Comtech Telecommunications Corp.

Gentlemen, thank you for standing by. Welcome to the ComTech Telecommunications Core Second Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press the star and 1 on your push-button phone. As a reminder, this conference is being recorded Thursday, March 10th, 2022. I would now like to turn the conference over to Mr. Jason DiLorenzo of ComTech Telecommunications. Please go ahead, sir.

Thank you, and good afternoon. Welcome to the ComTech Telecommunications Corp conference call for the second quarter of fiscal year 2022. With us on the call today are Michael D. Porcelain, President and Chief Executive Officer of Contact, and Michael Bondy, Chief Financial Officer. Before we proceed, I need to remind you of the company's safe harbor language. 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 involve significant risks and uncertainties. The 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 Securities and Exchange Commission filings. I am pleased now to introduce the President and new Chief Executive Officer of ComTech, Michael Porcelain. Mike?

Thank you, Jason, and good afternoon, everyone. Thanks for joining us today. We've got a lot to talk about, but first, let's have a look at the headline numbers. ComTech's consolidated net sales for the second quarter were $120.4 million, up 3.1% sequentially from the first quarter. Adjusted EBITDA, a non-GAAP financial measure, was $9.8 million, 76.7% sequential increase from the first quarter. New bookings, also referred to as orders, were 102.9 million, a 19.2% sequential increase from the first quarter, resulting in a book-to-bill ratio of 0.86. Our Q2 ending backlog was $611 million, compared to $628.5 million as of the end of Q1. Our revenue visibility is approximately $1.2 billion. We measure this revenue visibility as the sum of our $600 million backlog plus the total unfunded value of certain multiyear contracts that we have received and from which we expect future orders. And we did generate $4.8 million of cash flows from operating activities, this despite making almost $3 million of cash payments for our settled proxy contest. Our second quarter fiscal 2022 results showed sequential improvements in consolidated net sales, bookings, and adjusted EBITDA versus Q1 fiscal 2022. Finally, and although I wish we didn't have to do it, we lowered our fiscal 2022 financial targets and are now shooting for $520 million of revenue and adjusted EBITDA of approximately $50 million. Mike Bondi will discuss these changes in a bit, but first let me add a few more comments on the quarter and business environment. The second quarter of fiscal year 2022 was clearly transformative for ComTech. I took on a new role as CEO. We welcomed new independent members to our board of directors. We furthered plans to deploy the proceeds of $100 million strategic growth investment. And finally, we continued to solidify our position as a leading solution provider in our two key end markets, our next generation 911 public safety product line and our satellite and space communication product lines. Both are at the beginning of a long-term investment and upgrade cycle and are expected to significantly grow over the next several years. We see these two end markets are what ComTech will now call the fail-safe communications market. This market includes the critical communications infrastructure that people, businesses, and governments know they can rely on no matter where they are, on land, at sea, or in the air, and no matter what's going on outside, from armed conflicts to a natural disaster. For more than 40 years, Comtech's DNA was developing and manufacturing highly reliable communications equipment. But as markets changed, so did Comtech. Our customers, who are next-generation 911 and public safety providers, mobile network operators, governments and defense agencies, and other enterprises, require communications and data transmission solutions that work every time under the most demanding conditions. As such, over the past several years, our DNA has evolved to include more secure and sophisticated wireless technologies, cyber trading, and public safety software solutions. With new leadership in place and added flexibility to invest significantly in our strategic initiatives, our evolution will continue, and we are optimistic as we look ahead. Although we are optimistic, we know that we face short-term challenges and continued uncertainties in the second half of our fiscal 2022. We believe these items are appropriately reflected in our updated guidance. For instance, the repercussions of the military conflict between Russia and Ukraine are significant. For ComTech, the current conflict is directly impacting short-term elements of our sales pipeline. Certain customers have paused procurement and deployment of satellite and troposcatter communication systems and instead began purchasing warfighting equipment, such as anti-tank missiles and other lethal equipment. The U.S. defense budget and defense budgets worldwide are now being adjusted in real time to reflect the priorities of war in changing European geopolitics. On the other hand, our experience suggests that ComTech will benefit from an uptick in demand as conflict and uncertainties create new and different opportunities for the types of communication solutions we supply. And like many other companies around the world, We are working around supply chain constraints that include component shortages and quality issues, as well as delays. Component prices are up approximately 10% in the past several months, and freight costs in some cases have doubled. We have had trouble getting certain parts, like cooling fans and power supplies. In some cases, we have depleted our stock inventory and are now on a wait list for new components. Finally, while we are a stronger and more powerful organization for it, we are only just emerging from a drawn-out proxy contest and the distraction of an unsolicited acquisition offer. These events require time and focus from leadership and slow strategic execution. While competitors use this short-term uncertainty to their advantage, We did experience a higher level of employee stress and turnover. Some bookings and contract wins were delayed, and in some cases, we lost them. Nevertheless, despite all of these challenges ComTech faced during the second quarter, our company achieved a solid quarter of financial performance that exceeded our bottom line expectations. Now, let me turn it over to our CFO, Mike Bondy, for a little more details of the quarter, and then I will come back and provide some more remarks on these key developments.