3Q Earnings Highlights & Refinancing

Last week, we reported our third quarter earnings for fiscal year 2024, and announced the successful completion of a refinancing that allowed us to repay our existing lending facility, significantly strengthening our balance sheet. A detailed discussion of our results can be found in our investor letter, here, and in our filings (including our recent 10-Q, here).

Here, we wanted to recap some key highlights from our earnings announcement and call.

New $222 Million Credit Facility  

We know that our stakeholders – particularly shareholders – were interested in the October maturity of our previously existing bank facility. As we announced last Tuesday, following a period of significant diligence, Comtech has executed a $222 million credit facility with a new group of specialized lenders, exiting our prior facility. The new facility represents a combination of a $60 million revolver, and a $162 million term loan that matures in 2028. 

With this refinancing behind us, Comtech can continue to focus on growing our business while implementing operational improvements. Most importantly, our balance sheet should no longer distract the markets from the fundamental value of our businesses, or from the very real opportunities ahead of us.

Our Priority: Cash Conversion

We made it clear on our earnings call and in our investor letter that, with our refinancing completed, re-accelerating our cash conversion cycle is a key focus. In particular, this means managing our unbilled receivables downward from current levels.

Now, with long-term liquidity addressed, we’re working closely with vendors and partners to ensure that we can carry through our momentum to our sales, delivery, and billing cycles. 

Comtech Continues to Win 

Even as we faced challenges related to our balance sheet, Comtech continued to move forward. We have been winning new business, demonstrating the strength of our technologies and mission-critical nature of our solutions.

In the past quarter and more recently, we secured two substantial public safety contract wins, with a collective value of nearly $200 million and the potential for extension. For each of these contracts, Comtech will provide maintenance and operations for state-wide next-generation 911 public safety communications systems – showcasing our ability to capitalize on opportunities with existing and future customers as they face upgrade cycles and a shifting technology landscape. 

Great People Joining a Great Business

We continue to attract exceptional talent. You may have seen these announcements in previous Signals posts, but over the past few months we announced Jeff Robertson’s appointment as President of our Terrestrial & Wireless Networks business, the addition of two other senior public safety professionals (Tom Guthrie and John Whitehead), and on the Satellite & Space Communications side, we added Roly Rigual as VP of Business Development and Sales.

These are experienced operators, with deep experience – we expect them to make significant contributions to our leadership team and business performance. 

Looking Ahead

In the near term, we believe our financial performance for the fourth quarter – in terms of consolidated net sales and Adjusted EBITDA – will be similar to that of our third quarter, ended April 30th. 

Looking ahead, we see a combination of factors that have the potential to drive growth and performance:

  • We have made excellent additions to our leadership team.
  • Our financial performance will benefit from our operational transformation.
  • Our people, technology, and equipment are best-in-class, evidenced by our continuing success in winning new business.

Finally, we see growth potential in our existing end markets, and at the same time, entirely new markets are coming into view as advances in technology create new applications for our solutions.

In Closing:

Comtech has a decades long history of providing mission-critical communication solutions to its customers.

Challenges remain, but our ability to develop and deliver superior technology remains fully intact. Our underlying value as one of just a few businesses in the world that can do what we can do remains unchanged. With our refinancing now complete, we have a lot to look forward to.

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