COMTECH TELECOMMUNICATIONS CORP /DE/ Q3 FY26 earnings call CMTL

CEO Ken Traub framed the quarter around the completion of a four-pillar turnaround plan set out at his early-2025 debut: restore operational discipline, generate positive operating cash flow, conduct a strategic-alternatives review, and strengthen the capital structure. The headline outcome is the sale of most of the Satellite & Space (S&S) business to Gilat for $157.5M, which management characterized as a defining milestone that lets the company reorient entirely around Alerium's public-safety mission. The strategic-alternatives process, first publicly announced in 2024, is now formally concluded.

Net sales were $106M versus $126.8M a year ago, the decline reflecting a deliberate phase-out of low/no-margin S&S revenue (notably a VSAT satellite systems and services contract). Gross profit was $36.1M (34.0% of sales) versus $38.9M (30.7%) a year ago, extending a multi-quarter margin-improvement trend. The company reported a $3.1M operating loss (vs a $1.5M loss), burdened by $4.6M intangible amortization, $2.4M restructuring, $1.2M stock-based comp amortization and nominal CEO-transition costs; excluding those items operating income would have been $5.1M (4.8% of sales). Adjusted EBITDA was $8.2M (~8%) versus $12.6M, and operating cash flow was $6.1M — a fifth consecutive positive quarter — after $4.1M of net interest/tax payments and $0.4M of restructuring payments.

Net cash proceeds from the S&S sale are expected at ~$143M–$145M; per the credit facilities, 65% will prepay the senior secured term loan (retiring nearly all of it) and 35% will prepay subordinated debt, starting with the subordinated priority (Tranche 3) term loan. At June 12, 2026 senior borrowings were $115M (down from $119.7M at April 30) and subordinated borrowings were $104.8M (including PIK interest on the $35M subordinated priority term loan); a $32.5M make-whole tied to a $65M subordinated tranche is excluded from the amendments. The convertible preferred liquidation preference was $220.5M at June 12. A June 14, 2026 amendment further suspends net-leverage, fixed-charge-coverage and minimum-EBITDA covenant testing through the fiscal period ending July 31, 2027, and the existing convertible preferred is being replaced with a new series.

S&S net sales were $50.3M with operating income of $1.6M (vs $2.7M) and adjusted EBITDA of $4.1M (~8% of segment sales, vs $5.7M), after $0.8M restructuring. S&S book-to-bill recovered to 1.04x (vs 0.8x adjusted for a prior-year $36.4M debooking on the U.S. Army global FSR contract) — the first quarter above 1.0x since Q1 FY24. Key awards included >$7M for rapidly deployable troposcatter systems for an international government end customer, ~$6M incremental cybersecurity operations funding, ~$4.9M for antenna-related equipment, plus funded orders for long-range missile/rocket launch tracking, antennas, feeds and satellite ground infrastructure. Subsequent to quarter-end, S&S received >$10M of orders for initial EHF LEO satcom prototypes. A ~$20M-revenue, ~$3M-EBITDA cybersecurity/services operation (Florida and Buford, Georgia) is being retained.

Alerium net sales were $55.7M, down $5.9M YoY but roughly flat excluding a prior-year $3M retroactive-billing benefit; operating income was $4.4M and adjusted EBITDA $10.4M (~19% of segment sales). Book-to-bill was 0.32x (vs 0.91x) on timing of^📎 large multiyear awards, against 1.06x and 2.51x in earlier FY26 quarters. Awards included ~$6M of additional funding on a Midwestern U.S. next-gen 911 renewal and >$1.6M plus other funding from two domestic Tier 1 mobile network operators. Operational milestones: Kentucky's statewide NG911 program migrated 12 PSAPs in its first four months (first NG911 text and voice calls in the Commonwealth); >12 NG911 upgrades delivered across Canada in FY26 and a new purpose-built facility opened in Gatineau, Quebec. Management positions Alerium as the largest direct provider of NG911 to states, with high switching costs and an expanding TAM into wearables, connected vehicles and AI-enabled emergency workflows.

Post-close, Comtech becomes a focused public-safety company (Alerium plus a small retained cyber/services unit and corporate). Management cited a RemainCo pro forma adjusted EBITDA of ~$34M, built from historical Alerium EBITDA plus the ~$3M-EBITDA cyber business plus existing corporate, minus ~$12M of anticipated near-term transition savings. Segment funded backlog is $554M, mostly long-term, services/software-based contracts with a high recurring component. Management declined to give formal guidance but acknowledged an analyst-suggested ~3%-5% top-line growth framing as 'fair.' Comtech also retains rights to collect certain legacy accounts receivable as incremental proceeds.