Ladies and gentlemen, thank you for standing by. Welcome to Comtech Telecommunications Corp.'s Fourth Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Friday, October 4, 2013. I would now like to turn the conference over to Ms. Maria Salerno of Comtech Telecommunications. Please go ahead ma'am.

Thank you, and good morning. Welcome to the Comtech Telecommunications Corp. conference call for the fourth quarter and fiscal year ended July 31, 2013. With us on the call this morning are Fred Kornberg, President and Chief Executive Officer of Comtech; Michael Porcelain, Senior Vice President and Chief Financial Officer; and Rob Rouse, Senior Vice President, Strategy and M&A. Mike and Rob are at our corporate offices, and Fred is dialing in from another location. Before we proceed, I need to remind you of the company's Safe Harbor language. 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 involve certain 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 Securities and Exchange Commission filings. I am pleased now to introduce the President and Chief Executive Officer of Comtech, Fred Kornberg. Fred?

Thanks, Maria. And good morning, everyone, and thank you for joining us on this call. As announced yesterday afternoon, we reported fourth quarter results of $84.4 million in revenues and a GAAP diluted EPS of $0.28. For the year, our revenue totaled $319.8 million and a GAAP diluted EPS of $0.97. Our adjusted EBITDA was $14 million for the fourth quarter and $52.2 million for the full fiscal year. We believe we ended fiscal 2013 on a positive note. During the fourth quarter, we achieved the highest level of quarterly bookings for the year and ended fiscal 2013 with consolidated backlog of almost $190 million. At this point, we are still navigating through a very difficult global economy and with strong headwinds from U.S. government funding pressures. However, with this in mind, we believe that revenues in fiscal 2014 will be in the range of $320 million to $340 million and GAAP diluted EPS will be in the range of $1.07 to $1.19. Our adjusted EBITDA is expected to be in the range of $53 million to $57 million. During fiscal 2013, we generated $37.7 million of operating cash flow. In light of both of our short- and long-term growth expectations, yesterday, our Board of Directors approved the dividend for the first quarter of fiscal 2014 of $0.275 per common share. This dividend is expected to be paid on November 19 to stockholders of record on October 18, 2013. To date and over the past 12 consecutive quarters, we have paid out approximately $66.2 million of dividends and continue to believe our dividend program is an excellent way to return capital to our stockholders. In addition, during the fourth quarter of fiscal 2013, we also repurchased approximately 104,000 shares of our common stock at an aggregate cost of $2.7 million. To date, we have repurchased approximately $15.7 million pursuant to our board-authorized $50 million stock repurchase program. Now let me turn it over to Mike Porcelain to provide an overview of our financial results, and then I will return and talk more specifically about each of our business segments. Mike?

Thanks, Fred, and good morning, everyone. I'll walk you through the Q4 results, make a few comments about the full year and provide some commentary on our expected 2014 financial results and business outlook. During Q4, we generated revenues of $84.4 million, of which 25.1% were for U.S. government end users, 56.4% were for international end users, with the remainder being for domestic commercial customers. For the full year fiscal 2013, we finished at $319.8 million of revenue, with nearly 35% being generated from the U.S. government and approximately 50% being generated from international end users. Net sales on our Telecom Transmission segment were $50.1 million in Q4 of fiscal 2013 as compared to the $53.8 million we achieved in Q4 of last year, representing a decrease of 6.9%. This decrease is attributable to lower sales of our Satellite Earth Station products, primarily lower sales to U.S. government customers, which were partially offset by higher sales on our over-the-horizon microwave systems product line. Sales of our over-the-horizon microwave systems in Q4 include sales related to our performance on an ongoing 3-year $58.6 million contract to design and furnish a telecommunications system for use in a North African government's communications network. During Q4 of fiscal 2013, we received an additional $51.1 million contract to design and furnish the next phase of this same end customer's communication network. For the full year fiscal 2013, net sales in our Telecom Transmission segment were $194.6 million, down 7%. Looking to fiscal 2014, we expect that sales on the Satellite Earth Station product line will be slightly higher than the level we achieved in 2013, with a weighting towards the latter part of fiscal 2014. For our over-the-horizon microwave system product line, based on our expected performance on both North African and other contracts currently…

Thanks, Mike. I will now -- I'd like to now discuss some of the new developments in each of our 3 business segments, which should also some -- add some color as to why we are very excited about fiscal 2014. The largest segment is the Telecommunications Transmission segment. Within this segment, the majority of our revenues have been and are expected to be from our Satellite Earth Station product line. Our strong leadership position and market share in the Satellite Earth Station is driven by our proven ability to deliver the most bandwidth-efficient modems to our end customers. These customers want their networks to be as efficient as possible in order to save on operating costs, both on the ground and in the space segment, by allowing them to send more voice, more video and more data through the same satellite channel. As you know, we have a long track record of being the innovation leader in this space. For example, more than 10 years ago, we introduced the first satellite modem using our patented TPC Forward Error Correction. Approximately, 3 years ago, we introduced our patented Carrier-in-Carrier technology, which allows our modems to use the same bandwidth over both the transmit and receive satellite channels simultaneously, thereby essentially doubling bandwidth efficiency. Unfortunately, the introduction of this groundbreaking technology coincided with the onset of the economic downturn and therefore, muted the potential sales that we believe could have been realized in a more favorable economic environment. Accordingly, we believe this technology has a long way to go. And although this technology has been in the marketplace for a few years, we believe there may be a pent-up demand, which will benefit us as the economy rebounds and government spending goes back to normal. Just last year, we also introduced…

[Operator Instructions] And we'll go first to Joe Nadol with JP Morgan. Christopher Sands - JP Morgan Chase & Co, Research Division: It's actually Chris on for Joe. Couple of questions on capital deployment. First, I just want to confirm, it sounds like you started saying the convert will go away in the third quarter.

Well, the convert has a put of call date in the month of May of '14, so we would expect -- for our business outlook purposes, we're not expecting a conversion into stock, that it will either be matured or converted. So at the end of the day, it won't be around in our Q4. Christopher Sands - JP Morgan Chase & Co, Research Division: Okay. And then you made a comment in the 10-K that you would pursue one or more acquisitions, if the opportunities arise. Can you just talk about the environment and if you're looking at anything currently?

Sure, this is Rob Rouse. So the environment right now, certainly on the U.S. government side, is very soft. There's not a lot of properties out there for sale. We continue to look, we've looked at a bunch of things during the past year, and we're trying to obviously, look at as many commercial companies as possible. But I would generally describe it as relatively soft. Christopher Sands - JP Morgan Chase & Co, Research Division: Okay. And then last one on capital deployment. Mike, you bought back less shares that you have in recent periods, yet the stock is at a lower level, so just curious how you're thinking about that.

Well. I think that we're going to move forward with the dividend program as we talked about. We think the dividend program is a nice way to do that. And we do intend to continue to repurchase to the existing program that has about $34 million, $35 million left to go. And once we do that, then we'll revisit it and see what the right thing to do is. Christopher Sands - JP Morgan Chase & Co, Research Division: Okay. But no particular reason for the lower amount of repurchase this quarter?

Well, I think, at the last time -- maybe 2 conference calls ago, we kind of said that we thought we had bought a good amount back. But obviously, we continue to look at it. We have the program in place, and we do expect to use that repurchase program up and eventually, revisit it. Christopher Sands - JP Morgan Chase & Co, Research Division: Okay. And then last one. I think Fred alluded to this, but are you assuming nothing from JCREW 3.3 in fiscal '14?

Yes. I think as I mentioned, we see that kind of [indiscernible] up mode. The program is not dead, but it certainly is on hold.

And we'll go next to Tyler Hojo with Sidoti & Company. Tyler Hojo - Sidoti & Company, LLC: I was, first, just wondering if you could talk a little bit about portfolio-shaping initiatives, just really in context with the, I guess, recently announced sale of the SENS product line. Is there anything else that you don't think necessarily fits with kind of the portfolio today or is just kind of going in the wrong direction.

Tyler, this is Rob again. In terms of the SENS product line, it was a small product line for us. Just to be clear, it was a simplex or 1-directional device. All of our other product offerings are duplex. So for us, it just didn't have the scale to make a lot of sense. It's very much price-sensitive in terms of the hardware. I think for ORBCOMM, they have more scale in that area, and it made sense for them but wasn't strategically a good fit for us at this time. Currently, I don't really see any other anywhere near significant product lines that fall into that category, but we're always looking at our portfolio. Tyler Hojo - Sidoti & Company, LLC: Okay, great, Rob. And just on another topic, just in context with, I guess, Fred's discussion on the over-the-horizon product line. First, I'm just curious, just in regards to the $50-some-odd-million follow-on you got, what time period is that expected to be executed upon? And then kind of my follow-up is you mentioned a number of different bids out there in countries that you're kind of preliminarily working with, just curious if you would expect another large over-the-horizon booking in FY '14.

Generally, to answer the first part of the question, generally these 50 -- or let's say, they're -- rounding it just to $50 million. Generally, the $50 million programs for the North African customer go over a 3-year period, and that's -- it's been that way for the last 10 years. As far as new countries are concerned, I think in our tropo business, as we have become more recognized as the supplier of tropo and tropo has been recognized as a technique of communications that is very efficient as compared to satellite communications, we see more and more countries being interested in implementing this. Having said that, it is a long marketing sell, and we've been pursuing a number of opportunities, as I mentioned. And it may take 6 months, it may take 3 years, as you've seen in some of our programs, so it's very difficult to actually determine when those programs will fall into our lap. But we certainly have a lot of them in the pipeline, and we -- as I mentioned, we hope to kind of duplicate, hopefully, 1 or 2 countries in a similar fashion that we have with this North African customer. Tyler Hojo - Sidoti & Company, LLC: Okay. I guess I'll leave it there. And just lastly, I was hoping that you could perhaps discuss what your free cash flow expectations are for fiscal '14.

We're not going to put a specific number out there, but obviously, EBITDA is a good sense for kind of calculating that. And I think -- we generated $37.7 million worth of cash flow this year in '13, and we do expect to generate a significant amount. And given that everything is directionally higher, we hope that number would be higher. But given the timing of cash flows on the large contracts and so forth, it's very difficult to put a number out there.

And we'll go next to Rich Valera with Needham & Company. Richard Valera - Needham & Company, LLC, Research Division: First, for Rob, with respect to the M&A environment, can you just give us a sense of how you view seller expectations in terms of prices? Do you -- there was a period, I think, when things got pretty overheated. Have expectations come down as there has been -- some of these DOD headwinds? Just if you could give any sense of how you view the overall sort of M&A landscape at this point.

I would say, Rich, that anybody that has any defense portion of their business, looking at -- valuation is a function of 2 things, right, the base EBITDA and the multiple. I think, generally speaking, there's probably a pretty narrow range of expectations of what multiples are. The challenge is differences of opinion in terms of what a company's forward-looking EBITDA is going to be. So I think that's why you're probably not seeing a lot of deals getting done because there's just a difference between buyers and sellers as to what the outlook looks like. On the commercial side, I think that's kind of less of an issue, but we still have a weak economic environment, some of that is at play. But certainly on anything with government exposure, I think there's that same uncertainty that all public companies that you cover have. Uncertainty in the outlook drives uncertainty in terms of valuation. Richard Valera - Needham & Company, LLC, Research Division: Sure. That's helpful. Appreciate that. And then, Fred, with the North African contracts, are they strictly executed kind of in serial fashion? Or is there a chance of them overlapping at any point, where you would have kind of a bump in revenue?

Yes. I think, if you look at our last 2, the first one took forever for us to land, which we finally landed. And then the next one came much quicker than we would normally expect. So I think there will be an overlap in revenue as a result of it. Richard Valera - Needham & Company, LLC, Research Division: So like within fiscal '14, you could have some quarters where effectively you're working on both of them and recognizing revenue from both of them?

Yes.

Rich, to put some additional color on that, we just started working on the second contract. As I mentioned in my portion earlier, we do expect, in the second half of the year, to have a big bump in that product line. And then so for the year, that product line, and just to clarify, is going to be significantly higher in '14 than '13, and that should -- that trend should hopefully continue. Richard Valera - Needham & Company, LLC, Research Division: So for modeling purposes, should we think about that bump as sustainable? Or is that the period when you're simultaneously executing on both at higher rates and that will eventually taper down when you just get to one?

Well, it started from the second half of the year. We do expect to be running on both contracts pretty good, and that should, hopefully, continue in '15. And we'll leave it at that. Richard Valera - Needham & Company, LLC, Research Division: I got it. So the first contract, you expect will extend into and through '15. Is that fair?

It will have some tail, yes. Richard Valera - Needham & Company, LLC, Research Division: Okay. That's helpful. And then I'm guessing this is kind of a perfunctory risk disclosure, but with respect to the BFT maintenance contract, in your K, you talk about the possibility of not getting that as a risk. But it sounds like, in your prepared remarks, you're pretty confident you will get a follow-on there. So just wanted to see if you can put any color around that.

Well, nothing is -- nothing, obviously, is guaranteed with the U.S. government. But I think, unofficially, we have been told that the sustainment contract is likely to go, at a minimum, to FY '18 for us and most likely to FY '22. Given that, we go by the contract we have, which is typically a 2-year contract.

And we'll go next to Chris Quilty with Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: I was hoping perhaps you could help us with the -- what your expectations or range of expectations might be for the margins by segment. And specifically the mobile data, I guess there's a lot of variability there based upon the contract.

Yes. I think, Chris, I'd point you to the Q4 margins we reported for the year. For the quarter, our telecom segment was 15.2% and telecom -- or RF was 7.4%, our mobile data comm was 37%. When you aggregate it all, we did 11.6%. It was a very good quarter in terms of mix and so forth, like that. As I mentioned earlier, we're targeting about 11% in total for 2014. The Mobile Data Comm mix is pretty much going to be there. We do have that Q1 sale to ORBCOMM that is going to be in our Q1 numbers. But I do think what we did in Q4 sort of a good sense plus or minus, and we're targeting 11% for the year. Chris Quilty - Raymond James & Associates, Inc., Research Division: Great. And on the mobile data business, with the sales of the SENS and the shutdown of the AeroAstro business, I mean, is there anything -- I'm just trying to -- I didn't see in the 10-K, but is there anything left in the business beyond the sustainment contract? And is there any intent to try to leverage that portfolio? I know, in the past, you had talked about looking at commercial tracking opportunities. Have you just laid that to rest?

I think that's pretty well true. As you know, the SENS business and the AeroAstro business were kind of pieces of business that we inherited with the Radyne acquisition a number of years back and really didn't quite fit into our product portfolio. So both of those product lines are now out of the picture. I think the remaining mobile data comm area, the technology is there, certainly can be used on a commercial basis, but I think we're still studying that area pretty hard and don't really believe that we will be entering that -- into that arena. More so, I think we are going to try to take that technology on the government side and extend it into international applications. Chris Quilty - Raymond James & Associates, Inc., Research Division: Got you. And you talked optimistically about the outlook for the Carrier-in-Carrier technology in the past, that was sort of an exclusive technology based upon your license, but there's been some ongoing litigation with ViaSat and others. Can you give us an update on where you feel you stand with that technology in your competitive position?

I think we are still pretty well ahead of the oncoming competition in that area. I think the litigation between Raytheon and ViaSat on the patent applications, I think, is over. And both of us are free to go forward with that technology. We feel that we have taken that technology and developed it into a Carrier-in-Carrier modem capability in our products. At the moment, there are a number of companies that are trying to do something similar and trying to skirt the patent part of the technology, but we just don't see any competition at this point just yet. Chris Quilty - Raymond James & Associates, Inc., Research Division: Got you. And with regard to the free cash flow question earlier, can you at least address the capital expenditure side of that in terms of your expected CapEx for this fiscal year?

Sure, Chris. There's an exact range in our 10-K. But you'll see, for the year, we did $5.3 million in 2013, and it's fair to say we'll probably spend a similar amount and if not, maybe a couple of million dollars more in '14 depending on the types of projects we pursue. Chris Quilty - Raymond James & Associates, Inc., Research Division: And what type of products would actually require capital investment?

Well, we're constantly upgrading our machine and our -- machines and our PP&E in our Arizona facility. So really, we -- that's where the primary capital dollars were spent at the company.

[Operator Instructions] We'll go next to Mark Jordan with Noble Financial.

Just to follow-up a little bit more on the cash flow questions. You mentioned that -- or the caveat that, in fact, the over-the-horizon contracts would have milestone payments and that you could see those build -- receivables build up until you'd hit a milestone. Do you have a sense of what that peak level could be relative to your over-the-horizon contracts before you would get -- hit a payment milestone, which would then convert to cash and knock down that receivable?

Well, one thing to say, we generally try to be cash positive on the contracts. So as you're thinking about your cash flow model, that's the way we think about it, but obviously, sometimes there's hiccups or delays and so forth like that with international payments and so forth like that. But I think '13 is a good way for you to think about the free cash flow plus the growth that we're thinking about in '14. But it's difficult to put a number on it for those reasons.

Okay. Second question -- another question relative to the over-the-horizon business and the pipeline you have there. Obviously, with the Algerian contracts that you've had, they've been pretty much all in the 4s -- $40 million to $50 million range. As we think looking forward and as you have been marketing, is this the type of scale that you would typically sell as you hopefully bring on new countries as customers? Or is that template just unique to Algeria?

I think you have to look at it mainly with new countries. It will usually start more likely with a $5 million to $10 million effort, and then being proven on site, would then turn into a $50 million, $60 million effort from then on. So the early contracts, I think, will be probably in the $5 million to $10 million order. Similar to what we got last year from Saudi Arabia, which was a $10 million contract.

And we have no more questions at this time. I would like to turn the conference back over to the company.

Thank you very much for joining us today, and we look forward to speaking with you again in December. Again, thanks very much. Bye.

This does conclude today's conference. You may now disconnect, and have a wonderful day.