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Technology

Hardware

Comtech Telecommunications Corp.

Third Quarter 2023 Operating Results
Comtech continue to make progress under the One Comtech program during the quarter. Key financial metrics for the third quarter of fiscal 2023 include:
<div>
<ul>
<li>Consolidated net sales were $136.3 million, up 1.9% sequentially from the second quarter of fiscal 2023 and up 11.6% from the third quarter of fiscal 2022;</li>
<li>Gross margin was 31.7%, compared to 34.3% in the second quarter of fiscal 2023 and 38.2% in the third quarter of fiscal 2022;</li>
<li>GAAP net loss attributable to common stockholders was $9.2 million, and included $4.1 million of restructuring costs and $1.0 million of strategic emerging technology costs for next-generation satellite technology;</li>
<li>GAAP EPS loss of $0.33 and Non-GAAP EPS income of $0.11;</li>
<li>Adjusted EBITDA of $12.5 million, or 9.2% of consolidated net sales, a sequential increase from the $11.3 million, or 8.5% of consolidated net sales for the second quarter of fiscal 2023;</li>
<li>New bookings of $102.8 million and a quarterly book-to-bill ratio of 0.75x;</li>
<li>Backlog of $668.4 million as of April 30, 2023, compared to $702 million as of January 31, 2023 and $602.3 million as of April 30, 2022; and</li>
<li>Revenue visibility of approximately $1.1 billion.</li>
</ul>
</div>
<div>
The period-over-period increase in net sales was driven by the Satellite and Space Communications (SSC) segment. Net sales in the SSC segment were $82.2 million for the fiscal third quarter, as compared to $69.2 million last year, an increase of $13 million or 18.9%. The increase primarily reflects increased sales of troposcatter and SATCOM solutions, offset in part by lower sales of satellite ground station technologies, solid-state RF microwave high-power amplifiers and control components, and high reliability Electrical, Electronic and Electromechanical satellite-based space components. SSC segment adjusted EBITDA was $6.4 million, or 7.7% of revenue, compared to $5.4 million, or 7.8% of revenue, in the year ago period. This segment represented 60.3% of consolidated net sales for the three months ended April 30, 2023 as compared to 56.6% for the three months ended April 30, 2022. Net bookings in the quarter were $77.5 million, for a segment book-to-bill ratio for the three months ended April 30, 2023 of 0.94x.
Over at the Terrestrial and Wireless Networks segment, net sales totaled $54.1 million in the fiscal third quarter, as compared to $53 million in the year ago quarter, an increase of $1.1 million, or 2.1%. The higher net sales reflect higher sales of NG-911 solutions and services, offset in part by lower sales of trusted location and messaging solutions. Segment adjusted EBITDA totaled $9.2 million, or a 16.9% margin, in the quarter, compared to $9.7 million and 18.4%, respectively, last year. Terrestrial and Wireless Networks segment represented 39.7% of consolidated net sales in the just completed quarter, as compared to 43.4% for the three months ended April 30, 2022. Segment bookings were $25.2 million in the quarter, for a book-to-bill ratio for the fiscal third quarter of 0.47x.
Gross profit was $43.1 million for the three months ended April 30, 2023 versus $46.7 million in the same period last year. Third quarter 2023 gross profit margin was 31.7% as compared to 38.2% for the same period last year. The decline in margin reflects a higher proportion of lower margin Satellite and Space Communications sales, particularly sales of troposcatter and SATCOM solutions to the U.S. government. In addition, during the three months ended April 30, 2022, the Company recorded a lower provision for warranty obligations.
<div>Selling, general and administrative expenses were $31.4 million and $27.6 million for the three months ended April 30, 2023 and 2022, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 23.0% and 22.6% for the three months ended April 30, 2023 and 2022, respectively. During the just completed quarter, Comtech incurred $4.1 million&nbsp;of restructuring costs primarily to streamline operations and improve efficiency, including severance and costs related to the relocation of certain satellite ground station production facilities to the new 146,000 square foot facility in Chandler, Arizona. In the third quarter of last year, the Company incurred $1.6 million of such costs. Excluding restructuring costs, SG&amp;A for the three months ended April 30, 2023 and 2022 would have been $27.3 million, or 20.0%, and $26.0 million, or 21.3%, respectively, of consolidated net sales. The decrease in SG&amp;A expenses, as a percentage of consolidated net sales, is primarily due to the higher consolidated net sales. Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $3.9 million in the three months ended April 30, 2023 as compared to $0.9 million in the three months ended April 30, 2022.</div>
For the third quarter of 2023, consolidated net loss attributable to common stockholders was $9.2 million, or a loss of $0.33 per share, compared to a net loss attributable to common stockholders of $1.7 million, or a loss of $0.06 per share, during the three months ended April 30, 2022. On an adjusted basis, Comtech reported EPS of $0.11 compared to EPS of $0.25 last year.
Adjusted EBITDA for the quarter totaled $12.5 million, up from $11.2 million in the year ago period.
Balance Sheet
At the end of the quarter, the Company had $21.4 million of cash on the balance sheet, $155.3 million of long-term debt, down from $164.4 million of long-term debt at the end of the fiscal second quarter, and $3.75 million of current long-term debt, up from $3.1 million in the second quarter of 2023
During the quarter, the Company generated $16.6 million of cash flow from operations, with the majority of the cash flow generated from working capital improvements. We believe there could be additional upside from working capital improvements as the COVID impacted supply chain impediments continue to fade, enabling the Company to operate with a more normal level of inventory.&nbsp; 
 
Updated Projections
With an uncertain economic environment, we expect the near-term will remain&nbsp;challenging. However, we view the solid award level in the first half of the year as testament to the strength of the Comtech business, although we acknowledge the ongoing softness in the Terrestrial segment bears close watching. The Company&#8217;s end markets remain attractive and in the early stages of an upgrade cycle, while the convergence of the terrestrial and satellite markets could provide an even greater addressable market for Comtech. The management team has been strengthened and the new, state-of-the-art manufacturing facilities are now open. One Comtech has provided insight into opportunities to manage costs, streamline operations, improve efficiency, and accelerate decision making by eliminating management layers and other redundancies, the benefits of which we believe are beginning to accrue to the Company.
For the fiscal fourth quarter, we are projecting revenue to increase to $140 million, up 2.7% sequentially and up 10.2% year-over-year. We previously were estimating quarterly revenue at $138 million. We tempered our gross margin estimate to 32.5% from 36.0% previously given the mix shift. For SG&amp;A, we are projecting $4 million of restructuring costs. We estimate reported net loss of $8.2 million for the quarter, or a loss of $0.29 per share. On an adjusted basis, we estimate EPS at $0.21 for the quarter. Adjusted EBITDA is projected at $13.4 million, for an 9.6% margin. For the same period last year, Comtech reported a net loss of $6.8 million, or a loss of $0.26 per share, and an adjusted loss of $0.02 per share. Adjusted EBITDA was $12.7 million. 
 
For the full fiscal year 2023, we are projecting revenue of $541.2 million, a reported net loss of $36.8 million, or a loss of $1.31 per share, adjusted net income of $0.57 per share, and adjusted EBITDA of $48 million.
</div>

Comtech Telecommunications Corp. (CMTL)

Third Quarter Results Released

Fundamental Analysis:

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New Contract; Completed Sale (CMTL)

A Transformational Year (CMTL)

Major New Awards (CMTL)

New Contract Awarded (CMTL)

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