Comtech Telecommunications Corp Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Greg Burns - Sidoti & Company - Analyst : Good afternoon. The strategic review process for the terrestrial business, can you maybe give us a little bit more color on the timing of when you expect that to be completed? What kind of process is being run? Is it open? Or are you dealing directly with specific interested parties? And then assuming some transaction is completed, what do you foresee the capital structure of the stand-alone satellite business looking like? Do you expect to buy back all the debt and call the preferreds and be left with a clean balance sheet? Thank you.

Question: Greg Burns - Sidoti & Company - Analyst : The capital structure. Do you expect to be able to pay, like, is your goal to pay down all the debt and buy back or call the preferreds?

Question: Greg Burns - Sidoti & Company - Analyst : Okay. Could you just talk a little bit more about the margin headwinds that impacts this quarter? What was driving that from an operational perspective? And what you're doing going forward to avoid these types of situations where you run into these cost overruns and issues like this in the future?

Question: Greg Burns - Sidoti & Company - Analyst : Okay. And then I guess, looking forward, I guess, you had to take some bridge financing to get you through this quarter. You have some movement on the unbilled receivables. Like what's your line of sight on kind of converting those unbilled receivables? And I guess, your ability to -- going into the first quarter to maybe it's going to depend on a transaction with the terrestrial business. But if nothing is done, are you going to be able to generate enough cash or satisfy your obligations without taking on additional financing?

Question: Greg Burns - Sidoti & Company - Analyst : Okay, thank you. That's great.

Question: Joe Gomes - Noble Capital Markets - Analyst : Good evening. Thanks for taking my questions. I wanted to start out in your prepared remarks or in the shareholder letter, I guess I should say, you do talk about -- and Mike, you touched about it briefly about in the fourth quarter, how you scrubbed some of these estimates to complete different products. And I'm just wondering how much -- or what was the delta from what you originally had estimated as to now after this complete scrub, what is the change there? I mean, how big of a -- because it sounds like it was a pretty big change in your estimates. And I'm just trying to get some more color on that.

Question: Joe Gomes - Noble Capital Markets - Analyst : Okay. Thanks for that. And the TFSR contract, I was under the impression that you had finally got the approval to go ahead, but reading through the K last night, it appears that, that contract is still under protest. So just maybe give us a little more color on where that stands? When do you think you're actually going to get the opportunity to start fulfilling that contract and we can start seeing the impact of that on the results here?

Question: Joe Gomes - Noble Capital Markets - Analyst : Okay, thanks. And then just, if I'm looking at your R&D expenses, as a percent of revenues, you were 4.5% in '24, which was down from 8.8% in '23, which was down from 10.8% in '22. Are we underinvesting in R&D here at this point in time? Or is this we've completed some big programs that are R&D related and we're comfortable at this 4.5% of revenue level? Because it is a pretty big substantial decline over the past three years in terms of the amount of R&D that is being spent.

Question: Joe Gomes - Noble Capital Markets - Analyst : Okay, great. Thanks, sir. I'll get back in queue.

Question: Mike Crawford - B. Riley Securities - Analyst : Thank you, B. Riley Securities So absent further EACs, given that Q1 ends today, what type of revenue and gross margin should we expect in terms of a range for this quarterly period that ends today?

Question: Mike Crawford - B. Riley Securities - Analyst : And with these $124 million of unbilled or so that remain at July, what level should we look for those to decline to in this period that ends today? And what is the rough composition of those like versus troposcatter versus maybe software delivered to wireless carriers, et cetera?

Question: Mike Crawford - B. Riley Securities - Analyst : That's good to hear. You're doing a great job getting it delivered. And then just regarding margin, I know you have all of these additional legal and consulting costs associated with the decision to exit the one business, the strategic review, the proxy fight. But just when you get down to these modem, these digital modem development programs where you're getting kind of paid to develop them by your customers, but is there any reason to think that when you come out the other side of that into production that it's not going to be more close, similar to past margin experience?

Question: Mike Crawford - B. Riley Securities - Analyst : And I think you said A3M first. And maybe is that something that we could expect to start occurring in the second fiscal quarter ended January? Or when should we look for this transformation of that -- production to occur?

Question: Mike Crawford - B. Riley Securities - Analyst : Yeah. I'll just end with one final question on different topics. So now that the 10-K is filed, when would you, by statute, need to hold your AGM? And when do you expect to set a date for that?

Question: Mike Crawford - B. Riley Securities - Analyst : Okay. Alright, thank you very much.

Question: George Notter - Jefferies - Analyst : Hi there. I'm wondering if you can make any comments on the progress you're making in the potential sale of the terrestrial and wireless business. If I go back from memory, I think there were prior management teams that also, I think, looked at selling these assets. And I guess I'm just trying to handicap the likelihood of getting to a successful sale. I'm wondering how fresh this asset is on the marketplace.

Question: George Notter - Jefferies - Analyst : Got it. Also and then the other one I wanted to -- the Basingstoke facility, can you give us a sense for how much revenue and how much cost structure was associated with that business? Obviously, that will be coming out of the financials, but what would that look like?

Question: George Notter - Jefferies - Analyst : Can you tell us how many?

Question: George Notter - Jefferies - Analyst : Got it. Can you tell us how many people are in that business line? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 8:30PM, CMTL.OQ - Q4 2024 Comtech Telecommunications Corp Earnings Call

Question: George Notter - Jefferies - Analyst : Under five employees in that business.

Question: George Notter - Jefferies - Analyst : Okay, great. Thank you very much.