Comtech Telecommunications Corp. (NASDAQ:CMTL) Q4 2023 Earnings Call Transcript

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We anticipate having more to share prior to announcing our first quarter fiscal 2024 results. Overall, I am pleased with the significant progress being made with respect to strengthening our balance sheet. Such efforts, combined with optimizing our cost structure and improving business operations, provide a solid foundation as we look ahead to our ongoing transformation in fiscal 2024. Let me emphasize that the initiatives we have launched and the actions we are taking are working. Simply put, the improvements to our business processes and the increased attention to risk management and process discipline as we implement common systems and platforms across our enterprise have significantly enhanced our ability to identify and exploit synergies, increase cross-collaboration and optimize business execution across the entire organization.

Meanwhile, as I shared moments ago, focusing on the differentiated expertise and the diversity of perspective of our people, collaborating with our customers like never before, and leveraging our unique culture of innovation and technology leadership is resulting in our winning significant strategic new business and strengthening our core market positions and enabling us to expand into new market adjacencies in ways that validate that our One Comtech transformation is truly working. Simply put, we’re securing significant strategic enduring wins and I think there’s more coming, but for now let me highlight a few: the award of the Global Field Service Representative contract from the U.S. Army with an expected value of $544 million; the award of the Enterprise Digital Intermediate Frequency Multi-Carrier, or EDIM, modem contract from the U.S. Army for $48.6 million, plus what we believe could be full-rate production potential of over $1 billion based on the U.S. government’s prior fielding of the legacy EBEM modem; an award from the U.S. Army for our next-generation troposcatter systems with an initial contract value of $30 million; building upon our March 2020 contract award to design, deploy and operate a next-generation 911 system for the state of Ohio, $21 million of initial funding on this contract that we believe could be worth approximately $85 million over its lifespan; and being named one of multiple awardees on the Defense Logistics Agency, or DLA, Gateway to Sustainment, indefinite delivery, and indefinite quantity, multiple award contract with a ceiling value of $3.2 billion.

These are very significant wins that are a direct result of our business optimization initiatives, our improved enterprise-wide synergy and collaboration, our improving business processes, discipline, and the focus on our strategic growth priorities. These wins also validate our progress toward becoming One Comtech, an industry leader in technology, innovation, and listening to our customers to create the solutions they most value. Through our GFSR award, with an expected value of $544 million, we have been selected to provide critical, ongoing communications and IT infrastructure support for the Army, Air Force, Navy, Marine Corps, and NATO, enabling U.S. and coalition forces to maintain robust, resilient, and secure connectivity for global all-domain operations.

Comtech’s professional engineering services, our innovation and our extensive portfolio of blended software-defined smart-enabled technologies were critical to our success in winning this business, which will help the DoD and coalition partners maintain information advantage in virtually any environment. While currently under protest by the former incumbent, we believe such protest will be resolved in our favor and we expect the contract to meaningfully contribute to our second half of fiscal 2024 and beyond. Separately, we were awarded a $48.6 million contract by the United States Army to design and deliver new EDIM modems that support U.S. DoD satellite communications, digitization, and modernization programs. Comtech will design, develop, test and deliver EDIM modems and provide hardware, software and sustainment services to support performance enhancements for EDIM solutions over time.

Our EDIM modems are designed to support unique U.S. Army and Tri-Service requirements, meaning they can also be used for other branches of the Department of Defense looking to leverage next-generation SATCOM capabilities. Comtech’s EDIM modems are expected to replace the Enhanced Bandwidth Efficient Modem, or EBEM, currently supporting Army, Navy and Air Force SATCOM users, and it will replace it with an advanced digital and software defined platform. There are currently tens of thousands of these legacy EBEM modems fielded today and we expect to see replaced as part of this and related efforts. And we feel that the transition to digital SATCOM architectures offers a meaningful advantage that will encourage our customers to expand EDIM adoption well beyond the current EBEM footprint.

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