Comtech: Capturing Share in the Growing Troposcatter Market

Roughly a year ago, we wrote in detail about the advance in capabilities that Comtech’s Troposcatter Family of Systems (FoS) now delivers: a next-generation, software-defined solution that represents a thousand-fold performance increase over prior generations of equipment. Further, constant innovation means Comtech’s latest generation of equipment can be packed into two small cases that easily could be carried onto a commercial flight, offering significant mobility improvements.

Having best-in-class technology is a clear advantage when Comtech approaches customers in what would be considered the “traditional” Troposcatter end-market: defense. It’s why over the past year, our market-leading Troposcatter terminals have been chosen by the US Army, the Marines, and defense organizations overseas to support the tactical communications requirements of our allies.

From an investor perspective, Comtech has a best-in-class portable, powerful technology that allows reliable communications even in geographies and environments too harsh or costly for fiber, cell towers, or satellites. And while the traditional buyer is military, these advances in mobility and performance expand our end markets to include new kinds of customers.

Defense is a Growing Market

An important reality for shareholders is that even the traditional defense market is changing and growing in ways that make our equipment more relevant and useful. For years, conflicts involving the US and our allies mostly involved actions against unconventional adversaries with less advanced technology. That’s not the case anymore, as the war in Ukraine shows. Now, defense strategies are shifting to focus on threats from organized, better equipped adversaries. This places a premium on sophisticated communications technology.

As Comtech continues to gain share in defense sales to both the US and our allies around the world, it creates a flywheel effect: legacy equipment not only underperforms our technology, it expands demand for our equipment, due to the need for tech and armed-service branch interoperability (more military units and situations demand more of the capability that Comtech offers).

New Applications = New Markets

Yet our overall revenue opportunity in this space is not confined to defense. Last summer, during our investor day, we laid out a series of use cases for Troposcatter technology that demonstrated just how salable it is into a surprisingly wide range of both private sector and government applications beyond defense. Key areas include oil & gas, utility, marine and rail uses – any one of which would substantially expand Comtech’s addressable market.

We’re at the very beginning of this adoption cycle which currently accounts for a fraction of the overall Troposcatter market. One example of the opportunity ahead is in the oil & gas industry, where complex operations often undertaken in extremely harsh environments combine with the need to maintain constant, reliable communications and data flows. Today, Comtech’s sales into this market account for only a few million dollars in revenue for our Troposcatter business. We think there is a significant opportunity to expand going forward.

For these reasons, we’re excited by the potential for our Troposcatter FoS to deliver future growth to our shareholders. Comtech offers the best product, the best technology, a growing list of customers with expanding use cases, and a set of newly-developing end markets that should provide our business with a host of long-term growth opportunities.

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