focusing on the differentiated expertise and the diversity of perspective of our people, collaborating with our customers like never before, and leveraging our unique culture of innovation and technology leadership is resulting in our winning significance, strategic new business, and strengthening our core market positions, and enabling us to expand into new market adjacencies in ways that validate that our one-compete transformation is truly working. Simply put, we're securing significant strategic enduring wins, and I think there's more coming.

Our fourth quarter outperformance.

You mentioned you guys had.

Speaker 5: projected 2 to 4% sequential revenue growth. He came in over 9%. He projected a just at EBITDA margin in 9.5 to 10.5. And it came at 12.7 phenomenal results. And I just wonder if you give us a little more color as to what drove that.

Jack did 2% to 4% sequential revenue growth came in over 9% you projected adjusted EBITDA margin of nine and a half a turn and a half and it came at 12 seven phenomenal results and I'm. Just wondering if you give us a little more color as to what drove that.

Ken Peterman: But for now, let me highlight a few.

Yes, John I'll take the first piece.

Speaker 3: Yeah, certainly coming into the quarter, we had our ice bets on executing on our lean initiatives. So certainly, when we're talking about adjusted, even on margins clearly, I think you're seeing the benefits of those actions taken now in the second half of the year.

Yes, certainly coming into the quarter, we had our eyes set on executing on our lean initiatives. So certainly when we're talking about adjusted EBITDA margins clearly, yeah, I think youre seeing the benefits of those actions taken now in the second half of the year.

Speaker 3: 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're able to draw upon that in the quarter. So a lot of things click this quarter.

That's definitely driving the bottom line and in terms of also just the fielding schedules of our customers and the.

Ken Peterman: The award of the Global Field Service Representative Contract from the U.S. Army with an expected value of $544 million. The award of the Enterprise Digital Intermediate Frequency Multi-Carrier, or EDM, Modem Contract from the U.S. Army for $488.6 million, plus what we believe could be full-rate production potential of over $1 billion based on the U.S, government's prior fielding of the Legacy EDM Modem. And award from the U.S. Army for our next-generation triple scatter systems with an initial contract value of $30 million.

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 click this quarter.

Okay, great thanks for that and on the.

Speaker 5: the uh... the five hundred and forty four million dollar contract again congrats on on winning that you know uh... it is currently under protest you mentioned you thought it would start uh... to contribute in the second half of fiscal twenty twenty four

The 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.

Speaker 5: Did you give us any kind of insight as to what, when you say meaningful, what that could possibly mean to the top line and the margins on that contract?

Can you give us any kind of insight as to.

Ken Peterman: Building upon our March 2020 contract award to design, deploy, and operate a next-generation 911 system for the state of Ohio, $21 million of initial funding on this contract that we believe could be worth approximately $85 million over its lifespan. And being named one of multiple awardees on a Defense Logistics Agency, or DLA, Gateway to Sustainment, Indefinite Delivery, and Indefinite Quantity, multiple award contract with the ceiling value of $3.2 billion. These are very significant wins that are a direct result of our business optimization initiatives, our improved enterprise-wide synergy, and collaboration, our improving business processes discipline, and the focus on our strategic growth priorities.

What when you say meaningful what that could possibly mean to the top line and on the margins on that contract.

Speaker 5: in line with higher or lower than kind of either the corporate average margin.

In line with higher or lower than kind of.

There the corporate average margins.

Okay.

Speaker 3: 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 we're not think gets fully up and ramped up with all the positions. It's gonna be a pretty sizable increase on an annual basis. You know, going back in time, we had a similar contract and I would say, we kind of use it as a proxy. Joe, this can.

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 we're not thing gets fully up and ramped up with all the positions, it's going to be a pretty sizeable 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.

Joe This is Ken I would also say that.

Speaker 3: You know, 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 US Army.

Ken Peterman: These wins also validate our progress toward becoming one-contact, an industry leader in technology, innovation, and listening to our customers to create the solutions they most value, through our GFFR Award with an expected value of $544 million. We have been selected to provide critical ongoing communications and IT infrastructure, support for the Army, Air Force, Navy, Marine Corps, and NATO, enabling U.S, and coalition forces to maintain robust, resilient, and secure connectivity for global, all-domain operations.

While there is a protest in play that's a pretty routine practice for this particular customer in 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 five 1 billion.

Speaker 3: which leverages a 10 year 5.1 billion global Patrick communication systems too or G-Tax too, IDIQ contract.

Global petrol communication systems to our <unk> two <unk> contracts. The reason I mentioned that is because it's one of the reasons. We're excited about the <unk>.

Speaker 3: The reason I mention that is because it's one of the reasons we're excited about the

Speaker 3: I do I do I do contract that we have with a ceiling of 3.2 billion dollars 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 with with sudden sudden and dynamic demand

I do IQ 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.

Ken Peterman: Comtech's professional engineering surfaces are innovation and our extensive portfolio of blended software-defined smart-enabled technologies were critical to our success in winning this business, which will help the DOD and coalition partners maintain information advantage in virtually any environment. While currently under protest by the former incumbent, we believe such protests will be resolved in our favor and we expect the contract to meaningfully contribute to our second half of fiscal 2024 and beyond. Separately, we awarded a $48.6 million contract by the United States Army to deliver, design, and deliver new EDAM modems that support U.S. DOD satellite communications, digitization and modernization programs.

So with with sudden sudden and dynamic demand.

Potentially.

Speaker 5: Thanks for that and one last one for me. I'll get back in queue. I'm the sale of the power systems unit.

Yeah.

Thanks for that and one last one for me and I'll get back in queue.

On the sale of the power systems unit.

Speaker 5: Can you give us any kind of color on what that could mean in terms of the revenue and adjusted EBITDA that was related to that business? And is that kind of it in terms of potential sales or do you continue to look at some other aspects of the contact business that might not fit in with the new one contact?

Can you give us any kind of color on what that could mean in terms of.

The revenue and adjusted EBITDA that was related to that business and is there is that kind of it in terms of potential sales or do you continue to look at some other aspects of the contact business that that might not fit in with the new one contact.

Ken Peterman: Comtech will design, develop, test, and deliver, EDAM modems, and provide hardware, software, and sustainment services to support performance enhancements for EDAM solutions over time. Our EDAM modems are designed to support unique US Army and meaning they can also be used for other branches of the Department of Defense looking to leverage next-generation SATCOM capabilities. Comtech's EDAM modems are expected to replace the enhanced bandwidth-efficient modem, or EBEM, currently supporting Army Navy and Air Force SATCOM users, and it will replace it with an advanced digital and software-defined platform.

Speaker 6: So I'll take the first part of that question and then I think on the strategy going forward I'll hand it over to Ken.

Yeah I'll take the first part of that question and then I think on the strategy going forward I'll hand, it over to Ken.

Speaker 6: uh... i think in terms of you know the sizing of this transaction we won't comment on how much revenue and and ebada but you get a sense for you know based on the size of the purchase price

I think in terms of the sizing of this transaction, we won't comment on how much revenue and EBITDA, but you can get a sense for it based on the size of the purchase price.

Speaker 6: relatively speaking and in terms of the impact to fiscal 24, you know, obviously, you know, we're subject to customary closing conditions. We're expecting the close to being in the short term, but again, given the timing being a little unknown, it's hard to really decipher what the adjustment would be to the forecast, but I would say at this point, that's probably all we're gonna say on the transaction today.

Relatively speaking and in terms of the impact to fiscal 'twenty for you know obviously, we're subject to customary closing conditions, we are expecting to close to be in the short term, but again, given the timing being a little unknown, it's hard to really decipher what the adjustment would be to the forecast but I.

Ken Peterman: There are currently tens of thousands of these legacy EBEM modems fielded today, and we expect to see replaced as part of this and related efforts. And we feel that the transition to digital SATCOM architectures offers a meaningful advantage that will encourage our customers to expand EDAM adoption well beyond the current EBEM footprint. We believe this EDAM ward also means that Comtech's modems are at the heart of the Department of Defense's move to digitize hybrid satellite network architectures. And it puts us in an advanced competitive position as DOD and coalition force communications capabilities are upgraded and modernized.

I would say at this point, that's probably all were going to say on the transaction today.

Speaker 3: You'll come in on the strategic portfolio management activity. You know, this particular business, which is really a solid business, it didn't have a lot of synergy with other parts of our business. It didn't have a lot of synergy with our technology road maps and that kind of thing. So that kind of portfolio management decision, while it's difficult to make, I think it's the right decision for all concerns.

Joe commenting on the strategic portfolio management active.

Activity.

This particular business, which is really a solid business.

It didn't have a lot of synergy with other parts of our business. It didn't have a lot of synergy with our technology roadmaps and that kind of thing so that kind of a portfolio management.

Ken Peterman: In July, we announced that our market-leading next-generation triple-scatter systems were selected by the US Army to support tactical communications and modernization needs in a contract award worth $30 million. Here again, our commitment to innovation and technology leadership drove our success. We believe that our next generation software-defined triple-scatter family of systems represent up to a thousand-fold performance improvement over prior generations. And with the most triple-scatter systems deployed in the world today, we have a clear market leader in a technology with a rapidly expanding set of defense and commercial global market applications.

A decision while it's while it's difficult to make I think it's the right decision.

For all concerned.

Speaker 3: Now, portfolio management is something that we're beginning to do on a continuum. It's a part of any business management and executive leadership team operations were involved in dynamic market convergences, technology inflections. And I think that while we don't have anything to say on that, okay, and I'm not forecasting anything. I think portfolio, portfolio management is something that we have a responsibility to do on a continuing basis. That's all.

Now our portfolio management is something that we're beginning to do on a continuum. It's a part of any business management and executive leadership team operations. We're involved in a dynamic market convergence as technology inflections and I think that.

While we don't have anything to say on that okay, and I'm not forecasting anything I think portfolio a portfolio management is something that we have a responsibility to do on a continuing basis, that's all I need to say.

Ken Peterman: Let me take a minute to share just one example of the potential for expanded applications of our next-generation triple-scatter systems. Following broad scale natural disasters such as hurricanes, communications infrastructure is often heavily impacted. As Hurricane Ian, a category 4 storm, made landfall in southwestern Florida in September 2022. The Federal Communications Commission noted close to 18 percent of cell sites in Florida were out of service with some counties seeing over 82 percent of cell sites out of service.

Speaker 5: Okay, thanks for that guys, really appreciate it, and again, congrats on the quarter.

Okay. Thanks for that guys really appreciate it and again congrats on the quarter.

Thank you. Thank you Joe.

Okay.

Speaker 1: We'll move next to Greg Burns with Sedoti. Your line is open. Thanks.

And we'll move next to Greg Burns with Sidoti Your line is open.

Ken Peterman: This means millions of Floridians lost access to their cell phones, landlines, home internet cable, or a combination of those, both during and in the aftermath of the storm. Not to mention access to 911 emergency life-saving service. Services. Because of these outages, emergency responders could not communicate with their residents in life-threatening situations. Now, trope of scatters unique in that it doesn't rely on the purchase of satellite capacity and implement weather, which can interfere with satellite and microwave signals, doesn't have a negative impact on trope of scatter signals at all.

Thanks, Joe.

Just to follow up on the <unk>.

Speaker 7: GFSR contract and what you're contemplating in your guidance.

<unk> contract and what you're contemplating in your guidance.

Speaker 7: Is that is none of that in the guidance for one cue and if

Is that is none of that in the guidance for <unk> and <unk>.

For whatever reason it.

Speaker 7: Colors are starts earlier than you expect there might be some upside is that how we

Clauses or starts earlier than you expect there might be some upside is that how we should.

Speaker 6: Yeah, Greg on Q1, I would say you could think of it very normal or anything at this point, just given the timing of the award and what's happening.

Yes.

Greg on on Q1, I would say you could think of it as very nominal or anything at this point.

Just given the timing of the award and what's happening.

Speaker 7: And then you didn't mention any update on what's going on with your your Leo customer Are they are they progressing or are you getting closer to Seam production orders for them like what's the outlook for that in fiscal 24

Okay.

And then you Didnt mentioned any update on what's going on with your your Leo customer are they are they progressing or are you getting closer to seeing production orders for them like what's the outlook for that in fiscal 'twenty four.

Ken Peterman: In fact, bad weather actually enables trope of scatter to perform better. In natural disaster scenarios like Hurricane Ian, our next generation trope of scatter systems hold the potential to provide a new mechanism for states, emergency service providers, and global communities to sustain resilient and reliable communications infrastructures when it matters most. This is just an application we're excited about and we see other potential commercial opportunities for our trope of scatter systems as we continue to integrate and expand our capabilities within the portfolio. Finally, the US Army trope of scatter wind also validates our recently instituted capture and pricing process, process improvements, and underpins the value of our cost reduction actions and improved program management discipline.

Speaker 6: Yeah, in terms of the timing for that Greg, certainly we're tracking our progress alongside where the customer wants us to be and where they are on their schedule. I would say at this point in time, no major changes to our outlook for production orders. I think if we get a order, it would be for the next couple of months of deliveries.

Yeah in terms of the timing for that Greg certainly we're tracking our progress alongside you know where the customer wants us to be and where they are on their schedule I would say at this point in time.

No no major changes to our outlook for production orders I think if we get an order it would be.

For the next couple of months of deliveries. So I wouldn't expect you know.

Speaker 6: So I wouldn't expect multiple orders, it might be one larger order to work from.

Multiple orders that might be one large order to work from a you know in terms of the specific timing that we can't comment on today. The only thing this Ken the only thing we can say I think is that it is progressing on the timeline that we expected.

Speaker 6: in terms of the specific timing though, can't comment on today.

Speaker 3: The only thing this can, the only thing we can say I think is that it is progressing on the timeline that we expected.

Ken Peterman: In July 2023, we were very excited to finally have received our long-awaited initial funding of $21 million under our next generation 911 contract with the state of Ohio. This contract originally awarded to us in March of 2020 has a total expected value of approximately $85 million and has anticipated to start contributing meaningfully to our net sales in fiscal 2025 and beyond.

Speaker 7: And then in terms of the EDM modem opportunity, are you, is that,

Okay.

And then in terms of the Eden modem opportunity are you.

Is that a <unk>.

We'll source.

Speaker 7: contract or there are multiple vendors that are supplying these modems and

Contract or are there multiple vendors that are supplying these modems and.

When you think about the.

Speaker 7: conversion of the upgrade opportunity there. Is there...

The conversion of the upgrade.

Opportunity there or is there.

Ken Peterman: And finally, in April 2023, contact was selected as one of multiple awardees under the Defense Logistics Agency Gateway to Sustainment, in-definite delivery, indefinite quantity, multiple award contract with the ceiling value of $3.2 billion. This award enables the U.S. Department of Defense and other U.S, government customers purchase a wide range of our capabilities and services in the support of the command, control, computers, communications, fiber, intelligence, surveillance, and reconnaissance, or C5 ISR operations.

Speaker 7: Is there an upgrade cycle that goes on there or an end of life to these even modems? How should we think about that broader opportunity beyond the first 48 million order that you got?

Is there an upgrade cycle that goes on there or an end of life kind of to these the EBIT modems like how should we think about the broader opportunity beyond the first $48 million quarter that you got.

Speaker 3: Well, the ETAM contract, which is the acronym EDIM, okay, is a kind of a...

Well, they eat them contract, which is the acronym EDI I am okay.

<unk> is a kind of a.

Speaker 3: successor contract to the EBEM contract. It was led in 2003.

Successor contract to the Behm <unk> contractor was led in 2003, the 2003 contract head of development.

Speaker 3: The 2003 contract had a development design development phase along the lines of this current EDM one and then it resulted in significant fielded quantities. I believe tens of thousands perhaps more than 40,000 of the legacy modems were fielded.

Ken Peterman: Taken together, we believe these significant strategic contracts demonstrate context steadily improving performance across every facet of our business. And we intend to continue winning more strategic and enduring contracts that validate our ability to continue uptearing our solutions and services to solve some of the toughest networking and communication challenges that we will be facing today, as well as addressing the many challenges we anticipate in the future. The changes my leadership team has implemented, Comtet, over the 2023 fiscal year, are creating significant competitive advantage for us.

Design and development phase along.

Along the lines of this current Eden one and then it resulted in significant fielded quantities I believe tens of thousands perhaps more and more than 40000 of the legacy modems were fielded okay over the period of 2003 to say today. Okay. This is a single award.

Speaker 3: Over the period of 2003 to say today, this is a single award program to contact.

Third program to Comtech.

Speaker 3: We do have a major subcontractor in I-DRAC that provides an interference-excision of capability that has no value in this environment because this is a modem that could be looked at as eight modems in one.

We do have a.

A major subcontractor in Iraq that provides an interference excision of capability that has real value in this environment. Because this is a modem that could be looked at as eight modems and one.

Ken Peterman: Today, we're competing on the value we are delivering to our customers in a currency they understand. These recent contracts, I believe, represent only the beginnings of new customer engagements and it is clear we are establishing valuable long-term partnerships that we intend to continue to expand upon as we look to the future. For our shareholders, it means that Comtet's investments in optimizing operational performance, improving process discipline, and applying technology innovation are delivering revenues to create value today.

Speaker 3: and has a significant size weight power advantages over the modems that it's replacing. And it implements next generation waveforms to enable really to help realize DOD to realize its vision of multi-network connectivity over multiple diverse networks simultaneously.

And it has a significant size weight power advantages over the modems that it's replacing.

And implement next generation waveforms to enable really to help realize.

To realize its vision of multi network.

Connectivity over multiple diverse networks simultaneously. So this modem could could easily be viewed we're really excited about this contract and and I think it holds the potential for tens of thousands of production deliveries as a follow on but yes, It's a single award contract.

Speaker 3: So this momentum could easily be viewed. We're really excited about this contract. And I think it holds the potential for tens of thousands of production deliveries as a follow-on. But yes, it's a single award contract.

Ken Peterman: Before I turn to Mike to talk about our results in detail, let me make one last observation about this quarter's financial performance. When I first started at CEO a year ago, it was clear that maintaining the status quo was not enough. Commission. Notice was on Comtech and its leadership to regain the confidence of our investors and the only way to do that was through accelerating the decisive and total transformation of the organization. For our investors, this transformation is already translating into improved financial performance.

Speaker 7: Okay, great. Lastly, can you talk about cash flow this quarter? Looks like you built up a little bit of working capital. So how should we think about cash conversion as we go into fiscal 24?

Okay, Great and then lastly can you just talk about.

Cash flow this quarter it looks like you pulled up a little bit of working capital. So how should we think about cash conversion as we go into fiscal 'twenty four.

Speaker 6: Joe, sorry, Greg, on cash flows from ops, I would say we were thinking positive cash flows for the quarter. Certainly, we always subject to the timing of collections of large receivables.

Joe I'm sorry.

Alright, Greg on cash flows from ops I would say.

Taking positive cash flows for the quarter are.

Certainly.

Mike Bondi: I want to be sure to highlight the following as a clear indication we're on the right path. Over the course of the past four quarters, the work we've done at Comtech has resulted in our consolidated net sales, increasing sequentially every quarter of the fiscal year. Adjusted EBIT down margins have also increased sequentially every quarter of the fiscal year. Structurally, Comtech has undergone a series of thoughtful strategic changes that are beginning to manifest in margin improvement and growth.

We are always subject to the timing of collections of large receivables. So I would say you know in terms of quantifying a specific number.

Speaker 6: So I would say in terms of quantifying a specific number, it's definitely going to be a stronger cash flows than you saw in Q4. And in terms of for the full year, you know, get not quoting a specific number for the full year and giving full year guidance, but I would say we're going to start returning to more pre-COVID levels of cash generation.

Definitely you're going to be a stronger cash flows than you saw in Q4.

And in terms of for the full year.

You know again, not quoting a specific number for the full year and giving full year guidance, but I would say, we're gonna start returning to more pre COVID-19 levels of cash generation.

Speaker 6: and just being mindful too in terms of the CAPEX and free cash flow, our CAPEX targets for this year are around $15 million and probably more skewed towards the first half of the year, but pretty even throughout the year.

And just being mindful too in terms of the Capex and free cash flow our capex targets for this year are around $15 million and.

Mike Bondi: These encompass all aspects of our business from identifying redundancies within the organization to supply chain management and implementing key performance indicators to ensure we're meeting our customer commitments, all of which I've spoken about over the past three quarters and we delved into much deeper during our investor day in June. During our investor day, both Maria Hedden, our COO and Mike Bondi, our CFO, detailed multiple initiatives that we are implementing to drive operational efficiencies wherever we can.

Probably more.

Skewed towards the first half of the year, but pretty even throughout the year.

Okay, great. Thanks.

Mhm.

Okay.

Speaker 1: We'll move next to Mike Crawford with Be Rylee Securities. Your line is open.

And we'll move next to Mike Crawford with B Riley Securities. Your line is open.

Speaker 8: Thank you, Ken. You're talking about your one contact initiative. And I'm wondering.

Hum.

Thank you Ken.

You're talking about your one contact initiatives and I'm wondering.

Mike Bondi: For those of you that may have missed investor day, you can find the full presentation and video on the investor page of our website. And we noted that not only did we identify opportunities ahead of us that would benefit our top line, we believe we can achieve annual double digit sales growth over time with significant opportunities to simultaneously drive enduring margin improvement. We have confidence that while sales will grow, our margins will grow faster.

Uh huh.

Speaker 8: If you can give us a progress update on what component that I think is not complete yet, and that's the assessment you're doing regarding centralized supply chain operations.

If you can give us a progress update on one component of it I think is not complete yet and that's just assessment, you're doing regarding centralized supply chain operations and management.

Speaker 3: Yeah, well, so thank you Mike. By the way, it's good to have you on the call.

Yeah, well, thank you Mike by the way it's good to have you on the call.

Speaker 3: Let me say first that I think our one contact organization had two initiatives, two thrusts, okay? The first one is to bring the organization together, eliminate redundancy, streamline operations, streamline decision making, and a part of that was enabled a significant cost reduction.

Let me say first that I think are one contact organization had two initiatives at.

Mike Bondi: Now let me turn to to talk about our results in detail.

<unk> Okay. The first one is to bring the organization together eliminate redundancies streamline operations streamline decision, making and.

Mike Bondi: Mike. Thanks Ken. For Q4 fiscal 2023, we recorded $148.8 million of consolidated net sales of which 94.2 million were reported in our satellite and space communication segment. And 54.6 million were reported in our terrestrial and wireless network segment. Consolidated fourth quarter sales represented a 9.2 percent increase over last quarter and our seventh consecutive quarterly increase. Compared to the year ago quarter, our consolidated Q4 fiscal 2022 net sales increased 21.8 million or 17.2 percent reflecting higher net sales in both of our segments.

Part of that was.

It enabled a significant cost reduction second part of that enabled US you can think of to centralize our supply chain management operations.

Speaker 3: Second part of that enabled us, you can think of decentralized supply chain management operations, engineering, technology development so that we look across our enterprise.

Engineering.

Technology development, so that we so when we looked across our enterprise and we did things once we did it collaboratively and we did it collectively in a way that supported our enterprise collaborative strategy. Okay supply chain was certainly part of that we speak now with one voice and we've gone through all of our contracts with respect to.

Speaker 3: And we did things once, we did it collaboratively, and we did it collectively in a way that supported our enterprise collaborative strategy.

Speaker 3: Okay, supply chain was certainly part of that. We speak now with one voice. We've gone through all of our contracts, with respect to identifying opportunities to implement more constructive contract management. We've looked across our supply chain, and we're implementing supply chain actions to try to speak with one voice, speak with an amplified voice, and garner the value from that.

Identifying opportunities too.

<unk> two to implement more constructive contract management, we've looked across our supply chain and we're implementing supply chain actions to try to speak with one voice speak with an amplified voice.

Mike Bondi: Consolidated net sales for fiscal 2023 were 550 million of which 337.8 million were related to our satellite and space communication segment. And 212.2 million were reported in our terrestrial and wireless network segment. Consolidated growth margins for Q4 and the fiscal year 2023 were 32.7 percent and 33.5 percent respectively and 35.9 percent and 37 percent in the comparable periods of the prior year. The 32.7 percent we achieved this past quarter reflects a sequential increase from the 31.7 percent reported in the third quarter of fiscal 2023.

And garner the value from that okay.

Speaker 3: Now, the other thing is, I think also it gives us an opportunity to look at facilities and perhaps look at consolidating facilities.

The other thing is I think also it gives us an opportunity to look at facilities and perhaps look at consolidating facilities. So clearly this kind of a of an action.

Speaker 3: So clearly, this kind of an action, bringing the organization together. We've picked some low-hanging fruit, but it is a long process that's gonna last, really probably, you know, well more than another year.

Bringing the organization together, we've we've picked some low hanging fruit, but it is a long process, that's going to last a really probably well more than another year. We plant. We always plan for our discovery phase to last about 10 or 11 months, we actually got through it perhaps a little ahead of that and then we plan for our implementation phase implement the.

Speaker 3: We always plan for our discovery phase to last about 10 or 11 months. We actually got through it, perhaps, a little ahead of that. And then we plan for our implementation phase, implement the actions that came out of that discovery process. We had always planned for that to take 20 to 28 months.

Mike Bondi: Such changes reflect an increase in net sales and overall product mix changes primarily driven by higher net sales of our tropus scatter and saccom solutions to US government and international customers in our satellite and space communication segment. Including performance on our next generation tropus scatter terminals for the US Marine Corps and V-SAT equipment for the US Army. Operating income in Q4 fiscal 2023 was $1.1 million compared to an operating loss of 2.1 million in Q4 of fiscal 2022.

Actions that came out of that discovery process. We had always planned for that to take 20 to 28 months and we are operating inside that timeline. So we are on track.

Speaker 3: and we are operating inside that timeline. So we're on track. There's much yet to do.

There is much yet to do it right.

And then.

Sort of related.

I was hoping you could share some key components like I don't know, maybe or dynamic cloud platform of your strategy to become more of a system solutions provider.

Speaker 8: key components, like I don't know, maybe a dynamic cloud platform of your strategy to become more of a system solutions provider.

Speaker 3: So that's really the other side of the coin of the discussion that we just had about consolidating or centralizing the 14 siloed businesses into two segments and applying some central oversight and leadership in terms of enterprise-wide action.

So that's really the other side of the coin of the discussion that we just had about consolidating our centralizing.

Mike Bondi: Such operating income reflects higher net sales reported during the quarter, as well as the benefits from profit improvement and lean initiatives implemented during the second half of fiscal 2023. This marks our first quarter of gap operating income since Q4 of fiscal 2021. And the more impressive part is that we achieved this all while still incurring incremental expenses associated with our one-contact transformation and restructuring activities.

The 14th Siloed businesses into two segments and applying some central oversight and leadership in terms of enterprise wide actions.

Speaker 3: The other side of that coin is consolidating our businesses like this enables us to collaborate more effectively and enables us to offer customers subsystem systems and services solutions that the individual silos could not do alone.

The other side of that coin.

Is it is consolidating our businesses like this enables us to collaborate more effectively and enables us to offer customers a sub system systems and services solutions that the individual silos could not do alone Okay, and I think that first of all that's one one thing is that our that's what our customers are asking from us they're asking for more.

Speaker 3: And I think that first of all, that's one thing is that that's what our customers are asking from us. They're asking for more comprehensive systems and services solutions by bringing the technology products and capabilities and even the people expertise from across our enterprise together to be able to bring them our comprehensive solutions. Now, the customers are asking us for that and in this construct we're able to deliver that.

Mike Bondi: We think it is important to take a quick second out to thank all of our customers, suppliers, and most importantly, employees who made this happen. As explained in more detail and reconciled in our form 10K filed earlier today, we utilize a non-gap measure that we refer to as adjusted EBITDA. During Q4 fiscal 2023, adjusted EBITDA was $18.9 million, a 51.2% sequential increase from Q3 fiscal 2023. As a percentage of net sales, adjusted EBITDA was 12.7% and improvement from the 9.2% we achieved in Q3 fiscal 2023.

Comprehensive systems and services solutions by bringing the technologies products and capabilities and even the people expertise from across our enterprise together to be able to bring them more comprehensive solutions now that customers are asking us for that and in this construct we're able to deliver that so I think that that is a and by the way they typically.

Speaker 3: So I think that that is a, and by the way, typically, in the systems and services market segments, the financial return is much greater, profitability is much greater. So we're working steadily to move and up here our systems and services capabilities in that regard. We're making really good progress along those lines, and I think this GFSR contract and some of the other ones are an example of that.

In the systems and services market segments. The financial return is much greater profitability is much greater so we're working steadily to move in up tier or CIS.

Systems and services capabilities in that regard, we're making really good progress along those lines and I think this G.

Mike Bondi: For the full year, adjusted EBITDA was 9.7% and increase from the 8.1% we achieved last year. Adjusted EBITDA margin in the more recent period reflects higher net sales and the benefit of our one-contact lean initiatives implemented in the second half of fiscal 2023. We'll offset in part by a lower gross profit percentage due to shifts in the mix of solutions delivered in 2023. Overall, our consolidated Q4 net sales and adjusted EBITDA were ahead of our guidance provided last quarter and we're pleased to have well exceeded our targets, particularly in light of a macro environment that remains challenging and all while undergoing one of the most comprehensive transformations in this company's history.

<unk> contracted and some of the other ones are an example of that.

Speaker 8: Okay, great and in one final question for me is it's nice to see your terrestrial and wireless segment margin back over 20% where it used to be fairly consistently and I'm wondering if it's mostly just Job cuts there or what else is up play and if you think that's just saying

Okay, Great and then one final question for me is it's nice to see your terrestrial and wireless segment margin back over 20%, where it used to be fairly consistently and I'm wondering if it's mostly just job cuts there or what else is at play and if you think that's sustainable.

Speaker 6: Yeah, I think again, it's going to come down to our one contact. Lean initiative is taken. I think you're starting to see the benefit of those actions. And you know, certainly getting more work in-house like with Ohio and just kind of building that base of business up and ramping up piecestaps on the systems will certainly give us a better economies of scale leveraging the, you know, the infrastructure for supporting that business. So I think you're seeing both of those kind of happening in this Q4 period.

Yeah, I think again this is going to come down to a one contact lean initiatives taken I think you're starting to see the benefit of those actions.

And certainly getting more work in house like with Ohio, and just kind of building that base of business up and ramping up <unk> on the systems, we will certainly give us a better.

Mike Bondi: Despite these business conditions and resulting challenges and although we anticipate some variability from time to time as we move through our one-contact transformational change. For our first quarter of fiscal 2024, we are targeting consolidated net sales to sequentially increase approximately 1% to 4% and for our consolidated adjusted EBITDA margin to range between 11% and 13%. Such targets reflect our assumptions regarding the timing of and performance on orders from the U.S. Army for visa equipment as well as the timing of and our performance on our recently awarded 544 million dollar GFSR contract, which as Ken mentioned earlier, has been protested by the prior service provider. And while we expect a near-term close, such targets also do not assume any divestiture at this time due to the uncertain closing date of the transaction.

Economies of scale leveraging the infrastructure.

Structure for supporting that business. So I think you're seeing both of those kind of happening in this Q4 period.

Ken Peterman: Now, let me return the quote back over to Ken.

Great. Thank you.

Okay.

Okay.

Speaker 1: We'll move next to Lance Patenza with TD Cowan. Your line is open. Oh.

And we'll move next to Lance Vitanza with TD Cowen Your line is open.

Speaker 1: It looks like Lance may have withdrawn himself and just once more that is star and one for your questions will pause another moment.

And it looks like Lance may have withdrawn himself and just once more that is star one for your questions, we'll pause another moment.

Okay.

Okay.

Speaker 1: and it does... oh, we do have a follow-up from Greg Burns with Sedodie. Your mine is open.

Yes, it does.

We do have a follow up from Greg Burns with Sidoti Your line is open.

Speaker 7: I just wanted to follow up on the a margin question just on the the consulate at the consolidated level.

Hi, I just wanted to follow up on the.

Our margin question just on the <unk>.

At the consolidated level.

Ken Peterman: Ken, thanks Mike. Before we take your questions, I want to say that I'm excited about the momentum we are building as we progress on our one-compact journey. Going forward, I'm excited that we're already realizing significant strategic wins in material results that stem directly from our ass. Our implementation of standard tools, procedures and process discipline across the enterprise have been a key driving factor in the improvements we are seeing in our balance sheet and our performance.

Speaker 7: You got back to that, you know, we're close to 13% this quarter. I guess guiding to...

You got back to that.

Close to 13% this quarter I guess, Scott guiding guiding too yes.

Speaker 7: 12 at the midpoint. So kind of back to where we were, and I think where you were targeting in the near term. So how should we think about the business from here? Is this a good level or is there a next phase of the one contact initiative that...

<unk> 12 at the midpoint, so kind of back to where we were.

And I think where you were targeting in the near term.

So how should we think about the business from here or is this a good level or is there a next phase of the one concept Comtech initiative that.

Speaker 7: maybe where you can see margin is going higher from here.

Maybe.

Where you could see margins going higher from here. Thanks.

Ken Peterman: We have examined everything from supply chains to contract terms and the outcomes are evident in the results you're seeing today. The impact of our cost reduction actions cannot be overemphasized and as difficult as those actions were, they have resulted in a leaner, more agile organization where we are able to identify opportunities and prosecute them in a much faster and more efficient manner than ever before. Our ability to draw from all parts of the business to gather talent and expertise is one of the many advantages of our one-comtech transformation.

Speaker 6: Greg, on that good question, certainly as we're looking at the pool year and looking at the lean initiatives, we do expect certainly the RIF.

Greg on that good question certainly as we're looking at the full year.

And looking at the lean initiatives, we do expect certainly the risks actions taken last year, that's going to be sort of foundational in each of the quarters, but as we go throughout the quarters as Ken just alluded to we have supply chain initiatives facility initiatives.

Speaker 6: actions taken last year that's going to be sort of foundational in each of the quarters But as we go throughout the quarters as Ken just alluded to we have supply chain initiatives facility initiatives

Speaker 6: common tools and platform initiatives and we're starting to see those you know getting engaged and driving some of the results in our outlook so I would say each quarter you'll see probably progressively better bottom line margins.

Common tools and platform initiatives and we're starting to see those getting engaged in driving some of the results and our outlook. So I would say each quarter youll see probably progressively better bottom.

Ken Peterman: Advances that will further increase shareholder value as we hone these abilities over the coming months and years. Customers as well are also already benefiting from these actions as we are increasingly able to turn our attention to more thoughtful and comprehensive customer engagement and collaboration strategies to win new business as valued partners with innovative more comprehensive solutions. Our new business capture processes will continue to improve and enable us to enter new markets by combining technologies from within our existing portfolio as well as engaging with evoke partners to create truly cutting edge innovative capabilities where the end solution is a far greater customer value than any of the individual parts.

Bottom line margins as.

Speaker 6: as the year progresses. I think, you know, we're setting our sites higher than where we are today. You know, we're not satisfied with the 12.7% in Q4. Certainly we want to continue to do better. We had always as a target, we wanted to get back to at least the 14% we were doing before COVID and then exceed that.

As the year progresses, I think we're setting our sights higher than where we are today you know we're not satisfied with the 12, 7% in Q4, certainly want to continue to do better we had always San as a target we wanted to get back to at least 14%. We were doing before Covid and then exceed that so I think with the trajectory that we're on I think we are.

Speaker 6: So I think with the trajectory that we're on, I think we have line of sights for that.

Line of sight for that in the first quarter in terms of our guidance.

Speaker 6: in the first quarter in terms of our guidance.

Speaker 6: you know i think joe acts the question earlier about so to the margin profile some of these new contract wins

And I think Joe asked the question earlier about sort of the margin profile of some of these new contract wins.

Speaker 6: I think just given the fielding schedules of the army and what we're seeing being expected of us for deliveries in Q1, I would say probably our margins are probably going to be...

Just given the fielding schedules of the army and what we're seeing being.

Being expected of us for deliveries in Q1, I would say probably our margins are probably going to be slightly down from Q4.

Ken Peterman: Today, Comtec 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.

Well, we just reported but then progressively throughout the year.

With the mix that we're seeing it would get back to those more historical levels say in the mid 30% range.

Speaker 6: So overall I think it's the lean initiatives and I can help drive it up from here. I don't think this is where we want to stay I think we still have more to do

So overall I think it's the lean initiatives and I can help drive it up from here.

I don't think this is where we want to say I think we still have more to do.

I'll offer I'll also offer a market perspective on that I think that you're all aware, we're in a very dynamic geopolitical situation globally and sometimes that.

Ken Peterman: Everything we have done and are doing to create a one-comtec business machinery and culture 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.

Speaker 3: in parts sudden changes in mid.

In parts sudden changes in mix because the customers in those situations. That's in place sudden orders because they may need something differently than what they plan on meeting maybe six months or so ago, so that that kind of dynamic and volatility is favorable.

Operator: With that, let me take any questions you may have. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two. Once more, that is star and one.

In a macro sense to our to our top line, but it can introduce variability in mix that was unanticipated.

Alright, great. Thank you.

Okay.

Speaker 1: We do have Lance Batonzo with TD Cowan back in Q. Your line is open.

We do have Lance vitanza with TD Cowen back in queue. Your line is open.

Joseph Gomes: We'll move first to Joe Gums with Noble Capital. Your line is open. Good afternoon. Congrats on the quarter and thanks for taking my questions. Good morning, Joe. How are you doing, Joe? Great.

Speaker 9: Thanks guys, I apologize for the technical difficulty a second ago, but congrats on the quarter and I did just have a couple questions I wanted to actually go back I think Joe had asked about the out performance, you know in the quarter and you would talk about the lean initiatives, but with respect to the revenues in particular the out performance there would would you say that that was most notable in either of your two segments or was that sort of you know better than expected revenue growth was that more broad base.

Thanks, guys I apologize for the technical difficulty a second ago, but.

Mike Bondi: Maybe you could give us a little bit more details of what was behind the fourth quarter out performance. As you mentioned, you guys projected two to four percent sequential revenue growth. You came in over 9 percent. You projected adjusted EBITDA margin in 9.5 to 10.5 and it came at 12.7 phenomenal results. I'll take that first piece, certainly coming into the quarter. We had our I-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're able to draw upon that in the quarter.

Congrats on the quarter and I did just have a couple of questions I wanted to actually go back I think Joe had asked about the outperformance in the quarter and you had talked about the lean initiatives, but with respect to the revenues in particular the outperformance. There would you say that that was most notable in either of your two segments.

<unk> or was that sort of.

Better than expected revenue growth was that more broad based.

Speaker 6: I think it's going to be in our satellite and space communication segment for sure. You know, they had a pretty strong quarter when it came to, you know, deliveries of tropos gather and fat com solutions. You know, we're delivering items off to the US Marine Corps. V-Sat equipment for the Army. Solid state microwave, high power amplifiers were also pretty strong this quarter. And so that definitely was given us a good contribution in Q4.

I think it's going to be in our satellite and space Communications segment for sure.

Pretty strong quarter, when it came to deliveries of Copa scatter and Satcom solutions.

We're delivering items off to the U S Marine Corps.

VSAT equipment for the army solid state microwave.

High power amplifiers were also pretty strong this quarter.

So that definitely was giving us a good contribution in Q4.

Speaker 9: Great, okay, so on the Army contract, I think you mentioned during the Q&A that there was a prior contract that could offer some clues as to how this one might look when it ramps. My question is, does the GDSR contract, does that have a specific...

Great. Okay. So on the army contract I think you mentioned during the Q&A that there was a prior contract that could offer some clues as to how this one might look when it ramps. My question is does the recent does the GDS are contractors that have a specific targeted lifetime.

Speaker 9: targeted Lifetime in terms of years and if so could you discuss that if if it doesn't have a specific lifetime maybe

Mike Bondi: So a lot of things click this quarter. Okay, great, thanks for that. And on the $544 million contract, again, congrats on winning that, you know it is currently under protest, you mentioned you thought it would start to contribute in the second half of fiscal 2024. Did you give us any kind of insight as to what, when you say meaningful, what that could possibly mean to the top line? And on the margins on that contract in line with higher or lower than kind of the corporate average margins.

Our lifetime in terms of years and if so could you discuss that if it doesn't have a specific lifetime, maybe maybe you could just remind us how long that prior contract you were thinking about how long that wound up rent running.

Speaker 9: Maybe you could just remind us how long that prior contract you were thinking about. How long that wound up run?

Speaker 3: When I was talking about the power contract, I was talking about EDM and EDM, the two modem contracts, and that's one of the production tail. I don't think that's talking about here you mentioned GFSR, right? Yes.

When I was talking about the prior contract I was talking about Eden and <unk> to modem contracts and that just once a production tail I don't think thats, what youre talking about here you mentioned GSR right.

Yes.

Yeah, I think the way to that.

Speaker 6: Yeah, the GFSR contract, I think the way to think about it is, it's close to a five-year type contract. Once you get up running at full scale, could be several hundred positions that the army is looking to field globally. And so those fielding plans will be set once we get going. And the first quarter or two is going to be still ramping up mode. Certainly it's going to be a meaningful annual contribution. If you just take a, you know,

Yes, the <unk> contract I think the way to think about it is it's.

Close to a five year type contract.

Once you get up right now running at full scale it could be several hundred positions that the army is looking to field globally.

Mike Bondi: Joe, on the revenue profile for the contract, as we were setting in our prepared remarks, certainly we have to be mindful of the timing of getting started on that. So we're not think it's 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.

And so those those fielding plans will be said once we get going in the first quarter or two it's going to be we're still ramping up mode.

Certainly it's going to be a meaningful annual contribution.

If you just take a you know.

Speaker 6: Just carrying up the $544 million over like five years. Yeah.

Carving up to $544 million over like five years, yes.

Speaker 9: Perfect. Now that's exactly what I was looking for. And then on the Ohio 911 contract.

No that's exactly what I was looking for and then on the Ohio 911 contract.

Mike Bondi: Joe, this can. I would also say that, you know, 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 US Army, which leverages a 10-year 5.1 billion global Patrick communication systems, too, or GTACs, too, IDIQ contract. The reason I mentioned that is because it's one of the reasons we're excited about the GQS.

Speaker 9: eighty five million total twenty one million i think you you received i guess as a prepayment in July and i i assume that then that you you probably booked out as deferred revenue or uh... you know it's a prepaid amounts of that's gonna create some

$85 million totaled 21 million I think you you received I guess as a prepayment in July and I assume that then that you you probably booked that as deferred revenue are.

It's a prepaid amounts so that's going to create some some noncash EBITDA in fiscal 'twenty five when you actually start recognizing that is that right and maybe just talk a little bit about going forward what the.

Speaker 9: some non-cash EBITDA in fiscal 25 when you actually start recognizing that, is that right? And maybe just talk a little bit about going forward what the differential between the timing of the future cash inflows versus future revenue recognition, if there is going to be continued differences there.

The differential between the timing of the future cash inflows versus future revenue recognition. If there is going to be continued differences there.

Mike Bondi: I do 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 potentials. Thanks for that. And one last one for me, I'll get back in Q. On the sale of the power systems unit, can you give us any kind of color on what that could mean in terms of the revenue and adjusted EBITDA that was related to that business?

Yeah.

Speaker 6: Let's on this particular contract, the 21 million was the initial funding that was signed into the budget at the end of July .

Oh, that's on this particular contract the 21 million was the initial funding that was signed into the budget at the end of July .

Speaker 6: So in terms of cash flow, I don't believe there was anything meaningful on that initial funding. What we're going to do now is start the design work.

In terms of cash flow I don't believe there was anything meaningful on that initial funding well we're going to do now is start the design work and getting ready to architect the platform for the.

Speaker 6: and getting ready to, you know, architect the platform for the state. And so that's why it's not gonna generate meaningful revenues right away. It's something that, you know, we'll design, we'll get final from the customer, and then we'll start building the platform. And once we get the platform ready to go live, that's when the revenue will kick in, and that's when we'll start amortizing the asset that, you know, we're creating for this particular project.

The state and so that's why it's not going to generate meaningful revenues right away. It is something that we will design will get sign off from the customer and then we will start building the platform.

Mike Bondi: And is there, is that kind of it in terms of potential sales, or do you continue to look at some other aspects of the contact business that might not fit in with the new one contact? I'll take the first part of that question, and then I think on the strategy going forward, I'll hand it over to Ken. I think in terms of the sizing of this transaction, we won't comment on how much revenue and EBITDA, but you could get a sense for it based on the size of the purchase price relatively speaking.

And once we get the platform ready to go live that's when the revenue will kick in and that's when we'll start amortizing the asset.

We are creating for this particular project the.

Speaker 3: contract is an initial period of two years and it has options through 2031.

The contract has an initial period of two years and that is options through 2031.

Speaker 9: And then just last one for me, and thank you for taking these questions. Could you talk a little bit about how evoke has sort of played out in terms of development since the investor day? I know, obviously, the...

Got it and then just last one for me and thank you for taking these questions.

Could you talk a little bit about how evoke has sort.

Sort of played out.

In terms of development since the Investor Day, I know obviously the.

Speaker 9: broader story there which I think is pretty exciting. I'm just wondering if there's been any update.

The broader story, there, which I think is pretty exciting and I'm. Just wondering if there's been any update that you can speak to.

Mike Bondi: And in terms of the impact to fiscal 24, obviously we're subject to customary closing conditions, we're expecting the close to being in the short term, but again, given the timing being a little unknown, it's hard to really decipher what the adjustment would be to the forecast.

Speaker 3: We're getting continual and deeper engagement with our evoke partners. They're part of the collaborative working sessions we have with certain customers to give you a little light on this. You know, typical, you know, in our history satellite.

We're getting continual and deeper engagement with our Evo partners Theyre part of the collaborative working sessions, we have with certain customers to give you a little light on this.

Ken Peterman: But I would say at this point, that's probably all we're going to say on the transaction today. Joe Cometting on the Strategic Portfolio Management Activity. You know, this particular business which is really a solid business, it didn't have a lot of synergy with other parts of our business, it didn't have a lot of synergy with our technology road maps and that kind of thing. So, that kind of portfolio management decision, while it's difficult to make, I think it's the right decision for all of us.

Typical in our history satellite.

Speaker 3: We think of satellite communications mostly as geospatial satellites and they acquired their ground infrastructure by buying boxes and then stacking them together and then the boxes basically stayed in place for the 15 to 20 year life of the satellite.

We think of a satellite communications, mostly is geospatial satellites and they acquired their ground infrastructure by buying boxes, and then stacking them together and then the boxes basically stayed in place for the 15% to 20 year life of the satellite.

Speaker 3: New space at low Earth orbit is very different because the satellites have to exert.

New space at lower orbit is very different because the satellites have to exert.

Speaker 3: energy and propellant just to stay in orbit because the gravitational pull is so much greater at low Earth orbit. So those satellites typically only have a life of four or five years.

Energy and propellant just to stay in orbit because the gravitational pull is so much greater at lowest orbit. So those satellites typically only have a life of four or five years, okay. So lowest orbit.

Ken Peterman: Now, portfolio management is something that we're beginning to do on a continuum. It's a part of any business, management and executive leadership team operations were involved in dynamic market convergences, technology inflections, and I think that while we don't have anything to say on that, okay. And I'm not forecasting anything. I think portfolio portfolio management is something that we have a responsibility to do on a continuing basis.

Speaker 3: Okay, so lower-estorbit service providers don't want to buy hardware like the geosatellite providers did where they buy the hardware one time and live with it statically for 20 years. What they want is a ground infrastructure partner that can be largely cloud native that can evolve with them because they have the opportunity.

Satellite service providers don't want to buy hardware like the Geo satellite providers did where they buy the hardware onetime and live with it statically for 20 years, what they want is a ground infrastructure partner that can be largely cloud native that can evolve with them because they have the opportunity to replace their entire Sal.

Speaker 3: to replace their entire cellic cancellation every four or five years.

Constellation every four or five years in fact.

Speaker 3: In fact, they have to do that. So they move from Gen 1 to Gen 2 to Gen 3 every five years or so. So they need a ground infrastructure partner that has an integrated solution that's virtualized. And that's where frankly bringing our 14 silos together to be two segments, our new satellite and space segment has the organic capability to support a large degree of that kind of value proposition for those lower service satellite providers.

Joseph Gomes: That's all I mean to say. Okay, thanks for that guys. Really appreciate it. And again, congrats on the quarter. Thank you. Thank you, Joe.

They have to do that so they move from Gen. One to Gen. Two to Gen. Three.

Every five years or so so they need a ground infrastructure partner that has.

An integrated solution, that's virtualized and Thats, where our that's where frankly, bringing our 14th Siloed us together.

Greg Burns: And we'll move next to Greg Burns with Cedodi. Your line is open. Thanks. Just to follow up on the GFSR contract and what you're contemplating in your guidance. Is that is none of that in the guidance for one queue and if whatever reason it closes or starts earlier than you expect, there might be some upside. Is that how we should.

To be two segments are our new satellite in space segment has the organic capability to support a large degree of that kind of value proposition for those lower service satellite providers, but then we need partners in order to augment our organic capability in certain areas and those partners are playing an important role in our ability.

Speaker 3: But then we need partners in order to augment our organic capability in certain areas. And those partners are playing an important role in our ability to be long-term partners and build long-term relationships with Leo satellite providers at both the communications and geospatial domains.

Two to be long term partners and build long term relationships with Leo satellite providers in both the communications and geospatial domains.

Mike Bondi: Yeah, Greg on Q1, I would say you could think of it's very normal or anything at this point, just given the timing of the award and what's happening. Okay. And then you didn't mention any update on what's going on with your Leo customer. Are they are they progressing? Are you getting closer to seeing production orders for them? Like what's the outlook for that in fiscal 24? Yeah, in terms of the timing for that Greg, certainly we're tracking our progress alongside where the customer wants us to be and where they are on their schedule.

Thanks very much.

Thank you Lance.

Speaker 1: And it does appear that there are no further questions at this time.

And it does appear that there are no further questions at this time.

Speaker 2: Thanks, Ken Mike, and thanks to everyone for dialing in today. As Ken said, there are additional details about our strategy and performance available in our investor letter and FAC filings, and we'll provide ongoing insights and signals. And as a reminder, we intend to be as responsive as we can with investors going forward. So if we're anyone with questions, please reach out directly and let's connect. This concludes our fourth quarter call. We thank you for your continued support.

Thanks, Ken and Mike and thanks to everyone for dialing in today as Ken said there are additional details about our strategy and performance available in our Investor letter and SEC filings and we will provide ongoing insights and signals and as a reminder, we intend to be as responsive as we can with investors going forward. So for anyone with questions. Please reach out.

Directly and less connect this concludes our fourth quarter call. We thank you for your continued support.

Mike Bondi: I would say at this point in time, no major changes to our outlook for production orders. I think if we get an order, it would be for the next couple of months of deliveries. So I wouldn't expect multiple orders. It might be one large order to work from in terms of the specific timing that can't come on today. The only thing this can, the only thing we can say I think is that it is progressing on the timeline that we expect.

Okay.

Speaker 10: does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful evening.

This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful evening.

Yeah.

Mike Bondi: Okay. And then in terms of the the item modem opportunity, are you. Is that a sole source contract or are there multiple vendors that are supplying these modems? And when you think about the conversion of the upgrade opportunity there, is there. Is there an upgrade cycle that goes on there or you know an end of life kind of to these the even modems like how should we think about that that broader opportunity beyond the first 48 million order that you got.

Yeah.

Yeah.

Yeah.

Mike Bondi: Well, the EDM contract, which is the acronym EDIM, okay, is a kind of a successor contract to the EDM contract. It was led in 2003. The 2003 contract had a development design development phase along the lines of this current EDM one, and then it resulted in significant field in quantities, I believe, tens of thousands, perhaps more than 40,000 of the legacy modems were fielded, okay, over the period of 2003 to say today.

Yeah.

Uh-huh.

Hum.

Hum.

Okay.

Mhm.

[music].

Uh-huh.

Okay.

Yes.

Hum.

Okay.

[music].

Mike Bondi: Okay, this is a single award program to Comtech. We do have a major subcontractor in I-DRAC to provide an interference excision of capability that has no value in this environment because this is a modem that could be looked at as eight modems in one, and has a significant size weight-powered advantage over the modems that it's replacing, and it implements next-generation waveforms to enable, really, to help realize, DOD to realize its vision of multi-network connectivity over multiple diverse networks simultaneously. So, this modem could easily be viewed. We're going to think it holds the potential for tens of thousands of production deliveries as a follow-on, but yes, it's a single award contract.

Hum.

Hum.

Okay.

Okay.

Okay.

Okay.

Mike Bondi: Okay, great. Then, Leslie, can you talk about cash flow of this quarter? Looks like you built up a little bit of working capital. So, how should we think about cash conversion as we go into fiscal 24? Joe, sorry, Greg, on cash flows from ops, I would say we're thinking positive cash flows for the quarter. Certainly, we are always subject to the timing of collections of large receivables, so I would say in terms of quantifying a specific number, it's definitely going to be a stronger cash flow than you saw in Q4, and in terms of for the full year, you know, get not quoting a specific number for the full year and giving full year guidance, but I would say we're going to start returning to more pre-COVID levels of cash generation, and just being mindful to in terms of the CAPEX and free cash flow are CAPEX targets for this year, or around $15 million, and probably more skewed towards the first half of the year, but pretty even throughout the year.

Mike Bondi: Great, thanks.

Michael Crawford: And we'll move next to Mike Crawford with Be Rylee Securities. Your line is open. Thank you, Ken.

Ken Peterman: You're talking about your one contact initiative, and I'm wondering if you can give us a progress update on what component that I think is not complete yet, and that's the assessment you're doing regarding centralized supply chain operations and management. Yeah, well, so thank you. By the way, it's good to have you on the call.

Ken Peterman: Let me say first that I think our one contact organization had two initiatives, two thrusts, okay. The first one is to bring the organization together, eliminate redundancy, streamline operations, streamline decision making, and a part of that was enabled a significant cost reduction. The second part of that enabled us, you can think of decentralized supply chain management operations, engineering, technology development, so that we looked across our enterprise, and we did things once, we did it collaboratively, and we did it collectively in a way that supported our enterprise collaborative strategy.

Ken Peterman: Okay, supply chain was certainly part of that. We speak now with one voice. We've gone through all of our contracts with respect to identifying opportunities to implement more constructive contract management. We've looked across our supply chain, and we're implementing supply chain actions to try to speak with one voice, speak with an amplified voice, and garner the value from that. Okay, now the other thing is I think also it gives us an opportunity to look at facilities and perhaps look at consolidating facilities.

Ken Peterman: So clearly, this kind of an action, bringing the organization together. We've picked some low-hanging fruit, but it is a long process that's going to last really probably well more than another year. We always plan for our discovery phase to last about 10 or 11 months. We actually got through it, perhaps a little ahead of that, and then we plan for our implementation phase, implement the actions that came out of that discovery process. We had always planned for that to take 20 to 28 months, and we are operating inside that timeline. So we're on track. There's much yet to do.

Ken Peterman: And then sort of related is I was hoping you could share some key components like I don't know maybe your dynamic cloud platform of your strategy to become more of a system solutions provider. So that's really the other side of the coin of the discussion that we just had about consolidating or centralizing the 14 siloed businesses into two segments and applying some central oversight and leadership in terms of enterprise-wide actions. The other side of that coin is consolidating our businesses like this enables us to collaborate more effectively and it enables us to offer customers subsystem systems and services solutions that the individual silos could not do alone.

Ken Peterman: And I think that first of all that's one thing is that that's what our customers are asking from us. They're asking for more comprehensive systems and services solutions by bringing technologies, products and capabilities and even the people expertise from across our enterprise together to be able to bring them or comprehensive solutions. Now the customers are asking us for that and in this construct we're able to deliver that. So I think that that is and by the way, typically in the systems and services market segments the financial return is much greater.

Ken Peterman: Profitability is much greater. So we're working steadily to move and up here our systems and services capabilities in that regard. We're making really good progress along those lines and I think this GFSR contract and some of the other ones are an example of that.

Mike Bondi: Okay, great and then one final question for me is it's nice to see your trustable and wireless segment margin back over 20% where it used to be fairly consistently and I'm wondering if it's mostly just GFSR or what else does it play and if you think that's sustainable. Yeah, I think again, it's going to come down to our one-contact lean initiatives taken. I think you're starting to see the benefit of those actions and you know, it's certainly getting more work in-house like with Ohio and just kind of building that base of business up and ramping up p-staps on the systems will certainly give us a better economies of scale leveraging the, you know, the infrastructure for supporting that business. So I think you're seeing both of those kind of happening in this Q4 period. Great, thank you.

Greg Burns: And we'll move next to Lance Patenza with TD Cowan. Your line is open. Oh, and it looks like Lance may have withdrawn himself and just once more that is star and one for your questions, we'll pause another moment. And it does, oh, we do have a follow-up from Greg Burns with Sedodie. Your line is open. I just wanted to follow up on the a margin question just on the at the consolidated level.

Greg Burns: You got back to that, you know, we're close to 13% this quarter, of 12 at the midpoint. So kind of back to where we were and I think where you were targeting in the near-term. So how should we think about the business from here?

Mike Bondi: Is this a good level or is there a next phase of the one-contek initiative that maybe where you could see margins going higher from here, thanks? Greg, on that good question. Certainly as we're looking at the full year and looking at the lean initiatives, we do expect certainly the RIF actions taken last year. That's going to be sort of foundational in each of the quarters. But as we go throughout the quarters, as Ken just alluded to, we have supply chain initiatives, facility initiatives, common tools and platform initiatives.

Mike Bondi: And we're starting to see those, you know, getting engaged and driving some of the results in our outlook. So I would say each quarter, you'll see probably progressively better bottom-line margins as the year progresses. I think, you know, we're setting our sites higher than where we are today. You know, we're not satisfied with the 12.7% and Q4. Certainly we want to continue to do better. We had always said, as a target, we wanted to get back to at least the 14% we were doing before COVID and then exceed that.

Mike Bondi: So I think with the trajectory that we're on, I think, you know, we have line of sight for that. In the first quarter, you know, in terms of our guidance, you know, and I think Joe asked the question earlier about sort of the margin profile of some of these new contract wins. I think just given, you know, the fielding schedules of the Army and what we're seeing, you know, being expected of us for deliveries in Q1, I would say probably our margins are probably going to be as slightly down from Q4, what we just reported, but then progressively throughout the year.

Mike Bondi: With the mix that we're seeing, it would get back to those more historical levels, saying that, you know, mid 30% range. So overall, I think it's the lean initiatives and I can help drive it up from here. I don't think this is where we want to stay. I think we still have more to do. I'll offer, I'll also offer market perspective on that. I think that you're all aware we're in a very dynamic geopolitical situation globally and sometimes that imparts sudden changes in mix because of customers in those situations have to replace sudden orders because they may need something differently than what they planned on needing maybe six months or so ago so that that kind of dynamic and volatility is favorable in a macro sense to our top line, but it can introduce variability and mix that was anticipated.

Greg Burns: All right, great, thank you.

Lance Patenza: And we do have Lance Batonzo with TD Cowan back in Q. Your line is open. Thanks guys.

Ken Peterman: I apologize for the technical difficulty a second ago, but congrats on the quarter and I did just have a couple of questions. I wanted to actually go back. I think Joe had asked about the outperformance in the quarter and you would talk about the lean initiatives, but with respect to the revenues in particular, the outperformance there, would you say that that was most notable in either of your two segments or was that sort of better than expected revenue growth was that more broad-based?

Ken Peterman: I think it's going to be in our satellite and space communication segment for sure. They had a pretty strong quarter when it came to deliveries of troposcalter and fat-com solutions. We're delivering items off to the US Marine Corps, V-Sat equipment for the Army, Solid State, microwave, high-power amplifiers. We're also pretty strong this quarter and so that definitely was given us good contribution in Q4.

Mike Bondi: Great. Okay, so on the Army contract, I think you mentioned during the Q&A that there was a prior contract that could offer some clues as to how this one might look when it ramped. My question is, does the GDSR contract, does that have a specific targeted lifetime in terms of years? And if so, could you discuss that? If it doesn't have a specific lifetime, maybe you could just remind us how long that prior contract you were thinking about how long that wound up running?

Mike Bondi: When I was talking about the prior contract, I was talking about EDM and EDM, the two modem contracts, and that's one of the production tail. I don't think that's what you're talking about here. You mentioned GDSR, right? Yes. Yeah, I think the way the GFSR contract, I think the way to think about it is it's close to a five-year type contract. Once you get up running at full scale, there could be several hundred positions that the Army is looking to field globally.

Mike Bondi: Those fielding plans will be set once we get going. The first quarter or two is still ramping up mode. Certainly it's going to be a meaningful annual contribution. If you just take a, you know, just carving up to $544 million over like five years.

Mike Bondi: Yeah. Perfect. No, that's exactly what I was looking for. And then on the Ohio non-1-1 contract, 85 million total, 21 million, I think you received, I guess, as a prepayment in July, and I assume that then that you probably booked that as deferred revenue, or, you know, it's a prepaid amount, so that's going to create some non-cash EBITDA in fiscal 25 when you actually start recognizing that, is that right? And maybe just talk a little bit about going forward what the, you know, the differential between the timing of the future cash inflows versus future revenue recognition, if there is going to be continued differences there.

Mike Bondi: Here, let's on this particular contract, the 21 million was the initial funding that was signed into the budget at the end of July. So in terms of cash flow, I don't believe there was anything meaningful on that initial funding. What we're going to do now is start the design work and getting ready to, you know, architect the platform for the state. And so that's why it's not going to generate meaningful revenues right away.

Mike Bondi: It's something that, you know, we'll design, we'll get signed off from the customer, and then we'll start building the platform. And once we get the platform ready to go live, that's when the revenue will kick in, and that's when we'll start amortizing the asset that, you know, we're creating for this particular project.

Mike Bondi: The contract is an initial period of two years, and it has options through 2031.

Ken Peterman: And then just last one for me, and thank you for taking these questions. Could you talk a little bit about how evoke has sort of played out in terms of development since the investor day. I know obviously the broader story there, which I think is pretty exciting. I'm just wondering if there's been any updates. You can speak to. We're getting continual and deeper engagement with our evoke partners. They're part of the collaborative working sessions we have with certain customers to give you a little light on this, you know, typical, you know, in our history satellite.

Ken Peterman: We think of satellite communications mostly as geospatial satellites and they acquired their ground infrastructure by buying boxes and then stacking them together. And then the boxes basically stayed in place for the 15 to 20 year life of the satellite. New space at low Earth orbit is very different because the satellites have to exert energy and propellant just to stay in orbit because the gravitational pull is so much greater at low Earth orbit.

Ken Peterman: So those satellites typically only have a life of four or five years. Okay, so low Earth orbit, so satellite service providers don't want to buy hardware like the geosatellite providers did where they buy the hardware one time and live with it statically for 20 years. What they want is a ground infrastructure partner that can be largely cloud native that can evolve with them because they have the opportunity to replace their entire satellite constellation every four or five years.

Ken Peterman: In fact, they're they have to do that. So they move from Gen 1 to Gen 2 to Gen 3 every five years or so. So they need a ground infrastructure partner that has an integrated solution that's virtualized. And that's where our, that's where we're going to go. Where frankly, bringing our 14 silos together to be two segments are our new satellite and space segment has the organic capability to support a large degree of that kind of value proposition for those lower service satellite providers.

Ken Peterman: But then we need partners in order to augment our organic capability in certain areas. And those partners are playing an important role in our ability to to be long term partners and build long term relationships with Leo satellite providers at both the communications and geospatial domains.

Rob Samuels: Thanks very much. Thank you. And it has appeared that there are no further questions at this time. Thanks, Ken Mike. And thanks to everyone for dialing in today. As Ken said, there are additional details about our strategy and performance available in our investor letter and FAC filings. And we'll provide ongoing insights and signals. And as a reminder, we intend to be as responsive as we can with investors going forward. So if we're anyone with questions, please reach out directly and let's connect.

Operator: This concludes our fourth quarter call. We thank you for your continued support.

Operator: This does conclude today's program. Thank you for your participation.

Operator: You may disconnect at any time and have a wonderful evening. .