Satellite communications provider Comtech Telecommunications reported consolidated net sales of $151.9 million for Q1 FY24, a 16% year-over-year jump and up 2.1% from the previous quarter.
The Melville, N.Y.-based Comtech’s strong first-quarter performance, reported Dec. 7, brought its revenue visibility to $1.7 billion, Comtech Chief Executive Ken Peterman said in a letter to shareholders. The new outlook represents a 54.5% increase from the $1.1 billion Comtech had averaged for the past fiscal year.
THE BIG PICTURE: Strong bookings from U.S. military customers and defense contractors for space and satellite technologies were a driving factor in quarterly success, Peterman said on Comtech’s Q1 FY24 earnings call on Dec. 7.
Comtech, which produces both satellite and terrestrial communications technologies, has benefited from the U.S. military’s increased reliance on hybrid networks, Comtech Chief Strategy Officer Daniel Gizinski said last month in a keynote address at Connectivity Next Summit 2023.
“The ability to flexibly adapt a system to address the latest needs and capabilities is critical to realizing this monumental industry change,” Gizinski said at the time.
The U.S. Department of Defense, a key customer of Comtech, is looking to increase the use of commercial communications technologies for military applications, Gizinski said.
BY THE NUMBERS: Comtech reported $185.6 million in bookings in Q1 FY24, up 36.7% from Q1 FY23 and up 30.2% quarter over quarter. Peterman, who became Comtech’s CEO just over a year ago, said on the earnings call that the $185.6 million in bookings was the most reported since he joined Comtech.
Additionally, Comtech reported for the quarter:
- Sales for the Satellite and Space Communications segment were $102.4 million, up 26.6% YoY and up 8.7% QoQ;
- Sales for the Terrestrial and Wireless Networks segment were $49.5 million, down 1.6% YoY and down 9.3% QoQ;
- Adjusted EBITDA was $18.4 million, up 72% YoY and down 2.6% QoQ; and
- Net loss was $3.3 million, compared with a loss of $12.8 million in Q1 FY23 and a loss of $5.3 million in Q4 FY23.
WHAT THEY’RE SAYING: Joe Gomes, senior research analyst at Noble Capital Markets, said in an October note that Comtech’s FY23 was “transformational.” Gomes projected $151 million in consolidated net sales for Q1 FY24 and adjusted EBITDA of $17.1 million, which Comtech slightly exceeded.
Gomes said in the Oct. note that he expects Comtech to continue outperforming estimates for FY24 due to its strong government bookings. He reiterated his “outperform” rating following the earnings release.
FLASHBACK: In September 2022, Comtech established Evoke, an initiative to form strategic partnerships that combine companies’ technologies and solutions rather than each company creating new technologies in-house. Comtech has four publicly announced Evoke partners to date:
- Network provider Sirqul;
- Data analytics provider Descartes Labs;
- Blockchain company WishKnish; and
- Network infrastructure company Aarna Networks.
On the earnings call, Peterman said that Comtech’s collaboration initiatives are enabling the company to “deliver more value than ever before” to customers.
NOTEWORTHY: Comtech this week announced that John Ratigan, former CEO and president of Herndon, Va.-based satcom provider iDirect Government, will become Comtech’s first chief corporate development officer. Comtech expects Ratigan’s decades of experience in the satellite and defense sectors to support Comtech’s growth strategy, CEO Peterman said in the company’s investor letter.
Comtech has had a prolific quarter, nabbing several defense contracts within a two-month period, including:
- A $20 million order last month from U.K.-based partner Spectra Group to supply next-generation troposcatter systems for undisclosed NATO and European customers;
- In October, a U.S. Army contract worth up to $544 million for communications and engineering support;
- Also in October, a $48.6 million award from the U.S. Army for next-generation enterprise digital intermediate frequency multi-carrier modems; and
- In October, Stellant Systems, a portfolio company of private equity firm Arlington Capital Partners, acquired Comtech’s Power Systems Technology product line, which includes radio frequency amplifier technologies, for $40 million.
MARKET REACTION: Shares of Comtech (NASDAQ: CMTL) were up 4.2% from market open on Dec. 7 to $12.50 after the company’s post-market Earnings call. As of 2:30 p.m. ET today, Comtech’s shares had dipped 27.6% from the previous market close to $9.05. Comtech has a market capitalization of $352.48 million.
THE BOTTOM LINE: Comtech is beginning FY24 in a “competitive position,” Peterman said in the shareholder letter. The company continues to win business in growing markets and find ways to improve operations as it capitalizes on the increasing demand for hybrid capabilities, he said.
