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Comtech Idea Proposal (CMTL)

Comtech Idea Proposal (CMTL)
 

Will Comtech’s Next Gen 911 products continue to drive growth or is the momentum from the rollout fading?

Report Available: November 14, 2018

 

Blueshift’s initial research found CMTL posting its third consecutive year of growth and winning a string of business that has produced a record-high backlog as it enters fiscal year 2019. CMTL’s growth has been fueled in part by demand for Next Gen 911 systems. With the rollout of the CMTL’s 911 upgrades dating back to its acquisition of TeleCommunication Systems (TCS) in February 2016, there is a question of how much runway is left.

 

Observations

  1. CMTL posted a strong Q4 with an earnings surprise of 37.9% over consensus. Revenue missed Street estimates by 3%, but grew 13.3% compared to 2017. Full-year 2018 revenue was up 3.7% over 2017 and the backlog as of July 31, 2018 is a record-high $630.7 million. Guidance for 2019 calls for revenue of $600 million to $625 million, representing a 5% to 9.5% growth rate.
  2. CMTL has a presence in two robust and growing markets: Commercial and Government. Commercial contributed 60.5% of revenue in FY18, with Government bringing in the remaining 39.5%. CMTL boasts 50% market share of wireless 911 calls, which is part of the commercial segment. It also is the backbone of SMS text messaging, which includes the text-to-911 feature that is still rolling out in some areas.
  3. CMTL has recently scored an impressive string of contract renewals, awards, and new contract wins. However, only one is directly related to its 911 products.
  • October 10, 2018—CMTL announced that it received an order totaling approximately $1.1 million to provide troposcatter radio terminals to a prime U.S. contractor.
  • October 9, 2018—CMTL’s Safety & Security Technologies group was awarded a multi-year contract extension totaling $1.2 million to provide FCC mandated enhanced 911 services to Cellcom.
  • October 8, 2018—CMTL’s Enterprise Technologies group announced a multi-year $1.9 million order from a top U.S. telecom service provider for hosted data assistance services that will further enable the delivery of value-added location-based services.
  • October 8, 2018—CMTL’s Command and Control Technologies group has been awarded additional funding for Option Year One in the amount of $2.3 million on an existing contract to provide the State of Maryland Department of Human Services (DHS) with statewide Technical Operations Support Services (TOSS).
  1. CMTL faces significant challenges and headwinds as it pursues its fourth consecutive year of growth. CMTL operates in a highly competitive market that experiences rapid technological changes and breakthroughs. New companies and startups are common and a customer can sometimes become a competitor by adding new technology, products, or staff to replace CMTL. CMTL lists 42 companies as competitors including heavyweights like Google and Northrop Grumman with significantly greater financial, marketing, research and development, technological, and operating resources, as well as broader product lines. A new challenge to CMTL is the arrival of new tariffs. Some in the industry think these tariffs could help CMTL, while others think it will hurt the company.

 

Will CMTL continue to secure Next Gen 911 contracts or is growth and adoption of these products fading?  With 50% 911 market share, how much new business can CMTL obtain? How reliant is CMTL on renewals compared to new business? Where is CMTL in the rollout of its Next Gen 911 offering? How much runway remains? How will tariffs help or hinder CMTL? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: CMTL customers, CMTL sales channel, CMTL suppliers, CMTL competitors, and Industry specialists.

 

Companies: Comtech Telecommunications Corp. (CMTL), Maxar Technologies (MAXR), Loral Space & Communications Ltd. (LORL), Mitel Networks (MITL), Casa Systems (CASA), CalAmp (CAMP), Sierra Wireless (SWIR), Harmonic (HLIT), Gilat Satellite Networks (GILT), Ceragon Networks (CRNT), Energous (WATT), KVH Industries (KVHI), Vuzix (VUZI), Airgain (AIRG), Pointer Telocation (PNTR), and Aviat Networks (AVNW)

 

Research Begins: October 29, 2018

 

 

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