Comtech Telecommunications Q3 Earnings Call Highlights

Key Points

• Comtech said it will sell most of its Satellite and Space Communications business to Gilat for $157.5 million, using the proceeds mainly to reduce debt and sharpen its focus on public safety technology through Allerium.
• The company posted Q3 net sales of $106 million, down from $126.8 million a year earlier, but gross margin improved to 34% as it phased out lower-margin business and streamlined operations.
• Management said the turnaround is gaining traction, citing a fifth straight quarter of positive operating cash flow and about $50 million of available liquidity, while noting that Allerium revenue was broadly stable excluding a prior-year billing benefit.

Comtech Telecommunications NASDAQ: CMTL said its fiscal third-quarter results reflected continued progress in its turnaround plan, as the company announced an agreement to sell most of its Satellite and Space Communications business to Gilat for $157.5 million and refocus around its public safety technology business, Allerium.

Chairman, President and CEO Ken Traub described the transaction as a “defining milestone” for the company and said it followed a broader strategic review process intended to strengthen Comtech’s balance sheet and sharpen its strategic focus. Traub said the company has been executing against a four-part transformation plan centered on operational discipline, positive operating cash flow, strategic alternatives and capital structure improvements.

“Comtech is today a dramatically improved company,” Traub said, citing a streamlined cost structure and improved execution. He said the company reported its fifth consecutive quarter of positive operating cash flow and maintained approximately $50 million of available liquidity.

Comtech to Focus on Allerium After Satellite and Space Sale

Traub said the sale of most of the Satellite and Space Communications segment would do more than generate cash and reduce debt. He said it would allow Comtech to align its organization around Allerium, which provides public safety and emergency communications technologies.

Allerium’s portfolio includes Next Generation 911 call handling, location-based services, messaging, data management and AI-enabled capabilities, according to management. Traub said the company plans to execute a transition plan over the next several months while awaiting regulatory approval for the Gilat transaction.

“Upon closing, our transition to Allerium will mark the beginning of an exciting new chapter,” Traub said, adding that Comtech expects to focus investment and innovation on public safety technologies as the market shifts from traditional voice-based systems toward data-centric communications and real-time coordination.

Jeff Robertson, President of Allerium, said public safety response is moving beyond voice toward data, real-time decision-making and more complex coordination. He said Allerium is positioned across the emergency response ecosystem, from device location to systems, networks and data that support emergency assistance.

Third-Quarter Revenue Falls, Gross Margin Improves

CFO Michael Bondi said Comtech reported third-quarter net sales of $106 million, down from $126.8 million in the prior-year quarter. The decline reflected the company’s decision to phase out certain low- or no-margin revenues in the Satellite and Space Communications segment.

Gross profit was $36.1 million, or 34% of net sales, compared with $38.9 million, or 30.7% of net sales, a year earlier. Bondi said the higher gross margin reflected changes in product mix, operational improvements, streamlined product lines and lower cost structures.

Comtech reported an operating loss of $3.1 million, compared with an operating loss of $1.5 million in the prior-year period. Bondi said the quarter included $4.6 million of amortization of intangibles, $2.4 million of restructuring costs and $1.2 million of non-cash stock-based compensation amortization. Excluding those items, consolidated operating income would have been $5.1 million, or 4.8% of net sales, he said.

Adjusted EBITDA was $8.2 million, or close to 8% of net sales, compared with $12.6 million a year earlier. Bondi noted that the prior-year period benefited from a $3 million retroactive billing event in Allerium that did not recur.

Net bookings were $70.5 million, producing a book-to-bill ratio of 0.67, compared with $71 million and a book-to-bill ratio of 0.56 in the prior-year period. Operating cash flow was positive $6.1 million, compared with positive $2.3 million a year earlier.

Segment Results Show Lower Satellite Sales, Stable Allerium Revenue

Satellite and Space Communications net sales were $50.3 million in the quarter, down from the prior year as Comtech moved away from certain low-margin and working-capital-intensive revenues, including the VSAT Satellite Systems and Services contract. Segment operating income was $1.6 million, compared with $2.7 million a year earlier. Adjusted EBITDA was $4.1 million, or about 8% of segment net sales.

Daniel Gizinski, President of the Satellite and Space Communications segment, said Gilat is a “natural home” for the business and said the segment’s priorities during the period between signing and closing are to support customers, meet existing commitments and maintain operational discipline.

Gizinski said the segment received several notable awards during the quarter, including more than $7 million for rapidly deployable Troposcatter systems for an international government end customer, about $6 million for ongoing training and support of cybersecurity operations for U.S. government customers, and about $4.9 million for antenna-related equipment for a U.S. government end customer. He also said Comtech received more than $10 million in orders after quarter-end to develop and deliver initial prototypes for extremely high frequency, low Earth orbit satellite communications equipment.

Allerium reported net sales of $55.7 million, down $5.9 million from the prior-year quarter. Excluding the prior-year $3 million retroactive billing event, Bondi said Allerium revenue was consistent with the year-earlier period. Allerium operating income was $4.4 million, and adjusted EBITDA was $10.4 million, or about 19% of segment net sales.

Robertson said third-quarter Allerium awards included about $6 million of additional funding related to a renewal of Next Generation 911 services for a customer in the Midwest, $2 million from a domestic Tier-1 mobile network operator for web-based mobile network services, and more than $1.6 million from another domestic Tier-1 mobile network operator.

Proceeds Expected to Reduce Debt

Bondi said Comtech expects net cash proceeds from the sale of most of the Satellite and Space business to be approximately $143 million to $145 million. Under existing credit facilities, 65% of the net proceeds will be used to prepay most of the company’s senior secured credit facility, while 35% will be used to prepay subordinated debt, beginning with the subordinated priority term loan.

Comtech also amended its credit facility and subordinated credit facility on June 14, 2026, further suspending testing of the net leverage ratio, fixed charge coverage ratio and minimum EBITDA covenants until the four-quarter period ending July 31, 2027.

During the question-and-answer session, Traub said all stakeholders agreed that the Gilat transaction is not a change-of-control event and does not trigger liquidation preferences in the preferred stock. He also said Comtech will retain cyber operations and a small services business with about $20 million in revenue and approximately $3 million of EBITDA contribution.

Traub said the company expects to emerge with “a really clean and healthy capital structure” after applying proceeds and addressing remaining debt. Robertson said Allerium’s future growth will depend in part on using scale to improve margins and expanding its role in emergency response workflows.

About Comtech Telecommunications NASDAQ: CMTL

Comtech Telecommunications Corporation NASDAQ: CMTL, founded in 1969 and headquartered in Melville, New York, is a leading global provider of advanced communications solutions. The company designs, develops, and deploys equipment, systems, and services that enable secure and reliable transmission of voice, video, and data. Over its history, Comtech has built a reputation for innovation across satellite communications, wireless data systems, and public safety networks, serving both commercial and government customers worldwide.

Comtech operates through two primary business segments: Commercial Solutions and Government Solutions.

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