•	Net sales for the first quarter of fiscal 2020 were $170.3 million as compared to the $160.8 million achieved during the first quarter of fiscal 2019, representing an increase of $9.5 million, or 5.9%.

•	Bookings during the first quarter of fiscal 2020 were $135.6 million, with a company-wide book-to-bill ratio of 0.80. Backlog as of October 31, 2019 was $648.3 million. When adding Comtech's backlog and the total unfunded value of certain multi-year contracts that Comtech has received and for which it expects future orders, its revenue visibility approximates $1.0 billion.

•

In October 2019, Comtech announced that the U.S. Army awarded it a contract with a $98.6 million ceiling to provide global field support services for military satellite communication (“SATCOM”) terminals around the world. The field support contract covers diverse engineering and technical skills to support these SATCOM terminals, including logistics, help desk, network engineering, security engineering, RF and satellite system engineering and support. As of the end of Comtech’s first quarter of fiscal 2020, the contract has been funded at $24.4 million with additional funding expected to occur across the twelve-month performance period plus a possible six-month extension period.

•

In November 2019, the U.S. government announced that Comtech's teaming partner on a U.S. Marine Corps troposcatter opportunity was awarded a 10-year $325.0 million “IDIQ” contract to provide 172 next-generation troposcatter systems and related services. The teaming partner announced that it intends to subcontract the manufacture and delivery of these troposcatter systems to Comtech and the Company is currently negotiating contract terms and expects its initial order soon.

•

In November 2019, Comtech announced that it entered into an agreement to acquire UHP Networks Inc. and its sister company (together, "UHP"), a leading provider of innovative and disruptive satellite ground station solutions, for a purchase price of approximately $40.0 million. The transaction is subject to customary closing conditions and is expected to occur late in the second half of Comtech's fiscal 2020.

•	During the first quarter of fiscal 2020, Comtech's operating income was impacted by $2.4 million of acquisition plan expenses and $0.2 million of estimated contract settlement costs.

•	Excluding a $0.6 million net discrete tax benefit primarily related to stock based awards settled during the quarter, Comtech’s effective tax rate for the first quarter of fiscal 2020 was 23.0%.

•	On a GAAP basis, first quarter fiscal 2020 operating income was $9.3 million, net income was $6.4 million and net income per diluted share ("EPS") was $0.26. As shown in the table below, excluding acquisition plan expenses, estimated contract settlement costs and a net discrete tax benefit during the quarter, Non-GAAP EPS was $0.32.

•

Adjusted EBITDA for the first quarter of fiscal 2020 was $20.6 million, or 12.1% of consolidated net sales as compared to the $18.0 million, or 11.2% of consolidated net sales achieved in the first quarter of fiscal 2019, representing an increase of $2.6 million, or 14.4%. Adjusted EBITDA is a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure and is more fully defined below.

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•	Comtech is increasing its consolidated net sales target to a new range of approximately $712.0 million to $732.0 million as compared to the prior range of $710.0 million to $730.0 million.

•	Comtech is increasing its Adjusted EBITDA goal to a new range of $99.0 million to $103.0 million as compared to the prior range of $98.0 million to $102.0 million. Comtech's Adjusted EBITDA goal reflects a target of approximately 14.0% of its expected fiscal 2020 consolidated net sales.

•

Despite incurring $2.4 million of acquisition plan expenses and $0.2 million of estimated contract settlement costs in the first quarter of fiscal 2020, as well as an additional $2.4 million of such costs expected during the second quarter of fiscal 2020, GAAP operating income, as a percentage of the consolidated net sales, is still expected to approximate 7.0%. Excluding such expenses, operating income, as a percentage of fiscal 2020 consolidated net sales, is expected to approximate 7.7%.

•	There is no change to Comtech's expected interest expense rate (including amortization of deferred financing costs) of approximately 4.6% or total interest expense of approximately $7.5 million. Comtech's current and fiscal 2020 expected cash borrowing rate is approximately 4.0%.

•	Comtech’s effective income tax rate (excluding discrete tax items) for each of the remaining quarters of fiscal 2020 is expected to approximate 23.0%.

•

Comtech’s updated GAAP EPS target range for fiscal 2020 is $1.28 to $1.42. This GAAP EPS metric reflects all actual and expected second quarter fiscal 2020 acquisition plan expenses, estimated contract settlement costs and discrete tax items. Excluding actual and expected second quarter fiscal 2020 acquisition plan expenses, estimated contract settlement costs and discrete tax items, Non-GAAP EPS is now expected to approximate $1.42 to $1.56, which is an increase from Comtech's previous targeted range of $1.35 to $1.50.

•

Consistent with Comtech's business cycle for the past several years, Comtech's financial performance in the second half of fiscal 2020 is anticipated to be higher than the first half. Based on anticipated product mix and timing assumptions, Comtech expects its second quarter consolidated net sales to range from $168.0 million to $170.0 million, with Adjusted EBITDA ranging from $19.0 million to approximately $21.0 million. Comtech’s fourth quarter of fiscal 2020 is still expected to be the peak quarter - by far - for its consolidated net sales, GAAP operating income, GAAP net income and Adjusted EBITDA.

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COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

		Three months ended October 31,
		2019				2018
Net sales		$	170,267,000			$	160,844,000
Cost of sales		106,700,000				103,075,000
Gross profit		63,567,000				57,769,000
Expenses:
Selling, general and administrative		31,851,000				31,847,000
Research and development		14,861,000				13,210,000
Amortization of intangibles		5,206,000				4,289,000
Acquisition plan expenses		2,389,000				1,130,000
		54,307,000				50,476,000
Operating income		9,260,000				7,293,000
Other expenses:
Interest expense		1,804,000				2,669,000
Write-off of deferred financing costs		—				3,217,000
Interest (income) and other		(77,000		)		66,000
Income before provision for (benefit from) income taxes		7,533,000				1,341,000
Provision for (benefit from) income taxes		1,145,000				(2,127,000		)
Net income		$	6,388,000			$	3,468,000
Net income per share:
Basic		$	0.26			$	0.14
Diluted		$	0.26			$	0.14
Weighted average number of common shares outstanding – basic		24,555,000				23,999,000
Weighted average number of common and common equivalent shares outstanding – diluted		24,737,000				24,375,000

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COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	October 31, 2019				July 31, 2019
	(Unaudited)				(Audited)
Assets
Current assets:
Cash and cash equivalents	$	46,873,000			45,576,000
Accounts receivable, net	161,044,000				145,032,000
Inventories, net	71,810,000				74,839,000
Prepaid expenses and other current assets	15,995,000				14,867,000
Total current assets	295,722,000				280,314,000
Property, plant and equipment, net	26,873,000				28,026,000
Operating lease right-of-use assets, net	34,148,000				—
Finance lease right-of-use assets, net	447,000				—
Goodwill	309,871,000				310,489,000
Intangibles with finite lives, net	256,684,000				261,890,000
Deferred financing costs, net	2,943,000				3,128,000
Other assets, net	4,334,000				3,864,000
Total assets	$	931,022,000			887,711,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	29,380,000			24,330,000
Accrued expenses and other current liabilities	72,807,000				78,584,000
Operating lease liabilities, current	9,248,000				—
Finance lease and other obligations, current	567,000				757,000
Dividends payable	2,428,000				2,406,000
Contract liabilities	36,989,000				38,682,000
Interest payable	447,000				588,000
Total current liabilities	151,866,000				145,347,000
Non-current portion of long-term debt	169,000,000				165,000,000
Operating lease liabilities, non-current	27,725,000				—
Income taxes payable	2,298,000				325,000
Deferred tax liability, net	13,768,000				12,481,000
Long-term contract liabilities	11,457,000				10,654,000
Other liabilities	17,264,000				18,822,000
Total liabilities	393,378,000				352,629,000
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000	—				—
Common stock, par value $0.10 per share; authorized 100,000,000 shares; issued 39,402,226 shares and 39,276,161 shares at October 31, 2019 and July 31, 2019, respectively	3,940,000				3,928,000
Additional paid-in capital	551,316,000				552,670,000
Retained earnings	424,237,000				420,333,000
	979,493,000				976,931,000
Less:
Treasury stock, at cost (15,033,317 shares at October 31, 2019           and July 31, 2019)	(441,849,000		)		(441,849,000	)
Total stockholders’ equity	537,644,000				535,082,000
Total liabilities and stockholders’ equity	$	931,022,000			887,711,000

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		Three months ended October 31, 2019												Three months ended October 31, 2018
		Operating Income				Net Income				Net Income per Diluted Share				Operating Income				Net Income				Net Income per Diluted Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported		$	9,260,000			$	6,388,000			$	0.26			$	7,293,000			$	3,468,000			$	0.14
Facility exit costs		—				—				—				1,373,000				1,061,000				0.04
Acquisition plan expenses		2,389,000				1,840,000				0.07				1,130,000				873,000				0.04
Estimated contract settlement costs		230,000				177,000				0.01				—				—				—
Write-off of deferred financing costs		—				—				—				—				2,485,000				0.10
Net discrete tax benefit		—				(588,000		)		(0.02		)		—				(2,432,000		)		(0.10		)
Non-GAAP measures		$	11,879,000			$	7,817,000			$	0.32			$	9,796,000			$	5,455,000			$	0.22

		Fiscal Year 2019
		Operating Income				Net Income				Net Income per Diluted Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported		$	41,407,000			$	25,041,000			$	1.03
Estimated contract settlement costs		6,351,000				4,874,000				0.20
Settlement of intellectual property litigation		(3,204,000		)		(2,459,000		)		(0.10		)
Facility exit costs		1,373,000				1,054,000				0.04
Acquisition plan expenses		5,871,000				4,506,000				0.19
Write-off of deferred financing costs		—				2,469,000				0.10
Net discrete tax benefit		—				(2,875,000		)		(0.12		)
Non-GAAP measures		$	51,798,000			$	32,610,000			$	1.34