Comtech Reports Fiscal 2026 Results, Sales Fall to $249.6 Million

On Wednesday, Comtech Telecom (NASDAQ: CMTL ) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below. This content is powered APIs. S.

Army contracts. The company achieved a significant turnaround with positive operating cash flow of over $50 million since CEO Ken Traub's appointment, improving liquidity to $61 million. 5 million to reduce debt and focus on the Alerium public safety business. 6 million, reflecting higher gross profit and lower core SG&A expenses.

The company anticipates cost savings of $16-18 million annually post-transition, with a focus on enhancing Alerium's public safety and cybersecurity services, supported by strong recurring revenue and long-term contracts. Comtech's backlog increased to $520 million with a revenue visibility of $862 million, indicating a strong foundation for future growth. Leadership transitions were announced, with new appointments of Amy Rothstein Hovey as Chief Legal Officer and Rich Nyren as CFO, aiming to support the company's strategic focus on the Alerium business.

Full Transcript OPERATOR Welcome to Comtech Telecom's conference call for the fourth quarter and full year of fiscal 2026. As a reminder, this conference call is being recorded. I would now like to turn the call over to Maria Sariello, Senior Director of FP&A of Comtech. Please go ahead, Maria.

Maria Sariello, Senior Director of FP&A Thank you, Operator, and thanks everyone for joining us today. I'm here with Ken Traub, Comtech Telecom Chairman, President and CEO, Mike Bondi, our CFO, and Jeff Robertson, President of Elyrium. After Ken, Jeff, and Mike's remarks, they will be available for questions. Before we get started, please note we have a detailed discussion of the quarter and the year in the press release and 10-K we issued this afternoon, which are available on our website as well as the SEC's website.

As described in the documents, on June 14, 2026, we entered into an agreement to sell most of our satellite and space communications business to an affiliate of Galat Satellite Network. As a result, the portion of that business being sold is presented as discontinued operations in our financial statements. Unless we say otherwise, the financial results we discuss today relate to our continuing operations, with comparable prior periods recast to reflect these changes. S.

Army contracts, and corporate functions. Our press release includes reconciliations of the non-GAAP measures we will discuss to the most directly comparable GAAP measures. Certain information presented in this call will include, but not be limited to, information relating to the future performance and financial condition of the company, the company's plans, objectives, and business outlook, and the plans, objectives, and business outlook of the company's management. The company's assumptions regarding such performance, business outlook, and plans are forward-looking in nature and always involve significant risks and uncertainties.

Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statements contained in the company's SEC filings. With that, I will turn it over to Ken Traub. Ken Traub, Chairman, President and CEO Thank you, Maria, and good afternoon, everyone.

I appreciate you joining us today. Fiscal 2026 was a defining year for Comtech Telecom. When I joined the company as CEO in January 2025, I told you that I believe the most critical factor for success in any business, and especially in a turnaround, is building trust with all key stakeholders. And that trust is built by honoring promises.

I then laid out a transformation plan that had four pillars. First, our first pillar was to restore and enhance operational discipline throughout the company. Our second pillar was to generate positive operating cash flow. Our third pillar was to conduct a comprehensive review of strategic alternatives and our fourth pillar was to strengthen the company's capital structure.

Today, with the fiscal year behind us, I can report that we have delivered on each of these promises. Let me take them in turn, because in fulfilling the promises we made, we have not only executed the turnaround as planned, but we have successfully transformed our company. Comtech Telecom is now a far stronger company operationally, financially, organizationally and strategically. Our first pillar focused on operational discipline.

Any observer of Comtech Telecom today will see a dramatically improved operational discipline throughout the entire company. I would like to highlight a few notable aspects. First, anyone would observe we have a new culture throughout our organization which centers around transparency, empowerment and accountability. Second, Comtech Telecom now has a significantly reduced and much more efficient cost structure.

Third, we've implemented a disciplined approach to product and market initiatives. And fourth, we have enhanced our project execution. And finally, working capital management has been prioritized and optimized. These initiatives have helped to drive Comtech Telecom's dramatic improvement in financial results, which is evident in the significant increases in gross margins and EBITDA margins that Mike will discuss, but is particularly noteworthy in the return to more consistent generation of positive operating cash flow, which I will discuss in more detail in a moment.

The improved operational discipline throughout the company has also helped us win trust and credibility with our key stakeholders, particularly our employees, customers, suppliers and creditors. The second pillar of our transformation plan focused on returning the company to positive operating cash flow. For the seven quarters leading up to January 31, 2025, Comtech Telecom reported operating cash flow losses in each quarter with a cumulative total cash burn of over $80 million.

After taking over as CEO in January 2025 and announcing the transformation plan, we reported positive operating cash flow on a consolidated basis in each of the six quarters since then, with a cumulative positive operating cash flow in that period of over $50 million. This has enabled us to increase our liquidity to over $61 million at the end of fiscal year 2026 while also reducing our debt. This is the greatest level of liquidity Comtech Telecom has had in its recent history and has put us in a position of strength as we focused on the next two pillars of our transformation plan, the review of strategic alternatives and the strengthening of the capital structure.

Our third pillar of our transformation plan was that we committed to conduct a comprehensive review of strategic alternatives. We conducted a very broad and deliberate process and considered all relevant options with our overarching goal of identifying the best path to maximizing long-term shareholder value. Hence, we took our time and executed on the first two pillars to create the position of strength that was key to conducting a successful process. By running a broad process with various alternatives available to us, it also gave us optionality and negotiating leverage with any potential suitors.

And as we were not dependent on any one alternative, as we considered which assets to sell, one important consideration was to generate the cash to delever the balance sheet. But actually the even more important consideration was to retain in the company the most attractive business for us to build and create the best path for long-term value creation. The answer became clear. Divesting the majority of satellite and space communications business would accomplish multiple goals.

First, a sale of SNS could generate enough cash to prepay most of our senior debt and enable a recapitalization. Second, while we have succeeded in turning it around, the satellite and space business has been a difficult business for Comtech Telecom to manage over the years. As recently as fiscal 2025, the satellite and space business reported GAAP operating losses of over $110 million and experienced significant and unpredictable fluctuations in its operating cash flow over the years.

Third, by divesting Satellite and Space, which requires a lot of corporate support, we can streamline the business into one remaining operating segment and eliminate a significant amount of corporate overhead. Finally, and most importantly, our public safety business in Alerium, coupled with our cyber training services which has previously been part of Satellite and Space, have very attractive financial profiles with clear levers to drive future growth. Unlike the satellite and space business that we are divesting, Alerium is very stable as it is characterized by over 80% annual recurring revenue, long-term customer contracts and significant backlog.

Our cyber business has similar qualities. Recent innovations in our business coupled with favorable industry dynamics and drivers which Jeff will describe in more detail, provide opportunities for exciting long-term growth on top of the stable and predictable. Further, the sale of most of Satellite and Space enables us to streamline and realign the business to be fit for purpose to support the long-term growth and success of our public safety business. 5 million while keeping certain assets we wanted to retain.

We received already $10 million of this purchase price at the time we signed the agreement and while it is still subject to regulatory approval and other closing conditions, we expect to close this transaction by the end of this calendar year. The fourth pillar of our transformation plan was to strengthen our capital structure as the company's deep and expensive debt and preferred securities have been an issue for a long time.

We entered into two subordinated debt investments and two amendments to our subordinated debt and senior credit agreements in fiscal 2025, primarily to waive prior breaches of financial covenants, obtain covenant holidays going forward and lower near-term cash interest payments. These amendments, together with the operational improvements we made that demonstrated the return to consistent positive cash flow, enabled us to satisfy ourselves and our auditors that the company's prior disclosures expressing doubts regarding its ability to continue as a going concern can confidently be removed from our financial statements.

This was a very positive message and a sign of our progress to our stakeholders, including employees, customers and suppliers. Contemporaneous with signing the definitive agreement with Gilat in June 2026, we entered into new amendments with our senior creditors, subordinated lenders and preferred stockholders. We were in compliance with all of these agreements at the time and our operational strategic progress enabled us to negotiate favorable improvements in each of these agreements.

One issue that was critical for us to resolve was a provision in the Preferred Stock Agreement that called for the acceleration of the preferred stockholders' right to redeem the full amount of the preferred stock upon certain refinancings of the senior debt. We succeeded in having that provision removed from the agreements and extended the redemption rights from October 2028 to October 2029.

We also reduced the overall cost of capital by lowering the required prepayment fees on the senior debt and extending the trigger dates for increases in the make-call adjustments on the subordinated debt so that we can refinance and pay off the subordinated debt before the next increase in the make-call requirement comes into effect. We also obtained an extended covenant holiday through July 2027 so that we can focus on execution of the pending transactions and the transition without concerns on covenant compliance. Overall, as a result of these amendments, we have already reduced our cost of capital and improved our financial flexibility.

Further, we anticipate that upon closing the transaction to sell most of our SNS business, we will consummate additional refinancings and amendments that will result in a healthier capital structure going forward with further reductions in cost of capital and enhanced financial flexibility to support the long-term growth and development of our remaining business centered around Alerium, including cyber services.

Now that we have successfully executed on all four pillars of our transformation plan—the operational discipline, the return to positive cash flow, consummating the strategic sale transaction and improving the capital structure—Comtech Telecom is much stronger in every dimension, as I said, operationally, financially, organizationally and strategically. As we await regulatory approval of the sale of the satellite and space business, we are executing a transition plan to align the organization to be purpose-built to support the long-term growth and success of our remaining business centered around Delerian's public safety operations plus our cyber services.

Consequently, we announced today some important changes with our leadership team. Amy Rothstein Hovey joined us on October 1st as General Counsel and will become our Chief Legal Officer and Corporate Secretary right after Don Walters' last day at Comtech Telecom, which we expect to be shortly following the closing of the transaction to sell Satellite and Space to Gilat. We are excited to welcome Amy to Comtech Telecom as she brings more than 20 years of experience guiding governance, strategic transactions, capital markets activities, enterprise risk management and growth initiatives across global, public and private companies.

We also announced today that Rich Nyren, who joined us on October eighth as Executive Vice President of Finance, will become our Chief Financial Officer right after Mike Bondi's last day at Comtech Telecom, which we expect to be shortly following the filing of the 10-Q for the first quarter of fiscal 2027. We are also excited to welcome Rich to Comtech Telecom as he brings more than 30 years of finance, accounting, capital markets and strategic leadership experience across mission-critical communications, aerospace, telecommunications and infrastructure businesses. I want to sincerely thank and compliment Mike and Don for their dedication and contributions to the company.

They have both been terrific partners as we have successfully navigated Comtech Telecom's transformation together over the past two years. We are all looking forward to continuing to work closely with Mike and Don during this transition period and are very grateful for their valuable contributions that have enabled us to get to this pivotal point in Comtech Telecom's evolution. They are also both really a pleasure to work with. While we will miss them following their departures, I know they will both be very successful going forward and I wish them well.

We are also excited about the critical roles that Rich and Amy will serve as they will be integrated closely with Jeff's Alarium team and in building a focused, dynamic leader in public safety. With that, I will turn the call over to Jeff to share with you additional perspectives on our Illyrium business and why we are excited about the opportunities ahead for this business. Jeff Robertson (President of Elyrium) Jeff, thanks. Ken, I'm incredibly excited about what's ahead for Elyrium because we're entering this next chapter from a position of real strength.

S. telecommunications company in Kentucky. We migrated the Commonwealth's first public safety answering point in December and then migrated 12 more PSAPs within the first four months of operation, a first-in-market milestone that validates our platform at statewide scale. And in Canada, we completed more than 60 Next Gen 911 upgrades during the year and opened a new purpose-built facility in Gatineau, Quebec.

With support from the city and the Province of Quebec, we entered fiscal 2027 with $520 million in funded backlog. Approximately 80% of our annual revenue now is recurring, and we have long-standing relationships with states, public safety agencies, and some of the world's largest mobile network operators. As Ken described, subject to regulatory approval and the closing of the Gilat transaction, we also expect to have greater financial flexibility and an organization purpose-built around Elyrium, with our people, investments, and priorities aligned around the markets we serve.

That creates an opportunity I believe is much bigger than simply becoming a more focused company. We have spent decades operating across public safety and mobile networks.