Comtech Telecommunications Q3 Fiscal 2026 Earnings Call - Selling Satellite & Space for $157.5M to Focus on Allerium Public Safety

Operator, Conference Call Operator: Welcome to Comtech Telecommunications conference call for the third quarter of fiscal 2026. As a reminder, this conference call is being recorded. I would now like to turn the call over to Maria Ceriello, Senior Director of FP&A of Comtech. Please go ahead, Maria.

Maria Ceriello, Senior Director of FP&A, Comtech Telecommunications: Thank you, operator. Thanks everyone for joining us today. I’m here with Ken Traub, Comtech’s Chairman, President, and CEO; Michael Bondi, our CFO; Daniel Gizinski, President of our Satellite and Space Communications segment; and Jeff Robertson, President of Allerium. After Ken, Mike, Daniel, and Jeff’s remarks, they will be available for questions. Before we get started, please note we have a detailed discussion of the quarter in the press release on 10-Q we issued this morning, which are available on our website as well as the SEC’s website. 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. Ken?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Thank you, Maria. Good morning, everyone. I appreciate you joining us today. I will start the call by providing you with a strategic context on the significant announcements we are making today. Mike will follow with a review of the numbers. Daniel will provide an overview of the improved performance for our satellite and space business that helped us make the transactions we announced today possible. Jeff will conclude with the additional insights on the exciting future prospects for Allerium. In my first conference call as CEO of Comtech in early 2025, I had two phases of my discussion with you. The first phase was to share my background and my perspective on leadership. I emphasized then that I believe the most critical factor for success in leadership, particularly in a turnaround, is building trust with all key stakeholders.

Trust is built through acting with sincerity and integrity, most importantly, honoring promises. In the second phase of that conference call, I laid out a transformation plan that had four pillars, which I promised will be Comtech’s guiding principles. The first pillar, we will restore and enhance operational discipline throughout this company. Second, we will start to generate positive operating cash flow. The third pillar, we will conduct a comprehensive review of strategic alternatives. The fourth pillar, we will strengthen the company’s capital structure. Comtech’s recent operating and financial performance, together with the strategic and capital structure announcements we are making today, demonstrate that we are successfully delivering on each of those promises. Let me start with the first pillar, since that was the critical foundation to get to the next three pillars, including today’s significant announcements. Comtech is today a dramatically improved company.

We have a culture of operational discipline, accountability, and taking pride in successful execution. We are executing with a streamlined cost structure and delivering for our customers and other stakeholders. Comtech’s emphasis on operational discipline is evident in everything we do now. This improved operational discipline has been key in achieving the second pillar. After several quarters of negative operational cash flow prior to my arrival, we are pleased to report that this quarter is our fifth consecutive quarter of positive operating cash flow. This has enabled us to maintain about $50 million of available liquidity. The return to positive cash flow has helped to restore Comtech’s credibility and relationships with lenders, investors, customers, suppliers, and other stakeholders, and in turn has put us in a stronger position in everything we do.

On the third pillar, Comtech first announced a process of exploring strategic alternatives for its public safety business, Allerium, in 2024, before I arrived at the company. When I arrived, I announced a commitment to a broad and thorough strategic review process. I believe it is critical for such a process to be broad, to consider all options, and how the remaining company will be best positioned. A broad process also maximizes optionality. I also think it is best to pursue any such process from a position of strength. Now that we have accomplished the first two pillars, we’ve created that position of strength to pursue the best strategic path and negotiate with confidence and optionality. We are very pleased with the outcome of the strategic alternatives process and the transaction we consummated with Gilat to sell most of Satellite and Space for $157.5 million.

I will talk more in a moment about why I believe sharpening the company’s strategic focus on Allerium’s public safety business is the right way to optimize the company going forward. Suffice it to say that this is a defining milestone for this company. The fourth pillar regarding the need to strengthen the company’s capital structure is also critical and further addressed today. We have been fortunate that due to the progress we made in pillars one and two, we earned the trust of our creditors, and they previously agreed to accommodations that have been very helpful to the company. For instance, the amendments we previously entered into on our loan agreements that provided for covenant holidays were a key factor in removing the going concern qualification from our financial statements, which in turn has been helpful with customers, suppliers, and partners.

As a result of our continued success on pillars one and two, and the consummation of the transaction to sell Satellite and Space being announced today, we’ve been able to successfully negotiate further improvements in our credit agreements and preferred stock, which strengthen our liquidity, financial flexibility, and strength going forward. All of these pillars have reinforced each other, resulting in a stronger and healthier company. Now, I would like to return to the strategic rationale of the transactions we are announcing today. The sale of Satellite and Space means more for Comtech than generating $157 million in cash and retiring extensive debt. Under Jeff Robertson’s leadership, Allerium has been enhancing its mission-critical solutions for public safety agencies and mobile network operators. With an improved capital structure, focused organization, and strategic clarity, Allerium is poised to capitalize on its leadership in the public safety market and accelerate its growth.

Over the next few months, as we await regulatory approval, we will be executing a transition plan to align the organization to be purpose-built to support Allerium’s growth as a leader in next-generation public safety technologies and services. Allerium’s growing portfolio of software, cloud-native, data-driven, and AI-enabled capabilities put it at the center of Next Generation 911 call handling, location-based services, and data management. Upon closing, our transition to Allerium will mark the beginning of an exciting new chapter, one in which we will focus our investment, innovation, and execution on a singular mission, leading the evolution of public safety technologies as the market shifts from traditional voice-based systems toward data-centric communications, real-time coordination, and artificial intelligence-enhanced decision-making. We believe Allerium is uniquely positioned to lead this large and growing market for years to come. Finally, I would like to thank and compliment our entire team.

We set ambitious goals during a period of significant challenge for this company. We remained disciplined in our execution, and we delivered. Throughout our organization in Satellite and Space, Allerium, Finance, Legal, IT, and People Operations, I have seen the dedication, loyalty, and passion that is driving these significant achievements. I am personally so proud of this team and what we are accomplishing together. With that, I’ll turn the call over to Mike to walk through the financials. Mike.

Michael Bondi, Chief Financial Officer, Comtech Telecommunications: Thank you, Ken, and good morning, everyone. As Ken just highlighted, it is extremely rewarding to see the significant progress that our organization is achieving on multiple fronts. Effectuating transformational changes like we have experienced to date over the past several quarters is not trivial and is a clear testament that our employees take extreme pride in what they do and in delivering successful outcomes. To that end, we are pleased to be delivering another quarter of positive operating cash flow and continued gross margin strength relative to our recent past. Now, let’s turn to the financials. Net sales for the third quarter were $106 million. This compares to $126.8 million in the third quarter of last year. The decrease in consolidated net sales reflected the decision to phase out certain low or no-margin revenues in our Satellite and Space Communications segment.

Allerium reported net sales consistent with the prior year period, excluding a $3 million retroactive billing event that benefited the third quarter of last year. Gross profit in the third quarter was $36.1 million, or 34% of net sales, compared to $38.9 million, or 30.7% of net sales in the third quarter of fiscal 2025. Our gross profit percentage reflects overall product mix changes and improved operational and financial performance as a result of our transformation initiatives to enhance efficiency, streamline product lines with a focus on strategic higher operating margin products, and reducing cost structures in order to free up investment back into the business. The improvement in our gross profit percentage builds upon the quarterly trend achieved throughout fiscal 2025 and the first two quarters of fiscal 2026.

In our third quarter of fiscal 2026, we reported an operating loss of $3.1 million, which compares to an operating loss of $1.5 million in the third quarter of last year. Our most recent quarter reflects $4.6 million of amortization of intangibles, $2.4 million of restructuring costs, $1.2 million of non-cash amortization of stock-based compensation, and nominal CEO transition costs. As further discussed in our Form 10-Q filed earlier today. Excluding such items, our consolidated operating income for the third quarter would have been $5.1 million, or 4.8% of net sales. Again, the prior year period included the benefit of Allerium’s $3 million of retroactive billing events. Adjusted EBITDA in the third quarter was $8.2 million, or close to 8% of net sales, compared to $12.6 million in the third quarter of last year.

The year-over-year comparison reflects the factors discussed above, including the prior year benefit from Allerium’s retroactive billing event. Net bookings were $70.5 million in the third quarter, resulting in a book-to-bill ratio of 0.67. This compares to $71 million of net bookings and a book-to-bill ratio of 0.56 in the prior year comparable period. Over the past year, as part of our transformation plan, we have focused and prioritized our product development and sales efforts to eliminate certain low-margin revenues and to instead target higher-margin opportunities in which we have greater differentiation and can achieve improved cash flows. Such improvements in our financial performance and working capital discipline resulted in $6.1 million of positive operating cash flows for the third quarter of fiscal 2026, compared to $2.3 million of positive operating cash flows in the third quarter of last year.

As Ken said, this marks our fifth consecutive quarter of positive operating cash inflows. Operating cash flows in the third quarter of fiscal 2026 included aggregate net payments of $4.1 million, principally for interest, and, to a much lesser extent, income taxes, as well as $2.4 million in aggregate net payments for restructuring costs, including severance, CEO transition costs, and third-party professional fees. Turning to our individual segments, as anticipated, SNS net sales decreased compared to the third quarter of fiscal 2025, primarily reflecting our decision to phase out and eliminate certain low-margin and working capital-intensive revenues, such as the VSAT Satellite Systems and Services Contract. SNS net sales in the third quarter were $50.3 million. SNS operating income was $1.6 million in the third quarter of fiscal 2026, compared to $2.7 million in the third quarter of fiscal 2025.

SNS adjusted EBITDA was $4.1 million, or approximately 8% of segment net sales, compared to $5.7 million in the prior year period. SNS operating income in the third quarter of fiscal 2026 was impacted by $800,000 of restructuring costs to streamline operations, compared to $900,000 in the third quarter of fiscal 2025. Moving to Allerium. Net sales were $55.7 million in the third quarter of fiscal 2026, a decrease of $5.9 million compared to the third quarter of fiscal 2025. The prior year period included a $3 million benefit related to a negotiated retroactive billing event to recover costs incurred in previous quarters. Excluding that benefit in fiscal 2025, Allerium net sales were actually consistent with the prior year period. Allerium operating income was $4.4 million, and adjusted EBITDA was $10.4 million, or approximately 19% of segment net sales in the third quarter of fiscal 2026.

The year-over-year decreases in operating income and adjusted EBITDA primarily reflect the one-time $3 million retroactive billing event I discussed earlier that did not repeat this year, as well as our increase in research and development and go-to-market investments that Jeff will talk to in a moment. Allerium’s book-to-bill ratio in the third quarter was 0.32, compared to 0.91 in the prior year period. The ratio for the most recent quarter reflects the timing of large multiyear contract awards and is not unusual given Allerium’s strong book-to-bill ratios of 1.06 and 2.51 in the earlier quarters of this fiscal year. Turning to the balance sheet. We announced earlier today that the company has entered into amendments with the existing senior creditors and subordinated debt holders and agreed to replace the existing series of convertible preferred stock with a new series of convertible preferred stock.

These agreements, together with the sale of most of SNS’s business, deliver immediate improvements that enhance the company’s financial flexibility and represent the successful conclusion of the strategic alternatives process first publicly announced in 2024. The company anticipates that net cash proceeds from the sale of most of SNS’s business will be approximately $143 million to $145 million, which will be used to reduce debt and recapitalize the business. In accordance with its existing credit facilities, the company will use 65% of the net proceeds from the sale of most of SNS to prepay the majority of its senior secured credit facility, with the remaining 35% of the proceeds used to prepay subordinated debt outstanding, starting with repaying the subordinated priority term loan. This is expected to provide a stronger and healthier financial position for the company for the long term.

As previously disclosed, we amended our credit facility and subordinated credit facility in October 2024, March of 2025, and July of 2025 to, among other things, suspend testing of the net leverage ratio, fixed charge coverage ratio, and minimum EBITDA covenants until the fourth quarter period ending on January 31st, 2027. Such amendments, combined with our significantly improved operational and financial performance, led to our enhanced financial flexibility and the removal of our going concern disclosures in our fiscal 2025 Form 10-K filed back in November of 2025. On June 14th, 2026, Comtech amended its credit facility and subordinated credit facility to, among other things, further suspend testing of the net leverage ratio, fixed charge coverage ratio, and minimum EBITDA covenants until the four-quarter period ending on July 31st, 2027.

At April 30th, 2026 and June 12th, 2026, total outstanding borrowings under our credit facility were $119.7 million and reduced to $116 million, respectively. $3.6 million was drawn on the revolver at quarter end and was repaid in May 2026 in full. Total outstanding borrowings under our subordinated credit facility were $104.1 million and $104.8 million, respectively, including interest paid in kind or accrued on the $35 million subordinated priority term loan. These amendments do not include the $32.5 million of make-whole amount associated with the $65 million portion of the subordinated credit facility. The liquidation preference of our outstanding convertible preferred stock was $218.2 million and $220.5 million, respectively, excluding potential increases in the liquidation preference or other obligations that could be triggered by a change in control of the company.

Our available sources of liquidity totaled $49.4 million at April 30th, 2026, consisting of about $26 million of qualified cash and cash equivalents and about $24 million of remaining available revolver loan capacity. As of June 12th, 2026, our liquidity approximated $50 million, and the remaining available portion of the revolver loan was $27.3 million. With that, let me turn the call over to Daniel Gizinski, President of our SNS segment. Daniel?

Daniel Gizinski, President of Satellite and Space Communications Segment, Comtech Telecommunications: Thank you, Mike. We’re proud of our entire team who contributed to the significant turnaround and repositioning of our SNS business. We’ve come a long way as an organization, and today’s announcement marks a significant milestone in our journey. Gilat is a natural home for the SNS business, and we are confident that Gilat’s commitment to innovation, customer support, and continued investment in the business will provide the right foundation for the next phase of growth for this business and our customers. It remains a top priority to continue supporting our customers, delivering against existing commitments, and continuing to support new customer requirements. The third quarter reflected stronger demand across several areas where SNS has differentiated capabilities, with key awards including over $7 million in funding for several rapidly deployable Troposcatter systems intended for use by an international government end customer.

Approximately $6 million in incremental funding for ongoing training and support of complex cybersecurity operations for U.S. government customers. Approximately $4.9 million in incremental funding to design and manufacture antenna-related equipment for a U.S. government end customer, and additional funded orders for long-range missile and rocket launch tracking systems, antennas, feeds, and satellite ground infrastructure solutions. SNS’s book-to-bill ratio for the third quarter of FY 2026 was 1.04 times, as compared to 0.8 times in the prior year period, after accounting for a $36.4 million debooking in the prior fiscal year associated with the U.S. Army global FSR contract. This was the first quarter since Q1 of FY 2024 in which SNS achieved a book-to-bill ratio greater than 1.0 times.

Additionally, subsequent to the end of the quarter, the company received orders totaling over $10 million to develop and deliver initial prototypes for extremely high frequency, low Earth orbit satellite communications equipment. As we move through the period between signing and closing, our priority in SNS is straightforward: continue supporting our customers, delivering against existing commitments, and maintaining the operational discipline that improved this business in the first place. We believe the momentum in customer orders underscores both the progress the SNS team has made and the strength of SNS’s customer relationships. Jeff will now provide more detail on Allerium, which is well-positioned to define the next generation of emergency communications. Jeff?

Jeff Robertson, President of Allerium, Comtech Telecommunications: Thank you, Daniel. Allerium is Comtech’s future and the core of our public safety technology company we are building. Public safety response is moving beyond voice toward data and more complex coordination and real-time decision-making, as agencies and network operators face rising call volumes, increasing workforce constraints, and growing expectations for real-time situational awareness. This evolution is creating new opportunities for AI-assisted intelligent workflows and technologies designed to manage critical information during active incidents. Allerium is the first to bring together the complete emergency response ecosystem, from device location to the systems, networks, and data that help drive action and connect people to emergency assistance. During the quarter, we increased R&D and go-to-market investment to extend that product leadership and support future growth.

Following the sale of most of SNS, Allerium will be able to invest more decisively in advancing Next Generation 911 call handling, location-based routing and messaging for mission-critical public safety and emergency communications. We are converting that R&D and go-to-market investment into concrete market progress. Our win with the Commonwealth of Kentucky demonstrates a first-in-market milestone for Allerium and validates the strength of our NextGen 911 platform at statewide scale. In Canada, we delivered more than a dozen NextGen 911 upgrades during fiscal 2026, reflecting growing momentum with public safety agencies as they modernize emergency communications infrastructure. The developments over the past year, including in the third quarter and our announcement this morning, lead us to believe that Allerium can help public safety move from connectivity to coordination and set the standards for the next generation of emergency communications.

Key Allerium contract awards during the third quarter included approximately $6 million of additional funding related to a renewal of NextGen 911 services for a customer in the Midwestern region of the U.S., $2 million in funding from a domestic Tier-1 mobile network operator to support the development and migration of various web-based mobile network services, and over $1.6 million in funded orders from another domestic Tier-1 mobile network operator in support of various mobile network services. We also continue to build momentum across public safety and emergency communications. In April 2026, Allerium announced that its statewide Next Generation 911 program for the Commonwealth of Kentucky had migrated 12 PSAPs in its first four months of operation, including delivering the first NG911 text and voice calls in the Commonwealth.

In May 2026, Allerium announced the opening of a new purpose-built facility in Gatineau, Quebec, Canada, which builds on more than a dozen NextGen 911 upgrades that we have delivered across Canada this fiscal year and reflects our expanding role in modernizing emergency communications infrastructure. With strategic wins in the U.S., Canada, and Australia, we believe Allerium’s position as a trusted leader in 911, Next Generation 911, and public safety applications positions us increasingly well to deliver sophisticated solutions for other types of emergencies over time. Looking ahead, new emergency requesting devices, including wearables, connected vehicles, smart speakers, and AI-enabled cameras, and new delivery methods such as satellite networks, along with expansion in the emergency workflow technologies, are expected to expand our addressable market and drive growth over time. Going forward, we will have a simpler operating model, a strengthened balance sheet, and a single strategic focus.

That will allow us to accelerate recurring software and services revenue, expand margins through operating leverage, and invest more decisively in the innovation of our public safety customers and what they depend on. Today, a significant and growing portion of Allerium revenue is recurring, giving us a stable, high-visibility foundation on which to build. Ken, back to you.

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Thank you, Jeff. To sum up briefly, Comtech has successfully executed on each of the four pillars of our transformation plan and is now a stronger company. The sale of most of Satellite and Space, together with the credit agreement amendments and preferred stock agreements, brings the strategic alternatives process to a successful conclusion, and we are moving forward with greater strategic clarity. Over the next few months, we will execute a transition plan to align the organization to support Allerium’s strong future, supported by long-term customer relationships, leading positions in Next Generation 911, call handling, location-based services, messaging, and other AI-enhanced, mission-critical public safety capabilities to address the significant market demand for more connected, data-driven emergency response. As a reminder, Mike, Jeff, and Daniel will be joining me for Q&A. With that, operator, please open the call to any questions.

Operator, Conference Call Operator: Thank you. At this time, we will open the floor for questions. If you’d like to ask a question, please press star one on your touchtone phone. To remove yourself from the queue, you may press star two. Again, that’s star one to ask a question, and we’ll pause for just a moment to allow questioners time to queue. We’ll take our first question from Keith Housum with Northcoast Research. Please go ahead. Your line is open.

Keith Housum, Analyst, Northcoast Research: Good morning, gentlemen. And congratulations on the announcement. It wasn’t what I expected this morning, but glad to see it. Again, congratulations to the efforts. I know it’s a huge deal. Ken, obviously, the operations turnaround within the S&S segment has been in swing here, but there’s more room to go. I guess why now, and why not wait a little bit longer to see if perhaps you can maximize the value any further?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Good question, Keith. It’s a balancing. The company’s been looking at strategic alternatives for a long time because we have a heavy and expensive capital structure. Part of the reason why the company started considering strategic alternatives in 2024 was to address that capital structure. I believed that we needed to approach this process patiently and with a broad examination of all opportunities available to the company. Wait until we are in a position of strength to negotiate the right deal for the future of the company. We looked at all options, right? It was considered selling any aspect of the business, and we believe this is really the best way to optimize the long-term future of the business.

Allerium has tremendous growth prospects, it’s a really nice business, and we are now in a position where Satellite & Space has been turned around sufficiently where we’re able to consummate this type of a deal where it’s a good outcome for the sale of this business. Even more importantly, it enables us to now reorient the entire focus of the company to support the long-term growth of Allerium. We think the time was right. We finally got the company in the right position of strength to be able to negotiate a good deal for Satellite & Space, and we’re leaving the remaining business in a very strong position for long-term growth.

Keith Housum, Analyst, Northcoast Research: Okay, thanks. Appreciate it. Obviously, this has been a long way in helping capital structure, but you’re going to still be remaining with a good amount of subordinated debt and your convertible preferred stock. You also have the shelf registration that’s been out there since April. What does the capital structure for the company look like a year from now?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Well, we’ll see. The proceeds of this transaction will be used to pay down the debt. 65% of the proceeds of the sale of Satellite & Space will go to pay down the senior term loan. That in and of itself is almost all of the outstanding amount on the term loan. It’ll be easy for us to either use liquidity to pay off the balance, or we’ll be able to refinance with a new senior term loan. 35% of the proceeds will go towards paying the subordinated debt, and that will be more than sufficient to take out the most recent tranche, which is Tranche 3, and then we’ll work towards Tranche 1 and 2. We would anticipate that once we consummate this transaction and we refinance the senior debt, those proceeds will be sufficient to take out all the rest of the senior debt.

Excuse me, the rest of the subordinated debt. We’ll emerge with a really clean and healthy capital structure going forward.

Keith Housum, Analyst, Northcoast Research: Appreciate it. Did I hear that you’re going to be, probably amendments, suspending the debt leverage ratio for the debt until July 2027. Is that correct?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: That’s correct.

Keith Housum, Analyst, Northcoast Research: Okay.

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: That’s a nice additional concession that we got from both the senior term loan lenders as well as the subordinated lenders. That was one of the factors that was helpful to us in removing the going concern qualification when we last got the covenant holiday. Now we’ve got an additional covenant holiday, and that, combined with the company’s consistent generation of cash flow, we’re confident that we will continue to maintain the financial reporting without a going concern qualification.

Keith Housum, Analyst, Northcoast Research: Gotcha. The cybersecurity business is going to be retained as part of the S&S segment. Can you give us a little bit of a financial profile of that in terms of how much revenue and profitability that is, and is that an ongoing business for you guys?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Sure. It’s about $20 million in revenue, and it net about a $3 million of EBITDA contribution.

Keith Housum, Analyst, Northcoast Research: Got it. Okay. Appreciate it. Jeff, as we look at the Allerium business going forward, excluding the comparable from prior year flat business, how are you thinking about the growth profile for Allerium, both on the revenue side, but also in terms of profitability?

Jeff Robertson, President of Allerium, Comtech Telecommunications: Keith, thank you for your question. For the future, when we look at the profitability of the business, it’s really a matter of using scale to our advantage to improve margin profitability. For instance, the more states we provide NextGen 911 to, the more we can leverage our infrastructure to improve those margins. We’re working very hard, along with Tom Guthrie, our Chief Operating Officer here, to leverage that scale that we have every time we win a new region. The other area we see in emergency response is expanding on the workflow of what it takes to get a first responder to the scene and give them situational awareness. We think there’s other things that we can do in that emergency response process that expand our TAM and we can grow the business with.

Part of why we announced some of the investment in R&D this quarter, and a little bit of an increase in it, to deliver on that message.

Keith Housum, Analyst, Northcoast Research: Got it. Do I think about the top line growth profile being 3%-5% a year? Is that kind of fair?

Jeff Robertson, President of Allerium, Comtech Telecommunications: It is fair.

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: We’re not giving guidance right now, Keith.

Keith Housum, Analyst, Northcoast Research: Okay. Appreciate it. For clarification, if I look at your adjusted EBITDA for a pro forma basis, it’s $34 million there. If we want to think about going forward, we can probably think about the changes you’re going to be making in the business, the restructuring for additional $11 million-$13 million will be on top of that, correct? If I think about the business going forward?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: That $34 million is a pro forma that’s based on the historical EBITDA, with adjustments for the historical EBITDA for Allerium, the cyber business, and corporate, minus about $12 million of anticipated savings resulting from the transition.

Keith Housum, Analyst, Northcoast Research: Okay. Appreciate it. I’ll turn it back over, guys. Appreciate it. Thank you.

Operator, Conference Call Operator: Once more for your questions, that is star one. We will move next to Mike Crawford with B. Riley Securities. Your line is open.

Mike Crawford, Analyst, B. Riley Securities: Thank you. First question is, are all of the stakeholders in agreement that this transaction with Gilat will not be argued as any change of control that would trigger increase in the preferred before obligation?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Good question, Mike, yes. All stakeholders are in agreement that it is not a change of control transaction and does not trigger any of the liquidation preferences in the preferred.

Mike Crawford, Analyst, B. Riley Securities: Excellent. That’s a great outcome in and of itself. Then, just, Ken, to go back on your last statement, just to clarify that $34 million, that’s before you expect to take $12 million of corporate costs out of the business, or is that including that $12?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: It is. The way to look at that $34 million is the historical, not the projected, Allerium EBITDA, plus the cyber, plus the cost of existing corporate, minus an estimate of the near-term savings of $12 million.

Mike Crawford, Analyst, B. Riley Securities: I’m sorry. By minus, does that mean after that occurs, that $34 million, if nothing else.

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Correct

Mike Crawford, Analyst, B. Riley Securities: changes would be what it is?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: It’s a pro forma of.

Michael Bondi, Chief Financial Officer, Comtech Telecommunications: The $34 million, Mike, is reflective of $12 million of cost savings.

Mike Crawford, Analyst, B. Riley Securities: Okay. Perfect. Are there any other assets that you’re retaining that might be surplus to requirements, like any real estate owned? I’m not sure exactly what’s going to Gilat, like, build facilities in Arizona, et cetera.

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: No. We are retaining two operations, one in Florida and one in Buford, Georgia. That includes our cyber operations and a small services business. In total, $20 million of revenue. In addition, we are retaining legacy accounts receivable, rights to collection of some legacy accounts receivable that will be incremental proceeds to the company.

Mike Crawford, Analyst, B. Riley Securities: Okay.

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: If collected.

Mike Crawford, Analyst, B. Riley Securities: Excellent. Turning to William, I guess I have two questions. It’s great that a, quote, "significant portion" of that revenue is recurring. What % of that business would you characterize as recurring revenue?

Jeff Robertson, President of Allerium, Comtech Telecommunications: Thanks, Mike. I’m not going to give exact numbers on our recurring revenue, but I will tell you it’s a significant portion, and we see it growing over time. As the business morphs, it’s moving more from a traditional software licensing model into a more recurring model for the business right across all our product lines. I’m not prepared to give an exact number or %, but suffice it to say, it’s a significant portion and growing.

Michael Bondi, Chief Financial Officer, Comtech Telecommunications: Yeah. Jeff, I would add to that, just to highlight, in our press release today, we announced for the RemainCo, there’s $554 million of funded backlog for the segment.

Typically, these are long-term contracts. They’re mostly services, software-based services. Yes, from time to time, you’ll have deployments upfront, there might be some activity on the front end of a contract that will then run into monthly recurring services. By and large, these are services that are provided on a consistent, steady state. The %, as Jeff said, is significantly high for the segment.

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Something else to bear in mind in this business, there’s a mutual dependency. When states and municipalities work with our Allerium business, they need our service. There’s a very high switching cost. There’s a dependency on working with us, so these relationships tend to last for a long time.

Mike Crawford, Analyst, B. Riley Securities: Yes. Thank you, Ken, Mike, for that clarification. That high switching cost is a double-edged sword where it’s hard to wrest away someone else’s business. Are there any recompetes coming up that you’ll likely win, given that there’s a high switching cost? Conversely, are there any competitions that you’re gunning for now that if you win, would add additional layer of growth to the business?

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: I’m going to let Jeff answer the specifics, but we’re not going to get into specific competitive bids. We’ll give you more flavor on key drivers of growth in the business. Go ahead, Jeff.

Jeff Robertson, President of Allerium, Comtech Telecommunications: Mike, you bring up an interesting point is, again, we’re not going to get on specific deals or opportunities, but there are recompetes coming out in the marketplace. What’s changing is there are competitive features now as the market evolves, and we believe we have some very strategic competitive advantages. Part of that is because we do 911 call handling NextGen as well as the network, gives us some edges in these recompetes. I’m pretty bullish on some of these recompetes and the competitive advantage that we have going forward, as well as some other services that we offer that differentiate us from others. Keep in mind, we are the largest direct provider of NextGen 911 to the states.

Other competitors will either go through a local exchange carrier or a channel partner, whereas we are the largest that deal directly with the states. I also think that gives us a distinct advantage to be able to customize to their needs. There are recompetes coming out, I also think there are some with competitive advantage that we can win or position well to win.

Mike Crawford, Analyst, B. Riley Securities: All right. Well, thank you very much.

Operator, Conference Call Operator: It does appear that there are no further questions at this time.

Ken Traub, Chairman, President, and CEO, Comtech Telecommunications: Well, I would like to thank you all for your ongoing support, we look forward to continue to keep you updated on our progress. Thank you all. Have a good day.

Operator, Conference Call Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.