Comtech Telecommunications Corp. Stock

Welcome to Comtech Telecommunications Corp.'s conference call for the fourth quarter and full year 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.

Thank you, operator, and thanks, everyone, for joining us today. I'm here with Ken Traub, Comtech's Chairman, President and CEO; Mike Bondi, our CFO; and Jeff Robertson, President of Allerium. After Ken and Jeff and Mike's remarks, they will be available for questions.

Before we get started, please note, we have a detailed discussion of the quarter and the year in the press release and 10-K we issued this afternoon, which are available on our website as well as the SEC's website. As described in the documents, on June 14, 2026, we entered into an agreement to sell most of our Satellite and Space Communications business to an affiliate of Gilat Satellite Networks. As a result, the portion of that business being sold is presented as discontinued operations in our financial statements. Unless we say otherwise, the financial results we discuss today relate to our continuing operations with comparable prior periods recast to reflect these changes.

Our continuing operations consist of our Allerium public safety business, our retained cyber security training solutions business, the wind down of certain now inactive U.S. Army contracts and corporate functions.

Our press release includes reconciliations of the non-GAAP measures we will discuss to the most directly comparable GAAP measures. 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?

Thank you, Maria, and good afternoon, everyone. I appreciate you joining us today. Fiscal 2026 was a defining year for Comtech. When I joined the company as CEO in January 2025, I told you that I believe the most critical factor for success in any business and especially in the turnaround is building trust with all key stakeholders. And that trust is built by honoring promises.

I then laid out a transformation plan that had 4 pillars. First, our first pillar was to restore and enhance operational discipline throughout the company. Our second pillar was to generate positive operating cash flow. Our third pillar was to conduct a comprehensive review of strategic alternatives, and our fourth pillar was to strengthen the company's capital structure.

Today, with the fiscal year behind us, I can report that we have delivered on each of these promises. Let me take them in turn because in fulfilling the promises we made, we have not only executed the turnaround as planned, but we have successfully transformed our company. Comtech is now a far stronger company operationally, financially, organizationally and strategically.

Our first pillar focused on operational discipline. Any observer of Comtech today will see a dramatically improved operational discipline throughout the entire company. I would like to highlight a few notable aspects. First, anyone would observe, we have a new culture throughout our organization, which centers around transparency, empowerment and accountability. Second, Comtech now has a significantly reduced and much more efficient cost structure. Third, we have implemented a disciplined approach to product and market initiatives. And fourth, we have enhanced our project execution. And finally, working capital management has been prioritized and optimized.

These initiatives have helped to drive Comtech's dramatic improvement in financial results, which is evident in the significant increases in gross margins and EBITDA margins that Mike will discuss. But it's particularly noteworthy in the return to more consistent generation of positive operating cash flow, which I will discuss in more detail in a moment. The improved operational discipline throughout the company has also helped us win trust and credibility with our key stakeholders, particularly our employees, customers, suppliers and creditors.

The second pillar of our transformation plan focused on returning the company to positive operating cash flow. For the 7 quarters leading up to January 31, 2025, Comtech reported operating cash flow losses in each quarter with accumulated total cash burn of over $80 million. After taking over as CEO in January 2025 and announcing the transformation plan, we reported positive operating cash flow on a consolidated basis in each of the 6 quarters since then, with a cumulative positive operating cash flow in that period of over $50 million. This has enabled us to increase our liquidity to over $61 million at the end of fiscal year 2026 while also reducing our debt. This is the greatest level of liquidity Comtech has had in its recent history and has put us in a position of strength as we focused on the next 2 pillars of our transformation plan, the review of strategic alternatives and the strengthening of the capital structure.

Our third pillar of our transformation plan was that we committed to conduct a comprehensive review of strategic alternatives. We conducted a very broad and deliberate process and considered all relevant options with our overarching goal of identifying the best path to maximizing long-term shareholder value. Hence, we took our time and executed on the first 2 pillars to create the position of strength that was key to conducting a successful process.

By running a broad process with various alternatives available to us, it also gave us optionality and negotiating leverage with any potential suitors as we were not dependent on any one alternative. As we considered which assets to sell, one important consideration was to generate the cash to delever the balance sheet. But actually, the even more important consideration was to retain in the company the most attractive business for us to build and create the best path for long-term value creation.

The answer became clear. Divesting the majority of Satellite and Space Communications business would accomplish multiple goals. First, the sale of S&S could generate enough cash to prepay most of our senior debt and enable a recapitalization. Second, while we have succeeded in turning it around, the satellite and space business has been a difficult business for Comtech to manage over the years. As recently as fiscal 2025, the satellite and space business reported GAAP operating losses of over $110 million and experienced significant and unpredictable fluctuations in its operating cash flow over the years. Third, by divesting satellite and space, which requires a lot of corporate support, we can streamline the business into one remaining operating segment and eliminate a significant amount of corporate overhead.

Finally and most importantly, our public safety business in Allerium, coupled with our cyber training services, which has previously been part of satellite and space, have very attractive financial profiles with clear levers to drive future growth. Unlike the satellite and space business that we are divesting, Allerium is very stable as it is characterized by over 80% annual recurring revenue, long-term customer contracts and significant backlog. Our cyber business has similar qualities. Recent innovations in our business, coupled with favorable industry dynamics and drivers, which Jeff will describe in more detail, provide opportunities for exciting long-term growth on top of the stable and predictable base of business. Further, the sale of most of satellite and space enables us to streamline and realign the business to be fit for purpose to support the long-term growth and success of our public safety business.

In marketing the satellite and space business, together with our financial advisers at TD Securities, we contacted over 150 potential buyers, signed over 80 NDAs, met with numerous prospects, and we are very pleased with the outcome, which is reflected in the definitive agreement we entered into with Gilat to sell most of that business for $157.5 million while keeping certain assets we wanted to retain. We received already $10 million of this purchase price at the time we signed the agreement; and while it is still subject to regulatory approval and other closing conditions, we expect to close this transaction by the end of this calendar year.

The fourth pillar of our transformation plan was to strengthen our capital structure as the company's deep and expensive debt and preferred securities have been an issue for a long time. We entered into 2 subordinated debt investments and 2 amendments through our subordinated debt and senior credit agreements in fiscal 2025, primarily to wave prior breaches of financial covenants, obtain covenant holidays going forward and lower near-term cash interest payments. These amendments, together with the operational improvements we made that demonstrated the return to consistent positive cash flow enable us to satisfy ourselves and our auditors that the company's prior disclosures expressing doubts regarding its ability to continue as a going concern can confidently be removed from our financial statements. This was a very positive message and a sign of our progress to our stakeholders, including employees, customers and suppliers.

Contemporaneous with signing the definitive agreement with Gilat, in June 2026, we entered into new amendments with our senior creditors, subordinated lenders and preferred stockholders. We were in compliance with all of these agreements at the time, and our operational and strategic progress enabled us to negotiate favorable improvements in each of these agreements.

One issue that was critical for us to resolve was a provision in the preferred stock agreement that called for the acceleration of the preferred stockholders' right to redeem the full amount of the preferred stock upon certain refinancings of the senior debt. We succeeded in having that provision removed from the agreements and extended the redemption rights from October 2028 to October 2029. We also reduced the overall cost of capital by lowering the required prepayment fees on the senior debt and extending the trigger dates for increases of the make-whole adjustments on the subordinated debt so that we can refinance and pay off the subordinated debt before the next increase and the make-whole requirement comes into effect.

We also obtained an extended covenant holiday through July 2027 so that we can focus on execution of the pending transactions and the transition without concerns on covenant compliance. Overall, as a result of these amendments, we have already reduced our cost of capital and reduced and improved our financial flexibility. Further, we anticipate that upon closing the transaction to sell most of our S&S business, we will consummate additional refinancings and amendments that will result in a healthier capital structure going forward with further reductions in cost of capital and enhanced financial flexibility to support the long-term growth and development of our remaining business centered around Allerium, including cyber services.

Now that we have successfully executed on all 4 pillars of our transformation plan, the operational discipline, the return to positive cash flow, consummating the strategic sale transaction and improving the capital structure, Comtech is much stronger in every dimension, as I said, operationally, financially, organizationally and strategically. As we await regulatory approval of the sale of the satellite and space business, we are executing a transition plan to align the organization to be purpose built to support the long-term growth and success of our remaining business centered around Allerium's public safety operations plus our cyber services.

Consequently, we announced today some important changes with our leadership team. Amy Rothstein-Hovey joined us on October 1 as General Counsel and will become our Chief Legal Officer and Corporate Secretary right after Don Walther's last day at Comtech, which we expect to be shortly following the closing of the transaction to sell satellite and space to Gilat. We are excited to welcome Amy to Comtech as she brings more than 20 years of experience guiding governance, strategic transactions, capital markets activities, enterprise risk management and growth initiatives across global, public and private companies.

We also announced today that Rich Nyren joined us on October 8 as Executive Vice President of Finance and will become our Chief Financial Officer right after Mike Bondi's last day at Comtech, which we expect to be shortly following the filing of the 10-Q for the first quarter of fiscal 2027. We are also excited to welcome Rich to Comtech as he brings more than 30 years of finance, accounting, capital markets and strategic leadership experience across mission-critical communications, aerospace, telecommunications and infrastructure businesses.

I want to sincerely thank and complement Mike and Don for their dedication and contributions to the company. They have both been terrific partners as we have successfully navigated Comtech's transformation together over the past 2 years. We are all looking forward to continuing to work closely with Mike and Don during this transition period and are very grateful for their valuable contributions that have enabled us to get to this pivotal point in Comtech's evolution. They are also both really a pleasure to work with. While we will miss them following their departures, I know they will both be very successful going forward, and I wish them well. We are also excited about the critical roles that Rich and Amy will serve as they will be integrated closely with Jeff's Allerium team in building a focused, dynamic leader in public safety.

With that, I will turn the call over to Jeff to share with you additional perspectives on our Allerium business and why we are excited about the opportunities ahead for this business. Jeff?

Thanks, Ken. I'm incredibly excited about what's ahead for Allerium because we're entering this chapter, this next chapter from a position of real strength. To give just a few examples, earlier this year, Allerium secured a multiyear contract extension valued in excess of $130 million from our largest customer, a leading U.S. telecommunications company. In Kentucky, we migrated the Commonwealth's first public safety answering point in December and then migrated 12 more PSAPs within the first 4 months of operation, a first-in-market milestone that validates our platform at statewide scale. And in Canada, we completed more than 60 Next Gen 9-1-1 upgrades during the year and opened a new purpose-built facility in Gatineau, Quebec with support from the city and the province of Quebec.

We entered fiscal 2027 with $520 million in funded backlog. Approximately 80% of our annual revenue now is recurring and long-standing relationships with states, public safety agencies and some of the world's largest mobile network operators.

As Ken described, subject to regulatory approval and the closing of the Gilat transaction, we also expect to have greater financial flexibility and an organization purpose built around Allerium with our people, investments and priorities aligned around the markets we serve. That creates an opportunity, I believe, is much bigger than simply becoming a more focused company. We have spent decades operating across public safety and mobile networks. We understand how critical communications move through those environments from locating and routing an emergency call to delivering it to the right agency to helping the call handler understand what is happening while also providing location, messaging and alerting capabilities within some of the world's largest mobile networks.

That breadth matters because both markets are at inflection points. In public safety, Next Generation 9-1-1 is creating a secure IP-based foundation capable of carrying much more than the traditional voice call. The next opportunity is to make better use of that foundation. As more information becomes available, agencies need ways to receive it, understand it and move it with the incident across systems, agencies and jurisdictions. That is where we believe Allerium has a significant opportunity. We already provide the network infrastructure and call handling technology across the emergency communications path, and 2 of the capabilities we have spent years investing in are now in the market.

Mira is our new emergency call handling solution, and what makes it different is that it runs over the secure Next Gen 9-1-1 network rather than inside a single agency. More and more emergencies require several agencies to respond together; and because Mira's features and integrations live in the network, agencies can work the same incident together instead of each working alone. That is a real advantage.

Coral addresses the flood of new data coming into emergency communications, wearables, vehicle telematics, AI-enhanced cameras and other sources. Today, that information arrives through many different applications, often over the open Internet and is very hard to correlate in the middle of a stressful response. Coral carries it over the secure Next Gen 9-1-1 networks we have already deployed. So it reaches the right agency together with the call. And across the portfolio, we see opportunities to bring more intelligence into the workflow without compromising the reliability and control public safety requires.

Our opportunity in mobile networks is also very compelling. For decades, our technology has helped mobile network operators solve some of the most demanding location, messaging and emergency communications requirements. These capabilities operate deep within carrier networks at significant scale. As mobile networks become more software-driven and network capabilities become increasingly accessible through APIs, we believe our expertise in highly accurate location, messaging, alerting and carrier-grade infrastructure can support a broader set of services and applications.

Artificial intelligence will accelerate opportunities in both markets, and our approach to it is practical. Let me start with what AI will not do. It will never replace the emergency dispatcher. What it can do is act as an assistant, coaching a call handler through a complex emergency when information is arriving faster than any one person can absorb it. No dispatcher can be an expert in everything. AI can know how different vehicle architectures behave in a crash and how to free someone trapped in a car. It can guide the first minutes of a chemical spill. It can suggest the specific questions about a suspect or a scene that help responders when they arrive. Some of this is in use today, real-time transcription of calls, real-time translation on the fly, which we saw heavily used during the World Cup this summer, AI as a training tool for new dispatchers in a job where it takes years to become an expert.

Our clear advantage is where we sit. Allerium carries the audio and the information about an emergency from the moment it begins. So we can put AI to work on it in near real time inside systems where accuracy, reliability and security already matter. In mobile networks, the same applies to location and network intelligence. We believe that it gives us a competitive advantage in the marketplace and will drive better margins over time.

I also want to be direct about bookings. For the year, our book to bill was 1.06 and backlog grew, but the second half was lighter than the first. We don't manage this business to a quarterly ratio. Our awards are large, multiyear contracts with states and carriers, often with option years, and they arrive when procurement cycles finish, not when our quarter does. The better measures are order tempo over a longer horizon and the quality of what we have booked, $520 million of funded backlog and roughly $860 million of revenue visibility when you include the unfunded value of contracts already in hand. That said, converting our pipeline into bookings is our first priority for fiscal 2027.

One more piece of the portfolio as part of the transaction, we are retaining our cyber security training business, which becomes part of Allerium. It has an attractive profile, a profitable business built on long-standing U.S. government programs that have renewed through multiple cycles with proprietary training methods and deep customer relationships. It also fits where the market is going.

Securing our nation's first response networks is one of the leading challenges facing public safety today, and 9-1-1 systems are among the most targeted infrastructure in the country. As we bring this business into Allerium, we look forward to extending it into public safety, applying its experience and our own to help secure the nation's 9-1-1 services and cross selling it to state, local and carrier customers we already serve. We expect it to add to our growth.

When I look at Allerium today, I see a business with the pieces in place to grow. Roughly 80% of our revenue is recurring. According to Frost & Sullivan, we hold the #2 position in Next Gen 9-1-1 core services in the United States and the #3 position in call handling. And our location technology supports more than 250 million wireless subscribers. We are already the network, the call handling platform or the location provider for most of the customers we want to grow with, which means our new products go to market through relationships we already have.

Mira gives our call handling customers a path to the cloud. Coral gives every agency on our networks a reason to use more of what the network can do, and the market is moving toward exactly these capabilities as states modernize and carriers build out 5G. Our job now is to turn that position into growth. That means executing for the customers who already trust us, converting the investments we have made into revenue, expanding the value we provide within existing relationships and bringing new capabilities to market with the discipline these customers expect.

It also means focus. For the first time, every dollar we invest, every person we hire and every decision this leadership team makes will go toward one mission, improving how emergencies are answered and responded to. On the public safety side, that is getting the right information to the right agency faster and helping call handlers act on it. On the carrier side, it is helping mobile network operators locate callers accurately, route emergency calls reliably and alert the public when it matters. A company that puts all of its attention on one market and knows this well tends to build better products, serve customers faster and run more efficiently. That is what we intend to do, and that is why we are so excited about this transition.

I want to echo Ken's thanks to Mike Bondi and Don Walther for the tremendous amount of work they have done to put us in this position and for their partnership through this transition. I'm also excited to work with Rich and Amy and the rest of our leadership team as we build an organization designed specifically for Allerium and the opportunities ahead.

We have a lot of work to do, but we know these markets. We know our customers, and we know where we can create value for the communities that depend on 9-1-1 and for our shareholders. I'm excited to get after it.

With that, I'll turn the call over to Mike to walk through the financials. Mike?

Thank you, Jeff, and good afternoon, everyone. Before I get into the numbers, let me spend just a moment on presentation to reiterate what Maria just said at the top of the call. Because we had agreed to sell most of our satellite and space business, that business is now being presented as held for sale on our balance sheet and discontinued operations in our income statement and cash flow statements. Comparative prior year information has also been recast on that basis.

We now have one reportable operating segment, which consists of our historical Allerium segment, our cyber security training and related services business being retained in the sale to Gilat and our corporate function. Additionally, although wound down and inactive in fiscal 2026, our continuing operations in fiscal 2025 included the runoff of 2 legacy satellite and space contracts with the U.S. Army called VSAT and GFSR. Such contracts are not being acquired by Gilat and therefore are not part of discontinued operations. Unless expressly stated, the results I'll be presenting today relate to our continuing operations, and I refer you to our earnings release and 10-K filings for any reconciliations to non-GAAP measures.

I will review fiscal 2026 results first and the fourth quarter before turning to the balance sheet and liquidity. Fiscal 2026 net sales were $249.6 million compared to $300.9 million last year. It is important to understand that what drove this change in net sales has little bearing on Allerium's business going forward as the fiscal 2025 period included almost $49 million of net sales from the legacy U.S. Army VSAT and GFSR contracts, which had only contributed $1.7 million of gross profit last year. Those contracts principally wound down in fiscal '25 and had only negligible sales and gross profit in fiscal 2026 as a result of our decision to phase out and eliminate certain low-margin and capital-intensive revenues such as from these 2 contracts.

Excluding such contracts in each year, fiscal 2026 net sales were comparable to fiscal 2025 with slightly lower net sales of our call handling solutions this year as initial deployment activity in 2025 has now transitioned to recurring maintenance revenue in 2026. Gross profit in fiscal 2026 improved to $97.2 million or 38.9% of net sales compared to $95.2 million or 31.6% of net sales in fiscal 2025. So despite the fluctuation in net sales, we generated $2 million more in gross profit. The improvement in gross margin reflects the continued adoption of our solutions and the migration of PSAPs onto our NG9-1-1 core services and call handling platforms as initial deployments progress into monthly recurring revenue streams.

Selling, general and administrative expenses were approximately $88 million in fiscal 2026 and 2025. Both years included approximately $10 million of restructuring costs, primarily legal and professional fees associated with our strategic alternatives process and costs to streamline our operations. Excluding such restructuring activities, SG&A was approximately $78 million for each year, which reflects reduced corporate overhead offset by reinvestment back into Allerium and higher stock-based compensation.

Research and development expenses were $11.6 million in fiscal 2026, consistent with the prior year. However, overall, we did increase our investments in newer technologies and cloud-based platforms this year as we increased our capital -- capitalized internal use software development efforts from just under $4 million last year to a little over $6 million this year.

Our GAAP operating loss in fiscal 2026 was $18.2 million, an improvement compared to the $29.9 million of operating loss in fiscal '25. The fiscal 2026 amount includes $14.8 million of amortization of intangibles, the $10 million of restructuring costs I just mentioned, $3.1 million of stock-based compensation and $1.2 million of CEO transition costs.

Excluding such amounts, operating income would have been $10.8 million or 4.3% of net sales compared to $7.6 million or $2.5 million of net sales on the same basis last year, which also includes proxy solicitation costs and an allocated goodwill impairment charge recorded last year.

Adjusted EBITDA was $20.6 million or 8.3% of net sales in fiscal 2026 compared to $16.4 million or 5.5% of net sales in fiscal '25. The improvement, both in dollars and as a percentage, primarily reflects higher gross profit and lower core SG&A. Total interest expense across continuing and discontinued operations was $48.3 million and $45.6 million, respectively.

Fiscal 2026 reflects a shift from cash interest associated with our credit facility to accretive make-whole adjustments and paid-in-kind interest associated with our subordinated credit facility, in addition to higher amortization of the make-whole adjustments, deferred financing costs and debt issuance costs due to the assumed repayment of a significant portion of our debt when the anticipated transaction with Gilat closes. Interest expense allocated to continuing operations in fiscal '26 was $21.3 million compared to $19 million last year. Most of that interest expense is noncash.

Cash interest paid for continuing operations was approximately $5 million in fiscal 2026, down from $12.9 million last year. As Jeff mentioned, bookings for fiscal 2026 were $263.7 million, resulting in a book-to-bill ratio of 1.06. Bookings include a multiyear extension from Allerium's largest customer, valued in excess of $130 million at the time of award. Funded backlog at July 31, 2026, was $520.4 million compared to $506.3 million a year ago. Revenue visibility, which adds the unfunded value of certain multiyear contracts from which we expect future orders, was approximately $862 million.

Turning to cash flow. Operating cash flows were $25 million for fiscal 2026 compared to outflows of $29.2 million in fiscal 2025. The improvement reflects favorable changes in working capital management driven by improved accountability and process disciplines as well as the timing of and progress toward completion on contracts accounted for over time, which allowed us to reduce billed and unbilled accounts receivable.

Fiscal 2026 and fiscal 2025 operating cash flows absorbed about $7.8 million and $19.7 million, respectively, of payments for restructuring, severance, proxy solicitation and CEO transition costs. Including discontinued operations, total consolidated operating cash inflows were $37.4 million compared to outflows of $8.3 million last year, validation of our efforts to focus on cash generation.

Capital expenditures were $15.2 million in fiscal 2026 and primarily reflect efforts to build out cloud-based computer networks and internal use software applications, along with investments and building improvements associated with our leased facilities, including our new Gatineau location Jeff mentioned. We expect continued investment in these initiatives in fiscal 2027.

Now turning to our fourth quarter. Net sales for the fourth quarter of fiscal 2026 were $66.2 million. This compares to $75.3 million in the fourth quarter of last year. However, similar in concept for the year-over-year comparisons I just discussed, Q4 of last year included about $8 million of net sales and $0.5 million of gross profit related to the legacy VSAT contract. Excluding that contract, the change in net sales reflects lower sales of location-based and call handling solutions but offset in part by higher net sales of our NG9-1-1 solutions and cyber security training services.

Gross profit in the fourth quarter of fiscal 2026 was $26.9 million or 40.6% of net sales compared to $26.2 million or 34.7% of net sales in the fourth quarter of last year. Excluding the VSAT contract, the improvement in the gross profit percentage in the more recent period reflects the continued adoption of our solutions by customers and the migration onto recurring services.

For context, net sales in our third quarter of fiscal 2026 were approximately $61 million and gross profit was approximately $24 million or around 39% of net sales. So sequentially, in terms of sales and gross profit, we had a better Q4 relative to Q3, and such increase reflects growth in all 4 product areas.

In our fourth quarter of fiscal 2026, we reported an operating loss of $3.9 million, which compares to an operating loss of $0.8 million in the fourth quarter of last year. Our fourth quarter of fiscal 2026 reflects $5.7 million of restructuring costs, $3.6 million of amortization of intangibles, $1 million of stock-based compensation and $100,000 in CEO transition costs. Excluding such items, operating income for the fourth quarter would have been $6.5 million or almost 10% of net sales as compared to $5.1 million or 6.7% in the prior year period when excluding similar items. The improvement in fiscal 2026 primarily reflects higher gross profit, both in dollars and as a percentage of net sales and lower core SG&A.

Restructuring costs during the fourth quarter of fiscal 2026 principally related to our strategic alternatives process, which concluded with the sale of most of the S&S business to Gilat announced on June 15, 2026. Following the expected closing of the sale transaction in calendar 2026, we plan to align our operations, strategy and brand with Allerium's public safety focus.

Adjusted EBITDA for the fourth quarter of 2026 was $9.2 million or 13.9% of net sales compared to $7.5 million or 10% of net sales in the fourth quarter of last year, reflecting higher gross profit again and lower core SG&A. Cash provided by operating activities was $18.5 million for the fourth quarter of fiscal 2026 as compared to $1.2 million of cash used in operating activities in the fourth quarter of last year. Q4 fiscal 2026 marks our sixth consecutive quarter of positive operating cash flows. Operating cash flows in the fourth quarter of fiscal 2026 included aggregate net payments of $0.9 million, principally for interest. And as for restructuring costs, including severance, CEO transition costs and third-party professional fees, net payments were nominal due mainly to recoveries from insurance.

Now turning to the balance sheet. As Ken mentioned, contemporaneously with signing the agreement to sell most of the S&S business to Gilat at a time when we were in compliance with the terms of -- and conditions of our credit facilities, we entered into various amendments to our credit facility, subordinated credit facility and convertible preferred stock agreements, which enhance our overall financial flexibility and reduced our anticipated cost of capital.

Upon closing the sale transaction with Gilat, we will use the net cash proceeds to substantially reduce debt and then seek a comprehensive recapitalization of the business with the intention to further enhance our financial flexibility and reduce our cost of capital. Under our credit agreement, 65% of the net proceeds from the Gilat transaction will be applied to prepay the credit facility, which should retire the substantial majority of that facility, and the remaining 35% will prepay subordinated debt beginning with the remaining portion of the $35 million subordinated priority term loan.

In addition to the $10 million advance payment we received at signing, we estimate that we will receive an additional $128.3 million in net cash proceeds at closing after deducting sale-related expenses and funding a customary $3 million escrow obligation related to post-closing net working capital adjustments. Such amount also excludes potential proceeds from S&S assets that we are retaining. Because the business being sold to Gilat is considered held for sale and given the terms of our debt agreements, which require the use of net proceeds to prepay debt, $85.3 million of our senior term loan principal and $46 million of our subordinated term loan principal including PIK interest and applicable make-whole adjustments are classified as current liabilities.

As of year-end and as of October 13, 2026, respectively, total outstanding borrowings under our credit facility were $108.5 million at each such date. Total outstanding borrowings under the subordinated credit facility were $102 million and $103.1 million, respectively, including interest on a subordinated priority term loan outstanding at each date. These amounts do not include the 50% or $32.5 million make-whole amount associated with the $65 million portion of the subordinated credit facility.

The liquidation preference of our outstanding convertible preferred stock was $223.2 million and $227.1 million, respectively, excluding potential increases in the liquidation preference and other obligations that could be triggered by, among other things, breaches of covenants and/or asset sales resulting in a change in control of the company. And our available sources of liquidity, as Ken mentioned, totaled $61.3 million at July 31, 2026, consisting of $34 million of qualified cash and cash equivalents and $27.3 million of remaining available revolver loan capacity. As of October 13, 2026, our liquidity approximated $51.3 million and the remaining available portion of the revolver loan was $27.3 million.

Okay. And one update that I would like to provide at this time, it's a brief update on our pro forma disclosures included in our earnings announcement today. In connection with aligning our operations, strategy and brand with a public safety focus, we anticipate investing between approximately $13 million and $15 million for transition-related costs. Such costs are expected to be incurred mostly in fiscal 2027 and some in 2028 and associated with business system tools, capabilities, personnel and reporting functions. After completing the sale of most of the S&S business and after approximately 1 year of transition implementation, we anticipate annual cost savings to range from approximately $16 million to $18 million. Based on these assumptions, we estimate that pro forma adjusted EBITDA would have been between approximately $37 million and $39 million for fiscal 2026. And keep in mind, such amounts are unaudited estimates. And for additional context, while the midpoint of the investment increased about $1 million from our prior estimate in June, the midpoint of our pro forma adjusted EBITDA increased by $4 million now to $38 million.

And okay, one last item before turning the call back over to Ken. On a personal note, I would like to take a brief moment to personally thank Ken, the entire management team, the Audit Committee and the full Board of Directors and all of our employees throughout the organization for your partnership over these past, call it, 23 years at Comtech. It's truly been an amazing journey, and I could not be more excited for the business going forward.

We have successfully emerged from our transformation as a stronger company, and I am very proud of what we have accomplished together. I am already working together with Rich and my team to ensure a seamless transition, and I am confident that Allerium is in capable hands.

Now with that, let me turn the call back over to Ken. Ken?

Thank you, Mike, and you really should be proud. To sum up briefly, Comtech is now a much stronger company operationally, financially, organizationally and strategically. Assuming we obtain regulatory approval and close the strategic sale transaction of our S&S business, we will not only have a stronger capital structure, but we will be focused and aligned around Allerium's market-leading public safety business that Jeff has been building. This is a business that not only has an attractive financial profile today with high recurring revenue and long-term customer contracts but exciting opportunities to grow through our innovations and increasing market demand for next-generation public safety solutions.

I want to close by thanking our entire team. The dedication, discipline and pride I have seen across this organization in satellite and space, in Allerium, in our finance, legal, IT and people operations teams is what made all of our accomplishments possible. I am so proud of this team and what we are accomplishing together.

I am particularly grateful to Mike and Don for their dedication, their loyalty and their contributions to Comtech. It really has been a pleasure to work with both of them, and I have great respect and appreciation for all you are doing, Mike, as well as Don. We look forward to working with you both through this transition and wish them well in all of their future endeavors.

Now as a reminder, both Jeff and Mike will be joining me for Q&A. With that, operator, please open the call to any questions.

[Operator Instructions] And we'll take our first question today from Mike Crawford with B. Riley Securities.

Can you characterize any awards you won 11 weeks into this 13-week October quarter and whether this informs whether top line might be flat up or down from July level?

Mike, just to make sure that we captured your question correctly, you're looking for some update on awards post July?

Yes.

Okay. Great. Yes. In our business outlook in the 10-K, we did update for some subsequent events or insight on some key bookings that we thought were appropriate to put in there. That's not to imply that those are all the awards. Certainly, Jeff's team is hard at work. And I don't know, Jeff, if there's any color you want to provide on opportunities that were secured out.

Yes, we'd like to be -- because a lot of those opportunities are government related, we'd like to make sure that we clear it before making public announcements, but suffice it to say, there were some awards out there that we're proud of that are highlighted in some of the 10-K. But before publicly announcing them, I'd want to clear it with them first.

Yes. What we did disclose today was a $3 million order from the Canadian government for a deployment of Guardian. And we also had over $2.3 million from a domestic Tier 1 mobile network carrier for security features and enhancements, which is a recurring type of order we do get from our customer. Does that satisfy your question, Mike?

The first part. I guess the second part was on whether that informs top line direction versus July.

Yes. In terms of guidance, we're not going to put out guidance, but I would point to our updated disclosures in our financials. We have about $520 million of backlog. We expect that backlog to give us a nice foundation of revenue somewhat evenly over the next 3 years. And we're expecting that about 40% of that backlog is going to turn to revenue inside of fiscal '27. So it's really a strong base to build upon.

Okay. Great. And then...

Mike, as you look at our business going forward, it's going to be a much more predictable business, right? The satellite and space business, as you know, has been a lumpier, more volatile business for us to be in. As we focus on our public safety, more than 80% of our revenue is recurring in nature, so that forms a good base.

And the balance, we have long-term customer relationships that we know that we'll be building around. We think that there's going -- that our public safety business has been hamstrung to some extent by being part of a corporate organization that included satellite and space and had -- satellite and space had a recent history of challenges. Fortunately, we've overcome those challenges. And now the consolidated company is much stronger, and we're able to invest and support Allerium the way it should be supported, that gives us greater confidence to build around that base and support the growth of the company going forward.

Ken, that makes a lot of sense. And just a final question for me is given that base that you're building around now, can you characterize the size of your current pipeline and what recompetes and/or RFPs are in play this fiscal year?

I mean, I, typically again, am giving forward guidance, but I would tell you that our pipeline and many of the RFPs that we are going after are government procurement RFPs that are public. I wouldn't want to comment on them right now as we're in different stages of them right now. But suffice it to say, this should be one of the stronger years for government procurements along the Next Gen 9-1-1 cycle, not only in the United States but in the other countries we serve both in Canada and Australia, where you'll see a strong pipeline from us.

And Mike, something to add to that. In addition to winning new accounts, the cross-selling is an important element of our growth. We already have established relationships with a large customer base, and we have more opportunity to sell more to them than what we've been selling in the past. So we -- so it's not just about winning the next procurement. It's about building around existing customers.

No. It's a great point, Ken. I should have probably mentioned it, Mike, but these networks that we've deployed, once we deploy them, there's a financial profile that the company benefits from. But once the networks deploy the services, we can run on top of those networks. So Mira, you heard me talk about our new product. That runs over the network and could be resold to those customers to improve revenues as well as Coral. So we have many of those customers already looking at those products now in play that will hit the fiscal 2027 time frame for decisions. So thanks, Ken, for reminding me about that.

Our next question comes from George Erlandson with Northcoast Research.

It's George Erlandson on for Keith. And also, congratulations on the progress with the transformation and welcome to Rich and Amy as well. So the first question I have for you is, Jeff, you brought the Allerium and Mira -- and Allerium Mira and Coral to the market in June. Can you share any early customer feedback, pipeline activity or initial wins? And from the outside, what milestones should investors be watching for to judge whether these products are succeeding?

Great. So great question. I think the feedback we're getting and the early feedback in the market for both Mira and Coral, Mira is one that we are actively in beta for right now. The main feedback has come from the ease to whether you're switching from a traditional 9-1-1 system or moving to the cloud. The speed at which we can turn that up and deploy is one of the big benefits we've seen. The other is the -- as you move to running it over as a service on our network, a lot less customer premise equipment is required and a lot less technical sophistication required to deploy. So those are some of the feedbacks primarily from Mira.

The other thing I would say that we're also hearing is the upgrade cycle. Traditionally, when we've deployed 9-1-1 systems to PSAPs, it's a 5- to 7-year upgrade cycle, almost like a forklifting out new equipment. Now we anticipate the upgrade cycle to be much quicker as we can deploy new feature sets, new AI functions and other requirements over the network themselves that we push those to 9-1-1 centers rather than having to visit and upgrade traditional systems. So that's some feedback we're getting.

On Coral, one of the biggest challenges is -- and again, I'll just pick one example that we're seeing traction on, is mutual aid. And that's when multiple agencies will respond to an emergency and especially with these weather events that we've seen, they don't -- they're not just in one small city where that fire department is. It's a multi-agency response. We're using our network in Coral in particular, and we're proposing that to connect these other agencies together now on their dispatch systems to share information.

In the past, you didn't know whether that adjoining neighboring agency was responding, how far away they were, what apparatus they might have had available. And now we're seeing states and regions starting to do that in coordinated responses, not to mention state resources as well that can now be part of that network. So the feedback we're getting from Coral on these major incidents that we're seeing and even just last week with all the weather event, that's some of the early feedback we're seeing.

The other challenge or the benefit that a lot of our customers are seeing is that's over the secure 9-1-1 network. In the past, you could maybe do it over tools over the Internet or some other things, but those were neither secure or reliable. And now with the 9-1-1 network, specifically for this, we're seeing some good feedback. And just to note, our Next Gen 9-1-1 networks, it's -- they hover around 10% -- we only use 10% of their capacity today. They're built for these future applications. So 90% of that bandwidth is still available for other things, and both Coral and Mira are playing into that. So sorry to go a little technical on you, but I'm kind of passionate about it, George.

No, that was all great. And then also just kind of following on with that, looking at the Allerium portfolio today, is there a product or a technology area that you wish that you had? Or is there anything that you'd say like is on your wish list going forward?

Again, another great question. I could probably talk to you for an hour on this. But in summary, I think as you look at an emergency response, as we mentioned in our call just now, we started, the first time someone presses send on their phone when they dial 9-1-1, we're involved with the carrier to get that -- both the location and to route that call to first responders. So that's the very front end of an emergency response. Then, we take the request for help at the PSAP or the 9-1-1 center, and then we hand it off to allow the agency to dispatch. And then there can be reports or investigations after the fact, and there can be court and everything else in a response.

We would like to, and I would like to expand our TAM into the full emergency response process. Right now, we're on the very front end, George, of that. And I think there's opportunities to provide more services on that workflow. And these same services could run over that network I just mentioned. So if there was a wish list I had, it would be to handle more of that emergency response workflow.

Awesome. And then another question more so for Ken. You laid out a clear kind of vision for a focused Allerium. Looking like on from a year from now, once the transaction is completed, would you expect to have acquisitions be part of the growth plan? Or are you guys more so focused on organic growth right now?

We -- right now, we're focused on getting the transaction to sell the satellite and space business closed, and we're awaiting regulatory approval and working with the regulators to get that done. Once we get that done, our expectation is to refinance our capital structure that will give us the firepower to be able to invest in the future growth of the business, both organically because we -- as we have been describing, we think that there's significant opportunities within Allerium to grow organically, and we're going to continue to build Allerium, but we also see opportunities for complementary acquisitions. And once we consummate the sale and the refinancing, we're going to be in a good position to pursue that.

Awesome. And then also just final question. You guys -- for the annual cost savings, they're now $16 million to $18 million compared with the $11 million to $13 million you guys kind of stated when you announced the sale in June. What changed? And how much should we expect to see in fiscal 2027 versus 2028?

Okay. So George, we're not going to give guidance on '27 and '28. So -- but what we did here is provide a pro forma of if we had consummated the transaction and implemented the transition, the -- what would be the cost savings and therefore, the resulting pro forma of -- applied to fiscal 2026. And we improved those numbers on net $4 million improvement in EBITDA from what we expected in June of 2026 at the time we announced the transaction. That $4 million improvement is the result of now our corporate team and the Allerium team working closely together and identifying opportunities to operate more efficiently in a more streamlined structure built for purpose for the future growth and success of Allerium. So we're pleased that we have been able to find additional efficiencies that result in a more attractive pro forma than what we presented in June.

Our next question comes from Steven Kohl with Mangrove.

There's a lot of people to thank, but I will assume that's already done. But I do want to call out and say that it's been a hell of an effort across the board on the team to get to this point and certainly look forward to the next chapter. I wanted to kind of peel this onion back a little bit and see if I can get a handle and make sure I'm understanding this. So when we look at the total booked revenue that's under contract and then the opportunity, $862 million, is it right to look at it that we have a base amount and then we have the value-added services wrapped above that? So I know we're talking about Mira. You were just talking about Coral just now. Would that be, for example, included in that number? Or would that likely come on top of that number as you get the base contract?

On top of. So just to follow your question, Steve, the -- so as a result of the transaction, we are going to be selling all of satellite and space with the exception of our cyber service business. That incremental revenue and profit will now be part of Allerium. And in the future, we expect to have cross-selling there and future opportunities, but that's not counted in the pro forma of the way we look at the 2026 as if we had sold all the satellite and space. So we have the benefit of the historical revenue of cyber but not the incremental growth or the cross-selling.

We then -- the way we did the pro forma is we looked at the corporate cost and then what we need in a streamlined operation to support Allerium without satellite and space and without the complications of a multi-segment business. And that streamlined business is what results in the cost savings and the improvement in the pro forma EBITDA.

The only thing I would add to Ken's comments, Steven, if you were talking about booked business from Allerium in particular, that is signed booked contracts in hand. Many of those, for instance, when we're booking for a Next Gen 9-1-1 statewide network, they don't include those new services in there. Those would be add-ons later on that would add to the bookings backlog.

So a dumb question. As we start to learn, hopefully this will be less dumb. But in a typical contract, Jeff, how much would that be? So if we took a base of, let's say, $10 million, is it typical to get 20% add-ons? And is that the opportunity that you see that we could get a higher percentage going forward?

There's a mix, Steven. So typically, there's a percentage. So if it is $10 million, there's a percentage that's usually change orders as the state asks for new things or maybe new areas they want to have on the network. So there's usually a percentage, say, call it, 20% in change orders.

For these other solutions, it can vary depending on how well our sales team sells within that. Once we have the network statewide, for instance, some of these states have 200 to 400 PSAPs, if you will. As we penetrate that market, we could sell a lot of Mira to that. So it can vary from a percentage-wise. We have some states that have a lot of our call handling solutions, and we have some that are greenfields right now that we want to sell into, and our team is actively selling into those. So it'd be hard to give you a percentage on that, but the change orders is typically 20%. But the other applications, both Coral and Mira, we're still -- we're selling into that base.

Another aspect to answer your question there, Steve, is cash flow versus revenue and profit recognition. In the past, Comtech reported higher revenue and EBITDA than cash flow. In 2026, we caught up a lot with improved working capital management.

Why did it happen in the past? Because sometimes contracts are structured such that the work and investment is required upfront for the customer. The company has recognized revenue, but collection of the receivable could have been significantly delayed, could be multiple quarters, in some cases, years.

We've -- in fiscal 2026, we caught up. We delivered to customers. We're able to collect those receivables. And our aim is to continue to do a better job of aligning our cash flow with our revenue and profit. The business is -- accounting is one thing, but you need to generate the cash. And we are doing a much better job as a company in generating cash flow.

Right. And last question is when you look -- and I know you're not giving guidance, but I'm just thinking from a bigger picture. How do you look at the -- how should we, as investors, look at this from a growth perspective? So is this a 5% to 10% type of base business where margins -- I know I was looking back, Jeff, I think you've been in a number of these things, but EBITDA margins have seen certainly over 20% across some of these companies, which we're obviously not quite there yet. But just curious on how should we look at that. I mean -- and are we at a point that it could be faster than that for points? Because I think people are struggling to try to understand what to expect but obviously not having guidance yet.

Yes. Good try, Steve. So we're not going to give guidance now. But I'll try and give you flavor in answering your question. We're going through this transition now. So the best we could do for now is give you the pro forma on the economics of as a result of the transition, what -- how can you model the past performance of fiscal 2026. Those are numbers we reported, and we've identified the savings, and that's, in a way, helping you model going forward.

The -- now what we can tell you is once we get through this transition, and we do need a little bit of time to do that, this is a business that lends itself to predictability, and we should be in a position in the not-too-distant future to be giving guidance, but now is not the right time. It's -- we are going through the transition. We're making changes. We have to execute on that.

We're confident that we are building a better company with the investments we're making now in this transition, the cost savings and the isolation of a core business that we know has a lot of legs. It's got a great base with recurring revenue and long-term customers, and it's well positioned to capitalize on growth. How much that growth is? We're not going to say right now, but we're optimistic that this is a business we can build around.

This does conclude today's question-and-answer session. I will now turn the call over to Ken Traub for closing remarks.

Well, thank you all for joining us today. We do look forward to updating you as we proceed towards the anticipated closing of the sale of the satellite and space business, and our continued progress in building the Allerium business. Thank you all, and we look forward to speaking with you again soon.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Welcome to Comtech Telecommunications Corp. 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.

Thank you, operator, and thanks, everyone, for joining us today. I'm here with Ken Traub, Comtech's Chairman, President and CEO; Mike 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 and 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?

Thank you, Maria, and 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 then provide an overview of the improved performance in our satellite and space business that's helped us make the transactions we announced today possible. And then 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 2 phases of my discussion with you. The first phase was to share my background and my perspective on leadership. I emphasize then that I believe the most critical factor for success in leadership particularly in the turnaround, is building trust with all key stakeholders. Trust is built through acting with sincerity and integrity and most importantly, honoring promises.

In the second phase of that conference call, I laid out a transformation plan that had 4 pillars, which I promise 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. And 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 3 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 [indiscernible] . 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 in 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 our 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. But 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 address today. We have been fortunate that due to the progress we made in Pillars 1 and 2, we earn the trust of our creditors and they previously agreed to a combinations 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 1 and 2 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 space means more for Comtech than generating $157 million in cash and retiring expensive 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 towards 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 complement our entire team. We set ambitious goals during a period of significant challenge for this company. We remain disciplined in our execution, and we delivered. Throughout our organization in satellite 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.

And with that, I'll turn the call over to Mike to walk through the financials. Mike?

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 then 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 '25. 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 2 quarters of fiscal '26. 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 noncash amortization of stock-based compensation and nominal CEO transition costs, as further discussed in our Form 10-Q filed earlier today.

Excluded in 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, S&S 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. S&S net sales in the third quarter were $50.3 million. S&S 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.

S&S adjusted EBITDA was $4.1 million or approximately 8% of segment net sales compared to $5.7 million in the prior year period. S&S 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 '25.

Now 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 period -- I'm sorry, 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 onetime $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 ratio 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 S&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 S&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 S&S to prepay the majority of its senior secured credit facility but the remaining 35% of the proceeds used to prepay subordinated debt outstanding, starting with repaying 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 31, 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 14, 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 fourth quarter period ending on July 31, 2027.

At April 30, 2026 and June 12, 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 30, 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 12, 2026, our liquidity approximated $50 million and the remaining available portion of the revolver loan was $27.3 million.

Now with that, let me turn the call over to Daniel Gizinski, President of our S&S segment. Daniel?

Thank you, Mike. We're proud of our entire team who contributed to the significant turnaround and repositioning of our S&S 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 S&S 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 S&S 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.

S&S' book-to-bill ratio for the third quarter of fiscal '26 was 1.04x as compared to 0.8x 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 fiscal 2024, in which S&S achieved a book-to-bill rate ratio greater than 1.0x. 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 and communications equipment.

As we move through the period between signing and closing, our priority in S&S is straightforward: continue supporting our customers, delivering against existing commitments and maintaining the operational discipline that has improved this business in the first place. We believe the momentum in customer orders underscores both the progress the S&S team has made and the strength of S&S' customer relationships.

Jeff will now provide more detail on Allerium, which is well positioned to define the next generation of emergency communications. Jeff?

Thank you, Dan. Allerium is Comtech's future and the core of our public safety technology company we are building. Public safety response is moving beyond voice towards data and more complex coordination and real-time decision and 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 of the systems.

During the quarter, we increased R&D and good market investment to extend that product leadership and support deeper growth. Following the sale of most of S&S, Allerium will be able to invest more decisively in advance next-generation 911, all 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 next-gen 911 platform at statewide scale.

In Canada, we delivered more than a dozen next-gen 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 next-gen 911 services for our customer in the Midwestern region of the United States.

$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 4 months of operation, including delivering the first NG 911 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 next-gen 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 United States, 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 satelliting 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.

Thank you, Jeff. To sum up briefly, Comtech has successfully executed on each of the 4 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 alternative 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 Instructions]

And we'll take our first question from Keith Housum with Northcoast Research.

And congratulations on the announcement. It wasn't I expect this morning, but glad to see it. And again, congratulations for the efforts. I know it's a huge deal. Ken, obviously, the operations turn around 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 perhaps you can maximize value any further?

Good question, Keith. It's a balancing. We -- the company has been looking at strategic alternatives for a long time because we have a heavy and expensive capital structure. And part of the reason why the company started considering strategic alternatives in 2024 was to address that capital structure.

I believe that we needed to approach this process patiently and with a broad examination of all opportunities available to the company and wait until we are in a position of strength to negotiate the right deal for the future of the company. So we looked at all options, right? And 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 and space has been turned around sufficiently, where we were able to consummate this type of a deal where it's a good outcome for the sale of this business. But even more importantly, it enables us to now reorient the entire focus of the company to support the long-term growth of Allerium.

So 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 and space and we're leaving the remaining business in a very strong position for long-term growth.

Obviously, it's been a long way in helping our capital structure, but you're going to still be remaining with the good amount of subordinate debt and your convertible preferred stock. But you also have the shelf registration has been out there since April. What is the capital structure for the company look like a year from now?

Well, we'll see. So the proceeds of this transaction will be used to pay down the debt, 65% of the proceeds of the sale of satellite space go to pay down the senior term loan. That in and up almost all of the outstanding amount on the term loan. And so it will be easy for us to either use liquidity to pay off the balance or we'll be able to refinance with the 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 Trench 3, and then we'll work towards Tranche 1 and 2. We would anticipate that a -- once we consummate this transaction, and we refinanced the senior debt, those proceeds will be sufficient to take out the rest of the senior debt. And then we'll -- excuse me, the rest of the subordinated debt, then we'll emerge with a really clean and healthy capital structure going forward.

Appreciate it. And did I hear that you're going to be probably the amendments you will be suspending the debt leverage ratio for the debt until July 2027. Is that correct?

That's correct. So -- and that's a nice additional concession that we got from both the senior term loan lenders as well as the subordinated lenders. So that was one of the factors that was helpful to us in removing the going concern qualification when we last got the covenant holiday. And now we've got 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.

Got you. And then 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?

Sure. So it's about $20 million in revenue, and it's net about a $3 million of EBITDA contribution.

Got it. Okay. Appreciate it. And then, 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?

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 next-gen 911 to, the more we can leverage our infrastructure to improve those margins. And 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 that first responder to the scene and give them situational awareness. And 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.

Got it. And so do I think about the top line growth profile being 3% to 5% a year. Is that kind of fair?

It is fair I think...

But we're not going to give -- we're not giving guidance right now. Keith.

In clarification, if I look at your adjusted EBITDA for a pro forma basis, is $34 million there. That's not -- but if we want to think about going forward, we can probably think about the changes you're going to be making in the business and restructuring for additional $11 million to $13 million to be on top of that, correct? If I think about the business going forward?

So 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.

[Operator Instructions] We'll move next to Mike Crawford with B. Riley Securities.

The first question is, are all of the stakeholders in agreement that this transaction with Gilat does not -- will not we argue there's any change in control that would trigger increase in the preferred before obligation?

Good question, Mike. And 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.

Excellent. That's a great outcome in and of itself. And then just tend to go back on your last statement just to clarify that $34 million, that's the -- but that's before you expect to take $12 million of corporate costs out of the business? Or is that including?

It is. So it's -- so 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.

I'm sorry. So by minus , does that mean after that occurs with $34 million, if nothing else would be...

Correct...

So the $34 million, Mike, is reflective of $12 million of cost savings.

Okay. Okay. Perfect. And then -- are there any other assets that you're retaining that might be surplus to requirements like any real estate owned. Like I'm not sure exactly what's going to get like build facilities in Arizona, et cetera.

No, we are retaining 2 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 some legacy accounts receivable rights to collection of some legacy accounts receivable that will be incremental proceeds to the company.

Okay. Excellent. And then turning to Allerium. I guess I have 2 questions. So it's great that a significant portion of that revenue is recurring. What percent of that business would you characterize as recurring?

Thanks, Mike. I mean I wouldn't -- I'm not going to give exact numbers on our recurring revenue, but I would tell you it's a significant portion and we see it growing over time. As the business more sits moving more from a traditional software license and modeling to a more recurring model for the business right across all our product lines. So I'm not prepared to give an exact number of percentage, but suffice it to say, it's a significant portion in growing.

Yes. And 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. And typically, these are long-term contracts. They're mostly services, software-based services.

Yes, from time to time, you'll have deployments upfront. So there might be some activity on the front end of a contract that will then run into monthly recurring services. But by and large, these are services that are provided on a consistent steady state. So the percentage, as Jeff said, is significantly high for the segment.

And 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. And it's -- there's a very high switching cost. It's -- there's a dependency on working with us. So these relationships tend to be to last for a long time.

Yes. So that kind of thank you, Ken. Mike, for that clarification. So that high switching cost is a double-edged sword where it's hard to rest away someone else's business. So -- are there any recompetes coming up that you'll likely win given that it's -- there's a high switching cost. But conversely, are there any competitions that you're guiding for now that if you win would add an additional way of growth for the business?

Yes. I'm going to let Jeff answer the specifics, but we're not going to get into specific competitive bids. But we'll give you more flavor on why we -- key drivers of growth in the business. But go ahead, Jeff.

Yes, 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 of the marketplace. And what's changing is there are competitive features now as the market evolves and we believe we have some very strategic competitive advantages and part of that is because we do M1 coal handling next-gen as well as the network gives us some edges in these recompetes.

So 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. And keep in mind, we are the largest direct provider of next-gen 911 to the states and other competitors will either go through a local exchange carrier or a channel partner, whereas we are the largest to deal directly with the states.

And I also think that gives us a distinct advantage to be able to customize to their needs. So there are recompetes coming out, but I also think there are some with a competitive advantage that we can win or position well to win.

And it does appear that there are no further questions at this time.

Well, I would like to thank you all for your ongoing support, and we look forward to continue to keep you updated on our progress. Thank you all. Have a good day.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the conference call announcing Gilat's acquisition of Comtech's Satellite and Space segment. [Operator Instructions] As a reminder, this conference is being recorded, June 15, 2026.

I would now like to hand over the call to Mr. [ Sanjay Hurry ] of Alliance Advisors IR. Mr. [ Hurry ], would you like to begin, please?

Thank you, Haila, and good morning, everyone. Thank you for joining us today. With me on the call are Mr. Adi Sfadia, Gilat's CEO; and Mr. Gilad Landsberg, President of Gilat Defense. Earlier this morning, Gilat issued a press release regarding its acquisition of Comtech's Satellite and Space segment. The release, along with the accompanying slide presentation are both available on the Investors section of the company website.

Before we begin, I would like to remind everyone that some statements made during this conference call may contain forward-looking statements based on current expectations. Actual results could differ materially from those projected due to various risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenue from key customers, delays or reductions in U.S. and foreign military spending, acceptance of our new products on a global basis and disruptions or delays in our supply of raw materials and components due to business conditions, global conflicts, weather or other factors not under our control.

Gilat cautions investors not to place undue reliance on forward-looking statements, which reflect the company's analysis only as of today's date. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Gilat's operating results, financial position or performance are included in the company's filings with the Securities and Exchange Commission as well as in the forward-looking statements section of the press release and investor presentation.

In addition, please note that on today's call and in the press release that was issued this morning and its accompanying presentation that management may refer to certain non-GAAP financial measures that management considers to be useful and differ from GAAP. These non-GAAP measures should be considered supplemental to corresponding GAAP figures.

With that, I would like to turn the call over now to Gilat's CEO, Adi Sfadia. Please go ahead, Adi.

Thank you, Sanjay. Good day, everyone. I would like to thank you for joining our call today to discuss the acquisition of most of Comtech's Satellite and Space Communications segment announced earlier today. Today marks an important milestone for Gilat. This transaction accelerates our transformation into a global leader in mission-critical defense, space and satellite communications. By combining decades of technology leadership, strong customer relationships and complementary capabilities, we are creating a stronger and more diversified company positioned for the next phase of growth.

Before we begin, please note that some of our statements are forward-looking and subject to risks and uncertainties as outlined in our filings. On today's call, I will walk through the key highlights of the acquisition, the market opportunity and how Complex Satellite and Space Communications segment fits into our strategy. I will then cover the financials and conclude with a summary before opening for questions. We believe the acquisition is a game-changing transaction that reshapes our position in the defense SATCOM market, capabilities on growing market opportunities and bring together 2 proven SATCOM leaders to shape a stronger future. The additive transaction elevates Gilat to a new tier, building it into an even stronger leading provider of advanced defense SATCOM, mission-critical communication and space solutions.

At the core of this move is the doubling of our Gilat Defense business, significantly expanding our access to the U.S. Department of Work and allied military programs. It also creates a company with over $700 million in projected revenues aligned with accelerating demand for secure defense and satellite communications, bringing these capabilities together improves our ability to support speed and scale for defense, government and enterprise users. In addition, it significantly expands our U.S. presence, including engineering capabilities and manufacturing footprint. The addition of Troposcatter beyond line of site communication and space electronics portfolio extend our reach into adjacent markets with an estimated new addressable market of $500 million per year. Gilat's strengths in IFC, VSAT and modems, multi-orbit ESA and SSPA are complemented by Comtech Satellite and Space Communications capabilities in defense waveforms modems and TWTA high-power amplifiers, strengthening our position in high-growth markets.

Turning to the transaction details. Gilat will acquire most of Comtech's Satellite and Space Communications segment business and assets for $157.5 million in cash funded from our existing resources, a strong balance sheet with approximately $170 million in net cash. The combined company will have annual revenues of more than $700 million and annual adjusted EBITDA of $80 million. Beyond stand-alone financial contribution, we see significant upside from the combination. The primary value driver is revenue growth, leveraging Gilat's global reach and Comtech Satellite and Space Communication U.S. defense presence, while offering a broader combined portfolio. We also expect cost synergies and operational efficiencies across the combined company. The transaction is expected to be accretive to adjusted EBITDA upon closing. Closing is expected towards the end of 2026 and subject to customary closing conditions and some regulatory approvals.

While Comtech has faced challenges in the last few years, the Satellites and Space Communications segment represents a highly attractive business with differentiated technology, strong customer relationships and talented employees. It generated $187.8 million in adjusted revenue and $14.9 million in adjusted EBITDA in Comtech's fiscal year 2025 ended July 31, 2025, and $195.2 million in adjusted revenues and $16.8 million in adjusted EBITDA for the trailing 12 months ended January 31, 2026. Comtech Satellite and Space Communications has a long track record of supporting mission-critical communications, particularly with the U.S. Department of World. They have a strong relationship with Tier 1 government customers and are also the prime contractor on several key defense programs, a critical position in this environment.

In addition, they have more than 100 security cleared personnel. This strengthen come from deep expertise, proprietary know-how and U.S.-based manufacturing. It offers a broad portfolio across modems, high-power amplifiers, antennas, Troposcatter communication and space electronics. We are retaining the existing leadership and the majority of the employees and will invest to grow the business. Looking at the portfolio and customer base provides additional perspective on the value being added, the business includes satellite modems, amplifiers, ground system, Troposcatter and Space Electronics. It serves customers across the U.S. and international military organization, telecom and satellite operators and support markets such as aviation, maritime, energy and space.

In some areas, we already shared customers, particularly in modems but this expands the range of products we can offer. It also opens new verticals and markets where we previously had limited presence. This broadens our addressable market and allow us to deepen the relationship across both existing and new customers. Looking at the 2 businesses side by side, highlight the complementary nature. Comtech Satellite and Space Communications segment brings $195.2 million in revenues and $16.8 million in adjusted EBITDA. Its strength are rooted in defense-focused technologies, including U.S. DoW waveforms, software-defined modems, high-power amplifiers and troposcatter communications.

Our strengths include strong IFC portfolio and customer-based advanced VSAT platforms, multi-orbit ESA technologies and access to leading NGSO operators. We see opportunities to bring Gilat products into Comtech U.S. customer base bring Comtech technologies through Gilat's global channels and combined engineering capabilities to pursue larger opportunities than either company could address alone. Comtech Satellite and Space Communications bring a strong defense profile with more than 70% of its revenues coming from defense programs, reflecting deep participation in long-term program-driven environments. By combining this with Gilat's existing business, we increase Gilat Defense segment revenues from approximately 25% to around 40% of total Gilat revenue.

This creates a materially expanded defense business with a larger customer base, greater participation in long cycle and program-driven revenues stream supporting greater visibility and long-term program-driven growth. Looking at the combined portfolio, it spans multiple layers of satellite communications. In this chart, blue green represents Gilat and purple represent Comtech Satellite Space Communications. For example, at the network level, it brings together VSAT platform with SDR and SCPC modems, combining Gilat's strength in large commercial networks with Comtech Satellite and Space Communications digital wave modem designed for military networks. In high-power amplifiers, it combines SSPA and TWTA technologies that supports different power and operational needs, allowing broader coverage across applications. This enables participation in larger multi-domain programs across the communication defense market.

Driving sustainable growth and expanded capabilities, today's announcement marks a significant step forward for Gilat. It expands our technology portfolio and significantly strengthen our U.S. business, including engineering and manufacturing. It also expands access to an established customer base and long cycle defense and space programs. We expect strong growth opportunities through cross-selling, scale and portfolio expansions. It supports continued investment in next-generation technologies and high-growth markets. We believe this transaction represents a defining step in Gilat's evolution. We are combining scale technology, people and customer relationships to build a stronger company positioned at the center of growing demand for secure, resilient communication across defense, space and commercial markets. Thank you very much. I would like to take your questions.

[Operator Instructions] The first question is from Louie DiPalma of William Blair.

Congrats on the deal. Can you provide more details on the cross-selling opportunities with your existing DataPath subsidiary? And how is it complementary for the rest of your business?

Sure. So as you know, we are trying for several years to penetrate to the Department of Defense and now Department of War and the U.S. Army. We are doing this very well with DataPath product portfolio, less successful with Gilat product portfolio. Comtech has complementary solutions with a focus on the defense modems. They are very strong in the U.S. DoW and U.S. Army and we believe that they will be able to bring Gilat products and modems together with them into the DOW. There is a lot of synergies between the R&D divisions. There is a lot of complementary solution but also unique solutions of Comtech and Gilat that we are planning to integrate the technology together, and bring Gilat solutions also to BOW. On the other side, Gilat has a strong global presence where we would like to take Comtech products and cross-sell them in Israel and globally.

And for Comtech's modems, I'm under the impression that they have tactical modems with anti-jam technology, Will you be able to export that modem technology and sell it to your existing base of customers? Or are there export restrictions?

Comtech has several different modems. Some of them are -- they are -- regulated and we need the relevant approval in order to sell them globally. We will work hand-in-hand with Comtech people and the regulator to make sure that we get the right certifications in order to sell them. This is the same process Comtech is moving today is doing today, but with significantly lesser global presence. By the way, our modems from Israel perspective also has some kind of export regulation, and we are working hand in hand with the Israeli regulator in order to sell our products globally.

And can you provide more detail on the differences between the modem product portfolios that both companies have?

The main difference is that Comtech solution is mainly STPC based. They also have their TDMA solution for small -- very small networks which is complementary to our TDMA large network solution, the SkyEdge IV. They have several U.S. Army dedicated waveforms, which we don't have access to today. I guess that Comtech modem business will sit under a proxy agreement, same as we have with DataPaths today.

Great. And one final one. If I recall, I believe right before COVID, Comtech tried to acquire Gilat or you and they reached an agreement. Can you provide an overview of the history in terms of working together between both companies and how it appears that the strategic rationale for a merger made sense 6 years ago? And can you discuss how the current timing is right for the merger to take place again?

Yes, of course. I think it's an excellent question. And we expected such a question because this is what everyone asked us from we announced the acquisition a few hours ago. So not a lot of people in Comtech state from -- back then from 2020 when they signed an agreement to acquire Gilat. I was there and the prior process reflected a long-standing strategic alignment between the companies. The fact that it didn't proceed mainly relates to the effect of the COVID-19 pandemic, the outback, which resulted in significant decline in Comtech stock and their inability to raise the required financing. They decided to walk away from the deal and had to pay $70 million penalty, which we later distribute as dividend to Gilat shareholders.

I think that the strategic rationale between the companies were relevant then and even more stronger today I think it reflects our strategy to expand into the U.S. defense market. And there is a lot of overlapping a lot of complementary solutions. We received together with the acquisition and several solutions that will bring us to adjacent markets like space electronics and Troposcatter beyond line of sight communication, which we see a very nice potential for future growth. And I think that the fact that most of Comtech management wasn't there back then. The relationships are very good, and we really waiting for the closing and the integration to start.

One final one. Can you discuss what is Comtech's exposure to low earth orbit satellite networks as those have obviously gained tremendously in popularity with the mega constellations? Do they have any exposure there?

They have some exposure with unclassified customer where they bring some manufacturing and development capabilities to modem side and some technology for -- Like Waste stream on the SSPA side. This is their main exposure. Of course, it's one of their main objective to penetrate to large LEO constellation program. And I think that together with Gilat, we'll have advanced technology and much larger opportunities to work with.

Our next question is from Ryan Koontz of Needham & Company.

Congrats on the deal. Maybe a double click on the customer angle here. It sounds like obviously lots of defense exposure, but can you maybe help us understand the types of programs or groups within the DoD that Comtech brings to you that you don't have today and where you might have some customer overlap?

Yes. I think that the main customer overlap is on the SES side, SES Space and Defense. I think this is the main overlap and there are some smaller customers that we both approach today. I think that the main programs that they are working, they are part of the [ hiding ] way from -- with the DoW, they work with the large Tier 1 U.S. integrator like L3, they have some classified disclosed, program with the DoD.

That's helpful. And how about in the commercial side, what sort of -- what's that customer profile look like?

On the commercial fire side, since their focus on the EPC side. So they are going mainly to trunking and large cellular backhaul sites. On the other hand, they acquired in 2020, I think around the time that they signed an agreement with Gilat back then, they acquire a company, and they have a product that they called Elevate which is their main focus is the mesh technology TDMA for small networks, mainly to utilities, energy, but also small defense organization globally.

That's helpful. Maybe one last one. Just any rough idea of the head count you're going to pick up?

Again, sorry.

Head count of the acquired...

Slightly below 500 people. So all in all, it will be around 700 employees. 1,700. So 1,700 employees around 800 in the U.S. So the focus of Gilat is shifting to the U.S., we'll have close to 50% of our headcount will be based in the U.S.

The next question is from Chris Quilty of Quilty Analytics.

Congratulations on the deal. Maybe an unfair question, but you're picking up some new product lines. I think you mentioned troposcatter and space electronics. But is there a particular product or perhaps end market or customer activity that has you most excited about the opportunity in terms of synergies?

I think that -- first of all, we are very excited from the overall opportunity. I think that the rationale of combining the 2 companies is very obvious, and there is -- there are a lot of synergies between the companies. But the main focus is to grow the business. Comtech suffered from several years of financial distress. They went through several rounds of reduction in force and haven't had the capacity to invest. We are there to grow the business. We are going to invest in sales and marketing and in R&D, and we want to grow the business. The main reason we did this deal is the order to get a significant lag in the DoW in satellite modems communication, think Comtech has a significant leg over there. And we really believe that we have a lot to contribute in terms of technology, in terms of ability to finance projects that Comtech couldn't do today. And we are also excited to enter into a new adjacent market like the space, electronics and the Troposcatter.

Great. And Gil, I mean it's fair to assume they've probably underinvested in R&D and some other areas. Are there -- what should we expect in terms of sort of the blended investment rate in R&D or perhaps in OpEx in general?

So we expect that we'll have to do some investments within the -- probably within the first 2 years, mainly in R&D and in sales in order to secure future growth and in order to integrate between the companies. We do not expect this amount to be too high, but probably in the low teens within the next 2 years. I would say that most of Comtech investment in R&D today is mainly on...

Subsidized projects. So it's mainly part of Cox developing unique products or features to customers' demand and less on a road map investment, we do intend to increase the road map investment. We think that there is a lot of opportunity. But I think generally, it's fair to say that we'll keep the ratios that Gilat has today.

Very good. And Obviously, you're picking up a lot of manufacturing capability, and they have some unique sites in Chandler and whatnot. Are there any opportunities to either add to or bring together some of the manufacturing. And when you look at sourcing and supply chain issues? Is that going to be a challenge? Or are there opportunities there?

I think it's a combination of challenge and a big opportunity. Comtech took a decision to evaluate each and every product to make or buy internally. They have a very progressed manufacturing facility in Arizona. Gilat is most of our equipment is manufactured in outsourcing beside SSPAs, I think there is a lot of room for cooperation. We will be able to produce our modem within the U.S. Gilat modem, which will give us some credits with the DoW today with America First wants everything to be manufactured in the U.S. So I think that there is a lot of synergy potential, but we'll take it step by step and see what makes sense to do in-house and what makes sense to outsource.

Great. Back to Gil, I mean you used most of your cash on the balance sheet for the acquisition. Any changes to credit facilities or whatnot you need to put in place to have a little more financial strength.

Yes. So as of the end of Q1, we had approximately $170 million of cash, net cash, almost 0 debt. So we're planning to use that and to have some cash reserves through reestablished lines of credit to support some midterm working capital needs that we might have.

Got you. And final question, I mean, since you already have a proxy in place, I wouldn't expect there's any huge CFIUS issues here, but what is the time line on getting a response back?

So we received CFIUS approval twice in the last 3 years. So we do expect a regular process here. Usually, it takes 3 to 6 months the CFIUS process we -- in the last 2 times, it's was closer to 6 months. So this is what we expect today. We also need to get approval from the HSR, which should take a few months as well. So we do believe that closing will be towards the end of the year.

Next question is from Gunther Karger from Discovery Group.

Congratulations. One question. Which division of Gilat will this Comtech business be incorporated into?

The main division that will capture Comtech business will be the Gilat Defense division. There is a lot of similarity, sharing locations. But we are acquiring not just a full segment rather it's a group of companies and business units and operations within the Comtech business. And we'll -- after we will pass CFIUS, we will need to decide together with the DCSA, what goes into a proxy and what is not a proxy. So I also see some of the businesses is also going to the commercial. For example, the enterprise modem that is developed and headquartered in Canada.

In other words, you eventually plan to have it incorporate into a new division, I think I heard you say in Canada.

I said Comtech has activity in Canada. The Elevate small network VSAT platform and this is more of a commercial in nature. So the final organization will be decided before closing, but this is something that's more similar to the commercial. The rest of the business is typical to the defense. We do expect that Gilat Defense more than double its revenues, right, after the acquisition. In Gilat Defense, we see a lot of opportunity even without Comtech. The business is doing very well very strong pipeline, and we expect to have a very strong 2026 for Gilat Defense. And together with Comtech, they will become more than 40% of Gilat revenues.

The next question is from Caleb Henry of Quilty Analytics.

I got 2 questions from me. First, on the defense opportunities, and that's the main focus of the merger, can you give any specifics or examples of the types of opportunities that Gilat sees and Comtech brings to the table there?

Yes. So I don't want to get into all the programs, but I think that Iron Dome is one of the largest opportunities. Comtech is there. There is an ability to significantly increase their offering and portfolio. So I think this is one of the main examples that we can use. The IDM waveform that they are developing once it will move to production represent another big opportunity.

Okay. And then last one was just on the investment in the business. You mentioned if there's any specifics on R&D that you can talk about that you're excited about, whether that's SATCOM, Troposcatter, space electronics. And then as far as investing in sales and marketing, is that mainly something you foresee in the U.S.? Or is that more global or mix?

So on the R&D, as I said earlier, most of the development today is project driven and less on the on the road map driven. So as part of integration, we'll decide on the joint company road map, and we will recruit R&D personnel based on the decision on the road map. I expect to see an increase in the U.S. R&D headcount numbers. On the sales and marketing, again, it will be part of integration, but I expect to recruit both in the U.S. and globally.

There are no further questions at this time. Mr. Benyamini, would you like to make a concluding statement?

Yes. Thank you for joining our exciting call today on a short notice. We hope to see you or speak with you soon. Have a great week.

Thank you.

This concludes the last conference call. Thank you for your participation. You may go ahead and disconnect.

Welcome to Comtech Telecommunications Corp.'s Conference Call for the Second 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.

Thank you, operator, and thanks, everyone, for joining us today. I'm here with Ken Traub, Comtech's Chairman, President and CEO; and Mike Bondi, our CFO. After Ken and Mike's remarks, they will be available for questions together with Daniel Gizinski, President of our Satellite and Space Communications segment; and Jeff Robertson, President of our Allerium segment.

Before we get started, please note we have a detailed discussion of the quarter in the press release and 10-Q we issued this afternoon, 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?

Thank you, Maria, and good afternoon, everyone. I appreciate you joining us today. I'm going to discuss some key trends, and Mike will discuss our financials in more detail. Comtech continued on its positive trajectory of improvement as we delivered our fourth consecutive quarter of positive operating cash flow and ended the quarter with approximately $50 million of total liquidity.

With net bookings of $175 million in the quarter, we've achieved a book-to-bill ratio of 1.64x, increased our backlog to $732 million and maintained our revenue visibility at approximately $1.1 billion.

As previously disclosed, we've streamlined our product lines and are more selective in the customer orders we accept. As a result of these deliberate decisions as well as the temporary impact of the U.S. government shutdown, consolidated net sales decreased from $127 million in the second quarter of fiscal 2025 to $107 million this past quarter.

But importantly, we increased gross profit from $34 million to $36 million, increased our gross profit percentage from 27% to 34% and increased adjusted EBITDA from $2.9 million to $9.1 million. These improvements are due to the initiatives we have implemented to enhance operational efficiency, reduce the cost structure and focus our product development and sales efforts on strategic higher operating margin products.

As a result of our improved performance and stronger financial position, we continue to see increased support and enthusiasm from both current and prospective customers, vendors and employees. Now I will provide some commentary on our business units.

Our Satellite and Space Communications business continues to improve as a result of our transformation initiatives under Daniel Gizinski leadership. As anticipated, net sales in the Satellite and Space segment declined by 31% as a result of the company's decision to phase out and eliminate certain low-margin and working capital-intensive revenues as well as the impact of the recent U.S. government shutdown.

Examples of revenues that have been phased out include contracts for services such as the Very Small Aperture Terminal, or VSAT satellite Systems and Services contract and the Global Field Services Representative, or GFSR contract as well as legacy troposcatter-related products and services.

As part of this repositioning, S&S is pursuing sales of innovative, higher-margin solutions such as digital common ground modems, network solutions and rapidly deployable multipath radios, which we refer to as MPRs. Despite the decrease in net sales, S&S improved its operating income to $2.5 million in the second quarter of fiscal 2026 compared to $1.2 million in the second quarter of fiscal 2025.

The year-over-year improvement in Satellite and Space operating income primarily reflects the cost reduction and optimization initiatives we have implemented, partially offset by increased research and development expenditures. In terms of recent accomplishments, in the second quarter, among other key wins, Satellite and Space was awarded over $5.5 million of funded orders from several international government end customers who purchased our troposcatter family of systems, including our multipath radios and Modular Transportable Transmission Systems, which we refer to as MTTS.

Satellite and Space also received incremental funding in excess of $4.5 million for ongoing training and support of complex cybersecurity operations for U.S. government customers. We have begun deliveries of initial production units to our prime contractor in support of a next-generation satellite modem contract. We anticipate transitioning into full production during fiscal 2026.

A second next-generation product with the same prime contractor has significantly progressed in development, and it, too, is expected to begin production deliveries in this fiscal 2026. Furthermore, we have recently begun deliveries of our first digital common ground 7000 high-speed, small form factor, software-defined modems to Lite Coms for integration, interoperability and performance testing across diverse government and commercial satellite communications applications and ground terminal configurations.

DCG-7000 modems support DVB-S2X, along with other protected waveforms, and incorporate modern cybersecurity design principles, including integrated transmission security, also known as TRANSEC for over-the-air transmission. These are important milestones as they signify the long-awaited migration from low-margin, nonrecurring engineering efforts to higher volume production with improved operating margins and faster cash conversion cycles.

Now I'll provide some commentary on our Allerium segment. Allerium led by Jeff Robertson, continues to perform well. Net sales were $56.2 million, an increase of 6.2% compared to the second quarter of fiscal 2025. Compared to the prior year period, Allerium experienced higher net sales in all 3 product areas: location-based next-generation 911 and call handling solutions. Such increase reflects the continued adoption of Allerium solutions by new customers as well as the migration of more PSAPs onto Allerium's Next-Generation 911 core services, cloud-based platforms and monthly recurring revenue streams.

Allerium's operating income was $5.5 million compared to $3.4 million in the second quarter of fiscal '25. The year-over-year increase reflects higher net sales and gross profit, both in dollars and as a percentage of segment net sales. Allerium is also moving forward with cloud-based and AI-infused software applications designed to deliver advanced emergency communication platforms to its customers.

In the second quarter, Allerium received over $107 million of incremental funding toward a multiyear contract extension valued in excess of $130 million by Allerium largest customer, a leading U.S. telecommunications company in the United States. Allerium was also awarded in excess of $10.5 million in multiyear funding towards the deployment of a new next-generation 911 system in the South Central region of the United States.

With these and other key 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 translates well to delivering similarly sophisticated solutions for other types of emergencies.

Before turning it over to Mike to cover the financials in more detail, I would first like to address one more development of significance during the quarter. As previously disclosed, in March 2024, Comtech terminated Ken Peterman, its President and CEO at the time, for Cause. Also as previously disclosed, Mr. Peterman filed a claim against the company with the American Arbitration Association, claiming he was owed direct contractual damages in excess of $6 million and consequential damages in excess of $35 million.

Comtech has defended itself against Mr. Peterman's claims and filed counterclaims against Mr. Peterman seeking damages for breach of fiduciary duty, malicious prosecution, abuse of process, breach of contract and defamation. In January of this year, Mr. Peterman's Counsel wrote to the American Arbitration Association with 2 motions. First, he voluntarily asked to withdraw Mr. Peterman's claims against Comtech; and second, they sought dismissal of Comtech's counterclaims against Mr. Peterman.

In January 2026, the arbitrator granted Mr. Peterman's motion to withdraw all of his claims against Comtech in the arbitration, but rejected Mr. Peterman's motion for dismissal of Comtech's counterclaims. Accordingly, Comtech's counterclaims are still pending against Mr. Peterman.

Finally, I would like to thank our shareholders for their strong support, including the approval of all of the company's proposals at the fiscal 2025 Annual Meeting of Stockholders on March 9.

With that, I'll turn the call over to Mike to walk through the financials. Mike?

Thank you, Ken, and good afternoon, everyone. Overall, the successful turnaround continues to take root. We are pleased to be delivering another quarter of improved profitability and operating cash flows relative to our recent past.

Now let's turn to the financials. Net sales for the second quarter were $106.8 million. This compares to $126.6 million in the second quarter of last year. As Ken just referenced, net sales reflect the impact of the decision to phase out certain low or no-margin revenues in our Satellite and Space Communications segment as we continue to streamline our product lines and focus on strategic, higher-margin opportunities while optimizing cash flow.

Timing delays as a result of the recent but prolonged U.S. government shutdown also impacted S&S orders and net sales this past quarter. As for Allerium, Allerium's growth continued this past quarter with Allerium reporting higher net sales in all 3 product areas as compared to the prior year period. Gross profit in the second quarter was $36.2 million or 33.9% of net sales, representing an increase from $33.7 million or 26.7% of net sales in the second quarter of fiscal 2025.

This improvement demonstrates the progress we are making in improving our product mix, including our ongoing shift back to higher volume production orders in our satellite ground infrastructure solutions product line. The improvement in our quarterly gross profit percentage builds upon the improving quarterly trend achieved throughout all of fiscal '25 and the first quarter of fiscal '26.

In our second quarter of fiscal 2026, we reported an operating loss of $1.2 million, which compares to an operating loss of over $10 million in the second quarter of last year. Our second quarters for each year reflects several noncash and onetime charges as further discussed in our Form 10-Q filed earlier today.

Excluding such items, our consolidated operating income for the second quarter of fiscal 2026 would have been $6.2 million or 5.8% of net sales as compared to roughly breakeven in the second quarter of last year. The improvement primarily reflects higher gross profit, both in dollars and as a percentage of consolidated net sales and lower selling, general and administrative expenses, including lower restructuring costs, no proxy solicitation costs and lower amortization of stock-based compensation, offset in part by higher CEO transition costs that included a net benefit from the recovery of certain legal-related expenses in the prior year period.

The improvement in our financial performance resulted in $9.1 million of adjusted EBITDA for the second quarter, a 200% plus increase over the $2.9 million in the second quarter of last year. As Ken mentioned, net bookings were $175.4 million in the second quarter, resulting in a strong book-to-bill ratio of 1.64x. This compares to 0.63x in the prior year comparable period.

Bookings for our second quarter included over $107 million of incremental funding towards Allerium's multiyear contract extension with a large domestic Tier 1 mobile network operator. The improvements in our financial performance also resulted in $4.9 million of positive operating cash flows for the second quarter of fiscal 2026 compared to roughly breakeven cash flows in the second quarter of last year.

As Ken mentioned, this marks our fourth sequential quarter of positive operating cash inflows. The significant improvement from a year ago reflects favorable changes in net working capital requirements due primarily to improved accountability and process disciplines as well as the timing of and progress toward completion on contracts accounted for over time, including related shipments, billings and collections against those contracts.

These activities allowed us to further reduce receivables and inventory levels from July 31, 2025. Also, as a result of our enhanced liquidity, operating cash flows in the more recent period reflect our concerted efforts to maintain lower levels of accounts payable in order to improve the efficiency of our supply chains.

Now turning to the balance sheet. As previously disclosed, we amended our credit facility and subordinated credit facility on October 17, 2024, March 3, 2025, and again on July 21, 2025, to, among other things, suspend testing of the net leverage ratio and fixed charge coverage ratio covenants until the 4-quarter period ending on January 31, 2027. These amendments, combined with our significantly improved operational and financial performance led to our enhanced financial flexibility and importantly, removal of our going concern disclosures in our fiscal 2025 Form 10-K filed in November of 2025.

As of January 31, 2026, total outstanding borrowings under our credit facility were just about $125 million. Of such amount, $7.6 million was drawn on the revolver loan. And during the second quarter, we repaid $10 million against the revolver loan and made our scheduled principal payment against the term loan.

Total outstanding borrowings under our subordinated credit facility were $102.8 million, including interest paid in kind or accrued on the $35 million subordinated priority term loan. Such total does not include the $32.5 million of make-whole amounts associated with the $65 million portion of the subordinated credit facility. The liquidation preference of our convertible preferred stock was $213.4 million, excluding potential increases under certain circumstances. And our available sources of liquidity on January 31, 2026, totaled $49.9 million, which includes qualified cash and cash equivalents of approximately $30.2 million and the remaining available portion of the revolver loan of $19.6 million.

Now with that, let me please turn the call back over to Ken. Ken?

Thank you, Mike. To sum up briefly, Comtech has executed a successful transformation and is now a much stronger company. Our revitalized financial health is increasingly reassuring to our current and prospective employees, customers and vendors. I believe this creates a positive flywheel effect as our recent strengthening of our financial position is reassuring to employees, which aids in retention, recruitment and motivation, reassuring to customers, particularly those that rely on us for mission-critical technologies and services and reassuring for vendors who now see us as a reliable partner ready to deepen critical relationships.

As a reminder, Jeff and Daniel will be joining us for Q&A. With that, operator, please open the call to any questions.

[Operator Instructions] We'll take a question from Keith Housum with Northcoast Research.

Ken, as we look at the revenue in the quarter, how much of that revenue decline was due to the fiscal discipline you guys are showing versus prior quarters? And perhaps how much was from the federal business? And is that federal business that kind of lost or pushed out to later quarters?

So first of all, Keith, welcome. Nice to have you. And if you compare this year to last year, pretty much all of the decline in satellite and space is the result of phasing out old legacy business that was very low margin and not good business to have. That's the GFSR, the VSAT contract and the legacy troposcatter. In addition, we did have delays due to the government shutdown. That was offset by new revenue, particularly in the launch of the next-generation troposcatter products as well as the digital ground modem.

Great. Great. As we look forward, is there any more of that low-margin business that still has to be worked off just because of prior commitments or anything of that nature?

No. We phased that revenue out.

Okay. Great. And then this is kind of new to the story here. Just trying to understand the 2 modems that are hopefully going to reach production sometime here in the second half of the year. Is there any way to kind of dimensionalize the opportunity just as kind of we think about the opportunity for the end of the year and perhaps outwards as well?

Keith, can you repeat the question?

Yes. Just on the 2 contracts that were going towards hopefully to production here in the second half of the year. I'm just trying to understand if I can -- if you guys can dimensionalize here or provide some context about what the true opportunity is for Comtech. How do we think about it perhaps in revenue or number of units or anything? I'm just trying to get my hands around what the opportunity might be.

We want to be careful in the specifics. But Mike, you want to give them some guidance on that transition?

Sure. Keith, in terms of the 2 -- there's multiple modems that are coming online actually. One is already in low rate production, and we are expecting that to kick in, in the second half. This is a platform that we think will survive for many years. The other program, which we refer to as the EDIM program. We're just about finishing up with development and gearing up for production towards the tail end of the fiscal year. And that's another, I would say, very long-term program.

It's the successor to the EBEM modem that was sold by Viasat, and that was like a 10-year program. And I want to say tens of thousands of modems were sold over that period of time. So that's like if you think about the installed base that we're going to likely upgrade, maybe not every one of those systems, but there's a good quantity out there to upgrade.

Great. Okay. I appreciate that. And if I can get one more in here, if you guys don't mind. Jeff, nice to meet you here over the phone. In terms of Allerium, I understand in the PSAP space, AI is being introduced quickly amongst yourself and competitors. Can you perhaps provide a little bit of color about how you guys are embracing AI with your product portfolio? I guess, this is the first part. And the second part, how far along are you guys in the transition to the cloud for your customers? Or are you guys already there?

Yes. Thanks, Keith, both great questions. So as it comes to AI and the PSAPs, which are the 911 and dispatch centers, it's -- where it's mostly coming into play is they're being bombarded with many different forms of information during an emergency request for help. And we're using AI to kind of collect all the different sources of data and paint a simple emergency response picture so that they can dispatch the right emergency personnel and first responders to appropriate scene.

So that's where we're seeing most of the work being done with AI. But throughout our company, we're also using it in other areas for productivity enhancement, whether it be for development and coding or other just administrative tasks. But from -- I think your question was more on the product. But where we're seeing it early on is in the gathering of the information during a request for help or emergency.

On the second part of your question as it relates to cloud, I think we're a good ways away. I would say we're 3 quarters of the way down the road in moving our products to cloud. You're seeing announced last year a new product called Mira, which is coming out shortly, is our cloud-based 9-1-1 call handling platform. We've had some really good feedback in the market for that. But we're also moving many of our services we provide in the NextGen 9-1-1 core services, we'll be moving to a private cloud infrastructure. So I'd say we're 3/4 of the way through.

[Operator Instructions] And at this time, there are no further questions in queue. I will now turn the meeting back to Ken for any additional or closing remarks.

Well, thank you all for joining us today, and we look forward to speaking with you again soon. Thank you all. Have a good evening.

Take care.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Welcome to Comtech Telecommunications Corp.'s Conference Call for the First 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&I of Comtech. Please go ahead, Maria.

Thank you, operator, and thanks, everyone, for joining us today. I'm here with Ken Traub, Comtech's Chairman, President and CEO; and Mike Bondi, our CFO. After Ken and Mike's remarks, they will be available for questions together with Daniel Gizinski, President of our Satellite and Space Communications segment; and Jeff Robertson, President of our Allerium segment.

Before we get started, please note we have a detailed discussion of the quarter in the press release and 10-Q we issued this afternoon, 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?

Thank you, Maria, and good afternoon, everyone. I appreciate you joining us today. Today marks a sort of anniversary for me and a milestone for Comtech. My first day as CEO of Comtech was on January 13, 2025. And on that day, we belatedly reported the company's first quarter of fiscal 2025 financial results. Those were tough times for Comtech as we reported a GAAP net loss of over $148 million as well as significant other challenges facing the company. At the same time, I announced a transformation program anchored on earning the trust of all of our key stakeholders and restoring the company to financial health.

I am delighted to confirm that Comtech has been successfully transformed. As evidenced by our recent financial reports, we are now a much stronger company in virtually every respect. Financially, operationally, organizationally and strategically. This is the result of the successful execution of our transformation initiatives and the dedication and determination of the Comtech team. Our entire team takes pride in how much we have been accomplishing and building a stronger Comtech poised to capitalize on attractive opportunities ahead in each of our business segments. Mike will discuss financial performance in detail, and I will cover some key themes.

I've always believed the most important financial metric for any company and particularly a company like Comtech is cash flow. I have seen companies get into trouble when priorities shift and success is measured by other metrics such as revenue growth or non-GAAP measures like EBITDA, but cash is the key. It is what we need to pay our debts, pay our vendors and invest in our future. Consequently, the improvement in our cash flow generation is the most notable development in Comtech's financial performance. After previously reporting negative operating cash flows for multiple quarters, Comtech reported today its third consecutive quarter of healthy positive operating cash flows.

By way of comparison, in the first quarter of last year, Comtech had a negative cash flow from operations of approximately $22 million. The significant improvement in operating cash flow reflects a substantial increase in operating income resulting from enhanced operational efficiencies, streamlined product lines focused on strategic, higher-margin products, reduced cost structures and improved terms with customers and vendors as well as more efficient working capital management due primarily to improved accountability and process disciplines.

Our success in generating operating cash flow has enabled us to build our liquidity to $51 million as of the end of the first quarter. This is the healthiest liquidity that Comtech has had in a long time. Our lenders recognize our progress and credibility in improving performance and prospects early, which facilitated negotiations with them on the new investments and amendments we negotiated in both March and July. The significantly improved terms of our credit agreements provide us with much better financial flexibility, protections and confidence. All of this has put Comtech in much stronger financial footing with the acute financial concerns of the past behind us and increasing confidence in our future.

Most importantly, our stronger financial position is recognized and appreciated by current and prospective employees, customers and vendors. I believe this creates a positive flywheel effect as our recent revitalization of our financial position is reassuring to employees, which aids in retention, recruitment and motivation, reassuring for customers, particularly those that rely on us for mission-critical technologies and services and reassuring for vendors who now see us as a reliable partner, ready to deepen critical relationships.

Now I'll provide some commentary on our business units. Our Satellite and Space Communications business has been successfully transformed under Daniel Gizinski's leadership as well as the strong operational, technical and financial team we have built in that segment. As a vivid illustration of that transformation, Satellite and Space contributed over $3 million of GAAP operating profit in the first quarter of fiscal 2026, which compares to about $119 million of GAAP operating loss in the comparable period last year.

In addition to the noncash charges for goodwill impairment and write-down of receivables and inventories in fiscal 2025 that have not recurred, this improvement reflects significantly higher gross profit due to enhanced operational efficiencies and product mix improvements as well as lower selling, general and administrative expenses, offset in part by higher investment in research and development.

In the first quarter, Satellite and Space was awarded about $8 million in funded orders from an international reseller of our troposcatter family of systems, including Modular Transportable Transmission Systems and Multipath Radios intended for use in multiple international government end-user applications. MPR continues to be an opportunity where we believe we can provide a more differentiated solution at higher margins.

As mentioned on last quarter's call, in fiscal 2025, we began deliveries of initial production units to our prime contractor in support of a next-generation satellite modem contract. We will be transitioning into full production during fiscal 2026 as the program transitions from a multiyear development period into a production-oriented stage. A second next-generation product with the same prime contractor has also significantly progressed in development and is expected to begin production deliveries in fiscal 2026. These are important milestones as they signify the long-awaited migration from low-margin, nonrecurring engineering efforts to higher volume production with improved operating margins and faster cash conversion cycles.

Now I will provide commentary on our Allerium segment, formerly known as our Terrestrial and Wireless Networks segment. Allerium, led by Jeff Robertson, continues to perform well with adjusted EBITDA of $11.3 million, which is a modest improvement from the prior year period of $11.0 million. As anticipated, Allerium experienced lower net sales for our call handling solutions, offset in part by higher net sales of our next-generation 911 services. As I mentioned on last quarter's call, in early November, we secured a multiyear contract extension from Allerium's largest customer, a leading telecommunications company in the United States, known for its network reliability and security. This contract award is valued in excess of $130 million and is for a scalable service. The agreement reinforces Allerium's commitment to helping carriers and public safety organizations modernize critical infrastructure and optimize service reliability with confidence.

Securing long-term commitments from customers provides an anchor of stability and enables us to invest with confidence in building sustainable long-term partnerships. With strategic wins in the United States, 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 when it comes to delivering similarly sophisticated solutions for other types of emergencies.

During the first quarter, Allerium was also awarded over $15 million of incremental multiyear funding related to the continued development of next-generation solutions for a state in the Southwestern region of the United States. Allerium also received various funded orders from another top-tier U.S. mobile network operator totaling almost $6 million, primarily for maintenance and new feature releases associated with previously deployed wireless location-based solutions.

With that, I'll turn the call over to Mike to walk through the financials. Mike?

Thank you, Ken, and good afternoon, everyone. Net sales for the first quarter were $111 million. This compares to $130.4 million in the immediately preceding quarter and exceeds the midpoint of our revenue guidance provided on November 10. As anticipated, the first quarter reflects the impacts of earlier-than-anticipated orders and net sales as well as certain contracts nearing completion in the fourth quarter of fiscal 2025.

Performance in the first quarter, particularly in our Satellite and Space Communications segment also reflects the impacts of timing delays in orders and net sales as a result of the recent U.S. government shutdown as well as the decision to phase out and eliminate certain low-margin revenues.

Gross profit in the first quarter of fiscal 2026 was $36.8 million or 33.1% of net sales, representing a substantial 153.3% increase from the $14.5 million or 12.5% of net sales in the first quarter of fiscal 2025. The gross profit percentage in the more recent quarter also represents a sequential increase from the 31.2% of net sales in our fourth quarter of fiscal 2025. We continue to make progress in improving our product mix, including our ongoing shift back to higher volume production orders in our satellite ground infrastructure solutions product line as certain legacy low or no-margin nonrecurring engineering contracts draw nearer to completion.

The sequential improvement in our quarterly gross margin percentage builds upon the quarterly trend achieved throughout fiscal 2025, which reflects the impact of our initiatives to reduce cost of goods sold and improved product mix.

In our first quarter of fiscal 2026, we reported an operating loss of $2.8 million, which compares to an operating loss of $129.2 million in the first quarter of last year and an operating income of $1.9 million in the immediately preceding quarter. Our first quarters of fiscal '26 and 2025 reflect several noncash and onetime charges as further discussed in our Form 10-Q filed earlier today. Excluding such items, our consolidated operating income for the first quarter of fiscal 2026 would have been $6.6 million or 5.9% of net sales as compared to operating income of $9.9 million in the fourth quarter of fiscal 2025 and an operating loss of $33.7 million in the first quarter of fiscal 2025. The improvement from the operating loss in the prior year period reflects significantly higher gross profit, both in dollars and as a percentage of consolidated net sales and significantly lower selling, general and administrative expenses.

The more recent improvements in our financial performance resulted in $9.6 million of adjusted EBITDA for the first quarter and $13.3 million in our fourth quarter of fiscal '25 as compared to an adjusted EBITDA loss last year of $30.8 million in the first quarter of 2025. Net bookings were $101.9 million in the first quarter, resulting in a book-to-bill ratio of 0.92x. This compares to 1.1 in the prior year comparable period and 0.72x in the immediately preceding quarter.

Bookings for our first quarter included approximately $27 million of initial funding toward the multiyear contract extension that Ken mentioned earlier, which is valued in excess of $130 million.

The more recent improvements in our financial performance resulted in cash flows provided by operations of $8.1 million for the first quarter of fiscal 2026 and $11.4 million in the fourth quarter of fiscal 2025, substantial improvements from the negative $21.8 million of cash flows used in operations in the first quarter of last year.

As Ken mentioned, this marks our third sequential quarter of positive operating cash inflows. The significant improvement from a year ago reflects favorable changes in net working capital requirements due primarily to improved accountability and process disciplines as well as the timing of and progress toward completion on contracts accounted for over time, including related shipments, billings and collections. These activities allowed us to further reduce receivables and inventory levels from July 31, 2025.

Also, as a result of our enhanced liquidity, operating cash flows in the more recent period reflect our concerted efforts to maintain lower levels of accounts payable in order to improve vendor relations and gain further traction in negotiating more favorable vendor payment terms.

Turning to the balance sheet now. As previously disclosed, we amended our credit facility and subordinated credit facility on October 17, 2024, March 3, 2025, and July 21, 2025, to, among other things, suspend testing of the net leverage ratio and fixed charge coverage ratio covenants until the 4-quarter period ending on January 31, 2027. As of October 31, 2025, total outstanding borrowings under our credit facility were $135 million, of such amount, $17.6 million was drawn on the revolver loan. Subsequent to quarter end, on December 1, 2025, we repaid $5 million against the revolver.

Total outstanding borrowings under our subordinated credit facility at quarter end were $101.5 million, including interest paid in kind or accrued on the $35 million of subordinated priority term loan. Such total amount does not include the $25.7 million of make-whole amounts associated with the $65 million portion of such credit facility as of such date. The liquidation preference on our outstanding convertible preferred stock was $208.7 million, excluding potential increases in the liquidation preference and other obligations that could be triggered by, among other things, breaches of covenants and/or asset sales resulting in a change in control of the company and our available sources of liquidity on October 31, 2025, totaled $51 million, which includes qualified cash and cash equivalents of $41.4 million and the remaining available portion of the revolver loan of $9.6 million as of quarter end.

Now let me turn the call back over to Ken. Ken?

Thank you, Mike. To sum up briefly, Comtech has executed a successful transformation and is now a much stronger company. Our revitalized financial health is increasingly reassuring to current and prospective employees, customers and vendors.

To reiterate, I believe this creates a positive flywheel effect as our recent strengthening of our financial position is reassuring to employees, which aids in retention, recruitment and motivation, reassuring for customers, particularly those that rely on us for mission-critical technologies and services and reassuring for vendors who now see us as a reliable partner, ready to deepen critical relationships.

Before we move to the Q&A, I would like to highlight that we also announced today that Mary Jane Raymond has joined our Board of Directors. With Comtech's recent positive momentum, it is a good time for us to enhance our Board, and we look forward to benefiting from Mary Jane's broad governance, finance, internal control oversight, M&A and operational capabilities. Please join me in welcoming Mary Jane. As a reminder, Jeff and Daniel will be joining us for Q&A.

With that, operator, please open the call to any questions.

[Operator Instructions] Our first question comes from Mike Crawford with B. Riley Securities.

First off, that $130 million of new bookings, should that all flow to backlog in the current quarter?

So a portion of it was a booking in the first quarter, and -- but the great majority of it is -- will be booking in the second quarter.

Okay. So -- and that will go into backlog in the second quarter, that's great to have a nice [ start ] for the book-to-bill. And then just more broadly, do you think of these cross currents that you've discontinued some low-margin products, but now you're transitioning the higher volume production on some new digital modems. Like how should we think about return to top line growth, whether it's this fiscal year or next?

Our focus, Mike, is optimizing for cash flow. So we have deliberately shrunk to be in the position to now regrow. We feel like we're at that inflection point, and we are in a good position where we've phased out some low-margin, unattractive business while we're focusing on better strategic, higher-margin, long-term opportunities. So we do believe that we are at that inflection point where we've improved margins, and we have attractive growth opportunities ahead.

Okay. And then just final question for me is any updated thoughts on what some of your best options are now to do with your PIK preferred stock obligation.

I'm not going to comment on that right now, Mike. It's an important element of our capital structure. And as you know, we're looking at a variety of options to improve our overall capital structure, but we're not ready to announce anything specific at this time.

[Operator Instructions] At this time, there are no further questions in queue. I will now turn the meeting back to Ken for any additional or closing remarks.

Well, thank you, operator. And with that, we'd like to wish everyone a wonderful holiday season, and we look forward to speaking with you all soon. Happy holidays.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Welcome to Comtech Telecommunications Corp.'s Conference Call for the Fourth Quarter and Full Year of Fiscal 2025. 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&I of Comtech. Please go ahead, Maria.

Thank you, operator, and thanks, everyone, for joining us today. I'm here with Ken Traub, Comtech's Chairman, President and CEO; and Mike Bondi, our CFO. After Ken and Mike's remarks, they will be available for questions together with Daniel Gizinski, President of our Satellite and Space Communications segment; and Jeff Robertson, President of Allerium, formerly known as the Terrestrial and Wireless segment.

Before we get started, please note we have a detailed discussion of the quarter and year in the press release and 10-K we issued this afternoon, which is 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 planned 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?

Thank you, Maria, and good afternoon, everyone. I appreciate you joining us today. I am proud to report how much stronger Comtech is today, financially, operationally and strategically. This is the result of the ongoing successful execution of the transformation initiatives that we announced when I started as CEO in January 2025.

As a testament to our improving financial health, the company no longer has uncertainties regarding its ability to continue as a going concern, and this disclosure has been removed from our financial statements. We have executed a successful turnaround of our Satellite and Space business, which is now revitalized and our Allerium business, formerly known as terrestrial and wireless has continued to deepen our presence in the public safety market while securing long-term customer partnerships. We expect the company's significantly improved operational and financial health to be reassuring to our current and prospective customers, vendors, employees, investors and partners. The early success of our transformation initiatives and the positive trajectory of the business are evident across numerous key metrics.

Let me provide some examples. First, operating cash flow. We reported $11.4 million of positive operating cash flow in the fourth quarter, which follows the $2.3 million of positive operating cash flow in the third quarter. These are the first quarters of positive operating cash flow for Comtech since fiscal 2023. These operating cash flow numbers are after taking into account the payment of cash interest expense and fees on our debt as well as restructuring activities, including payments to resolve legacy issues we inherited from former management. The significant improvement in operating cash flow is the result of a cultural shift, emphasizing optimizing cash flow, improved process disciplines, better working capital management as well as the timing of and progress of completion on contracts that enabled us to bill customers and collect accounts receivable.

Second, liquidity. We concluded the fiscal year with $47 million of liquidity. That includes qualified cash as well as undrawn availability under our revolving credit facility. This is the highest level of liquidity that Comtech has had in recent history compares to $27 million disclosed as recently as March 2025. This is the result of the generation of operating cash flow that I just described as well as improved terms with our lenders. The increased liquidity gives us comfort to continue executing on our improvement initiatives as well as the ammunition to prudently invest in building sustainable long-term value. Third, accounts payable to vendors. The cash flow and liquidity improvements that I just discussed were achieved while we also paid accounts payable down to the lowest level Comtech has had in years. We finished the fiscal year with accounts payable of just $26 million, which is down from $43 million as of January 31. We are now building stronger and healthier relationships with key vendors and partners.

Fourth, revenue increase and improved mix. Quarterly revenue increased 13% from the first quarter to the fourth quarter of fiscal 2025 despite the anticipated wind down of certain legacy contracts, a deliberate shift away from a number of low-margin contracts and the elimination of other revenue contracts that had unsatisfactory operating margins or excessive demands on working capital. This increase in quarterly net sales reflects improvements in both of our operating segments, including a shift back to higher rate production orders in our satellite ground infrastructure solutions product line, which is expected to produce a more favorable revenue mix going forward.

Fifth, improved gross margins. Gross margins improved from 12.5% in the first quarter to 31.2% in the fourth quarter of fiscal 2025. Gross margins are improving as a result of the revenue discipline I just described, resulting in a more favorable revenue mix as well as the implementation of operational efficiencies and cost savings measures. Sixth, we've improved the bottom line. Our adjusted EBITDA, a non-GAAP measure, improved sequentially in each quarter of the year. We went from a negative $30.8 million in the first quarter to positive $2.9 million in the second quarter to $12.6 million in the third quarter and $13.3 million in the fourth quarter. Our adjusted EBITDA gains stem from our improved gross margins as well as further savings in corporate overhead and operating expenses. Adjusted EBITDA is now more closely correlated with operating cash flows than it has been in the past.

Seventh, improved credit facility terms. As previously reported, we succeeded in negotiating significantly improved terms with Comtech's creditors. These negotiations were facilitated by both the operational and financial improvements I just discussed as well as a relationship of trust and a spirit of cooperation that we've developed with our lenders. As a result, Comtech now has significantly enhanced financial flexibility.

Eighth, progress in repeating -- in remediating our material weaknesses. We have been implementing improved control systems and working with external experts to remediate the previously disclosed material weaknesses in the company's internal controls. While we have more to do in this regard, we have made significant progress. The revised engineering estimates that we made recently on a development project with an international customer are manifestations of this progress. While I was disappointed that the revisions delayed our report on all of the accomplishments that we are discussing today, I am also encouraged that our enhanced bottoms-up analysis have led to an overall improvement in our processes and quality of our reports. The metrics that I just described highlight the significant improvements and achievements in the second half of fiscal 2025. However, we recognize that we still have legacy challenges to address and fluctuations in our quarterly results are inevitable.

Now I would like to share with you just some of the initiatives that made these achievements possible. First, improved corporate governance. I have always believed that strong corporate governance and a healthy dynamic both within the Board of Directors and between the Board and executive management is fundamental to corporate success. The corporate Board of Comtech is well informed and is working diligently, collaboratively and constructively in their evaluation and support of corporate priorities. This strong governance and alignment between the Board and management has enabled a focused execution of the transformation initiatives that I will describe in more detail.

Secondly, strengthened executive leadership. The Comtech leadership team is now strong and capable, both at the corporate level and the operating segment level. Our executives are rising to the occasion and performing at a high level as they are aligned around key priorities and core values. We have also recruited additional key members of the team that are helping to drive continuous improvement. I will discuss this in more detail when I move into the discussion of developments at the segment level later in this call. The strengthened executive leadership team has fostered an improved dynamic and is energized by the positive momentum resulting from the successful execution of our transformation initiatives.

Third is accountability. We've empowered key contributors throughout this organization while implementing new disciplines to foster accountability. For example, we've initiated a revised delegations of authority program that clearly defines lines of responsibility, authority and accountability. We've also improved the systems we use to manage, approve and monitor critical activities, including capital expenditures, research and development initiatives, purchasing, contract execution, employee hiring and incentives.

Fourth, cash flow optimization. I've seen companies in my career use various metrics as their primary focus. such as revenue growth, revenue per employee, adjusted EBITDA and others. These metrics can get companies into trouble, particularly if they are misaligned with cash flow or inconsistent with either short- or long-term shareholder equity value maximization. The principle that we're currently focusing on here at Comtech is optimizing for cash flow, not revenue. Our return to positive cash flow enables us to strengthen our short- and long-term financial, operational and strategic positions.

Fifth, improving working capital management. A key component of cash optimization is alignment of the organization around understanding and managing the balance sheet and particularly working capital. Our strengthened financial position, coupled with enhanced disciplines will anchor further initiatives to optimize working capital management as a source of cash for further improvements in our capital structure as well as investments in value-accretive opportunities.

Sixth, strong customer focus and support. We are dedicated to meeting and exceeding our customers' current and future needs and expectations. We've already seen how our efforts are enhancing customer satisfaction. Our team is focused, not only providing excellent customer service and support today, but we're also developing innovative next-generation solutions to address the growing needs of our customers in each segment of our business.

Seventh, enhanced operational efficiency. We have been implementing new processes to improve reliability, quality, on-time delivery and capacity utilization as well as streamlining product lines and operations to reduce complexity and cost. And the eighth initiative is a reduced cost structure. In addition to savings from operational efficiencies, we are identifying opportunities to lower the cost structure with less internal labor and reduce use of external consultants and expensive professional service firms.

And finally, is a revitalized corporate culture. The final major initiative I would like to mention is centered around corporate culture. I say this for last because it is the most important. We've been reinvigorating the corporate culture here at Comtech by emphasizing transparency, empowerment and accountability. On a personal note, it is particularly gratifying for me to see how our employees are increasingly taking pride in contributing to our success, which has also enhanced morale, retention and performance. The initiatives I just described not only helped to drive Comtech's significantly improved financial performance, but also enabled us to improve relationships with current and prospective employees, customers, vendors and creditors. This leads to a flywheel effect, in my opinion, in which improved relationships create a healthier dynamic for the business going forward and ultimately, further improvements in operational and financial performance.

Now I will provide some commentary on our business units. Under Daniel Gizinski's leadership, our Satellite and Space Communications business has been executing a successful turnaround. In fiscal 2024 and early in fiscal 2025, Comtech's Satellite and Space business performed poorly and was a drain on the company's financial results and liquidity. Daniel was promoted to President of the business in the second quarter of fiscal 2025 has done a very impressive job of identifying the issues that gave rise to the previous underperformance, executing a remediation plan to address those issues and positioning the Satellite and Space segment for margin improvement, cash flow generation and long-term growth.

As Daniel took the reins of the Satellite and Space business, he and the team identified several factors that contributed to the prior underperformance of that segment. Let me explain 6 of those factors. First, the company suffered from a failure to respond effectively to industry trends. Secondly, the company had a product portfolio that included some aging and obsolete products. Third, we had poor cost management. Fourth, the company had poor procurement approval disciplines and related excessive inventory buildup. Fifth, the company had poorly negotiated contractual terms. And sixth, we had a lack of skilled program managers, resulting in poor change control management.

Over the course of the past year, Daniel and our leadership team addressed these issues with decisive actions, which yielded immediate improvements and have positioned the business for long-term success. Let me explain some of these actions. First, we recruited a strong segment leadership team, specifically Steve Black as Chief Operating Officer; Brent Norman as Chief Financial Officer; Mark Dale as Chief Technology Officer; Bob Pescatore as General Manager as well as other key contributors under Daniel's direction. Second, we developed a new product road map, featuring differentiated technologies aligned with customer needs. Third, we've eliminated over 50% of slow-moving products, which enabled us to have a tighter focus on a differentiated value-driven product line. Fourth, we restored operational discipline.

Fifth, we implemented productivity enhancements and cost reduction initiatives. Sixth, we implemented a disciplined approach to procurement and inventory management. Seventh, we improved customer relations and contractual terms. And finally, we established best practices in program management, showing improved reliability and performance. These initiatives are already having a significant impact.

For instance, in the fourth quarter of fiscal 2025, Satellite and Space generated over $20 million of operating cash flow. This compares to a negative cash flow of $1 million in the first quarter of fiscal 2025 and approximately $23 million of negative cash flow in fiscal 2024. The significant improvement in Satellite and Space cash flow in the fourth quarter reflects the early impact of the operational improvements I just described.

Additionally, in the fourth quarter, Satellite and Space benefited from earlier-than-anticipated orders and related cash collections. Now that these improvements have been implemented, the Satellite and Space business is better positioned to pursue growth opportunities in our markets. We are prepared to meet increasing demand for technology to support 5G nonterrestrial networks and sovereign defense networks with the launch of our next-generation platforms. We are already seeing traction from the launch of our digital common ground platform, including additional early production prototype order agreements.

In the fourth quarter, the Satellite and Space business completed initial deliveries of our small form factor troposcatter system, referred to as our Multipath Radio or MPR, to an international Air Force customer. We believe the small form factor troposcatter capabilities align closely with the modern defense demands, and we believe there will be increasing demand for the unique features and capabilities we offer. When you hear me discuss shifting our focus toward opportunities in which we can provide a more differentiated solution at higher margins, MPR is one such type of opportunity.

During fiscal 2025, we began delivery of initial production units to our prime contractor support of a next-generation satellite modem contract and we'll be transitioning into full production during fiscal 2026 as the program transitions from a multiyear development period into a production-oriented stage. A second next-generation product with the same prime contractor has also significantly progressed in development and is also expected to begin production deliveries in fiscal 2026. This is an important milestone as it signifies the long-awaited migration from low-margin nonrecurring engineering efforts to higher volume production with improved operating margins and faster cash conversion cycles.

We continue to support key space initiatives, including NASA's Artemis project with bookings in support of this project of approximately $10 million during the fourth quarter. Additionally, satellite and space was awarded over $7 million for its work supporting a U.S. government cybersecurity training program. All of the initiatives that we have been executing under Daniel's leadership in our Satellite and Space business have resulted in a comprehensive turnaround with significantly improved operating performance. This has helped to reinvigorate employee morale, partner commitments and customer trust. The durable differentiation in our product portfolio as well as the new products that we have been developing position Satellite and space to capitalize on the growing demand for the innovative, secure communication solutions we provide to our target markets.

Now I will provide commentary on our Allerium segment, formerly known as our Terrestrial and Wireless Networks segment. Our Allerium segment led by Jeff Robertson, delivered a strong fourth quarter with adjusted EBITDA growing 37% to $13.7 million from $10 million in the same period last year. This performance was driven by higher net sales and gross profit related to our location-based and next-generation 911 call handling solutions, offset in part by increased research and development activities geared toward further solidifying our role as a trusted provider of innovative emergency communication and location-based technologies.

During the fourth quarter, Allerium was awarded multiple orders across each of its 3 product areas, reflecting confidence in Allerium's performance and the strong collaboration with customers that defines these relationships. In total, bookings for the fourth quarter aggregated about $50 million. Taken together, we believe these awards validate Allerium's role as a market leader in emergency communication and location-based solutions. This momentum is underscored by a significant achievement that we reported today. After year-end, we have secured a multiyear contract extension from Allerium's largest customer, a leading telecommunications company in the U.S. known for its network reliability and security. This contract award is valued in excess of $130 million and is for a scalable service. The agreement reinforces Allerium's commitment to helping carriers and public safety organizations modernize critical infrastructure and optimize service reliability with confidence. This also highlights a core strength of this business.

Regardless of broader economic conditions, emergency response has a history of consistent funding. As the world becomes more complex and riskier, governments as well as commercial entities are increasing their investment in public safety and precise location-based technologies, which provides Allerium with a durable tailwind and enhances our long-term revenue opportunities. The Allerium rebrand reflects a new unified go-to-market strategy that consolidates this segment's product lines under the single Allerium name. It marks a fresh new chapter, elevating our name in the markets we serve. Internally, it has served as a rallying cry for our teams, renewing focus on innovation and strengthening both employee engagement and recruitment as we drive the next generation of public safety technology.

To support and accelerate this strategy, we have opened a new Allerium Innovation Lab in Broomfield, Colorado. This facility will be a center of excellence, focusing on next-generation R&D and attracting the best talent in public safety technology. A cornerstone of this strategy is Allerium Mira, our next-generation public safety-grade cloud-native call handling solution. Mira simplifies complex emergency call handling operations by allowing public safety answering points to manage voice, text, video and alerts through a single interface, unlocking smarter routing and deeper integration.

Allerium Mira is also the engine for our broader service expansion. We are moving beyond traditional 911 calls to handle many other forms of information for a wide array of originating service providers. This includes data from wearables, connected cameras, fire panels, vehicles and traffic cameras. By integrating these inputs with next-generation software tools, we provide critical situation awareness to ensure first responders are prepared to deliver the emergency services the public needs. This strategy is proving successful, both domestically and abroad.

As I stated last quarter, some of our key growth drivers include cloud-based products like Allerium Mira, next-generation call handling solutions and 5G location-based technologies for international customers. We are already executing on this global strategy and expanding our international footprint as I can confirm that during the fourth quarter, Allerium secured over $6.5 million in new contracts for work in South Australia and Canada. This entire vision is underpinned by Allerium's competitive advantage, the combination of our industry-leading statewide, innovative next-generation 911 networks with decades of experience in dispatch centers around the world. As agency expand beyond voice to multimodal data-rich request for help, this integration of network and dispatch technology gives us a distinct ability to help them manage complex emergencies.

As previously disclosed, the company has been reviewing strategic alternatives with the assistance of nationally recognized investment bankers. We will only be providing updates on these processes if and when we have something specific to share.

At this point, there is nothing to share. With that, I'll turn the call over to Mike to walk through the financials. Mike?

Thank you, Ken, and good afternoon, everyone. Before getting into the detailed results, I would like to first summarize this past quarter. Sequentially, our consolidated GAAP operating results were better than our third quarter of fiscal 2025. We continue to grow net sales and improve gross margins, further reduced our operating expenses, generated positive GAAP operating income for the first time in over 5 quarters, further increased our adjusted EBITDA and achieved our second consecutive quarter of positive cash flows from operations.

The Allerium segment continues to perform well, securing several large multiyear contract extensions from key customers. Our Satellite and Space Communications segment has been rejuvenated and improvements are evident with sequential growth in net sales, gross profit, operating income, adjusted EBITDA and operating cash flows. We were also successful in reducing corporate unallocated operating expenses during the more recent fiscal year quarter. While there are always opportunities for greater efficiency, the transformation plans that Ken described earlier have not only stabilized our business, but have also strengthened our financial condition and opportunities for further growth.

I'm going to review our financial results for fiscal 2025 first, then discuss results for the fourth quarter. In fiscal 2025, Comtech had consolidated net sales of $499.5 million compared to $540.4 million in fiscal '24. The change in sales reflects the anticipated wind down of certain legacy troposcatter contracts, lower sales of EEE space components and antennas, including those related to the CGC divestiture that we initiated in our fourth quarter of fiscal '24 and the divestiture of our high-powered solid-state amplifiers product line in November of 2023. These items were offset in part by higher sales of our Allerium's NG911 emergency communication, call handling and location-based solutions and SATCOM solutions in our Satellite and Space segment, primarily satellite ground infrastructure solutions and VSAT and similar equipment sales to the U.S. Army.

Gross margin as a percentage of net sales was 25.6% for fiscal 2025 compared to 29.1% in fiscal 2024. Fiscal 2025 margins reflect an $11.4 million noncash charge in our first quarter from inventory write-downs related to restructuring within our Satellite and Space segment. Our quarterly gross profit, both in dollars and as a percentage of consolidated net sales improved sequentially throughout fiscal 2025. Over the course of the fiscal year, we improved our quarterly consolidated GAAP operating income from a loss of $129.2 million in the first quarter to income of $1.9 million in the fourth quarter. Reductions in quarterly expenditures for SG&A expenses contributed to this improvement.

As outlined in the company's annual report on Form 10-K for fiscal 2025, Net loss attributable to common shareholders was $204.3 million compared to $135.4 million in fiscal 2024. In aggregate, fiscal 2025 results were impacted by $187.5 million of net charges, of which $167.1 million were noncash. Our net loss attributable to common shareholders improved sequentially throughout fiscal 2025 due primarily to improved operational and financial performance, as Ken just explained. Adjusted EBITDA loss for Comtech in fiscal 2025 was $2 million compared to adjusted EBITDA income of $45.7 million in fiscal 2024. This change primarily reflects the anticipated lower consolidated net sales and gross profit in fiscal 2025, both in dollars and as a percentage of consolidated net sales and including an $11.4 million noncash charge in our first quarter related to the write-down of inventory and higher selling, general and administrative expenses driven by a $16.1 million noncash charge in our first quarter related to the allowance for doubtful accounts, offset in part by lower company-funded research and development expenses in light of increased levels of customer-funded initiatives.

Overall, we experienced sequential quarterly improvements in adjusted EBITDA throughout fiscal 2025 with improvements ranging from negative $30.8 million in our first quarter to positive $13.3 million in our fourth quarter. Net bookings in fiscal 2025 were $372.7 million compared to $700.6 million in fiscal 2024. Bookings in fiscal 2025 were impacted by a $36.4 million debooking in the third quarter following the award of a protested low-margin U.S. Army field services contract to the incumbent provider. Also, bookings in the prior year included a large multiyear contract awarded to us from an NG 911 customer in the Northeastern region of the U.S.

Comtech's funded backlog as of July 31, 2025, was $672.1 million compared to $798.9 million as of July 31, 2024, and $708.1 million as of April 30, 2025. For clarity, such backlog does not yet include the $130 million-plus multiyear contract extension just recently awarded to Allerium. Fiscal 2025 GAAP cash flows used in operations were $8.3 million, a significant improvement from the $54.5 million of cash flows used in operations last year. Fiscal 2025 cash flows include $23 million in aggregate payments for restructuring costs, including severance, proxy solicitation costs and CEO transition costs. This compares to $16 million in fiscal 2024.

Fiscal 2025 also includes cash payments for interest and taxes of $29.6 million as compared to $23 million in fiscal '24. Throughout fiscal 2025, Comtech had sequential quarterly improvements in operating cash flows, improving from negative $21.8 million of operating cash flow in our first quarter to positive $11.4 million in our fourth quarter. Pivoting now to our results for the fourth quarter of fiscal 2025, consolidated net sales were $130.4 million compared to $126.2 million in the fourth quarter a year ago and $126.8 million in the third quarter of fiscal 2025. The fourth quarter benefited from earlier-than-anticipated orders in both segments, offset in part by a $3.5 million charge in our fourth quarter due to higher-than-expected cost completion on a nonrecurring development project within our Satellite and Space segment.

Gross profit in the fourth quarter of fiscal 2025 was $40.7 million or 31.2% of net sales, representing a substantial 50.2% increase from the $27.1 million or 21.5% of net sales in the fourth quarter last year. Gross profit in the more recent quarter also represents a 4.6% sequential increase from the $38.9 million or 30.7% of net sales in our third quarter of fiscal 2025. We continue to make progress in improving our product mix, including our ongoing shift back to higher volume production orders in our satellite ground infrastructure Solutions product line as certain legacy low or no-margin nonrecurring engineering contracts draw near to completion.

In our fourth quarter of fiscal 2025, we continued our trend of lowering GAAP operating expense, in particular, SG&A. Such reduction resulted in our ability to report positive operating income in our fourth quarter of $1.9 million, which compares to an operating loss of $1.5 million in the prior quarter and an operating loss of $81.5 million in the fourth quarter of fiscal 2024. These improvements in our financial performance also resulted in consolidated adjusted EBITDA for the fourth quarter to increase to $13.3 million compared to $0.3 million in the fourth quarter of last year and $12.6 million in the third quarter of this year. As mentioned, fourth quarter of fiscal 2025 cash flows provided by operations were $11.4 million, a substantial improvement from the $9.5 million of cash flows used in operations in the fourth quarter of 2024 and the $2.3 million of cash flows provided by operations in the third quarter of this year. The improvement in this metric is due to operational enhancements and our revitalized culture with aligned focus on optimizing cash flow, which in part contributed to earlier-than-anticipated collections in our fourth quarter of fiscal 2025.

Now turning to the balance sheet and as discussed in more detail in our SEC filings, we recently amended our credit facilities. These amendments, among other things, provided for the incurrence of a $35 million incremental subordinated priority term loan, the net proceeds of which were used to prepay without premium $28.5 million of outstanding term loans and $5.8 million of the outstanding revolver loan under the credit facility. Importantly, it suspends until the 4-quarter period ending January 31, 2027, testing of the net leverage ratio, the fixed charge coverage ratio and the minimum EBITDA covenants. They altered the interest rates applicable to term loans under the credit facilities. It delayed the scheduled repayment of a portion of the principal on the term loans and fees due pursuant to the second amendment to the credit facility.

The amendments reduced the minimum EBITDA requirements, reduced the minimum quarterly average liquidity requirements from $17.5 million to $15 million, permanently reduced commitments under the credit facility revolver loan by $2.1 million and obligated the company to enter into management incentive and retention arrangements for its key personnel. Such amendments also permit us to engage in the sale or disposition of certain properties and assets approved by the administrative agents subject to the conditions to use net cash proceeds from such sale to repay outstanding principal amounts of the obligations under our credit facilities. Collectively, these amendments provide Comtech with enhanced financial flexibility.

In terms of our liquidity and outstanding debt obligations, at July 31, 2025, our available sources of liquidity totaled $47 million. Total outstanding borrowings under our credit facility were $133.9 million, of which $17.6 million was drawn on the revolver. Total outstanding borrowings under our subordinated credit facility were $100.1 million, excluding the $25.7 million make-whole amount associated with the $65 million portion of such facility through July 31, 2025 and the liquidation preference of our outstanding convertible preferred stock was $204.2 million, excluding potential increases that could be triggered by, among other things, asset sales and/or changes in control of the company.

Before turning it back over to Ken, I will now provide a brief update on our consolidated performance for the first quarter of fiscal 2026. While we currently have a policy of not providing guidance or full year targets, given the unique situation of having our fiscal 2025 earnings call after the end of our first quarter of fiscal 2026, we felt an update in this instance, albeit preliminary, would be appropriate. For the fiscal quarter ended October 31, 2025, we are currently estimating the following consolidated results: net sales to approximate a range of $107 million to $113 million compared to $115.8 million in the first quarter of fiscal '25.

Cash flow provided by operating activities to approximate a range of $6 million to $7 million compared to cash flow used in operating activities of $21.8 million in the first quarter of fiscal '25 and liquidity, defined as our qualified cash and cash equivalents and available portion of our revolver loan under our credit facility as of October 31, 2025, was $51 million. Performance in the first quarter of fiscal 2026 is expected to reflect, among other things, the impacts of earlier-than-anticipated orders, net sales and cash collections that we just discussed as well as certain contracts nearing completion in the fourth quarter of fiscal 2025.

Additionally, performance in the first quarter of fiscal 2026, particularly in our S&S segment, is expected to reflect the impacts of timing, delays in orders, net sales and cash collections as a result of the U.S. government shutdown as well as the decision to phase out and eliminate certain low-margin revenue. While not providing full year guidance or specific targets, we do expect performance to improve in subsequent quarters of fiscal 2026. Additional details will be provided when we file our Form 10-Q for the first quarter of fiscal 2026, Also, as a reminder, statements about our anticipated results are subject to the cautionary language on forward-looking statements included at the start of this call as well as in our various SEC filings.

Now let me turn the call back over to Ken. Ken?

Thank you, Mike. To sum up briefly, Comtech has been successfully executing the transformation plan that I announced in January, which has not only helped to drive Comtech's significantly improved operating and financial performance, but also has enabled us to improve relationships with current and prospective employees, customers, vendors and creditors. I believe this leads to a flywheel effect in which improved relationships create a healthier dynamic for the business going forward and ultimately, further improvements in operating and financial performance.

As a reminder, Jeff and Daniel will be joining us for the Q&A. With that, operator, please open the call to any questions.

[Operator Instructions]

And we'll take our first question from Matthew Maus with B. Riley.

Matthew on for Mike Crawford. I guess to start off, regarding the $130 million carrier contract, I'm assuming it hits 2Q '26 bookings. Can you help us model some of the economics in terms of the contract duration, how it's -- how the revenue is expected to ramp and whether you think it kind of represents a meaningful step-up in Allerium's growth trajectory?

Thanks for the question, Matthew. So it's -- we're not going to give a lot more specifics for commercial and competitive reasons. We'll say that it's at least $130 million contract. It is a long-term commitment with a major customer, and we believe it gives us an opportunity to build significantly around that.

Jeff Robertson is on the call. Jeff, do you want to add anything?

No, Ken. I think you covered it well. We're just encouraged by this customer, and it's the long-term backlog that it represents gives us some confidence in the future. That's all I would add to that.

So I do want to clarify, Matthew, that this is an existing customer that is making a going-forward long-term commitment. And -- but it is -- it's a very significant milestone for us, right? This locks in a long -- one of our most important customers in the Allerium business, and it's an anchor of stability that we will be building around.

Got it. And you provided some preliminary first quarter '26 guidance. I guess, given the government shutdown impact and the pull forward you mentioned, how should we think about the quarterly cadence through fiscal '26?

Okay. So we're a company that doesn't give guidance. We did for Q1 because Q1 is already complete. So what we can tell you is we do believe that business will continue to improve throughout fiscal 2026 and beyond. We've now -- we've achieved a lot of improvements that I've detailed in my remarks, and we do anticipate improvements in the quarters following Q1.

Got it. All right. And so bookings and the book-to-bill ratio both improved sequentially. I'm just wondering if you can lay that out one more time. What's kind of driving that improvement towards getting that above 1 in fiscal '26? And like where -- which segment specifically do you see the most strength of that?

Mike, do you want to handle that question?

Sure, Ken. In terms of our book-to-bill ratio, just always keep in mind that as you just heard us announce today, we had a very large contract, a multiyear contract award that was booked in November. So that's something that we would not expect to repeat. But overall, I think we're very excited about our progress in Allerium's success in international markets. That's been a focus of ours, and it's nice to see that we're getting some bookings there as well. And I think working through the government shutdown, we don't think it's going to be permanent. And I would think that the cadence will pick up once we get past this shutdown period.

And last one for me, just quickly on -- I think previously, you mentioned the EDIM certification was expected prior to calendar year-end. I'm just wondering where things stand now. Are you through the certification and what would the ramp look like?

Matthew, could you clarify your question? What was it that you were asking about a certification?

Yes, the EDIM certification in terms of it being -- it was previously expected prior to year-end. I'm wondering if there's an update on that.

Okay. I think you're referencing the EDIM program, we referenced it as EDM.

Right, EDIM.

Yes. Maybe that's a question best answered by Dan Gizinski. But yes, I'll start off by saying that, that program has been progressing. We definitely are excited that we're getting towards the tail end of our nonrecurring engineering phase and moving to production, which is in our wheelhouse, but I'll turn it over to Daniel.

Yes. Thanks for the question. So high level on the EDIM program, I think the expectation that we had communicated is that we would be delivering initial prototype equivalent products to begin the certification process prior to calendar year-end. We are still expecting to see that final certification phase that we're going to work through collaboratively with the U.S. government certainly will be dependent on the delivery of those units as well as coordination with various different government entities to conduct that final certification, and that will take place over the earlier parts of calendar '26 with, I think, some flexibility in the schedule. We are continuing to make good progress and are still expecting to have those units delivered in place to begin the certification process prior to our calendar year-end.

[Operator Instructions]

We show no further questions at this time. I will now turn the call over to Ken Traub for closing remarks.

Well, I'd like to thank you all for joining us today. And as a final message, in anticipation of Veterans Day tomorrow, I would like to express our gratitude to all those who have served our country. Thank you all very much.

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time. Thank you.