Comtech announces transformation strategy and capital structure update

Comtech’s (CMTL) Board of Directors and management team are executing a strategy to transform Comtech into a pure-play satellite and space communications company and provided a capital structure update. Ongoing and future actions supporting Comtech’s transformation strategy include: an exploration of strategic alternatives for the company’s Terrestrial & Wireless Networks segment, which is well underway; the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus; and the implementation of additional operational initiatives to align Comtech’s go-forward cost structure with a pure-play focus on satellite and space communications. Comtech’s T&W business is a provider of 911 infrastructure and solutions for state and local governments and telecom carriers across North America. The Board in recent months commenced a strategic alternatives process for the T&W business. There is no timeframe for the conclusion of the process. Comtech’s Satellite & Space Communications segment is a U.S.-based provider of advanced modems and high-power amplifier technologies. Proceeds from the potential divestiture of T&W would enable Comtech to substantially simplify its capital structure and strengthen its balance sheet. The company has undertaken a detailed evaluation of its S&S portfolio to identify opportunities to divest, separate and/or rationalize businesses or facilities that are not core to Comtech’s go-forward focus. In its Q4, Comtech made the decision to exit its subsidiary operations in Basingstoke, U.K. Comtech expects to realize approximately $10M of annual cash savings. Comtech has conducted a review of its product portfolio to focus future investment on the company’s most strategic, high-margin revenue opportunities within its S&S portfolio. The company anticipates reporting significantly lower-than-expected performance, primarily in its S&S segment, in Q4.