Q1 2024 Comtech Telecommunications Corp
Speaker 1: Welcome to Comtech's fiscal Q1 2024 earnings conference call. As a reminder, this conference is being recorded today, Thursday, December 7, 2023. I would now like to turn the conference over to Mrs. Maria Sariello of Comtech. Please go ahead, Maria.
Welcome to Comtech fiscal Q1, 'twenty 'twenty four earnings conference call.
As a reminder, this conference is being recorded today Thursday December seven 2023.
I would now like to turn the conference over to Mrs. Maria Sorry, yellow of Comtech. Please go ahead Maria.
Yeah.
Thank you operator.
Speaker 2: Good afternoon, everyone, and thanks for taking the time to dial in today.
Good afternoon, everyone and thanks for taking the time to the island today.
Speaker 2: Welcome to the ComTech Telecommunications Corp's conference call for the first quarter of fiscal year 2024.
Come to the Comtech Telecommunications Corp conference call for the first quarter of fiscal year 2024.
Speaker 2: Today, I'm here with Comtex Chairman, President, and Chief Executive Officer, Ken Peterman. We're also joined today by Maria Hedin, Comtex Chief Operating Officer, and Mike Bondy, Comtex CFO .
Today, I'm here with context, Chairman, President and Chief Executive Officer, Ken Peterman.
We're also joined today by Maria Haddon context, Chief operating officer, and my funding complex CFO.
Speaker 2: Before we get started today, please note we have a detailed discussion of the quarter in our shareholder letter available on our website. We have also been working to communicate directly about our business and our market on our blog context signals.
Before we get started today. Please note we have a detailed discussion on the floor.
In our shareholder letter available on our website and we have also been working to communicate directly about our business and our market on our block context signals.
Speaker 2: 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.
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.
Speaker 2: The company's assumptions regarding such performance, business outlook and plans are forward-looking in nature and always involve significant risks and uncertainties.
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 filing.
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.
Speaker 3: Now I'm pleased to introduce the President and Chief Executive Officer of Comtech, Ken Peterman. Ken? Thank you Maria. Hello everyone and thanks for joining us today.
Now I'm pleased to introduce the president and Chief Executive Officer of contract churn Peterman Ken.
Thank you Maria Hello, everyone and thanks for joining us today.
Speaker 3: This call represents the fifth quarter of our one-contact transformation, our fifth sequential quarter of incremental revenue growth, and our second consecutive quarter with positive gap operating income, clearly demonstrating the positive momentum we are building as one contact.
This call represents the fifth quarter of our one content transformation.
Fifth sequential quarter of incremental revenue growth and our second consecutive quarter with positive GAAP operating income.
Demonstrating the positive momentum we are building as one time.
Speaker 3: As we finish the first quarter of our new fiscal year, the One CompTec transformational change is well underway.
As we finished the first quarter of our new fiscal year. The one comtech a transformational change is well underway, including a collaborative culture of innovation. We are building our steadily improving sequential performance and promising strategic trajectory we're on.
Speaker 3: including the collaborative culture of innovation we're building, our steadily improving sequential performance, and the promising strategic trajectory we're on. While there remains much to do, we believe more than ever before that we have a very exciting future ahead.
While there remains much to do we believe more than ever before that we have a very exciting future ahead.
Speaker 3: Since I took on the role of CEO a little over a year ago, I have consistently expressed how critical it is for us to fully embrace the need for change and work together to drive a near total transformation of our organization, and together we're doing that.
Since I took on the role of CEO, a little over a year ago I have consistently expressed how critical it is to fully embrace the need for change and work together to drive a near total transformation of our organization and together we're doing that.
Speaker 3: Having brought 14 historically siloed businesses together, we are collaborating better than ever before, utilizing common practices, tools, and processes across our unified enterprise to steadily improve operational performance. We're leveraging our people strategy to reveal and address emerging skill gaps, and we're harvesting synergies among our programs and our product roadmap.
Having brought 14 historically siloed businesses together, we are collaborating better than ever before utilizing common practices tools and processes across our unified enterprise to steadily improve operational performance.
Leveraging our people strategy to reveal and address emerging skill gaps and we are harvesting synergies among our programs and our product.
Speaker 3: As one content, we are collaborating with customers in new ways to deliver more customer value than ever before. Developing more comprehensive solutions aligned with our vision for smart networks and unique technology convergences that provide our global customers with new forms of productivity, insights, and actionable intelligence that have the potential to fundamentally transform network productivity infrastructures around the world.
As one combat.
We're collaborating with customers in new ways to deliver more customer value than ever before.
Eloping more comprehensive solutions aligns with our vision for smart networks and unique technology convergence.
I will provide our customers with new forms.
Insights and actionable intelligence.
But fundamentally transform network connectivity infrastructures around the world.
Speaker 3: As I shared before, our customers need us to be more than a vendor. They need a technology partner. We are becoming that partner who listens and solves the challenges they're facing every day with the foresight to proactively position and address the challenges looming on their horizon.
As I shared before our customers need us to be more than a vendor they need a technology partner, we are becoming that partner, who listens and solves the challenges they're facing every day with the foresight to proactively position and address the challenges looming on the horizon.
Speaker 3: Recent strategic contract wins, such as EDAM, DOD's next-generation eight-channel satellite modem, and GFSR are clear proof that as one Compact we are succeeding.
Recent strategic contract wins, such as Ido.
Dod's next generation eight channel satellite modem and GSR are clear proof that is one contract we are succeeding.
Speaker 3: Our global customers, ranging from emergency service providers, commercial mobile network operators, satellite service providers, and the Department of Defense, continue to place their trust in Comtec. More importantly, these customers recognize that our comprehensive solutions will deliver greater value than ever before in addressing their toughest challenges.
Our global customers ranging from emergency service providers commercial mobile network operators satellite service providers and the department of defense.
To place their trust in context.
More importantly, these customers recognize that our comprehensive solutions will deliver greater value than ever before and addressing their toughest challenges.
Speaker 3: As we launched our FY 24, we have remained focused on the crucial daily work of steadily improving our operations, balance sheet and financial performance. When necessary, we've made bold decisions to empower our teams on the front line with both the resources and the authority they require to address our customers needs.
As we launched our FY 'twenty four we have remained focused on the crucial daily work of steadily improving our operations balance sheet and financial performance.
Necessary.
Made bold decisions to empower our teams on the front line with both the resources and the authority that required to address our customers' needs.
Speaker 3: Importantly, we're seeing the results of these efforts every single day. Together, we're working to assure our culture of collaboration and innovation. In conjunction with our differentiated expertise, technology leadership, and unique understanding of our customers' needs, ComTech will continue to be positioned to lead the way in delivering the blended, hybrid, smart-enabled solutions and services that will bring forward smart networks and new technology convergences that can empower a truly connected planet.
Importantly, we're seeing the results of these efforts every single day.
Together, we are working to assure our culture of collaboration and innovation.
Junction with our differentiated expertise technology leadership and unique understanding of our customers' needs content will continue to be positioned to lead the way in delivering a blended hybrid smart enabled solutions and services that will bring forward smart networks and new technology convergence.
Our actual reconnected.
Yeah.
Speaker 3: While Michael speaks to this quarter's results in a moment, I'd like to steal just a little bit of his thunder and highlight some numbers we're proud of.
Well Michael speak to this quarter's results in a moment I would like to feel just a little bit of his thunder and highlight some numbers we're proud of it.
Speaker 3: First, I'm pleased to report that ComTech continues to deliver on our commitment to growth. Our net sales rose about 16% year-over-year to $151.9 million, with new bookings of $185.6 million, which is the highest they've been since I assumed the role of CEO .
First.
I'm pleased to report that Comtech continues to deliver on our commitment to growth our net sales rose about 16% year over year to $151 9 million.
With new bookings of $185 6 million, which is the highest they've been since I assumed the role of CEO.
Speaker 3: We're also consistently meeting or exceeding our financial projections, delivering sequential revenue growth in each and every quarter since our one ComTech transformation began.
We're also consistently meeting or exceeding our financial projections delivering sequential revenue growth in each and every quarter since our one comtech transformation began.
Speaker 3: Our revenues this quarter are, in my view, a direct reflection of the multiple year-long initiatives that we've implemented to transform our company, reinvigorate our sales, and aggressively turn toward delivering more comprehensive, innovative solutions that exploit the emerging opportunities of a complex communications landscape.
Our revenues this quarter are in my view, a direct report reflection of a multiple year long initiatives that we've implemented to transform our company to reinvigorate our sales and aggressively turned toward delivering more comprehensive innovative solutions that exploit the emerging opportunities.
<unk> communications landscape.
Speaker 3: Let me emphasize again that our transformation to One Comtech is working. Simply put, the improvements to our business processes and the increased attention to risk management and process discipline as we implement common systems and platforms across our enterprise have significantly enhanced our ability to identify and exploit synergies, increase cross-collaboration, and optimize business execution across the entire organization.
Let me emphasize again that our transformation to one comtech and 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 has significantly enhanced our ability to identify exploit synergies increased cross collaboration.
And optimized business execution across the entire organization.
Speaker 3: allow me also to highlight a couple of key wins this quarter that I think highlight a comparative advantage that our technology leadership gives us right now and that I think will extend going forward.
Allow me also to highlight a couple of key wins.
This quarter, but I think highlight a competitive advantage that our technology leadership gives us right now and then I think we'll extend going forward.
Speaker 3: Our satellite and space segment had an especially strong quarter.
Our satellite in space segment, and especially strong quarter.
Okay.
Speaker 3: On the heels of multiple significant contract wins, we recently announced the receipt of a $20 million-plus order from UK-based Spectre Group for our Comet portable triple-scatter systems. For our international allies, network-agnostic, secure, and interoperable communications capabilities comprise a crucial component of any and every national defense and security strategy. We believe this Comet order is another clear indicator that this increasing global market demand.
On the heels of multiple significant contract wins, we recently announced the receipt of a $20 million plus order from UK based spectrum group for our comment affordable Triple a scatter systems.
For our international Allies network Ignostic secure an interoperable communications capabilities comprise a crucial component of any and every national defense and security strategy.
Believe this comment orders another clear indicator.
This increasing global market demand.
Speaker 3: For our triple scatter family of systems, every additional win further validates our position as the provider of the best triple scatter solution in the market.
So a couple of scatter family of systems every additional win further validates our position as the provider of the best from a scatter solution in the market.
Speaker 3: Other parts of our satellite space portfolio are also contributing to our growth.
Other parts of our satellite space portfolio are also contributing to our growth.
Speaker 3: In October , Comtec was awarded a $9.6 million sole source contract by a division of L3Harris Technologies. The contract calls for the delivery of Comtec's highly regarded modem technologies and platforms, supporting the Air Force and Army Anti-Jam Modem, or A3M, program. This provides cutting-edge anti-jam satellite communications capabilities to military personnel across diverse operational environments and geographies.
Tober contact was awarded the $9 6 million sole source contract by a division of <unk> technologies.
Contract calls for delivery of complex highly regarded modem technologies and platforms supporting the Air Force and Army anti jam modem or <unk> III.
Program.
It provides cutting edge anti jam satellite communications capabilities to military personnel across diverse operational environments and geographies.
Speaker 3: This contract vehicle also allows the DoD to place production order requests for A3M modems for years to come.
This contract vehicle will also allow us the deal Didnt place a production order requests for <unk> modems for years to come.
Speaker 3: At the same time, our trust in the wireless business also secured a key win this quarter with significant upside potential.
At the same time, our terrestrial wireless business also secured a key win this quarter with significant upside potential.
Speaker 3: The Canadian government at the federal level has mandated countrywide adoption of next generation 911 services by March of 2025 to ensure a national 911 infrastructure that is future proof, utilizing the best of modern communication technologies, including voice, text, video, location based services, and both terrestrial and satellite based networks. Comtech is at the forefront of this emerging opportunity.
The Canadian government at the federal level has mandated countrywide adoption of next generation 911 services by March of 2025 to ensure a national 911 infrastructure that is future proof utilizing the best modern communications technologies, including voice.
Video location based services and both terrestrial and satellite based networks.
Contact us at the forefront of this emerging opportunity.
Speaker 3: when Strathcona County in Alberta recently became the first municipality in the country to introduce these services. It was context recognized expertise as a service provider that got them there.
When stress Kona County in Alberta.
Recently became the first municipality in the country to introduce these services. It was context recognized expertise as a service provider that got them there.
Speaker 3: This win for ComTech is particularly exciting because we are only at the very beginning of a nationwide implementation. We expect ComTech to be extremely competitive as communities in Canada and across North America migrate to new emergency response technology.
This window Comtech is particularly exciting because we are only at the very beginning of it.
Nathan wide implementation.
<unk> com has to be extremely competitive in this and as communities in Canada and across North America migrate to new emergency response technology.
Speaker 3: In fact, in October , members of the Pennsylvania Emergency Management Agency, a ComTech customer, received the Pennsylvania Governor's Award for Excellence in recognition of their efforts in the PEMA Next Generation 9-1-1 Project.
In fact in October members of the Pennsylvania Emergency Management agency contact customer received a Pennsylvania Governor's Award for excellence in recognition of their efforts in the PMI next generation 901 project.
Speaker 3: Increasingly sophisticated first response technologies and services collect and integrate data from multiple sources to direct and optimize responses. These communications infrastructures will increasingly demand not only assured connectivity, interoperability between terrestrial and wireless networks, and advanced analytics, but also need to meet the highest security standards as well.
Increasingly sophisticated first response technologies and services collect and integrate data from multiple sources to direct and optimize responses. These communications infrastructures will increasingly demand not only assured connectivity interoperability between terrestrial wireless networks and advanced analytics, but also need to meet the highest six.
Charity standards as well.
Speaker 3: These are all core competencies for us at Comtech. And the work we've done to combine and harmonize our own businesses under one Comtech means that we can bring our native fluency in all aspects of communications network infrastructures to bear on our clients' most complex problems.
These are all core competencies.
And the work we've done to combine and harmonize our own businesses under one contact means that we can bring our native fluency in all aspects of communications network infrastructures to bear on our clients' most complex problems.
Speaker 3: When I first started as CEO a little more than a year ago, it was obvious that maintaining the status quo was not an option. The onus was on Comtech and its leadership to regain the confidence of investors, and the only way to do that was through accelerating the decisive and total transformation of the organization.
When I first started as CEO, a little more than a year ago. It was obvious that maintaining the status quo was not an option. The honest was on comtech as leadership to regain the confidence of investors and the only way to do that was through accelerating the decisive and total transformation of the organization.
Speaker 3: improved operational performance combined with the collective technology advantage we deliver to our customers as one contact across an expanding range of applications in the expanding set of growth markets is one of the reasons I'm so excited as we look to the year ahead.
Improved operational performance combined with the collective technology advantage, we delivered to our customers as one context across an expanding range of applications and expanding set of growth markets is one of the reasons I'm. So excited as we look to the year ahead.
Speaker 3: With that said, I'd ask our Chief Operating Officer, Maria Hedden, who some of you may remember from our Investor Day this summer, to speak to the significant progress we are making as we implement our OneContact transformational initiatives. Maria?
With that said I'll ask our Chief operating Officer Maria.
Who some of you may remember from our Investor day. This summer to speak to the significant progress we are making as we implement our one contact transformational initiatives.
Speaker 4: Thanks, Ken. Having spent my career driving continuous improvement in business execution, I found it is important to be able to not only point to actions and change, but more importantly, genuine, measurable improvement.
Thanks, Ken.
My career driving continuous improvement and business execution I've found it is important to be able to not only point to actions and change, but more importantly, genuine measurable improvement.
Speaker 4: The internal metrics we use to gauge our performance are compelling, and looking at this quarter's financial performance confirms it's working.
The internal metrics, we use to gauge our performance are compelling and looking at this quarter's financial performance confirms its working.
Speaker 4: Following the implementation of One Contact and excluding restructuring costs, our consolidated operating income this quarter was 10.1% of net sales. That's a 410 basis point improvement on a comparable year-over-year basis and a million dollar sequential improvement from last quarter.
Following the implementation of one contract.
In restructuring.
Consolidated operating income this quarter was 10, 1% of net sales.
That's a 410 basis point improvement on a comparable year over year basis and $1 million.
So an improvement from last quarter.
Speaker 4: As we shared before, upon launching our OneContact transformational journey, we first initiated an appropriate period of discovery, wherein we visited each of our 14 siloed businesses and conducted a thorough assessment that included operating policies, processes, tools, platforms, and skill sets.
As we shared before upon launching our one context transformational journey, we first initiated an appropriate period of discovery.
We visited each of our 14 siloed businesses and conducted a thorough assessment that included operating policies processes tools platforms and skill set.
Speaker 4: Following this discovery phase, we analyzed the collected data and rapidly launched standardized best practices, common tools, processes, and platforms across the entire enterprise.
Following this discovery phase, we analyzed the collected data and rapidly launched standardize best practices common tools processes and platforms across the entire enterprise.
Speaker 4: As we continue to execute, we are already realizing measurable improvements in operational performance as well as identifying opportunities to collaborate and exploit synergies in ways that were simply not possible before.
We continue to execute we are already realize even measurable improvements in operational performance as well as identifying opportunities to collaborate and exploit synergies in ways that were simply not possible before.
Speaker 4: Importantly, we identified key performance parameters and institutionalize the methodology necessary to quantify, measure and empirically assess our ongoing operational improvements.
Importantly, we identified key performance parameters and institutionalized methodologies necessary coupon.
Alright.
On to that.
Measure empirically is that our ongoing operational improvement.
Speaker 4: We are increasingly exploiting performance metrics and extending their applications to drive continuous improvement across the enterprise. While we have much work ahead of us and the simplification phase is far from over, we are making significant progress in nearly every aspect of our operations.
We are increasingly exploiting performance metrics and extending their applications to drive continuous improvement across the enterprise.
We have much work ahead of us and the simple presentation phase is far from over we are making significant progress in nearly every aspect of our operations.
Speaker 4: There are many examples of the transformational changes underway across our enterprise. We have instituted a formal program management office to standardize best practices, which is having an impact on not only our ability to efficiently manage existing contracts with customers, but bring more effective budgeting controls, risk and timeline management to future projects, all of which I believe will expand margins over time.
There are many examples of the transformational changes underway across our enterprise.
<unk> instituted a formal program management office to standardize best practices, which is having an impact on not only our ability to efficiently manage existing contracts with customers.
More effective budgeting controls risk and timeline management to future projects, all of which I believe will expand margins over time.
Speaker 4: We have launched an internal finance academy to ensure that all our business leaders have a clear understanding of the economics that impact our contracts, programs, and proposals.
We have launched an internal finance academy to ensure that all our business leaders have a clear understanding of the economics that impacts our contract programs and proposals we have consolidated our enterprise why engineering functions under a single leader, which allows us to prioritize staffing and resource deployment across the organization.
Speaker 4: We have consolidated our enterprise wide engineering functions under a single leader, which allows us to prioritize staffing and resource deployment across the organization.
Speaker 4: This streamlines decision-making, optimizes resource deployment, and improves efficiencies, while simultaneously improving employee career progression.
This streamlines decision, making optimizes resource deployment and improved efficiencies, while simultaneously improving employee career progression.
Speaker 4: We have strengthened our operational finance team with additional leadership with a proven track record in all aspects of financial planning, forecasting, execution, analysis, and capital allocation.
We have strengthened our operational finance team with additional leadership with a proven track record in all aspects of financial planning forecasting execution analysis and capital allocation.
Speaker 4: In parallel, we're applying lean manufacturing and operating principles to everything we do enterprise-wide. We are synchronizing our technology roadmaps to leverage technology inflections and make the most of market convergence, which is improving every aspect of our new product development process. It's a lot of work, but when we look at the results, like the meaningful improvement in our operating income, it's clearly worth it.
In parallel we're applying lean manufacturing and operating principles to everything we do enterprise wide.
We are synchronizing, our technology roadmaps to lever technology inflections and make the most of markets convergence, which is improving every aspect of our new product development process.
Lot of work, but when we look at the results like the meaningful improvement in our operating income is clearly worth it.
Speaker 4: Thanks for the opportunity to share our progress and let me bring it back to Ken.
Thanks for the opportunity to share our progress and let me bring it back to Scott.
Thank you Maria.
Speaker 3: While there's much yet to do, it's clear we've made remarkable progress over these past few months, and you and your team are critical to driving the transformational change that is already making a difference to our bottom line. Thank you all.
While there is much yet to do it's clear we've made remarkable progress over these past few months and you and your team are critical to driving the transformational change that is already making a difference to our bottom line.
Thank you all.
Speaker 3: It's also noteworthy that we're continuing to attract proven leaders and great people who we expect will make significant contributions to Comtech's growth. We recently appointed industry veteran John Rattigan as our chief corporate development officer.
It's also noteworthy that we're continuing to attract proven leaders and great people.
We expect will make significant contributions to <unk> growth.
Recently, we recently appointed industry veteran John <unk>, as our Chief Corporate Development Officer.
Speaker 3: with three decades of leadership experience behind him, including the creation from scratch of a $100 million a year annual revenue satellite communications business. John's leadership experience and track record clearly indicate that he is uniquely well-suited to help drive Comtech's strategic business trajectory, accelerate our transformational journey, and lead our expansion into new growth markets. I've known John for many years, and I'm thrilled to welcome him to our Comtech team.
With three decades of leadership experience behind them, including the creation from scratch over $100 million.
Dollar a year annual revenue satellite communications business John's leadership experience and track record clearly indicate that he is uniquely well suited to help drive context strategic business trajectory accelerate our transformational journey and lead our expansion into new growth markets I have known John for many years and I'm thrilled to welcome them to our Com Tech team.
Speaker 3: Finally, and before I turn to Mike to discuss our financial performance in detail, I want to speak about the importance of proactively managing our balance sheet, which I talked about last quarter.
Finally, and before I turn to Mike to discuss our financial performance in detail I want to speak about the importance of proactively managing our balance sheet, which I talked about last quarter.
Speaker 3: Our credit facility matures in October 2024, and we're continuing our engagement with multiple parties as we make steady progress in evaluating a variety of alternatives, negotiating terms, and working toward achieving a favorable outcome for our steadily improving business. On that point, it's particularly noteworthy that we've grown revenue every quarter since I took on this role of CEO .
Our credit facility matures in October 2024, and we're continuing our engagement with multiple parties as we make steady progress in evaluating a variety of alternatives negotiating terms and working toward achieving a favorable outcome for our selling improving business.
On that point is particularly noteworthy that we've grown revenue every quarter since I took on this role as CEO.
Speaker 3: We've expanded EBITDA margins and have generated positive operating income growth for the past two quarters.
Expanded EBITDA margins and have generated positive operating income growth for the past two quarters and we have good visibility into approximately $1 7 billion of.
Speaker 3: and we have good visibility into approximately 1.7 billion dollars of future revenue.
Speaker 3: We are undoubtedly making steady progress in our transformational journey. Our performance clearly indicates that we are on a favorable business trajectory that has delivered sequentially improving performance each quarter. With that,
Future revenue.
We are undoubtedly making steady progress in our transformational journey.
Our performance clearly indicates that we are on a favorable business trajectory that has delivered sequentially improving performance each quarter.
With that let me turn to Mike.
Speaker 3: Thanks, Ken. For Q1 fiscal 2024, we recorded 151.9 million of consolidated net sales, of which 102 million were reported in our satellite and space communication segment, and 49.5 million were reported in our terrestrial and wireless network segment.
Thanks, Ken for Q1 fiscal 2024, we recorded a $151 9 million of consolidated net sales of which $102 million were reported in our satellite and space Communications segment and $49 5 million were reported in our terrestrial and wireless networks segment.
Speaker 3: Consolidated first quarter sales represented a 2.1% increase over last quarter and our eighth consecutive quarterly increase. Compared to the year ago quarter, our consolidated Q1 fiscal 2024 net sales increased $20.8 million, or 15.9%, reflecting higher net sales in our satellite and space communications segment.
Consolidated first quarter sales represented a two 1% increase over last quarter.
And our eighth consecutive quarterly increase compared to the year ago quarter.
Solidago Q1 fiscal 2024, net sales increased $20 8 million or 15, 9%, reflecting higher net sales in our satellite and space Communications segment.
Speaker 3: consolidated gross margins for Q1 with 31.5% and 35.7% in the comparable period of the prior year.
Consolidated gross margins for Q1 was 31, 5% and 35, 7% in the comparable period of the prior year.
Speaker 3: Such changes reflect an increase in net sales and overall product mix changes.
Such changes reflect an increase in net sales and overall product mix changes, including significantly higher net sales of our triple scatter and satcom solutions to U S government customers.
Speaker 3: including significantly higher net sales of our Troposcatter and Satcom solutions to U.S. government customers. Gross profit and comparable period of the prior year also reflects the benefit of higher net sales of our beyond line-of-sight communications terminals and upgrades to the Ukrainian government's existing systems as part of an FMS contract awarded to us during that quarter.
Profit for the comparable period of the prior year also reflects the benefit of higher net sales of our beyond line of site communications terminals and upgrades to the Ukrainian government existing systems as part of an Fms contract awarded to us during that quarter.
Speaker 3: Operating income in Q1 fiscal 2024 was $2.1 million compared to an operating loss of $9.7 million in Q1 of last year.
Operating income in Q1 fiscal 2024 was $2 1 million compared to an operating loss of $9 7 million in Q1 of last year.
Speaker 3: Such operating income this quarter reflects hard-earned sales reported as well as the benefits from profit improvement and lean initiatives implemented through October 31st, 2023.
Such operating income this quarter reflects higher net sales reported as well as the benefits from profit improvement and lean initiatives implemented through October 31 2023.
Speaker 3: This marks our second quarter of GAAP operating income since Q4 of fiscal 2021. This is not a small accomplishment when considering that we achieved this all while still incurring incremental expenses associated with our one contact transformation that Maria just discussed, along with our restructuring activities.
This marks our second quarter of GAAP operating income since Q4 of fiscal 2021. This is not a small accomplishment when considering that we achieved this all while still incurring incremental expenses associated with our one comtech transformation that Maria.
As discussed along with our restructuring activities.
Speaker 3: Of importance, too, we believe this provides a stronger foundation for sustainable and profitable growth in the future.
Of importance to we believe this provides a stronger foundation for sustainable and profitable growth in the future.
Speaker 3: As explained in more detail and reconciled in our Form 10-Q filed earlier today, we utilize an on-gap measure that we refer to as adjusted EBITDA. During Q1 fiscal 2024, adjusted EBITDA was $18.4 million, or 72% increase from Q1 fiscal 2023.
As explained in more detail and reconciled in our Form 10-Q filed earlier today, we utilize a non-GAAP measure that we referred to as adjusted EBITDA.
During Q1 fiscal 2024, adjusted EBITDA was $18 4 million or 72% increase from Q1 fiscal 2023.
Speaker 3: Also, as a percentage of net sales, adjusted EBITDA was 12.1%, an improvement from the 8.2% we achieved in Q1 fiscal 2023.
Also as a percentage of net sales adjusted EBITDA was 12, 1% an improvement from the eight 2% we achieved in Q1 fiscal 2023.
Speaker 3: Adjusted EBITDA margin in the more recent period reflects higher growth profit from higher net sales in our satellite and space segment and the benefit of our one-contact lean initiatives.
Adjusted EBITDA margin in the more recent period reflects higher gross profit from higher net sales in our satellite in space segment and the benefit of our one contact lean initiatives.
Speaker 3: Overall, our consolidated Q1 net sales and adjusted EBITDA were within our guidance provided last quarter and we're pleased with our continued strong results, 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 Q1 net sales and adjusted EBITDA were within our guidance provided last quarter and we're pleased with our continued strong results, particularly in light of the macro environment that remains challenging and all while undergoing one of the most comprehensive transformation in this company's history.
Speaker 3: In addition to optimizing our cost structure, securing key contract wins, and expanding our pipeline of opportunities, we have also been very busy addressing strategic questions about the composition of our business and the strength of our balance sheet.
In addition to optimizing our cost structure, securing key contract wins and expanding our pipeline of opportunities. We have also been very busy addressing strategic.
Strategic questions about the composition of our business and the strength of our balance sheet.
Speaker 3: First and foremost, we made some important liquidity and going concern disclosures in our SEC filings today, and we strongly urge you to read those disclosures carefully. Now with that as context, we discussed in October , following a careful review of our current business and product lines, we saw an opportunity to divest our solid state power amplifier product line. As disclosed in our Form 10-Q file today, we successfully completed this divestiture on November 7th, 2023.
First and foremost we made some important liquidity and going concern disclosures in our SEC filings today, and we strongly urge you to read those disclosures carefully.
Now with that as context, we discussed in October following a careful review of our current business and product lines, we saw an opportunity to divest our solid state power amplifier product line as disclosed in our Form 10-Q filed today. We successfully completed this divestiture on November seven 2023.
Speaker 3: We are also simultaneously addressing the need to refinance our credit facility, which expires in October of 2024 and is now current. In anticipation of this maturity, we have engaged with third-party financial advisors to assist us in our discussions and negotiations with our existing lenders and holders of convertible preferred stock to extend or refinance the credit facility and or amend or restructure our convertible preferred stock.
We are also simultaneously addressing the need to refinance our credit facility, which expires in October of 2024 and is now currently.
In anticipation of this maturity, we have engaged with third party financial advisors to assist us in our discussions and negotiations with our existing lenders and holders of convertible preferred stock to extend or refinance the credit facility and to amend or restructure our convertible preferred stock.
Speaker 3: We've also engaged with our advisors to assist us with seeking other sources of credit or outside capital.
We are also engaged with our advisors to assist us with seeking other sources of credit or outside capital.
Speaker 3: During our Q&A session, we will do our best to respond to your questions regarding our refinancing efforts, as well as our disclosures in our SEC filings today, but due to the ongoing nature of our discussions and negotiations with various parties, we may be limited in what we can or will say.
During our Q&A session, we will do our best to respond to your questions regarding our refinancing efforts as well as our disclosures in our SEC filings today.
But due to the ongoing nature of our discussions and negotiations with various parties. We may be limited in what we can or will say.
Speaker 3: As we enter the second quarter of fiscal 2024, business conditions continue to be challenging and the operating environment is largely unpredictable, including factors such as inflation, rising interest rates, the repercussions of the military conflicts in Russia and Ukraine and the Middle East, and a potential global recession.
As we enter the second quarter of fiscal 2024 business conditions continue to be challenging in the operating environment is largely unpredictable, including factors such as inflation rising interest rates the repercussions of the military conflicts in Russia, and Ukraine, and the middle East and a potential global recession.
Speaker 3: order and production delays, disruptions in component availability, increased pricing for labor and parts, lower levels of factory utilization and higher logistics and operational costs have in the past and could impact our business in the future.
And production delays disruptions in component availability increased pricing for labor and parts lower levels of factory utilization and higher logistics and operational costs have in the past and could impact our business in the future. Despite.
Speaker 3: 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 second quarter of fiscal 2024, subject to the risks highlighted in our Form 10-Q and other filings with the SEC, we are targeting consolidated net sales to increase approximately 1% to 3%, and for our consolidated adjusted EBITDA margin to range between 11% and 13%.
Despite these business conditions, and resulting challenges and although we anticipate some variability from time to time as we move through our one comtech transformational change for our second quarter of fiscal 2024 subject to the risks highlighted in our Form 10-Q, and other filings with the SEC. We are targeting consolidated net sales to increase approximately one.
1% to 3% and for a consolidated adjusted EBITDA margin to range between 11% and 13%.
Speaker 5: As an important reminder, net sales in future periods will no longer include high-powered, solid-state power amplifiers and switches due to the divestiture of this product line on November 7, 2023. With that, now let me return the call back over to Ken.
As an important reminder, net sales in future periods. We will no longer include high powered solid state power amplifiers and switches due to the divestiture of this product line on November seven 2023 with that now let me return the call back over to Ken.
Okay.
Thanks, Mike.
Speaker 3: As ComTech moves further into our fiscal year 2024, the practical impact of our transformation is playing out, positively and clearly across all facets of our business. As Maria and Mike both highlighted, our operational performance is steadily improving. We're winning more business because we're providing more sophisticated technologies and solutions than our competitors. We're generating more revenue because we're solving our customers' most challenging problems.
As contact moves further into our fiscal year 2024, the practical impact of our transformation is playing out positively and clearly across all the facets of our business as <unk> highlighted our operational performance is steadily improving.
We're winning more business, because we're providing more sophisticated technologies and storage solutions than our competitors.
We are generating more revenue because we are solving our customers' most challenging problems.
Speaker 3: The implementation of our One CompTec transformation is unlocking growth opportunities in a difficult overall market environment that includes inflationary pressures, interest rate shocks, and rising geopolitical tensions.
The implementation of our one comtech transformation is unlocking growth opportunities in a difficult overall market environment that includes inflationary pressures interest rate shocks and rising geopolitical tensions.
And of course, we work everyday to make sure our business is managed effectively bringing the right resources in the right people together to support our ability to deliver on our customer commitments.
Speaker 3: Everything we are doing is being done to put our company on a durable growth trajectory that I believe will create and deliver value for years to come.
Everything we are doing is being done to put our company on a durable growth trajectory I believe will create and deliver value for years to come.
Speaker 3: Thank you, as ever, for your support and confidence. With that, we'll take any questions that you may have.
Thank you as ever for your support and confidence with that we'll take any questions that you may have.
Yes.
Speaker 1: 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 zero. Once more, that is star and one.
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 zero.
Once more that is star one.
Speaker 1: And we'll move first to Greg Burns with Sidoti. Your line is open.
And we'll move first to Greg Burns with Sidoti Your line is open.
Speaker 6: Afternoon, in regards to the balance sheet and the refinancing, I think at the last.
Good afternoon.
In regards to the balance sheet.
The refinancing I think at the last minute.
Speaker 6: If earnings release, you'd hope to get something done. I think before you reported this quarter. Obviously, that hasn't been the case. So could you just
The earnings release, you hope to get something done I think before you reported this quarter, obviously that hasnt been the case so could you just.
Speaker 6: Maybe give us an update on why that might have been, you know, you're not seeing.
Maybe give us an update on what why that might've been youre not seeing.
Speaker 6: favorable financing opportunities or you're waiting for something more favorable, could you just give us a little bit more color on the timing of when you expect to get this done?
Favorable.
Financing opportunities or Youre waiting for something more favorable can you just give us a discuss give us a little bit more color on the timing of when you expect to get this done.
Sure Good afternoon, Greg.
Speaker 5: Yeah, in terms of the refinancing process and the timeline, I think what we're
Yeah in terms of the refinancing process and the timeline.
Think what we are.
Speaker 5: um afforded us is really a good trajectory uh and strong results you know looking back we have about 60 61 million dollars of trailing uh EBITDA for the business and I think when we're going into our discussions and negotiations I think we have a good amount of alternatives to explore and we've been uh going down each one of those uh you know in detail to review you know the pros and cons of it
Afforded us is really a good trajectory.
And strong results looking back we have about 60 $61 million of trailing EBITDA.
EBITDA for the business and I think when we're going into our discussions and negotiations I think we have.
Good amount of alternatives to explore and we have been going down each one of those.
In detail to review, the pros and cons of it.
Speaker 5: You know, one of the things that, you know, we'd like to do is make sure that we're getting a good deal for contact in this environment. And so I think we're trying to be methodical about that and considering the tools that are available to us. I think, you know, from our perspective, you know, there's a lot to balance. And I think we're going through it at a good pace and we'll get it done.
One of the things that we'd like to do is make sure that we're getting a good deal for Comtech.
In this environment and so I think we're trying to be methodical about that.
The tools that are available to us.
I think from our perspective, there's a lot to balance and I think we are going through it at a good pace and we'll get it done.
Speaker 6: Okay, thanks. And then in terms of the Canada E911 opportunity, the when you announced this quarter,
Okay. Thanks, and then in terms of the Canada I'm on one opportunity.
The win you announced this quarter.
Speaker 6: Was that a previous one that just got deployed? It didn't sound like it was necessarily tied to the Canadian mandate. And then can you just talk about the differences or similarities between the Canadian market and the North American market? Is it similar competitors up there? Maybe...
Was that a previous one that just got deployed it didn't sound like it was necessarily tied to the to the <unk>.
Canadian mandate and then can you just talk about the differences or similarities between the Canadian market and in the North American market is it.
Similar similar.
Competitors up there.
Maybe.
Speaker 6: in terms of the size of that opportunity, market opportunity for you.
In terms of the size of that opportunity.
The market opportunity for you.
Speaker 3: Yeah, this is Ken, how are you, how are you doing?
Yes. This is Ken Alright, alright, Greg.
Speaker 3: I don't want to give the timing because I don't know the specific date of the award, but it was it was recent.
I don't want to give the timing because I don't know the specific date of the award but it was it was recently.
And I think that.
It's significant because there is a Canadian mandate the mandate is.
The role of this next generation capability out by March of 2025.
Speaker 3: And so that's a fairly short timeline when you think about rolling it out across an entire country.
And so thats a fairly short timeline when you think about rolling it out across the entire country.
It is significant at least similar to the next gen capability roadmap that we're implementing in the United States. So I think the thing that I'm. Most excited about is that we're the leader in terms of.
The provider of the next Gen 901 capability of this very first Canadian County.
That launch to handle all the others.
Speaker 3: I think we're well positioned, I think it's right in our sweet spot, and I think that it holds a lot of promise in the near term.
I think we're well positioned I think it's right in our sweet spot.
It holds a lot of promise in the near term.
Orders and growth perspective.
Speaker 6: Okay. In terms of the market size, comparing it to maybe the U.S., is Canada a similar addressable market and is it the same competitors that you're seeing in the RFP process?
Okay.
In terms of like the market size like comparing it to maybe.
The U S is kind of a similar similar.
Addressable market and is it the same competitors that youre seeing in the RFP process.
Okay.
Speaker 3: It's a similar technology. You remember the, I'm speculating here a little bit, but I think the population of Canada is roughly the same as the population of California. So I think from a market size perspective in terms of people, I think you can think of it that way. I would not be able to speculate the number of public service answering points that stretch across Canada, but I think that gives you some gauge in terms of the market size.
It's a it's a similar technology.
But I'm speculating here a little bit I think the population of Canada is roughly the same as the population of California. So I think from a market size perspective in terms of people I think you can think of it that way I would not.
Be able to speculate the number.
We start with answering points the stretch across Canada, but I think that gives you some gauge in terms of the market size.
Alright, thank you.
Speaker 1: And we'll move next to Mike Crawford with B. Reilly Securities. Your line is open.
And we'll move next to Mike Crawford with B Riley Securities. Your line is open.
Speaker 7: Thank you. You talked about this revenue visibility of $1.7 billion, including a couple of the big new wins you had, but is that entirely synonymous with the unfunded plus funded backlog numbers you used to give? I know we have the funded backlog number, but not the unfunded backlog number.
Thank you you talked about this our revenue visibility is a $1 7 billion, including a couple of the big New wins you had but.
Is that is that entirely synonymous with the unfunded plus funded backlog numbers you used to give I I know, we have funded backlog number but not unfunded backlog number.
Speaker 5: Yeah, the methodology has not changed. What you're seeing is an increase in the number due to some recent large awards, namely the GFSR contract. The initial funding was in the $40 million range on the $540 million contract.
Yes, the methodology.
Has not changed what Youre seeing is an increase in the number due to some.
Some recent large awards.
Really the GSR contract. The initial funding was in the $40 million range on the $540 million contract. So the balance that $500 million or so went into that unfunded.
Speaker 5: So the balance, that $500 million or so, went into that unfunded.
Section of our calculation because we have the contract we have visibility to what the customer is looking to do over the phone.
Speaker 5: we have visibility to what the customer is looking to do over the almost five years of that contract. So we'll put the 37 million in the funded column, we'll put the 500 million in the unfunded column, and that's really probably the largest driver to the revenue visibility of 1.7 billion. We also have the EDM contract, which was a almost $50 million contract. That would be another good example of, initially the funding that we received was a small amount, so the balance goes into that unfunded calculation. But again, we know what the customer is trying to achieve with the EDM modem.
Five years of that contract so look with the $38 7 million in the funded column, we will put the $500 million in the unfunded column and Thats really the probably the largest driver to the revenue visibility of $1 7 billion. We also had the <unk> contract, which was almost $50 million contract.
That will be another. Good example of initially the funding that we received was a smaller amount. So the balance goes into that unfunded calculation.
Speaker 5: But again, we know what the customer is trying to achieve with the EDA modem. We saw what they did in the prior eBIM modem, you know, historically. So we feel good about that visibility.
But again, we know that the customer is trying to achieve with the EDA modem, we saw what they did in the prior year EBIT modem.
Historically, so we feel good about that visibility.
Speaker 7: Thanks, Mike. I would like to talk about maybe the Edomonim in a second relative to the Edom, but...
Thanks, Mike.
I would like to talk about maybe the modem and the second relative to that but.
Speaker 7: With the ongoing restructuring costs and also what I guess you bill as strategic emerging technology costs, which I think might relate to evoke, is that something that should remain in the $5 million a quarter range, or when does that ever start to tail off?
With the ongoing restructuring.
And also what I guess your bill is strategic emerging technology costs, which I think.
Mike.
To evoke.
Is that something that should remain in the $5 million a quarter range or when does that ever start to tail off.
Speaker 5: So I'll cover the restructuring first and then get to the strategic emerging technology cost.
So I'll cover the restructuring first and then get to the strategic emerging technology costs I think in terms of the restructuring we will start to see that.
Speaker 5: I think in terms of the restructuring, we will start to see that unwind over the course of this year. Yeah, a lot of our discovery phase happened already. A lot of our migration to the Chandler facility and Basingstoke facility, you know, that's now behind us. So last year, towards the end of the year, we had a restructuring event with our workforce.
Unwind over the course of this year a lot of our discovery phase happened already a lot of our migration to the Chandler facility <unk> facility.
Behind us so last year towards the end of the year, we had a restructuring event with our workforce.
Speaker 5: You know, that's now behind us. We have an immaterial amount of severance, I think, left to pay out. So, you know, at this point going forward, you know, we still are seeing opportunities to invest in the business.
Now behind US we have.
Immaterial amount of severance I think left to pay out. So at this point going forward, we still are seeing opportunities to invest in the business to get it on a good footing going forward. So if we see an opportunity we will undertake the actions, but I think at this point.
Speaker 5: to get it on a good footing going forward. So if we see an opportunity, we will undertake the actions. But I think at this point, over the course of the next several quarters, you'll start to see that winding down.
Over the course of the next.
Several quarters, you'll start to see that winding down similarly, with the strategic R&D.
Speaker 5: Similarly, with the strategic R&D, I would say that's more for one specific customer that we're incurring that R&D cost for on a particular LEO program. As we're getting through the development efforts, we're seeing that the market is being a lucrative one to be in. So, we're looking to be a good partner with our customer and making our own investments there. And I would say as they get closer to production orders, that would also start to, you know, go down over time over the course of the year.
I would say that's more for one specific customer we are incurring that.
R&D costs for on a particular Leo program as we're getting through the development efforts, we're seeing that.
Market as being a lucrative one to be in so we're looking to be a good partner with our customer and making our own investments there and I would say as they get closer to production orders that would also start to go.
Go down overtime over the course of the year.
Speaker 7: Okay, um, excellent. Thank you. And then.
Okay excellent. Thank you and then.
Speaker 7: Can you, well, first of all, can you say what the revenue and or EBITDA was of the divested PST business? And then I guess, ancillary to that is.
You can.
Well first of all can you say what the.
Revenue and or EBITDA was of the divested <unk> business, and then I guess ancillary to that.
Speaker 7: Are those numbers adjusted for your credit facility EBITDA and leveraged calculation?
Is.
Are those numbers adjusted for your credit.
Credit facility EBITDA leverage calculations.
Speaker 5: In terms of the first question, I will not be able to give you specifics pursuant to the stock purchase agreement in terms of the size of the organization.
In terms of the first question.
I will now be able to give you specifics pursuant to the stock purchase agreement in terms of the size of the organization, but it was a smaller product line for us.
Speaker 5: But it was a smaller product line for us, you know, relatively speaking, it was a nice good steady business that had, you know, good, good strong margins, but from a revenue and EBIT perspective, you know, historically in our numbers, it's in the historical numbers, in our guidance of one to 3%. I would think of it this way. You know, we're, we're increasing our guidance one to 3% on a base that included that product line.
Relatively speaking it was a nice good steady business.
Good strong margins, but from a revenue and EBITDA perspective.
Historically in our numbers, it's in the historical numbers and our guidance of 1% to 3%.
I would think of it this way.
We're increasing our guidance to 3% on a base that included that product line. So our guidance of 1% to 3% is actually probably higher.
Speaker 5: So our guidance of 1% to 3% is actually probably higher if you were to do like an apples to apples adjustment for it.
Like an apples to apples adjustment for it.
Speaker 8: But in terms of the actual revenue for the year and the EBITDA, I won't be able to give you that specific, but we viewed it as a new material product line.
But in terms of the actual revenue for the year and the EBITDA I won't be able to give you that specific but.
So we viewed it as any material product line.
Right in terms of.
Yeah.
Speaker 5: Yeah, in terms of our credit facility that we have today, you know, we're in the process of looking to refinance that. So I would imagine, you know, all of the efforts with the divested share would be rolled into that refinancing of a new instrument.
Yeah, and Tim in terms of our credit facility that we have today, we're in the process of looking to refinance that so I would imagine.
All of the.
Efforts with the divestiture would be rolled into that refinancing of a new.
Instrument.
Speaker 7: Okay, thank you, and then I guess the final question, just getting back to the modem, the ebm.
Okay. Thank you and then I guess a final question just getting back to the modem.
The album.
Speaker 7: modem business that Visat has had for, well, 15 plus years. How many of those would you estimate were ever deployed in the field?
Modem business advice that has had a third oh 15 plus years.
How many of those would you estimate wherever deployed in the field.
Speaker 3: Hi, this is Ken. Yeah, the eBEM program, which was awarded to Viasat, eBEM is E-B-E-M. It stands for Enhanced Bandwidth Efficient Modem. Contract was awarded about 15 or more years ago, and Viasat has deployed a little over 40,000 of those eBEM modems. It's a single channel modem that implements
Hi, Ken.
Sure.
Yes, the <unk> program, which was awarded to Viasat <unk> stands for enhanced bandwidth efficient modem.
I wasn't worried about 15 or more years ago.
And as I said has deployed a little over 40000.
Those EBIT modems into single channel modem that implements.
D wave forms for satellite communications.
The program that we.
One is the EDM program enterprise digital intermediate frequency multi carrier modem.
Distinctively different because there are 80 modems in each.
Our units each of our <unk> units.
Speaker 3: So it can also utilize a variety of different waveforms that operate over a variety of commercial and military satellite networks.
And it also can utilize a variety of different waveforms that operate over.
A variety of commercial and military satellite networks.
We expect Theres every reason to expect that.
We will deliver tens of thousands at least modems over the program's life.
Excellent. Thank you Ken.
Sure.
Speaker 1: And once more for your questions, that is star and one. We'll move next to George Notter with Jeffreys. Your line is open.
And once more for your question that is star and one we will move next to George Notter with Jefferies. Your line is open.
Yeah.
Speaker 9: Hi, guys. Thanks very much. I was taking a quick look at the 10-Q filing. There's some references in there to your lenders shrinking the size of the revolver or the term loan. Could you walk through what exactly is going on there?
Hi, guys, thanks very much.
I I was taking a quick look at the 10-Q filing there is some references in there too.
Your lenders shrinking the size of the revolver or the term loan could you walk through what exactly is going on there.
Yes.
Speaker 5: Hi George. In terms of the amendment that we entered into on November 7th when we cleared the transaction with Stellan, we had gone to the banks to get
Hi, George in terms of the amendment that we entered into an <unk>.
Remember, 7% when we cleared the transaction.
With Sterling.
We had gone to the banks to get.
Speaker 5: The ability to take some of those proceeds and actually apply to the revolver instead of all going to the term loan So as part of our negotiations and you know, they understand that, you know, we're looking to refinance We've been you know talking very closely with our existing lenders I think they're just looking to make sure that they're holding our feet to the fire and we're doing the same To make sure that we get this done Expeditiously, so I think in our view it was part of the overall negotiation To retain some of the proceeds on the sale
Yeah.
The ability to take some of those proceeds and actually apply to the revolver. Instead of all go into the term loan so as part of our negotiations and they understand that we're looking to refinance we'd been talking very closely with our existing lenders.
I think they're just looking to make sure that they're holding our feet to the fire and we're doing the same to make sure that we get this done expeditiously. So I think in our view it was part of the overall negotiation to retain some of the proceeds on the sale.
Speaker 9: Got it. Okay. That makes sense. And then.
Got it okay that makes sense and then.
Speaker 9: So the term loan, do you have more availability on the term loan then between now and when this facility expires?
So the term loan do you have more availability on the term loan then between now and when this facility expires.
Speaker 5: Good question. In our footnotes, we did disclose that we have borrowed up to the maximum on the revolver at this point. Just wanted to make sure that we had efficient access to cash as we're going through these discussions and negotiations. As we're going to, you know, into the second quarter, we did draw down at the start of Q2, just to make sure we had adequate liquidity.
Okay. Good good question in our footnotes, we did describe disclosed that we have borrowed up to the maximum on the revolver at this point.
Just wanted to make sure that we had efficient access to cash as we're going through these discussions and negotiations.
As we're going to into the second quarter, we did draw down at the start of Q2, just to make sure we had adequate liquidity.
Speaker 5: At this point, the answer is no, we don't have any additional barring capacity on the revolver. And the term loan, as we pay it down, it settles the commitment on that portion of the facility.
So at this point the answer is no. We don't have any additional borrowing capacity on our revolver and the term loan as we pay it down.
It settles the commitment on that portion of the other facility.
Got it okay.
Speaker 9: Okay, and then is there is there any I'm just thinking about the timing of it all, you know, you guys have been working on.
Okay, and then is there is there any.
I'm just thinking about the timing of it all you guys have been working on.
Speaker 9: kind of resolving the balance sheet issues for some time and I guess I'm just curious about the process. I mean, I assume the Stellent transaction was, you know, kind of an element or a step in kind of moving down the path. I mean, do you feel like, is there any, you know, context you can give us in terms of milestones or progress or what we're kind of waiting for to, you know, kind of arrive at a deal here?
Kind of resolving the balance sheet issues for some time.
I guess I'm just curious about the process I mean is I assume the Sterling transaction was.
Kind of an element or a step and kind of moving down the path I mean do you feel like is there any.
Context, you can give us in terms of milestones or progress or what we're kind of waiting for to.
Kind of arrive at a deal here.
Speaker 5: Sure, good question. We've been at this for a little bit. I think over the last several months, we've been approaching alternatives like an asset based loan. For example, Comtech has never had an asset based loan before with a borrowing based capacity. So something like that. We needed to educate ourselves on.
Sure. Good question, we've been at this for a little bit I think over the last several months, we've been approaching alternatives like an asset based loan for example, Comtech has never had an asset based loan before with a borrowing base capacity, so something like that we needed to educate ourselves on.
Speaker 5: So we did engage with third parties to do our own internal evaluation of what a borrowing base could be and how that would fit into our alternatives.
So we did engage with third parties to do our own internal evaluation of what our borrowing base could be and how that would fit into our alternatives.
And that's just one example of the homework, we have been doing to try to get it done.
<unk> solution here and stuff like that does take a little bit of time.
Speaker 8: We think it was worth it to do that. We did get some good insights and as we've been saying, we've been talking with several parties, so we've been also translating all these alternatives and how something like an asset-based loan would fit into the cap structure. So that's just one example of something that takes a little bit of time to do, but that's behind us now in terms of the timing. I think we've progressed through that step and now trying to fit that into what a cap structure could look like. Got it. Okay, thank you very much.
We think it was worth it to do that.
They get some good insights.
As we've been saying we've been talking with several parties. So we then also translating all of these alternatives and how something like an asset based on would fit into the cap structure. So that's just one example of something that takes a little bit of time to do but that's behind US now in terms of the timing I think we are progressed through that step and now trying.
Speaker 8: and now trying to, you know, fit that into what a cash structure could look like. Got it. Okay.
To put that into our cash structure.
Got it okay. Thank you very much.
Thanks.
Okay.
Speaker 1: And it does appear that there are no further questions at this time. I would now like to turn it back to the speakers for any closing remarks.
And it does appear that there are no further questions at this time I would now like to turn it back to the speakers for any closing remarks.
Speaker 3: Thanks, everyone. We're very excited about the journey we're on. We're very excited about what's ahead of us. And we thank you for the call.
Thanks, everyone.
We're excited about the journey, we're on and very excited about what's ahead of us and we thank you.
Hey, Paul.
Yes.
Thank you.
Speaker 1: This 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.
[music].
Speaker 10: That.