Ladies and gentlemen, thank you for standing by. Welcome to the Comtech Telecommunications Corp. Fourth Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded, Tuesday, September 24, 2019.I would now like to turn the conference over to Mr. Jason DiLorenzo of Comtech Telecommunications. Please go ahead, sir.

Thank you and afternoon. Welcome to the Comtech Telecommunications Corp. conference call for the fourth quarter of fiscal year 2019. With us on the call this afternoon are Fred Kornberg, Chief Executive Officer and President of Comtech; Michael D. Porcelain, Senior Vice President and Chief Operating Officer; and Michael Bondi, Chief Financial Officer.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 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 Chief Executive Officer and President of Comtech, Fred Kornberg. Fred?

Thank you, Jason. Good afternoon, everyone, and thank you for joining us on this call. This afternoon, we will be discussing the results for our fourth quarter of fiscal 2019.As you can see from our announcement today, our fourth quarter performance was an outstanding finish to a very successful year for Comtech. We generated robust financial results across the board and finished the year with a healthy backlog. We exceeded the guidance that we provided at the beginning of the year by far, completed two small complementary acquisitions and positioned Comtech for an even better fiscal 2020. As such, we’re setting our initial fiscal 2020 revenue goal to be in the range of approximately $710 million to $730 million. Our initial GAAP diluted EPS goal to a range of $1.30 to $1.45, and our initial adjusted EBITDA goal to be in the range of $98 million to $102 million.At this time, I will turn the call over to Mike Bondi, our CFO, who will provide a discussion of our financial results, both from the quarter and the full year in more detail. After that, Mike Porcelain, our COO, will provide a discussion of our business segments, as well as some thoughts about fiscal 2020. And then, I’ll come back before opening up to questions and answers. Mike?

Thank you, Fred, and good afternoon, everyone.Our net sales for the fourth quarter of fiscal 2019 were $176.4 million and given our strong Q4 performance, we finished the year with sales of $671.8 million, which represents an annual growth rate of 17.7%.From a geographic perspective, net sales in fiscal 2019 to U.S. based customers were 74.6% of total net sales with 25.4% to international customers.Bookings for the fourth quarter were solid at $112.2 million. For the full year, we achieved bookings of approximately $724.1 million and ended fiscal 2019 with a strong book-to-bill ratio of 1.08. We finished the year with healthy backlog of $683 million, which is near our record high. When you add our backlog, plus the total unfunded value of multiyear contracts awarded to us but not in backlog and for which we expect orders against, we have clear visibility to about $1 billion in total future revenue.Our gross profit percentage in Q4 2019 was 36.3% and for the year was 36.8%. As discussed before, our gross profit in 2019 reflects a significant year-over-year increase in sales in our Government Solutions segment, which historically achieves lower gross margins than our Commercial Solutions segment. Looking forward, at this point, we expect our gross profit percentage in fiscal 2020 to be about the same or perhaps slightly lower. The ultimate level of gross margin percentage will be driven based on final fiscal 2020 product mix.GAAP SG&A expenses were $31.4 million for the three months ended July 31, 2019, or 17.8% of consolidated net sales. For the year, GAAP SG&A expenses were $128.6 million or 19.1% of consolidated net sales and include $6.4 million of estimated contract settlement costs related to our repositioning in our Commercial Solutions segment, a certain of our location technology solutions and $1.4 million of facility…

Thanks, Mike.Based on demonstratively strong operating results, I do believe it is clear that our long-term business strategies are paying off. Let me give you some recent developments and additional color for each of our two business segments, both for 2019 and 2020.As we head into fiscal 2020, we have started to rebrand some of our product lines and further integrate them to make them more reflective of our strategies, leverage sales efforts and to highlight the growth opportunities that we see. I’ll mention the rebranding efforts as I go along.In our Commercial Solutions segment, it was a great year. Net sales were $103 million this quarter, and $357.3 million for fiscal 2019. Total sales in this segment were up 3.5% versus last year. Bookings in this segment were $65.7 million for the quarter and $448.1 million for the year, resulting in an outstanding 1.25 book-to-bill ratio. Our satellite ground station technologies solution line, which consists primarily of our modems and amplifiers, both solid state and TWTA that are used in satellite communications, and which we previously referred to as our communications technology product line, had a terrific year.Although our satellite ground station technology solutions line did experience order delays and lower sales for in-flight communication amplifiers, it experienced significant growth in sales in fiscal 2019 to international customers as well as incremental demand from U.S. government customers. We believe this product line is poised for growth, not only in fiscal 2020, but for the next several years.Our Heights products are clearly hitting their mark, and it was a very successful fiscal 2019. Heights sales were significantly higher than the levels achieved in fiscal 2018, and the pipeline continues to grow.Based on the anticipated increase in the number of satellites, both high-throughput or HTS and LEO satellites expected to be…

That’s a hard act to follow, but as I previously mentioned, I’m very pleased with how our business is performing in fiscal 2019. And fiscal 2019 was a terrific year for Comtech. It illustrates the earning power of our business and our product leadership positions.Looking out to fiscal 2020, I can say at this point, we have a clear visibility, lots of optimism, and a strong business momentum.We believe that in an environment of increasing market demand for global voice, video and data usage, customers will increasingly turn to Comtech to fulfill their needs for secure wireless communications. With that wind at our backs, I’m confident that we’re looking at sustained growth for years to come.Given our strong business outlook, our Board of Directors today declared a dividend for the fourth quarter of fiscal 2019 of $0.10 per common share, payable on November 15, 2019 to shareholders of record at the close of business on October 16, 2019. We continue to believe our dividend program is a great way to return capital to our shareholders as we grow our business into the future.Now, I’d like to proceed to the question-and-answer period of our conference call. Operator?

[Operator instructions] We will take our first question from Joe Gomes with Noble Financial. Please go ahead. Your line is open.

Good afternoon and great quarter and nice finish to the year.

Thank you, Joe.

Just wondering if you might provide a little bit more talk on the BFT and the troposcatter programs, where you guys are on those, where you think you might see happening in 2020 on those two programs?

First, Joe, I guess, I’d like to mention that none of those two areas are in our guidance and what we foresee in 2020. Having said that, let me take on and give you some information that we can put forward.The troposcatter requirement by the U.S. Marines is in process, obviously. And as we understand, the technical evaluation has been finalized and the award is projected to be in the next government fiscal year, which starts in October 1st. That said, whether it’s in October or in January of next year, we really can’t tell. That’s really a situation that the army -- I am sorry, the Marines will determine as their funding becomes real. So, we’re anxiously waiting, we are very positive on it, but we can’t tell you more than that.The second part on the BFT area. As you know, we did receive a while back, 5,000 of our transceivers for the use with the BFT-2 program. We anticipated at that point with the Army’s statements that there would be follow-ons to those 5,000 transceivers periodically to accrue to almost better than 20,000 transceivers. That has not happened, and that is probably something that has been kind of diverted for the moment.I think, what we see now, and as you have seen, we received two development programs from the program office of the Army to develop some new requirements that will fit into what was now called the BFT-3 program and that the BFT-2 program will really not get any further -- let’s say further development or further usage from the Army. So, I think as a total program to us at least, it appears that the Army has decided to kind of push it to the right and going to BFT-3 rather than fixed BFT-2.

Okay. Thank you for that update. I appreciate it. And on the enterprise tech repositioning, I know this is somewhat difficult to get a clear answer. But, how much long do you think that that takes, what else do you guys need to do there to have that repositioning all finished?

Yes. It’s sort of a two-pronged answer. The first is really continued evaluation of our current set of contracts. And if you remember, during 2019, we took some charges associated with that. And I would say to you that that piece is largely done. We’ve kind of been through the portfolio of customers and contracts that we have. We’re still trying to work through one or two of them. But that part of the process is done.So, then, we’re -- I think, I mentioned on the call, we had lost and decided not to bid on a few different contracts with companies that have been in the news lately and some that have been restricted, because of the location of the business that they actually operate into. And so that piece and that analysis is sort of done. So, now, we’re into the second phase, which is really shifting our focus on new opportunities where we have the best strength. We have key capabilities and market [ph] leadership positions in location with, let’s say, telephone companies, or mobile carriers. And just to give you a sense, a lot of people think, we’re just providing location data to U.S. companies, but we actually do 100% of all the companies up in Canada, for instance. So, we’re working to expand our ability to provide Location Technologies, not only amongst U.S. carriers, but elsewhere in the world. And so that process is an ongoing effort. And that’s really a sales effort.The second piece, again, is also a sales effort that we’re going to be trying to take some of our key mapping products. And, again, working with partners, I’m not saying too much about our plans, we’re going to be focusing on the public safety market to really going to our customers and bring them new ways of helping first responders when it comes to dealing with 911 type situation.So that piece is going to take some time, and I would say to you, our 2020 revenue guidance that Fred and Mike had talked about earlier that sort of reflects our efforts in there. But, sales efforts is going to take some time before that to launch off. But from a charge and a cost perspective, I would say we’re largely done with that. We’re more into the -- we’re now into grow in that business and going after our new business phase.

Great. And one final one for me, I mean, obviously, you guys knocked the ball out of the park ‘19, ‘20; ‘20 is looking even better. What is out there that gives you concern going into 2020 that might be an obstacle to making your numbers that -- guidance numbers?

I think, mainly, it would be probably government funding, recession, things like that. I think, percentage wise, we probably have 2020 revenue to the tune of 60% of the backlog right now. So, we don’t have that much to -- I guess, to book and ship. So, we’re pretty confident that 2020, we’ll get there.

[Operator Instructions] We’ll take our next question from Chris Quilty with Quilty Analytics. Please go ahead. Your line is open.

Hi, guys. I wanted to follow-up on the Heights product line. Last quarter, you had mentioned, through Q3, you had already exceeded the FY18 effort. I was wondering where you finished at? And second part to the question is, where -- what markets or applications are you specifically seeing strength?

Well, it’s fair to say that Q4, we had more sales, and so we added to our accomplishments I guess, in 2019. We’re -- as this business is growing, we’re probably going to give less information in terms of where we are in terms of the actual number, except just to either confirm that we’re continuing to grow, and it is picking up sales. So, yes, it definitely was a good quarter in Q4.The applications are really all over the place. Some of it’s in the cellular backhaul side with some opportunities. We’ve sold some stuff to Japanese transportation companies. We’ve sold, as we previously announced, to Claro, one of the Latin American cellphone companies. And really, -- and stuff all over the place, in the cruise line as well. So, this is a product that has wide range of applications, and we’re focusing on those areas.

Got you. And a follow-up, I think, last quarter, you had mentioned a low cost version of platform was at the Pico something.

Yes.

But, I don’t remember when had that product been released or when was the release date for it? And sort of expectations for what market it’s going to be attractive and possible contribution in ‘20?

Yes. There’s a couple of different variations of the Pico. But, I’m going to jump the gun here a little bit and say, I think we’ve announced them. If not, they’re going to be announced very shortly, but we have talked about them publicly with our customers. And yes, they’re really for what you think about it, when you when you have a network, and you have many, many different terminals that are out there, remote terminals, you want to provide the more accessibility to that network. So, Pico type of a product is really able to allow customers to develop very large networks at lower cost, because they don’t need all that power, let’s say in all of the different areas.So, it’s really allowing our expanded -- that’s what’s really driving the expansion of the total addressable market for that product, because it will allow Heights to be deployed within much larger networks that need a low-cost terminal.

Understand. Shifting gears, the Marine Corps tropo program, do you know is that expected to be a funded line item or is that an unfunded requirement?

No. It’s a funded line item for the Marine Corp. They did have the funding earlier when they were in combination with the Army program. But, having parted ways, they shifted their funding into the next fiscal -- government fiscal year, which starts in October. So, their funding will be available as from what I understand as of October 1st.

Understand. And less important, but some of the international tropo programs, anything that might land in ‘20 that would be meaningful?

Yes. We have a number of opportunities internationally, but obviously at a much smaller booking rate than the Marine Corps. The Marine Corps is the large program that we’re chasing at the moment. We do have some in the single-digit millions or some even in the double-digit millions. But, as you know, these things take inordinate amount of time to book. So, it’s a long booking cycle. So, we’ve got the opportunities, but it’s really difficult to tell exactly when some of the biggies will come in.

And there are no further questions on the line at this time. I will turn the program to our presenters.

Okay. Well, thanks again for joining us today. And we look forward to speaking with you again in December. Thank you very much.

This does conclude today’s program. Thank you for your participation and you may now disconnect.