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

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We believe this EDIM award also means that Comtech’s modems are at the heart of the Department of Defense’s move to digitized hybrid satellite network architectures. And it puts us in an advanced competitive position as DoD and coalition force communications capabilities are upgraded and modernized. In July, we announced that our market-leading next-generation troposcatter systems were selected by the U.S. Army to support tactical communications and modernization needs in a contract award worth $30 million. Here again, our commitment to innovation and technology leadership drove our success. We believe that our next-generation software-defined troposcatter family of systems represent up to a thousand-fold performance improvement over prior generations.

And with the most troposcatter systems deployed in the world today, we are a clear market leader in a technology with a rapidly expanding set of defense and commercial global market applications. Let me take a minute to share just one example of the potential for expanded applications of our next-generation troposcatter systems. Following broad-scale natural disasters such as hurricanes, communications infrastructure has often heavily impacted. As Hurricane Ian, a category 4 storm, made landfall in southwestern Florida in September 2022, the Federal Communications Commission noted close to 18% of cell sites in Florida were out of service, with some counties seeing over 82% of cell sites out of service. This means millions of Floridians lost access to their cell phones, landlines, home internet, cable, or a combination of those, both during and in the aftermath of the storm, not to mention access to 911 emergency life-saving services.

Because of these outages, emergency responders could not communicate with their residents in life-threatening situations. Now, troposcatter is unique and that it doesn’t rely on the purchase of satellite capacity, and inclement weather, which can interfere with satellite and microwave signals, doesn’t have a negative impact on troposcatter signals at all. In fact, bad weather actually enables troposcatter to perform better. In natural disaster scenarios like Hurricane Ian, our next-generation troposcatter systems hold the potential to provide a new mechanism for states’ emergency service providers and global communities to sustain resilient and reliable communications infrastructures when it matters most. This is just one application we’re excited about and we see other potential commercial opportunities for our troposcatter systems as we continue to integrate and expand our capabilities within the portfolio.

Finally, the U.S. Army troposcatter win also validates our recently instituted capture and pricing process improvements and underpins the value of our cost reduction actions and improved program management discipline. In July 2023, we were very excited to finally have received our long-awaited initial funding of $21 million under our next-generation 911 contract with the state of Ohio. This contract, originally awarded to us in March of 2020, has a total expected value of approximately $85 million, and is anticipated to start contributing meaningfully to our net sales in fiscal 2025 and beyond. And finally, in April 2023, Comtech was selected as one of multiple awardees under the Defense Logistics Agency Gateway to Sustainment, indefinite delivery, indefinite quantity, multiple-award contract with a ceiling value of $3.2 billion.

This award enables the U.S. Department of Defense and other U.S. government customers purchase a wide range of our capabilities and services in support of the Command, Control, Computers, Communications, Cyber, Intelligence, Surveillance, and Reconnaissance, or C5ISR, operations. Taken together, we believe these significant strategic contracts demonstrate Comtech’s steadily improving performance across every facet of our business, and we intend to continue winning more strategic and enduring contracts that validate our ability to continue up-tiering our solutions and services to solve some of the toughest networking and communication challenges the world is facing today, as well as addressing the many challenges we anticipate in the future.

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