Q2 2025 Comtech Telecommunications Corp Earnings Call
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Speaker Change: Welcome to Comtech Telecom's Corp's conference call for the second quarter of fiscal 2025.
As a reminder, this conference is being recorded.
Speaker Change: I would now like to turn the conference over to Maria Ceriello, senior director of financial operations of Comtech.
please go ahead, Maria.
Thank you, Operator, and thanks everyone for joining us today.
Speaker Change: I'm here with Ken Trab, Comtex Chairman, President and CEO , Mike Bondi, CFO , Daniel Gizinski, President of the Satellite and Space Communications Business, and Jeff Robertson, President of the Terrestrial and Wireless Networks Business.
Speaker Change: Before we get started, please note we have a detailed discussion of the quarter in the press release we issued this afternoon, which is available on our website.
Speaker Change: 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 Change: The company's assumptions regarding such performance, business outlook and plans are forward looking in nature and always involve significant risks and uncertainties.
Speaker Change: Actual results could differ materially from forward-looking information. Any forward-looking statements are qualified in their entirety by question their statements contained in the company's SEC filings. With that, I will turn it over to Ken. Ken?
Ken: Thank you, Maria, and good afternoon everyone. I appreciate you taking the time to join us today.
Speaker Change: Context last conference call was on January 13th, 2025, which was also my first day in the role as president and CEO of the company
Speaker Change: I joined the company shortly before that as an independent director on October 31st, and then assumed the role of executive chairman on November 26th, so I had a little bit of experience with the company when I shared my perspectives that day.
Speaker Change: A point I emphasize on that conference call, as I have done consistently since then, with all of Comtech stakeholders, is that I believe earning trust is the most essential ingredient for success in business.
Speaker Change: I stated specifically that frankly, the Comtech organization has worked to do to earn trust in light of its historically poor track record of financial performance and missed expectations.
Speaker Change: Our goal is to earn the trust of all of our stakeholders and we intend to do that by being transparent, holding ourselves accountable and delivering on our promises.
Speaker Change: On January 13th, we were clear and direct. Comtech's recent financial performance was unacceptable.
Speaker Change: Further, we disclosed our expectation at that time because the company anticipates breaching financial covenants as the end of the quarter on January 31st, and this could have significant consequences for the company.
Speaker Change: In light of the company's challenges, I announced a comprehensive transformation plan.
Speaker Change: The key pillars of that transformation plan are number one, improving operational discipline and reducing the cost structure.
Speaker Change: Number two, supporting the growth and development of successful high-margin business initiatives.
Third, Conducting a Broad Review of Strategic Alternatives
Speaker Change: to us strengthening the company's capital structure and fifth, promoting a corporate culture centered on taking pride in our transformation resulting in enhanced employee morale and productivity.
Speaker Change: The early evidence that this transformation plan is gaining traction and credibility is the series of transactions we announced last week to improve the company's capital structure.
Speaker Change: Sure the breaches that already occurred for the quarter ended January 31st.
Speaker Change: And agreed to suspend certain financial covenant testing till after the quarter ending October 31 2025.
Speaker Change: I would like to emphasize that gaining the support of our lenders and creditors and these transactions was the result of demonstrating that each element of our transformation plan has merit.
Speaker Change: Why you would see evidence of the progress of some of these initiatives and the results discussed today, we do anticipate we will be showing even more demonstrable progress on each of the pillars of our transformation plan in the coming quarters.
Speaker Change: Before we discuss the specific business units and recent developments I want to comment briefly on our previously disclosed process to broadly explore strategic alternatives.
Speaker Change: As an update we have engaged imperial capital.
Speaker Change: Review of strategic alternatives for the terrestrial and wireless business and we have engaged TD Cowen for the review of strategic alternatives for the rest of the company, including the satellite and space business.
Speaker Change: We will provide updates on these processes only it's been when we have something specific to share.
Now ill provide some comments on our business yet.
Speaker Change: Our satellite and space business has underperformed in recent quarters has been in need of a turnaround.
Speaker Change: Daniel Kaczynski was appointed President of this business on November 19th 2024, and he's doing a great job of addressing historic issues that have undermined performance and is developing a new approach to optimize the business and drive future profitability and value <unk>.
Speaker Change: Some examples of this new approach include.
Speaker Change: Number one offering a refocused product portfolio that emphasizes differentiated higher margin offerings.
Instituting clear lines of accountability, resulting in more effective operational discipline.
Speaker Change: Third implementing more disciplined approval policies for purchasing and inventory management.
Speaker Change: Fourth highlighting customer value proposition, enabling improved pricing and terms.
Speaker Change: Yeah.
Speaker Change: Adding strong product management capabilities to ensure alignment among engineering product quality and customer expectations.
Speaker Change: Eliminating slow moving and low margin skus.
Speaker Change: And seventh launching next generation products with validated customer demand.
Speaker Change: Positive impact of <unk>.
Speaker Change: These actions are already bearing fruit.
That's starting to be reflected in the second quarter results that Mike will describe shortly.
Speaker Change: As further validation of our progress on March 10, we announced that our customer L. Three Harris awarded Comtech sole source contracts in excess of $26 million for advanced next generation anti Jam modems supporting the U S Army and the U S Air Force.
Speaker Change: Daniel will provide further details on how all of these actions are better positioning the satellite and space business going forward.
Speaker Change: The terrestrial and wireless business continues to perform well.
Speaker Change: And is poised for growth due to the planned launch of new cloud based emergency response products and increased interest from international carriers Roundup proven five G location technologies PNW generally performed in line with our expectations for this quarter, while the reduced level of performance was prime.
Speaker Change: Merrily attributed to a one time implementation delay in Q2 as well as the quarterly variations and deployment timing and sales cycles. We remain confident in the position of this business and strong backlog and continue to take steps to enhance its strategic potential.
Speaker Change: Now before I turn the call over to Mike to go through the financials I wanted to take a moment to talk about our corporate culture.
Speaker Change: The contact organization has had a challenging run over the past few years.
Speaker Change: Now it has been difficult and frustrating for all of our employees, but it is really gratifying to see.
Speaker Change: Corporate culture, starting to bright as employees are increasingly taking pride in the positive trajectory toward a stronger and healthier and healthier future for comtech.
Speaker Change: I am proud to lead the Comtech organization and I Hope every employee partner and stakeholder shares and my enthusiasm embarking on the journey for successful future for Comtech, Mike is going to review context finances, now followed by Daniel Ingests discussion of the business segments daily.
Speaker Change: Have some closing remarks, and then we will open the call for questions.
Speaker Change: Mike.
Mike: Thank you Ken before getting into the detailed results I would like to first summarize this past quarter for you.
Mike: Overall, our GAAP results were significantly better sequentially than our first quarter of fiscal 2025.
Mike: While this reflects a meaningful operational improvements it is primarily due to the fact that the first quarter included several large noncash charges and write downs, which did not repeat in this more recent quarter.
Mike: The T N W segment continues to perform well and our satellite and space Communications segment reported significantly improved results on both its top and bottom lines.
Mike: While we are encouraged by the results. We believe the transformation plan that Ken described will be key to achieving further improvements now.
Mike: Now, let's turn to the key metrics for this past quarter.
Mike: Consolidated net sales were $126 6 million compared to $134 2 million, a year ago and $115 $8 million in Q1 of fiscal 2025.
Mike: Net sales in both segments were lower this past quarter relative to the prior year period.
Mike: Compared to last year net sales in our satellite in space segment. During Q2 reflected lower net sales of our triple scatter solutions offset in part by higher net sales of our Satcom solutions and satellite ground infrastructure solutions.
Mike: As discussed in our prior earnings call in fiscal 2024 within our truckload scatter product line. Our next generation trouper scatter contracts with the U S. Marine Corps and Army, we're in full swing with respect to procurement and manufacturing to it.
Mike: These contracts have significantly progressed, allowing us to begin invoicing and collecting on the unbilled receivables that we had built up in fiscal 2024.
Mike: Collectively these two programs accounted for approximately $11 million quarter over quarter reduction in net sales.
Mike: During Q2 of last year, we also had a large sale of triple geared to an international customer, which did not repeat this quarter and which accounted for approximately $7 million of the decrease in net sales.
Mike: As for offsetting increases in net sales during the more recent quarter as compared to last year satellite and space experienced an uptick in equipment sales to the U S. Army during the period for example, under the VSAT three idea IQ contract as well as from the delivery on an equipment order previously received under the U S Army.
Mike: <unk> contract when it was not under protest.
Mike: Net sales in the satellite space segment was $73 $7 million in the second quarter, a 25% sequential increase driven primarily by higher sales of Satcom solutions to the U S Army.
Mike: Importantly, our operational improvement initiatives have shown appreciable progress as reflected in our segment margins, which also increased sequentially.
Mike: Net sales in the TWC segment with.
Mike: With $52 $9 million, a decrease of 5% from the prior year.
Mike: And a decrease of 7% from last quarter.
Mike: This is primarily due to the repositioning to sell our <unk> and related location based solutions internationally.
Mike: The timing of our performance on statewide and gene iron one and coal handling contracts.
Mike: Specifically compared to last year, our T. N W results reflect lower net sales of our location based solutions and next Gen. On one services will set in part by higher sales of our coal handling solutions.
Mike: Consolidated net.
Mike: Long term contracts within our <unk> segment in prior periods, which were not expected to repeat this quarter.
Mike: Our consolidated book to Bill ratio, a measure defined as bookings divided by net sales for the three months ended January 31, 2000, 25.63 and was roughly the same ratio for each of our segments.
Mike: Context consolidated gross margins for the quarter were 26, 7% compared to 32, 2% in the second quarter of fiscal 'twenty four gross profit in the more recent quarter significantly improved from the 12, 5% reported in the immediately preceding quarter.
Mike: Due in part to an $11 $4 million noncash charge in the first quarter of fiscal 2025, and the SNF segment related to the write down of inventory.
Mike: Consolidated operating loss was $10 $3 million in the second quarter compared to operating income of $3 million in the prior year period.
Mike: Operating loss in the more recent quarter significantly improved from the $129 $2 million operating loss reported in the immediately preceding quarter due in large part to a $79 $6 million noncash charge in the first quarter of fiscal 2025, and the SNF segment related to the impairment of goodwill.
Mike: As explained in more detail and reconciled in our Form 10-Q for the quarter, we utilize a non-GAAP measure that we referred to as adjusted EBITDA.
<unk> adjusted EBITDA was $2 $9 million in the second quarter compared to adjusted EBITDA of $15 $1 million in the prior year period.
Adjusted EBITDA in the more recent quarter significantly improved from the adjusted EBITDA loss of $19 $4 million in the immediately preceding quarter due in large part to a $17 $4 million noncash charge in the first quarter of fiscal 2025 in the SNF segment related to a fully reserving for an unbilled receivable.
Mike: Turning to the balance sheet as Ken highlighted in his remarks, we amended our credit facility and subordinated credit facility to among other things waive all the folks specifically the net leverage ratio and fixed charge coverage ratio.
Mike: Suspend testing of these covenants until October 31 2025.
Mike: Reduced the interest rate on the term loan by 470 basis points on the and on the revolver alone 215 basis points.
Reduced the minimum quarterly average liquidity requirement from $20 million to $17 $5 million and allow for the new $40 million capital infusion in the form of subordinated debt from existing holders of our convertible preferred stock and subordinated debt.
Mike: Oh, the subordinated debt proceeds received $27 3 million and $9 1 million, respectively net of fees and closing costs were immediately used to prepay without penalty a portion of the term loan and revolver loan outstanding under the credit facility with $3 $2 million of the revolver loan repayment, representing a permanent reduction.
Mike: <unk> and commitment related to the revolver alone.
Through the combination of reduced debt balances and lower interest rates, we anticipate saving approximately $5 million in near term cash interest expense related to the credit facility.
Mike: As of March 10, 2025 are qualified cash and cash equivalents were 21 5 million total outstanding borrowings under the credit facility were $168 million of which $23 4 million was drawn on the revolver.
Mike: Total outstanding borrowings under the subordinated credit facility, excluding accreted interest was $65 million and available sources of liquidity approximated 27 4 million.
Consisting of both qualified cash and cash equivalents as well as the remaining portion of the committed revolver.
Mike: As for our consolidated Unbilled receivables, we were successful this past quarter and lowering such investments in working capital decreasing down from $112 million as of October 31, 2024 to <unk> $86 million as of January 31, 2025.
Mike: With respect to cash flows during the three months ended January 31, 2025, we had roughly breakeven operating cash flows cash flows during the more recent period were approximately $20 million better than our first quarter of fiscal 2025.
Mike: The operating cash flow for the quarter includes close to $6 million in aggregate.
Mike: Payments for restructuring costs, including severance and CEO transition costs and proxy solicitation cost.
Speaker Change: Now, let me turn the call over to Daniel Daniel.
Daniel Kaczynski: Thanks, Mike.
Daniel Kaczynski: First I want to underscore <unk> comments about organizational improvement simplifying the segment structure is a top priority.
Daniel Kaczynski: Our employees have embraced the clear lines of accountability that the new structure enabled.
Theres a direct connection between the <unk> segment's progress on Logan margins and our operational improvements.
Daniel Kaczynski: 10, plus percent reduction of segment staff and product rationalization.
Daniel Kaczynski: Alongside these organizational changes we've addressed the policies and processes to ensure the purchasing and inventory management, a well coordinated and subject to appropriate reviews.
Daniel Kaczynski: Our plan is having a positive effect.
Daniel Kaczynski: Regarding product rationalization, we are migrating customers to modern products and discontinuing products with negative or no gross margin.
Daniel Kaczynski: Those discontinued products represented less than 10% of <unk> revenue over the trailing 12 months.
Daniel Kaczynski: The wind down of our Shareable antenna business is also being finalized.
Daniel Kaczynski: A separate initiative underway in the <unk> segment has been to adjust our go to market process. As a result, we have seen early success in negotiating more favorable contract terms, leading to better management of working capital in the future as we cycle out older contracts from backlog.
Daniel Kaczynski: We continue to monitor the ongoing stock work related to our next generation Triple scatter contract in support of the U S. Marine Corps and while we do not have any material updates relative to our previous disclosures in our SEC filings, we anticipate learning more in the near future.
Daniel Kaczynski: In closing our ethanol segment delivered meaningful top and bottom line improvement in Q2. These improvements resulted directly from a shift in corporate culture and accountability that has reinvigorated the organization.
Daniel Kaczynski: <unk> tremendous efforts by our employees to take ownership of their projects and be accountable for performance at a local level.
Daniel Kaczynski: These operational improvements benefit not only our financial performance, but our customer satisfaction and confidence.
Daniel Kaczynski: We recognize there's more to do and we will continue to drive good decision, making cost reduction and rationalization throughout the organization.
Daniel Kaczynski: I'll now turn it over to Jeff to discuss our terrestrial and wireless segment.
Daniel Kaczynski: Jeff.
Jeff: Thanks Dana.
Overall, our terrestrial wireless performance has met our expectations for Q2.
Jeff: Given the public safety and care technologies entail long sales cycles, large backlogs and multiyear contracts.
Jeff: Pearsons of our tw bookings can fluctuate from quarter to quarter.
Jeff: As a reminder, CDW has three divisions first C.
C L T.
Jeff: This division focuses on wireless carriers network solutions related to location emergency notification and messaging <unk>.
Jeff: <unk> five G cloud based location services.
Jeff: Really gaining traction with global wireless carriers.
Second.
Jeff: S T E.
Jeff: Our largest in terms of revenue.
Jeff: This serves as the core Oh next generation Matawan networks. We currently support 11 states in multiple regions in the United States with plans to expand to additional states and regions soon.
Jeff: Third C S T or solar com the fastest growing division serves local dispatch centers with hosted and local applications for managing emergency responses.
Jeff: Enormous S. T Division, we were recently notified of a Nextgen now unrelated award.
Jeff: And then contract negotiations with the state in the southeastern part of the United States and estimated to be worth north of $25 million over five years.
Jeff: With such a broad network of mission critical customers, we're developing a plan to leverage our nationwide scale to reduce significant network expenses by interconnecting various jurisdictions and offering new customers enhanced redundancy options to adjacent regions and data centers.
Jeff: Along with our development efforts. This focuses on bringing more core nextgen one technologies in house, reducing our reliance on third parties and improving our gross margins across existing and new customers.
Jeff: And our CLC Division, we booked one of a series of anticipated purchase orders with Vodafone.
Jeff: Beginning in the United Kingdom.
Jeff: Currently negotiating the statement of work, which will likely expand beyond this initial region potentially adding 30, plus more with this global wireless carrier overtime.
Jeff: This award directly relates to our new location based solutions developed for a major U S carriers, which we are focused on selling internationally.
Jeff: We expect other U K based wireless carrier orders as they work to meet regulatory or regulatory requirements around location technologies.
Jeff: In Q2, we also saw significant interest from major Canadian wireless carriers, which we're hopeful will translate into orders booked into the future.
Jeff: Our C. L. T Division also recently secured a unique application using our location based technologies to serve Polaris for continued support of their motorcycles and off road vehicles. This award represents a five year contract valued at approximately $8 million.
Jeff: As for C. S T silicon.
Jeff: It continues to be our fastest growing segment.
Jeff: Our CST division is diligently developing our next generation secure cloud based 911 call handling platform, which when launched is expected to grow our competitive position not only in North America, but also globally for emergency response.
Jeff: That's for other updates in CST. The U S. Navy support contract has been extended and an entire eastern Canadian Province has initiated a significant change order and our partner in Australia Telstra.
Jeff: It is a substantial technology refresh older order.
All of which we believe bodes well for our coal handling business with that I'll turn it back to Ken for some final comments.
Speaker Change: Thank you, Jeff I wanted to close with a brief summary the.
Jeff: The performance in the second quarter of 'twenty five.
Jeff: It reflects the initial impact of our transformation plan.
Jeff: To recap the elements of our transformation plan our <unk>.
Jeff: Number one, earning the trust of all key stakeholders with transparency accountability and delivering on our promises.
Jeff: Number two.
Proving operational discipline and reducing the cost structure.
Jeff: Third supporting the growth and development of successful high margin business initiatives.
Jeff: Conducting a broad review of strategic alternatives.
Fifth strengthening the capital structure and finally, six promoting a corporate culture that is centered on taking pride in our transformation, resulting in enhanced employee morale and productivity.
Jeff: We are delighted that we have already succeeded in strengthening the capital structure with our recently announced capital infusion coupled with the amendments to the credit agreement and we do believe this is a validation of the trust and confidence of our lenders and creditors have the merits and early results of our transformation plan.
Jeff: Matt.
Speaker Change: Operator, please open the call to questions.
Speaker Change: Certainly at this time, if you would like to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue at any time by pressing star two.
Speaker Change: Once again that is star one to ask a question.
Greg Burns: We will go first to Greg Burns with Sidoti <unk> company.
Greg Burns: Good afternoon.
Greg Burns: Okay.
Speaker Change: Can you just talk about maybe the progress you're making in terms of.
Speaker Change: Cost optimization in the satellite business.
Speaker Change: How far along are you in that process is it all reflected in this quarter's results or is there more.
Speaker Change: To be gained in coming quarters.
I'm I'm going to start.
Speaker Change: Greg and then I'll turn it over to Daniel for some more specifics so.
It's a continuous process. So you know we announced the transformation plan on January 13th now there were there was some work that was taking place before that to.
Speaker Change: To start reducing the cost structure, but this is an ongoing process and we are it's not just about reducing cost it's about being more efficient in how we operate and be more targeted in the business that we choose to take on and what we choose not to take off.
Speaker Change: Historically this company has.
Speaker Change: Taking on very low margin and frankly in some cases negative gross margin business, we need to be better at assessing what our cost is going into a job pricing it appropriately and taking it on so it's not just about.
Reducing cost, it's an element of it but it's about running the business more efficiently and targeting business opportunities, where we can justify appropriate gross margins.
Daniel: Daniel you want to add anything to that.
Daniel: Absolutely. So I think a couple of points worth mentioning here first as Ken mentioned this process is ongoing and something that we'll continue to.
Daniel: Fully evaluate.
Certainly.
Daniel: Many of the cost reduction efforts that have already been deployed were accomplished during our second quarter and so.
Daniel: There is a partial benefit thats reflected in there for some of those.
Daniel: But the product rationalization process and the effort to.
Daniel: Move into some higher margin areas are a kind of a continuing ongoing effort.
Daniel: We are in the process today still working through some of the committed backlog on existing products and existing contracts.
Daniel: That we are.
Daniel: Have some additional time to pro forma dry as well.
Okay. Thanks, and then maybe in terms of.
Daniel: You know looking forward and and targeting maybe some.
Some are higher margin.
Daniel: Business.
You announced the $26 million.
Order with L. Three.
Daniel: <unk> M modems.
Speaker Change: Could you just maybe talk about maybe some of these higher margin programs that you're that you've been doing development work for over the last maybe year or two that are now potentially going into production. This year what should we.
Daniel: Think of looking forward in terms of.
Opportunities.
Speaker Change: For.
Speaker Change: Growth in some of these.
Speaker Change: Areas, where you've been doing development work.
Again, I'll start and.
Daniel Kaczynski: Daniel can add if he likes.
Speaker Change: No.
Speaker Change: We're not going to comment on gross margins of any particular job I assume you can appreciate that.
Speaker Change: But the company's aggregate gross margins had been weighted down.
Speaker Change: Bye.
Speaker Change: And the incorporation of it frankly inappropriate jobs.
Speaker Change: And we are going to be more selective so when you see our gross margin.
Speaker Change: Going forward, we are hoping that it will improve partly as a result of improved product mix.
Speaker Change: We are.
Speaker Change: Deliberately not going to accept jobs going forward as the company has done in the past that are.
Speaker Change: Very low thin or even negative gross margins.
Speaker Change: So that in and of itself is going to improve the mix.
Speaker Change: The other thing I'll add to that is we are going to do a better job.
Speaker Change: Of <unk>.
Speaker Change: Leveraging our differentiated and proprietary technologies and providing.
Speaker Change: <unk> service to our customers that enable us to solve our customer problems.
Speaker Change: And where we can deserve better gross margins didn't what the company is charged for similar programs in the past, but as.
Speaker Change: We provide a better more differentiated solution, we do deserve improved gross margins.
Daniel: Daniel do you want to add to that.
Daniel: I think I agree with those points.
Daniel: On atrium, specifically certainly you know, we're very pleased to see a program that we've.
Daniel: It worked through the development phase over the past several years.
Daniel: Beginning to transition into production contract awards.
Daniel: I think it reflects the continued level of confidence from both our end users within the U S. D O D and other partners as well as with our direct customer at all three Harris.
Daniel: We're continuing to focus on delivering differentiated capabilities that offer meaningful understandable customer value that allows us to capture meaningful margins.
Speaker Change: Okay, and then just lastly.
On the cash flow and you're working through some of your own build receivables what do you think or what is your outlook for the cash cash flow in the second half of the year do you expect to be cash flow positive.
Okay.
Speaker Change: Okay.
Your actions, but Mike maybe you can give us some color on that.
Mike: Yeah, I was just going to say, we are probably not going to give any specific guidance on that Greg, but you know in terms of our trajectory on the Unbilled. We are working through and you can see each quarter chipping away.
Speaker Change: At the growth we had experienced last year.
Speaker Change: I think that coupled with our cost reduction initiatives, our focus on being mindful of our capex requirements. We are certainly having a view that we were trying to improve our cash position with profitable business going forward. So our expectation is we'll continue to do better, but we still have some more work to do.
Speaker Change: Alright, thank you.
Once again, if you would like to ask a question. Please press star one on your telephone keypad now.
Griffin: We will go next to Griffin boss with B Riley Securities.
Griffin Boss: Hi, good afternoon, Thanks for taking my questions I'd like to drill down on that.
Griffin Boss: Some of the questions. Greg just asked there with maybe a little bit more pointed question I'm curious just with the deliberate decision Q.
Griffin Boss: To not except low margin bookings your business, which I. Appreciate is there any color you can provide.
In terms of what you believe could be a sustainable margin profile for for space and satellite and GW in general not taking any specific programs on a on a go forward basis.
Griffin Boss: Assuming this you.
Griffin Boss: Asked and asked gets back to normal operations post restructuring you know that that that historically it was maybe a 10% EBITDA business team that'll be in maybe 20% just generalizing on perhaps.
Griffin Boss: Perhaps any more color on kind of a go forward basis with these new new bookings profile that you're targeting.
Griffin Boss: Okay.
Griffin Boss: Yeah.
Griffin Boss: We're not giving guidance so.
Griffin Boss: We do.
Griffin Boss: Aim to improve the gross margins through that.
Griffin Boss: Cost discipline.
Griffin Boss: <unk>.
Griffin Boss: Product mix and improved.
Griffin Boss: Product positioning that.
Griffin Boss: <unk> us to justify.
Griffin Boss: Better gross margins by delivering better value to our customers.
Griffin Boss: Where we're not in a position to give you.
Griffin Boss: Specific numbers on what that gross margin is at at.
Griffin Boss: At this time.
Griffin Boss: Yeah.
Griffin Boss: Okay understood.
Griffin Boss: So just shifting gear related to the unfavorable ruling.
After what I believe was the protest by the incumbent on GFS are I. Appreciate this this news occurred today, but is there just curious is there anything contact can do to to re protest this yourselves and even if sell it there is something you could do related to jet <unk> is that something that you even want to.
Griffin Boss: Spend time on at this time, given the low margin profile of that contract.
Griffin Boss: Good good question, we are considering it.
Griffin Boss:
Griffin Boss: As you know that.
Griffin Boss: We were alerted today.
Griffin Boss: The <unk>.
Griffin Boss: Decision.
We are well we are going to consider our options in light of the.
Griffin Boss: The.
Griffin Boss: Their decision on the protest there is room for us to respond.
Griffin Boss: But you know what.
Griffin Boss: As you also observed.
Griffin Boss: The margin is very low there as well.
Griffin Boss: So we.
Griffin Boss: We are considering our options.
Daniel Kaczynski: Daniel do you want to provide any further color on that.
Ken: Ken I think I agree with the summary, it's relatively fresh news at this point.
Speaker Change: There are a number of options available to us that we're in the process of evaluating.
Ken: Assessing at this point.
Speaker Change: Okay fair enough. Thanks for that and then maybe one more if I could just more broadly on <unk>, maybe for Ken or for Jeff.
Ken: Just curious if you had any.
Ken: Any commentary around the FCC released there are kind of meeting agenda floor. There Theyre meeting later in March and in it and it really highlighted their commitment to ensure <unk> 911 resilience and extensibility. Just curious if there was anything on that front that maybe you wanted to comment on or.
Ken: Anything in that that surprised you or are.
Ken: I appreciate your confidence in that part of the business going forward.
Yeah.
Jeff: Jeff do you want to take that question.
Jeff: Sure, Yes Griffin. Thank you for the question, Yes, we were anticipating the FCC's agenda coming out there's really.
Jeff: Two key things there they are exciting for us one theres a focus on location accuracy since we.
Jeff: Are the key supplier to wireless carriers for location accuracy.
Jeff: It really helps our business and gives us some opportunity there within the carriers themselves. They specifically call out Z access which is the.
Jeff: The floor someone's on when they dial emergency so thats also something we are.
Jeff: We do and offer two wireless carriers.
Jeff: But the second part to your point as they also talked about Nextgen now one resiliency.
In the agenda, and it's kind of what I talked about in my prepared comments as we interconnect the networks, adding additional resiliency to the network.
Jeff: Something we're looking at doing in the FCC's.
Jeff: Just kind of enhancing that.
Mandate and looking for.
Vendors comment on so we will be preparing.
Jeff: Some replies and comments for them and some recommendations along that but we're already.
Jeff: Doing that and anticipated there their move there so both where we thought were very favorable for our business at tw.
Speaker Change: Great. Thanks for that color, Jeff and thanks to everyone for taking my questions appreciate it.
It appears that we have no further questions at this time I will turn the program back over to Mr. Ken Shah for any additional or closing remarks.
Speaker Change: Thank you operator.
So those of you who are attending the fast show in D. C. This week, we hope you find the chance to stop by our Booth and beat some of the Comtech team members.
Speaker Change: We really look forward to speaking with you all on our next earnings call for fiscal Q3. Thank you all very much and have a good evening.
Speaker Change: Thank you. This concludes today's program. Thank you for your participation you may disconnect at any time.
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