CMTL

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.