Comtech Telecommunications (NASDAQ:CMTL) executives told investors the company delivered its fourth consecutive quarter of positive operating cash flow in fiscal second-quarter 2026, while continuing a shift away from lower-margin business and toward higher-margin production programs and recurring software and services revenue.
Chairman, President and CEO Kenneth Traub said Comtech ended the quarter with approximately $50 million of total liquidity and reported net bookings of $175 million, resulting in a book-to-bill ratio of 1.64x. Backlog increased to $732 million, and the company maintained revenue visibility of approximately $1.1 billion, according to Traub.
Sales declined as Comtech phased out lower-margin revenue
Traub said examples of revenue phased out included service contracts such as the Very Small Aperture Terminal (VSAT) Satellite Systems and Services contract and the Global Field Services Representative (GFSR) contract, along with “legacy Troposcatter related products and services.” In response to an analyst question about whether additional low-margin revenue remains to be worked off, Traub said the company has phased that revenue out.
Margin and profitability improved despite lower revenue
While consolidated sales fell year over year, profitability metrics improved. Traub said gross profit increased to $36 million from $34 million, gross margin expanded to 34% from 27%, and adjusted EBITDA rose to $9.1 million from $2.9 million.
CFO Michael Bondi reported gross profit of $36.2 million, or 33.9% of net sales, compared with $33.7 million, or 26.7%, in the prior-year quarter. He said the improvement reflected better product mix and progress in shifting back toward higher-volume production orders in satellite ground infrastructure solutions.
On a GAAP basis, Comtech recorded an operating loss of $1.2 million, compared with an operating loss of more than $10 million a year earlier. Bondi said both periods included non-cash and one-time charges. Excluding those items, he said consolidated operating income would have been $6.2 million, or 5.8% of net sales, versus roughly break-even a year ago, driven by higher gross profit and lower selling, general, and administrative expenses. He also cited lower restructuring costs, no proxy solicitation costs, and lower amortization of stock-based compensation, partially offset by higher CEO transition costs.
Segment update: Satellite and Space and Allerium
Satellite and Space Communications net sales declined 31% year over year, which Traub said was expected given the company’s exit from certain low-margin revenue and the government shutdown impact. Despite the sales decline, the segment improved operating income to $2.5 million from $1.2 million in the year-ago quarter. Traub said the improvement primarily reflected cost reduction and optimization initiatives, partially offset by higher research and development spending.
Traub highlighted several developments in the segment during the quarter:
- Over $5.5 million of funded orders from several international government end customers for Troposcatter systems, including Multipath Radios (MPRs) and Modular Transportable Transmission Systems (MTTS).
- Incremental funding in excess of $4.5 million for ongoing training and support tied to complex cybersecurity operations for U.S. government customers.
- Initial production deliveries to a prime contractor supporting a next-generation satellite modem contract, with a transition to full production anticipated during fiscal 2026.
- Progress on a second next-generation product with the same prime contractor, also expected to begin production deliveries in fiscal 2026.
- Initial deliveries of Digital Common Ground 7000 software-defined modems to Lite Coms for integration and testing across government and commercial satellite communications applications.
During the Q&A, Bondi provided additional context on modem programs, saying one platform is already in low-rate production and is expected to “kick in” in the second half of the fiscal year, and that another program—referred to as the EDIM program—was nearing the end of development and gearing up for production toward the end of the fiscal year. Bondi characterized both as long-term programs and referenced the EBEM modem installed base as a potential upgrade opportunity, noting that “tens of thousands” of modems were sold over approximately a 10-year period.
Allerium (the company’s public safety and emergency communications segment) posted net sales of $56.2 million, up 6.2% year over year, with Traub citing growth across location-based, Next Generation 9-1-1, and call handling solutions. He said the increase reflected new customer adoption and continued migration of public safety answering points (PSAPs) onto Allerium’s Next Generation 9-1-1 core services, cloud-based platforms, and monthly recurring revenue streams.
Allerium operating income rose to $5.5 million from $3.4 million, which Traub said reflected higher net sales and gross profit in both dollars and as a percentage of segment sales. Traub also pointed to major awards during the quarter, including more than $107 million of incremental funding toward a multiyear contract extension valued in excess of $130 million with Allerium’s largest customer, described as a leading U.S. telecommunications company. He added that Allerium received more than $10.5 million in multiyear funding for deployment of a Next Generation 9-1-1 system in the South Central U.S.
In response to an analyst question, Allerium President Jeff Robertson said the company is applying AI in PSAP environments to help consolidate multiple sources of information during emergency calls and present a clearer picture for dispatch. On cloud migration, Robertson said Allerium is “three-quarters of the way down the road,” referencing a cloud-based 9-1-1 call handling platform called Mira and plans to move Next Generation 9-1-1 core services to a private cloud infrastructure.
Cash flow, liquidity, and capital structure
Bondi said Comtech generated $4.9 million of positive operating cash flow in the quarter, compared with roughly break-even in the year-ago period, marking the fourth straight quarter of positive operating cash inflows. He attributed the year-over-year improvement to changes in net working capital and “improved accountability and process disciplines,” along with timing and progress toward completion on contracts accounted for over time, including related shipments, billings, and collections. Bondi also said the company reduced receivables and inventory from July 31, 2025, and maintained lower accounts payable levels as liquidity improved.
As of Jan. 31, 2026, Bondi said Comtech had $49.9 million in available liquidity, including about $30.2 million in qualified cash and cash equivalents and $19.6 million available under its revolver. Total outstanding borrowings under the credit facility were about $125 million, including $7.6 million drawn on the revolver. Bondi noted the company repaid $10 million on the revolver during the quarter and made its scheduled term-loan principal payment.
Bondi also discussed the subordinated credit facility, saying outstanding borrowings were $102.8 million (including interest paid in kind or accrued on a $35 million subordinated priority term loan), and he noted the figure did not include $32.5 million of make-whole amounts tied to a $65 million portion of the facility. He added that the liquidation preference of the company’s convertible preferred stock was $213.4 million, excluding potential increases under certain circumstances.
Bondi reiterated that credit facility amendments suspended testing of net leverage and fixed charge coverage covenants through the four-quarter period ending Jan. 31, 2027, and said the combination of the amendments and improved performance supported removal of “going concern” disclosures from the company’s fiscal 2025 Form 10-K filed in November 2025.
Arbitration update involving former CEO
Traub also provided an update on a dispute with former CEO Ken Peterman. Traub said Peterman was terminated for cause in March 2024 and subsequently filed an arbitration claim seeking more than $6 million in direct contractual damages and more than $35 million in consequential damages. Traub said Comtech filed counterclaims seeking damages for breach of fiduciary duty, malicious prosecution, abuse of process, breach of contract, and defamation.
According to Traub, Peterman’s counsel moved in January to withdraw Peterman’s claims and sought dismissal of Comtech’s counterclaims. Traub said the arbitrator granted the withdrawal of Peterman’s claims but rejected the request to dismiss Comtech’s counterclaims, which remain pending.
In closing remarks, Traub said he believes Comtech’s improved financial health is increasing confidence among customers, vendors, and employees, supporting retention, recruitment, and deeper partner relationships.
About Comtech Telecommunications (NASDAQ:CMTL)
Comtech Telecommunications Corporation (NASDAQ:CMTL), founded in 1969 and headquartered in Melville, New York, is a leading global provider of advanced communications solutions. The company designs, develops, and deploys equipment, systems, and services that enable secure and reliable transmission of voice, video, and data. Over its history, Comtech has built a reputation for innovation across satellite communications, wireless data systems, and public safety networks, serving both commercial and government customers worldwide.
Comtech operates through two primary business segments: Commercial Solutions and Government Solutions.
