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COMTECH TELECOMMUNICATIONS CORP /DE/ (CMTL)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue and non-GAAP EPS were both ahead of S&P Global consensus; revenue was $126.8M vs $124.1M estimate and non-GAAP EPS was ($0.18) vs ($0.21) estimate, aided by mix and a ~$3M NG-911 catch-up billing that will not repeat in Q4 (management flagged) . Revenue/EPS estimates from S&P Global: see Estimates Context (values marked with *).
  • Margin and cash flow inflected: gross margin rose to 30.7% (from 26.7% in Q2), Adjusted EBITDA improved to $12.6M (9.9%), and GAAP operating cash flow turned positive $2.3M for the first time in eight quarters .
  • Bookings/book-to-bill under pressure due to a $36.4M debooking on a low-margin U.S. Army GFSR contract; gross bookings (ex debooking) were stronger at $107.4M with 0.85x book-to-bill, but reported net book-to-bill was 0.56x and funded backlog fell to $708.1M (from $763.8M) .
  • Liquidity stabilized after the March 3 capital structure actions; available liquidity was ~$27.3M on June 6; covenants suspended until Q4FY25 end; total borrowings under the Credit Facility were $168.0M and Subordinated Facility $65.0M .
  • No formal guidance; management reiterated transformation focus (cost reductions, product rationalization) and declined to comment on Q4 outlook on the call—key stock reaction catalysts are margin traction, cash generation, bookings trajectory, and any DDTC/ITAR update .

What Went Well and What Went Wrong

What Went Well

  • Margin/cash flow inflection: “We… increase gross margins and reduce administrative costs… It is a significant milestone: the company generated GAAP cash flow from operations of a positive $2.3 million this quarter” .
  • T&W segment strength with mix tailwinds: T&W net sales grew 12% sequentially to $59.2M; operating income rose to $8.4M; Adjusted EBITDA to $13.9M, aided by ~$3M NG-911 retroactive billing; cloud/AI-based call handling nearing launch .
  • Cost actions taking hold: 15% workforce reduction since July 31, 2024 ($33M annualized labor cost saves) and >70 S&S products discontinued to improve focus/margins .

What Went Wrong

  • Bookings softness/backlog decline: Net bookings $71.0M (0.56x book-to-bill) and backlog down to $708.1M, driven by $36.4M debooking on low-margin U.S. Army GFSR contract awarded to the incumbent .
  • S&S revenue decline: S&S net sales down 8.3% sequentially to $67.6M as U.S. Marine Corps/Army troposcatter programs wind down; segment Adjusted EBITDA of $5.7M below prior-year $7.2M .
  • Regulatory overhang: Company received a DDTC request related to 2024 voluntary disclosures regarding potential modem misclassification; corrective actions underway and licenses sought under ITAR .

Financial Results

Consolidated performance – last three quarters

MetricQ1 FY25 (Oct 31, 2024)Q2 FY25 (Jan 31, 2025)Q3 FY25 (Apr 30, 2025)
Revenue ($USD Millions)$115.8 $126.6 $126.8
Gross Margin %12.5% 26.7% 30.7%
Operating (Loss) ($USD Millions)($129.2) ($10.3) ($1.5)
GAAP Diluted EPS ($)($5.29) ($0.76) ($0.49)
Non-GAAP Diluted EPS ($)($1.27) ($0.35) ($0.18)
Adjusted EBITDA ($USD Millions)($19.4) $2.9 $12.6

Estimates vs Actuals (S&P Global) – last three quarters

MetricQ1 FY25Q2 FY25Q3 FY25
Revenue Estimate ($USD Millions)*$125.5*$117.0*$124.1*
Revenue Actual ($USD Millions)$115.8 $126.6 $126.8
Revenue Surprise ($USD Millions)*($9.7)*+$9.6*+$2.7*
Non-GAAP EPS Estimate ($)*($0.36)*($0.57)*($0.21)*
Non-GAAP EPS Actual ($)($1.27) ($0.35) ($0.18)
EPS Surprise ($)*($0.91)*+$0.22*+$0.03*
Values retrieved from S&P Global.*

Segment breakdown

MetricQ1 FY25Q2 FY25Q3 FY25
S&S Net Sales ($USD Millions)$58.9 $73.7 $67.6
S&S Operating Income ($USD Millions)($118.8) $1.2 $2.7
S&S Adjusted EBITDA ($USD Millions)($21.1) $4.7 $5.7
S&S Book-to-Bill (x)0.99x 0.64x 0.26x (0.80x ex $36.4M debooking)
T&W Net Sales ($USD Millions)$56.9 $52.9 $59.2
T&W Operating Income ($USD Millions)$5.3 $3.4 $8.4
T&W Adjusted EBITDA ($USD Millions)$11.0 $8.9 $13.9
T&W Book-to-Bill (x)1.22x 0.61x 0.91x

KPIs (Q3 FY25)

KPIQ3 FY25
Net Bookings ($USD Millions)$71.0
Book-to-Bill (x)0.56x
Funded Backlog ($USD Millions)$708.1
Revenue Visibility ($USD Billions)~$1.2
GAAP Cash from Operations ($USD Millions)$2.3
Available Liquidity at Jun 6 ($USD Millions)~$27.3
Credit Facility Borrowings ($USD Millions)$168.0
Subordinated Credit Facility ($USD Millions)$65.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal financial guidance (revenue, margins, etc.)FY25/Q4 FY25Not providedNot providedMaintained (no guidance)
Near-term bookings/outlook commentaryQ4 FY25N/ADeclined to comment in Q&AMaintained (no outlook)
DividendN/AN/ANone mentionedN/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1, Q2)Current Period (Q3)Trend
Transformation/cost reductionWorkforce -13% since 7/31/24; CGC wind-down; >70 S&S products discontinued; plan to take further actions Workforce 15% down since 7/31/24 ($33M annualized saves); >70 S&S products discontinued; site-level accountability Improving
Capital structure/liquidityJan: covenant risk disclosed; Mar 3: $40M subordinated debt, covenant waivers, rate cuts Covenants suspended to Q4FY25; liquidity ~$27.3M; Credit Facility $168.0M; Subordinated $65.0M Stabilizing
S&S portfolio shiftQ1-Q2: troposcatter wind-down; focus on higher-margin satcom; DCG/ELEVATE launches S&S net sales softer; improved mix; COO hire; debooking of low-margin GFSR Mixed (revenue down, mix better)
NG-911/cloud & AI rolloutT&W bookings and renewals; product development underway Cloud/AI call-handling product near launch (NENA); $3M NG-911 catch-up boosted Q3 Positive
Bookings/backlog visibilityQ1 book-to-bill 1.10x; Q2 0.63x; visibility ~$1.6B Q3 net book-to-bill 0.56x; visibility ~$1.2B; ex-debooking gross book-to-bill 0.85x Weaker headline; ex-debooking better
Regulatory/legal—DDTC request re 2024 voluntary disclosures (modem classification); corrective actions and ITAR licensing underway New risk

Management Commentary

  • “We… implemented measures to… improve operational efficiency, streamline our product lines, increase gross margins and reduce administrative costs… our transformation is still in the early innings” — Ken Traub, CEO .
  • “Sequentially, our consolidated GAAP results were better… better mix of higher gross margin business, lowered… opex, increased… EBITDA, and achieved positive cash flows from operations” — Michael Bondi, CFO .
  • “We do not expect [the ~$3M NG-911 retroactive revenue] to repeat in Q4” — Michael Bondi, CFO .
  • “We have discontinued more than 70 products across the satellite and space business… [to] focus on… newer… higher margin [products]” — Ken Traub .
  • “Completed initial deliveries of next generation VSAT systems to a strategically significant allied Navy partner… deliveries… over a two-year period” — Company PR .

Q&A Highlights

  • S&S next-gen digital platforms: Continued progress on U.S. Army EDIM; targeting joint certification progress by year-end; early production units in select customers’ hands — Daniel Gizinski .
  • T&W pipeline: Multiple NG-911/location bids outstanding; not disclosing specifics — Jeff Robertson .
  • Guidance stance: Management declined to provide intra-quarter/Q4 outlook — Jeff Robertson .
  • S&S product discontinuations: Revenue impact expected to be <10% of S&S revenue; intent is to shift to later-generation, higher-margin products — Daniel Gizinski .

Estimates Context

  • Q3 FY25: Revenue beat by ~$2.7M; non-GAAP EPS beat by ~$0.03, driven by improved mix, cost reductions, and a non-recurring ~$3M NG-911 retro billing that also lifted gross margin . Revenue/EPS estimates from S&P Global; see table above.*
  • Q2 FY25: Revenue beat by ~$9.6M and EPS beat by ~$0.22 as S&S delivered higher VSAT/satcom sales; margins rebounded from Q1 trough . Values from S&P Global (see table).*
  • Q1 FY25: Revenue miss and EPS miss amid goodwill impairment, inventory write-downs, and unbilled receivable reserve in S&S; baseline for subsequent improvement . Values from S&P Global (see table).* Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin/cash-flow traction is the central near-term driver: gross margin expanded 400 bps q/q to 30.7% and GAAP operating cash flow turned positive; sustainability into Q4 bears monitoring given the Q3 NG-911 catch-up will not repeat .
  • T&W momentum offsets S&S variability: T&W delivered sequential growth and higher profitability; S&S mix improved but revenue softened as troposcatter programs wind down .
  • Bookings headline weak due to low-margin debooking; ex-debooking gross bookings improved (0.85x book-to-bill). Watch whether underlying order momentum continues without reliance on debook adjustments .
  • Balance sheet risk moderated but not eliminated: liquidity ~$27.3M, covenants suspended until Oct 31, 2025; leverage remains elevated (Credit Facility $168.0M; Subordinated $65.0M) .
  • Regulatory inquiry introduces an overhang; management has taken corrective actions and is pursuing ITAR licenses — any resolution/disclosure could impact sentiment .
  • No guidance: stock likely trades on execution of transformation (cost saves, product rationalization, mix) and order flow visibility (NG-911 wins, S&S next-gen platforms) rather than targets .
  • Near-term setup: Positive catalysts include continued margin/EBITDA improvement, cash generation, and NG-911/cloud+AI launch; risks include bookings softness, S&S revenue headwinds, and regulatory outcomes .