Comtech means contact. Through its subsidiaries, Comtech Telecommunications operates in three divisions: mobile data communications, telecommunications transmission, and radio-frequency (RF) microwave amplifiers. Comtech makes equipment used largely by the US government and related defense contractors. Other customers include satellite systems integrators, communications service providers, and oil companies. Its transmission equipment includes modems, frequency converters, very-small-aperture terminal (VSAT) satellite transceivers and antennas, and microwave radios. Comtech's RF amplifiers enable wireless instrumentation and medical systems and provide satellite-based messaging services and location tracking.
Comtech's biggest segment with 67% of revenue is Telecommunications Transmission, which provides equipment and systems that enhance satellite transmission efficiency and that enable wireless communications in environments where terrestrial communications are unavailable or impractical. The RF Microwave Amplifiers segment contributes 25% of sales from satellite earth station traveling wave tube amplifiers and solid-state, high-power, narrow and broadband amplifiers. About 8% of revenue is from Mobile Data Communications, which provides customers with integrated systems for global, satellite-based communications when mobile, real-time, secure transmission is required.
Headquartered in Melville, New York, Comtech makes its products in Santa Clara, California, and Germantown, Maryland. Its telecommunications transmission segment also has offices in Brazil, Canada, China, India, North Africa, Singapore, and the UK. Its sales to international customers jumped to 59% of revenue in 2014 (ended July) from 50% in 2013.
Sales and Marketing
Comtech sells through its sales staff and through independent sales companies and value-added resellers. Customers include AT&T Inc., China Mobile Limited, Raytheon Company, and Varian Medical Systems. The company sales to US government entities were 28% of total revenue in 2014, off from about 35% in 2013.
While revenue in 2014 (ended July) rose 8% from 2013, it was still less than the $747 million in revenue its posted in 2010. Sales declined in the following years with fewer orders from the US Army, which has been Comtech's biggest customer. In 2014, revenue was $347 million compared to about $320 million the year before. Sales were boosted from a contract with a North African government to design and supply in a communication network. A decrease in mobile data communications revenue was attributed to lower funding and the timing of work performed related to BFT-1 sustainment services for the US Army.
Comtech's net income jumped 41% to $25 million in 2014 from 2013's $17.8 million with the higher revenue and a drop in interest expense as the result of the settlement of $200 million principal of 3% convertible senior notes.
The company's cash flow from operations dropped by about $3 million in 2014 to $34.6 million because of high capital requirements and the timing of billings and commission payments on contracts for over-the-horizon microwave system contracts.
Comtech plans to stretch its international sales beyond the 59% it now has by expanding international marketing efforts with more independent sales reps, distributors, and value-added resellers. It also intends to set up more foreign sales offices.
For it RF Microwave Amplifiers segment, Comtech plans to set itself up as one-stop shop approach for RF microwave amplifiers; to =handle more amplifier production outsourced by other companies; and exploit its traveling wave tube amplifier in the direct-to-home market. The company's mobile data communications unit seeks opportunities with the US Army, including blue force tracking (BFT) 2.5 and seek expansion into foreign military markets.
The BFT efforts paid off in 2014, when Comtech won two new contracts for BFT-1 sustainment totaling more than $68 million.