Sign in

You're signed outSign in or to get full access.

CT

COMTECH TELECOMMUNICATIONS CORP /DE/ (CMTL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 revenue was $126.6M, down 5.7% YoY and up 9.3% QoQ; gross margin improved sequentially to 26.7% from 12.5% on better mix and cost actions .
  • GAAP diluted EPS was $(0.76) vs $(1.07) in Q2 FY2024 and $(5.29) in Q1 FY2025; Adjusted EBITDA was $2.9M vs $15.1M YoY and $(19.4)M QoQ improvement .
  • Bookings were $79.4M (book-to-bill 0.63x); funded backlog was $763.8M with ~$1.6B revenue visibility; management reiterated strategic alternatives and operational transformation .
  • Capital structure was strengthened post-quarter via $40M subordinated debt infusion and covenant waivers to Oct 31, 2025; interest rates reduced on term and revolver loans, easing near-term cash interest burden .
  • Wall Street consensus estimates from S&P Global were unavailable at time of writing; estimate comparison omitted (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Sequential improvement: gross margin rose to 26.7% from 12.5% and operating loss narrowed to $(10.3)M from $(129.2)M; Adjusted EBITDA improved to $2.9M from $(19.4)M on mix and cost actions .
  • T&W segment resilience: net sales $52.9M and operating income $3.4M; backlog of $511.8M; management highlighted cloud-based emergency response products and international 5G location technology demand .
  • Strategic progress: capital infusion and covenant suspension improved flexibility; CEO emphasized trust, accountability, and transformation plan momentum—“earn the trust of all of our stakeholders…by being transparent, holding ourselves accountable and delivering on our promises” .

What Went Wrong

  • YoY compression: revenue down 5.7% YoY to $126.6M; gross margin down to 26.7% vs 32.2% prior year; Adjusted EBITDA fell to $2.9M vs $15.1M YoY .
  • Bookings softness: consolidated bookings $79.4M, down 44% YoY; book-to-bill 0.63x reflecting deliberate avoidance of low-margin deals and timing of larger contracts .
  • Elevated interest and non-cash items weighed on GAAP: interest expense $11.0M; changes in warrant/derivative fair values impacted results; net loss attributable to common shareholders $(22.4)M .

Financial Results

MetricQ2 FY2024Q1 FY2025Q2 FY2025
Revenue ($USD Millions)$134.225 $115.800 $126.574
Gross Margin %32.2% 12.5% 26.7%
Operating Income (Loss) ($USD Millions)$2.973 $(129.170) $(10.257)
Net Loss Attributable to Common ($USD Millions)$(30.532) $(155.862) $(22.356)
Diluted EPS ($USD)$(1.07) $(5.29) $(0.76)
Adjusted EBITDA ($USD Millions)$15.111 $(19.397) $2.903
Bookings ($USD Millions)N/A$127.9 $79.4
Book-to-Bill (x)N/A1.10x 0.63x
Funded Backlog ($USD Millions)N/A$811.0 $763.8
Revenue Visibility ($USD Billions)N/A~$1.6 ~$1.6

Segment performance (time-series):

Satellite & Space Communications (S&S)

MetricQ1 FY2025Q2 FY2025
Net Sales ($USD Millions)$58.9 $73.7
Operating Income (Loss) ($USD Millions)$(118.8) $1.2
Adjusted EBITDA ($USD Millions)$(21.1) $4.7
Net Bookings ($USD Millions)$58.4 $47.4
Book-to-Bill (x)0.99x 0.64x
Funded Backlog ($USD Millions)$278.4 $252.1

Terrestrial & Wireless Networks (T&W)

MetricQ1 FY2025Q2 FY2025
Net Sales ($USD Millions)$56.9 $52.9
Operating Income ($USD Millions)$5.3 $3.4
Adjusted EBITDA ($USD Millions)$11.0 $8.9
Net Bookings ($USD Millions)$69.4 $32.0
Book-to-Bill (x)1.22x 0.61x
Funded Backlog ($USD Millions)$532.6 $511.8

KPIs and liquidity

KPIQ1 FY2025Q2 FY2025
Qualified Cash & Equivalents ($USD Millions)$26.3 (Jan 31) $26.7 (Jan 31)
Credit Facility Outstanding ($USD Millions)$202.9 (Jan 31) $168.0 (Mar 10)
Revolver Draw ($USD Millions)$32.5 (Jan 31) $23.4 (Mar 10)
Subordinated Credit Facility Outstanding ($USD Millions)$25.0 (Jan 31) $65.0 (Mar 10)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue, EPS, EBITDAFY2025Not providedNot providedMaintained “no guidance” stance
Capital structure covenantsThrough Oct 31, 2025Covenant testing resumed Jan 31, 2025Net leverage and fixed charge coverage covenants suspended until quarter ending Oct 31, 2025Eased covenants
Interest rates (Term/Revolver)Effective Mar 3, 2025Higher prior ratesReduced by ~470 bps (Term) and ~215 bps (Revolver)Lowered
Minimum quarterly Average LiquidityOngoing$20.0M$17.5MLowered

Earnings Call Themes & Trends

TopicQ4 FY2024 (Q-2)Q1 FY2025 (Q-1)Q2 FY2025 (Current)Trend
Transformation plan & cultureAnnounced pure-play S&S strategy; exiting UK antenna ops; record backlog ~$800M New CEO outlined pillars: trust, cost discipline, strategic alternatives, capital structure; “earn the trust…with transparency” Progress cited; accountability clearer; improved mix and costs; trust focus reiterated Strengthening execution and tone improving
Capital structureAmended facility; $25M subordinated loan; covenants waived for Q4 FY2024 Debt classified current with anticipated breaches; working with lenders constructively $40M infusion; covenant suspension to Oct 31, 2025; rate reductions Materially improved flexibility
S&S product portfolioCost growth and impairments; plan to rationalize SKUs Discontinuing >70 products; rationalize footprint; focus on higher-margin offerings Continued rationalization; COO hire; better mix, margin; A3M sole-source awards Portfolio shift to differentiated, higher-margin
T&W businessStrong bookings; NG911 wins; book-to-bill 1.70x FY2024 Growing call handling and NG911; strategic alternatives broadened QoQ net sales impacted by timing; cloud+AI NG911 call handling solution nearing launch Durable, expanding product roadmap
Working capital & cash flowUnbilled receivables reduced by ~$17.5M Plan to monetize unbilled; breakeven operating cash flow Further reduction trajectory; positive GAAP cash from ops highlighted in Q3 (forward context) Execution improving
Regulatory/legal—FCC NG911 focus (location accuracy, resiliency) seen as positive DDTC RFI re: export classifications disclosed (Q3 call; for outlook) Tailwinds in NG911 vs compliance work in S&S

Management Commentary

  • CEO: “A vital element of our transformation plan is to earn the trust and confidence of all of our stakeholders…by being transparent, holding ourselves accountable and delivering on our promises” .
  • CFO: “Consolidated gross margins for the quarter were 26.7%…a sequential increase from the 12.5% reported in the immediately preceding quarter” .
  • CEO on portfolio discipline: “We are…not going to accept jobs…that are very low, thin or even negative gross margins” .
  • S&S leadership: “We expected the impact…of some of these discontinued products to be less than 10% of the satellite and space segment revenue” .
  • T&W leadership: “We anticipate launching [our] next-generation 911 call-handling solution…leveraging cloud and AI capabilities” .

Q&A Highlights

  • Margin and portfolio discipline: Management reiterated refusal to accept low-margin business and focus on differentiated technology to justify improved margins .
  • Cash flow trajectory: Team expects ongoing improvement through working capital actions, though refrained from specifics; breakeven operating cash flow achieved in Q2 .
  • GFSR contract protest: Outcome unfavorable; company evaluating options but noted very low margin profile, consistent with portfolio discipline .
  • NG911 regulatory tailwinds: FCC emphasis on location accuracy (including Z-axis) and resiliency seen as supportive of T&W .

Estimates Context

  • S&P Global consensus estimates for Q2 FY2025 EPS and revenue were unavailable at time of writing; comparison omitted. Values retrieved from S&P Global were unavailable due to request limit constraints.
  • Given sequential margin recovery and deliberate avoidance of low-margin bookings, forward estimate revisions may reflect improved gross margin trajectory and mix in S&S, while T&W’s regulatory tailwinds and upcoming cloud+AI product launch could support revenue quality and backlog conversion .

Key Takeaways for Investors

  • Sequential recovery credible: Gross margin expanded to 26.7% and operating loss narrowed materially; Adjusted EBITDA improved QoQ, signaling traction in cost and mix initiatives .
  • Capital structure risks mitigated: $40M infusion and covenant suspension to Oct 31, 2025 reduce near-term default risk and cash interest burden, enabling operational execution .
  • Portfolio focus should lift margins: Discontinuation of >70 low/obsolete SKUs and tighter bid discipline align S&S toward higher-margin products; A3M sole-source wins validate product strength .
  • T&W offers stable, strategic value: Large backlog, NG911 regulatory support, and pending cloud+AI call handling solution underpin multi-year revenue durability and potential strategic alternatives optionality .
  • Bookings softness intentional in part: Lower book-to-bill reflects rejection of low-margin work; monitor conversion of high-quality backlog and new awards (e.g., VSAT deliveries, NG911 contracts) .
  • Watch working capital execution: Continued reduction in unbilled receivables and milestone billing discipline are key to sustaining cash flow improvement .
  • Risk factors persist: Interest expense remain elevated; legal/regulatory inquiries (DDTC) and program timing can drive volatility; maintain position sizing accordingly .