Comtech Telecommunications Corp.

Q3 2021 Earnings Conference Call


spk_0: the is and gentlemen thank you for standing by welcome to contact telecommunications corp third quarter of fiscal twenty twenty one earnings conference call at this time all participants are in listen only mode later we will conduct a question and answer session at that time if you have a question you will need to press the star and one on your push button phone as a reminder this conference is being recorded tuesday june eight twenty twenty one i would now like the turn the conflict over to mr jason dealer renzo of contact telecommunications please go ahead sir
spk_1: thank you that afternoon welcome to the conflict telecommunications corp conference call for the third quarter of fiscal year two thousand twenty one with us on the call today or friend clambered chairman of the board and chief executive officer of contact michael the porcelain president and chief operating officer and michael band the chief financial officer for we proceed i need to remind you of the company safe harbor language certain information presented in this call will include the 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 planned objectives and business outlook of the company's management the company's assumptions regarding such performance business outlook and plans are for looking in nature and of are significant risks and uncertainties actual results could differ materially from such forward looking information any for looking statements are qualified in their entirety by cautionary statements contained in the company securities and exchange commission filings i am pleased now to introduce the chairman and chief executive officer of contact for kornberg fred thank you jason good afternoon everyone and thank you for joining us on this call
spk_2: to delay we will be discussing the results for a third quarter of fiscal twenty twenty one and our outlook for the full fiscal year let me just started this call by saying when i hope will the last words about covert ninety as you would expect from the news headlines around the world covered nineteen well clearly receding in the united states is still a challenge for certain international countries normal operations have not really yet resumed and international business travel is still almost impossible nevertheless as you see from our announcements this afternoon or operating performance of the third quarter of fiscal twenty twenty one was very solid a third call it a net sales were a hundred and thirty nine point four million with adjusted he bodnar of seventeen point seven million we look to a strong fiscal twenty twenty one and we now as the made that fiscal twenty twenty one consolidated net sales will be within a range of five hundred and eighty million to five hundred ninety million dollars our efforts to streamline our operations are really paying off and we continue to target adjusted he be done in the range of seventy four to seventy six million deaths based on are strong pipeline and year to year the business momentum we anticipate it's achieving a book the bill ratio for fiscal twenty twenty one in excess of one point zero with positive signs of a post pandemic recovery continued overall them man's remain strong and we have recently secured important contract awards and we're excited about our future all in all we continue to whether the covert stolen and we continue to see these clouds lifting now let me turn the call of the michael bondi our see i phone will provide additional commentary by the third quarter of financial performance and our business outward after that michael porcelain our president and c o will provide an update on our total business then i will come back before opening at the line of questions and answers at tim
spk_3: mike thank you for adding good afternoon everyone has fred mentioned or net sales were one hundred and thirty nine point four million dollars in three which is higher than what we achieved in last year's que three other one hundred and thirty nine point four million dollars of that sells seventy nine point eight percent were to the us based customers with twenty point two percent to international customers
spk_1: bookings for the third quarter were one hundred and fifteen point nine million dollars and are consolidated both to bill ratio was point eight three we finish the quarter with backlog of six hundred and thirty six point five million dollars and when you factor in the total unfunded value of certain multi year contracts
spk_3: that have been awarded to us but which are not yet nor backlog we are visibility into approximately one point one billion dollars a potential future revenue
spk_1: how gross profit percentage and que three a fiscal twenty twenty one was thirty eight percent as compared to the thirty nine point two percent achieved in the third quarter of twenty twenty the period of a period change in our gross profit percentage reflects changes in overall product mix and significant increases in costs due to production delays minor supply chain disruptions lower levels of factor utilization and higher logistics and operational costs resulting from the covert nineteen pandemic
spk_3: cute three a fiscal twenty twenty one also reflects a two million to our benefit from the recovery of historical excise tax paid based on are expected level and mix of net sales for the remainder of fiscal twenty twenty one we anticipate a consolidated gross margin percentage approximating thirty six percent as dna from que three of fiscal twenty twenty one was twenty seven million dollars or nineteen point four percent of consolidated net sales as compared to thirty two point three million dollars or twenty three point nine percent and que three a fiscal twenty twenty
spk_4: and que three fiscal twenty twenty one we incurred six hundred thousand dollars or restructuring costs related to the shifting of production of many of our key satellite or station products from our existing tempe arizona locations to a new one hundred and forty six thousand square foot facility in chandler
spk_3: arizona we expect about another million dollars to such cost and que for
spk_1: to turning to our day we spent thirteen point one million dollars in the third quarter or nine point four percent of net sales
spk_3: total stock based compensation for the third quarter was one point two million dollars and amortization of intangibles was five point three million dollars we continue to expect stock based compensation to approximate eleven million to twelve million dollars for f y twenty twenty one are consolidated gap operating income was two point four million dollars and reflects five point three million dollars of acquisition plan expenses primarily due to the april twenty twenty one settlement of an acquisition related litigation and are completed acquisition of us pay are adjusted ebitda i was seventeen point seven million dollars or twelve point seven percent of consolidated net sales for the third quarter of fiscal twenty twenty one adjusted ebitda in our commercial solution segment was fifteen point nine million dollars or seventeen point four percent of related sales and in our government's solution segment it was three million dollars or six point three percent of related net sales
spk_1: the fiscal twenty twenty one using the midpoint of are consolidated net sales and adjusted ebitda targets are adjusted ebitda margin approximate thirteen percent now let me talk about interest taxes dps cashflows and or balance sheet
spk_3: interest expense was one point five million dollars in the third quarter and we expect to finish the year with total interest extent of approximately seven million our annual estimated effective tax rate excluding discreet tax items is expected to approximate eleven and a half percent on the bottom line or gap net income in the third quarter of fiscal twenty twenty one was eight hundred thousand dollars or three cents per diluted share excluding acquisition plan expenses restructuring costs covert nineteen related cost strategic emerging technology cost and the net discreet tax expense non gaap net income was six point eight million dollars or twenty six cents per share cash generated by operating activities was six point eight million dollars for the third quarter and we expect even stronger operating cash inflows for a fourth quarter of fiscal twenty twenty one
spk_5: or balance sheet as of april thirtieth twenty twenty one includes thirty nine point two million dollars of cash and cash equivalents and our total debt outstanding was two hundred and fifteen million dollars or parents secure leverage ratio as defined in our credit facility was two point seven eight times now i will handed over to michael
spk_2: porcelain mike
spk_6: thank you and good afternoon everyone we are pleased with our que three performance especially given a during the third quarter we continue to operate our business and what remains a difficult operating environment the didn't news is that all employees of the gun limited travel mostly in the united states have started to return to the office in person demonstrations of are solutions are picking up and been scheduled for those such activity in the international market remains limited as that man slowly picks up across our industry we are seeing higher logistics and operational costs supply chain issues are becoming more prevalent as lead times for certain parts has significantly inc that all said lisa good problems to have compared to the health issues of coded now let me more let me talk more about our business results in our commercial solution segment nutshells when ninety one point four million this quarter issued orders aggregating seventy five point one million resulting in a book to the ratio of pointed to ooh for the segment we continue to see positive momentum and or public safety on location technology products net sales during the quarter for this product line were higher the last year's comparable quarter than reflect the benefit of incremental sales of or next generation nine one one and location be solutions or said in part by the absence of nine one one wireless call routing cells to eighteen two as noted or less conference call we were awarded the statewide contract by you know to one hundred and seventy five point one million to design deploy and operate next generation nine one one services for the commonwealth of pennsylvania this contract was initially funded at one hundred and thirty seven point four million one hundred eleven million of which was booked on or second quarter work on this contract has just begun and is expected to ramp up next year in addition as discussed or less conference call his contract was awarded to us shortly after we announced the receipt of a fifty four million dollar contract to design deploy and operate next generation nine one one services for the state of south carolina we're really pleased with what we are seen to date in south carolina in addition to this current contract of bush starting performance we are sing songs from the customers that additional work may be on the way we believe that have strong interest in our solar calm call handling solution and we hope to make some announcements here pretty soon obviously the pennsylvania and south carolina contracts are important but don't let them overshadow other important contract awards we received and que three including a nine point eight million dollar contract with a major tier one mobile network operator for a broad suite of new capabilities and services senate around work realized applications and five g products we received orders excuse exceeding three point eight million with a tier one mobile network operator for additional capabilities related to a virtual mobility location center platform all point six million dollar next generation nine one one services contract to provide soldier comes guardian poll management solution to the toronto put paramedic services the largest municipal paramedic service and canada we also received the one point three million dollar contract no with a tier one mobile network operator to support messaging services and we received off first international five g's services contract with a leading tier on mobile network operator in australia we continue to build out various situational awareness data products for on nine one one customers that we are working on a number of exciting initiatives in a public safety cyber security area also i can say is continue to stay tuned now i will discuss are subtly ground station product line where things do i mean challenging for are looking better net sales and this product line during que three or higher than the comparable three months of the school twenty twenty we benefited this quarter from a number of awards including a contract valued at more than three million for of be been traveling we tube amplifiers what do you do beauty is to support a new high speed satellite network in order valued at more than two million or state of the york five hundred watt to a band high power apple fires supporting a leading high throughput a customer we receive the two million dollar order for rugged k been high powered t w th for us military communication system and an order with exceeding a million dollars for our falcons fifty k solid state power amplifiers born in flight connectivity application and and order receiving a million for expand solace the paddle amplifiers and block of convergys for a transportable military satellite communication system in addition the man for our heights technology solutions is strong and we recently received a multi million dollar contract award from an international custom let me also talk about our acquisition of huge be networks which close during this quarter and which is receiving alkaloids across our industry as we have said before we believe you is fees develop the revolutionary technology and is transforming the growing very small aperture terminal market or be said market with and market for high speed satellite based network significantly growing we're excited to extend or product offerings to include their td amazed subtly modems the integration of you hp into or solid ground station proper line and or commercial solution segment is well on the way now that you hp his full access to our direct and indirect distribution message we believe that you a few cells was significantly increase from levels over the next few years the a meeting with our customers discussing with them the benefits of our hide solution and or you hp solutions and how our road maps will play out based on the feedback we have received today we have no doubt we are headed in the right direction overall the spite navigating twelve months and poland and fiscal twenty twenty one we remain optimistic than that cells in a commercial solution segment will be slightly higher than the amount we achieved in fiscal two thousand and twenty now he return to our government solution segment where sales were forty eight million as compared to fifty six point eight million if you've realized year bookings and or commerce and government solution segment came in at forty point seven million with a book the the ratio point five as everyone knows period the period fluctuations in bookings are normal for the segment the most recent quarter primarily reflects lower sales of global field support services and other programs with the us army or said in part by higher sales of are solid state high power able fires and also are tripoli or high reliability electrical outlet electronic and literal mechanical space component it's last quarter we announced that we received initial orders related to a new multiyear contract by you'd have to two hundred and thirty five point two hundred thirty five point seven million to provide ongoing system refurbishment sustainment services and these ban equipment to the us army in support of it's she could internet protocol router the know i'm secure in their political writer access point or snap family of gretel ground satellite charles in the third quarter we received an additional nine point two million dollars or borders on to this contract other notable awards but given to us during the third quarter include the following a six point five million of funding from the us government for a joint cyber analysis cause training solutions six point two million funding to support the us army's project management mission command boon for tracking one program a three million dollar order from an overseas agency for the maintenance of downrange tracking stations we received the two million dollar order to provide the huge marine corps with rugged be span command the control modules for program manager of light armored vehicles and we received a one point six million dollar contract for our if michael with solid state amplifiers from a major domestic prime contractor since we last spoke to you we are seeing changes with respect to short term prospects for a government solution segment specifically in april twenty one the us government announced that it intends to fully withdraw troops from afghanistan by september twenty twenty one this accelerated plan will result in lower revenues than previously anticipated for certain for rams we participated in addition the us presidential administration released it's fiscal twenty two budget request this request includes less money for certain legacy programs but additional funding for modernization a new programs that we will participate on all little we believe these budget changes will benefit us over the longer term but will result in our government solution segment revenues a significantly lower amount and we achieved and fiscal forty one we're definitively same strong interest across the board for a recently introduced contact contact terminals and other new technology solutions the we are actively discussing with our customers those in the third quarter we the we conducted successful in fuel demonstrations including or industry leading trope got a solution that we are currently providing to the us marines other military commands including the us army are pleased with what they see and have shown shown strong interest in addition as we enter into our fourth quarter in support of the us army's network modernization efforts we've been working to respond to a new proposal request related to the development of the melted mission command transport or m m c d terminal which is the successor to the us army's blue force tracking to program we estimate that there are over one hundred and twenty thousand legacy be of the terminals across the army and join services and an ultimate production contract to us could be worth hundreds of millions of dollars over the years we have been providing the of t one system and services to the us army along with old development and engineering type services and we believe the we'll we'll position to meaningfully participate on this upcoming program in addition to the good prospects with respect to this new mm c program we are excited about opportunities with a new strategic partner as announced earlier today we enter into a strategic technology partnership with committed to broaden it's network of antenna terminals through interoperability with our as all fifty six fifty be program that the fifty six be as a us army forces strategic command why then google satcom modem that is used for critical commercial got call as well as government and military applications it's fully compliant with key military standards and complies with and supports this one forty two certified encryption this climate a partnership expands or solution said and capabilities offered to our government and military user base that will benefit both our government or commercial solution segment now turning it over fred a dual to share with you some good news with respect to emerging shuttle opportunities that so many of you have that this about as disclosure form tend to during the storm third quarter mean for three hundred thousand dollars or strategic emerging technology cost for next generation satellite technology which was used to advance or solution offerings to be used on new broadband satellite constellations as many of you know there was widespread industry discussions of next generation subtly technologies that is likely to be used in the thousands of new leo meal and even yo satellites expected to be launched over the next few years these new satellite constellations at their core are being developed than deployed to provide high quality high speed broadband internet access to over three billion people across the world and are intended to meet demand for unprecedented data transmission from smart devices as stated in a variety of industry publications the investment cycle is well underway and we believe attention is now turning to equipment that we provide including ground station equipment that's why antennas modems enabled in order to make this unique in emerging need show and technical capabilities need to be expanded and efforts must be encouraged to decrease size weights and complexity this market is new for us and some during the quarter we made an initial small investment to jettison or business plan although this in total on the investment for i was small we do continue to evaluate this new market in relation to a long term business strategies and will encourage will cost over the next four months with the title said i'm very excited to report at the start of our fourth quarter we entered into a multiyear agreement enabling the customer to potentially order hundreds of millions of dollars of our next generation satellite or station technology shortly after signing this agreement we received our first order at more than thirteen million dollars to make certain customization on behalf of this customer work on these efforts has commenced immediately i do hope that you understand the due to competitive reasons a nondisclosure agreements we can't say much more about it this is a very strategic one for us but i want to extend my thanks for all the hard work or team members to me that that made this happen we expect to fully perform and this initial development work and are very optimistic that future orders will calm or what
spk_7: now i will turn it back to fred to provide some closing remarks from
spk_2: thank you mike as i mentioned previously i am very pleased with our business performing during this epidemic as we enter our fourth quarter i believe we are of on track for strong finish the fiscal twenty twenty one i'm also very excited about our prospects going to fiscal twenty twenty two including or strengthening positions on the large developing new term opportunities that might just mention even our business artwork because of our business have a board of directors has declared a dividend of ten person ten cents per come share payable on august twentieth twenty twenty one to shareholders of record at the close of business on july twenty one twenty twenty one we continue to believe that our dividend program is still a great way to return some capital to my shoulders as we look to grow our business
spk_0: now i would like to proceed to the question and answer point of i comforts of roof at this time if you are like asking questions past a star and one it may remove yourself from it time by pressing the pound once again that a star and one ask a question we will pass for a moment to allow questions you
spk_8: and it looks like we have a question from joe gomez noble capital
spk_9: and please go ahead
spk_10: thank you good afternoon
spk_11: for joe
spk_9: so i don't eat he kept mentioned you can talk a whole lot about the the new multi year agreement ah but you did manage to get a first order third he made as when are you might be able to get with a little arm color i'm you know
spk_6: a how long the that last you know what's the timing for that thirty million was kind of it would be the next steps in the process arm once that contract the thirty million is completed sure what you know as as we discussed in our ten que lo you know we are making customization so to our our technology so i mean obviously it's a to development contract and that we first got and you know as we say and you're right i can't say much more but the we we think that there's a potentially hundreds of millions of dollars that
spk_12: you know once that customization is done
spk_11: oh that's that's what we expect
spk_9: okay thanks i met arm and energy kind of went over that the pennsylvania in the south carolina that by and he nine one one opportunities they believe there was another one out there that that you were chasing maybe going to give us a little more color on what else is out there right now that you know you're looking for that might be
spk_6: you know in the south carolina and or you know pennsylvania type of size yeah doing this really i'd say at this point is probably to contractor will probably main main them since the information out there is is pretty public at this point so have been a weren't were waiting for ohio thought to have fun you know what would probably a triple million dollar contract ovule north of a hundred some odd million dollars
spk_11: it is out there and we we were just sort of waiting on the funding for that particular contract and when we're really waiting on an award announcement which is more competitive in in the state of arizona and you know those are very you're near term opportunities and oh that's pretty much out there for for public consumption okay thanks and in one last one for me and i'll get back and que i'm in a bowl games and in both of the the business segments were worried of point eight
spk_9: and point eight five your you mention in the in the government's illusions that it's it's normal to see some fluctuations there and the commercial side anything out of the ordinary are that just again some more just your normal fluctuations
spk_6: in in in business for the quarter there yeah i mean obviously in queue to you know it's is lower than q do because we had that large in a love of pennsylvania booking but or two three bookings was actually higher than what we achieved and key one for the commercial segment so you know i i i would you say as normal fluctuations up and down and obviously the international more
spk_11: gate you know is is difficult right now and so are in all those will eventually come at some point
spk_0: great things like a bag kill them
spk_13: i think comes from chris and head
spk_6: thanks mike as what does follow up on that constellation ordered i don't know whether you can provide the detail but are you providing
spk_14: i'm a point solution i ye amplifiers are based band or you providing a comprehensive solution for this customer that it would rain from the gateway to the end user terminal
spk_13: while the best answer i'll give you is that we're going to ride the wave of what's happening and in the industry and that i can only referred to it as next generation satellite technology but i'm not going to get into the specific products
spk_6: of that we're we're we're putting forth
spk_13: okay i you not build the satellite at least style right i did you get ziggy i agree with ya now it's with i got something from you shifted over real quick to the the height product line i you said you're seeing positive momentum i just general business friends that you're seeing their in terms of and market or domestic and international coming back and you've got some like oil and gas that that tend to be pretty cyclical
spk_15: the yo has moved in titles
spk_6: you know any color you can give us you don't i think that's different than the last time i mean we've always wear a big believer that data transmission and and then with needs are going to increase in the a new certainly ashore an acceleration of that during the coven pandemic arm deal ward of heights spiders international customer again too much a million dollars and mean it was it is a a very prominent award in that part of the world and and we we actually think did i will lead to additional hide sales
spk_16: in there are you at the same time you know are you p network solutions dustin breed by by far in obviously you know that we've had some in death experience with satellite companies have alleged two years and you a fee is what well positioned and given the growth that happening with forge
spk_13: gee and five g around the world with mobile network operators we thank you hp and or high solutions is a very uniquely positioned impact ray and
spk_2: shifted over to the government segment of the business if i read the language correctly it sounded like there was a significant afghanistan component
spk_6: to the that the guide down in on the guidance or the government segment you can use size that for us is that stuff that goes away because troops are not deployed or does it get reallocated somewhere else and show up later i'm it's more would eat what you said in the earlier part of your palmer in a loop most most if not all of the change but was related to the withdrawal of troops with afghanistan and you know i think we've always said publicly of you have a few troops in afghanistan or in a particular areas any communication system here the plan is to fully woodrow troops so i mean you're talking about addition dismantling of of an infrastructure that google was it was out there so on will think that the that's coming back in both to you know to are thinking camp for any is another you know the ground action or something unexpected that that may happen so you're those those program changes were announced by the us presidential administration during the quarter so we don't see that revenue coming back at the same time we're working through the budget and you're the best example you know that i can point to his look there was certainly legacy programs that the this administration is going to not fun but at the same time they're funding next generation system such as the blue for striking successor program so i mean you you can see that mean the white paper was out there were responding were responding to this finally after so many years i told people from the phone don't even ask me about blue for tracking three it when i have certain the say daniel no i'm talking about it because it's real and in a we all responding we have done some pretty good directing agreements with the work i'd like to think that the government will get the band back together and be of the one was an extremely successful program he sold one point five billion dollars worth of equipment
spk_13: under the be of the one program i'll take care for that you know a in in in this next generation cycle so we're very optimistic that the successor program to the be of t to program to have program i guess you could call it will will happen and you know we're going to put forth our best foot forward to the government will see what happens but that's an example of where in old you know outside of the short term noise the long term prospects looked dynamite every so technically i'm not asking a question about it because you brought it up but
spk_6: is there a determination at this point in terms of frequency band that that system might go in so much of this outcome capacity that that being brought on line bull vo and leo is a bay on me or are we you know migrating for military only expand or staying in to you i think the way i would describe it as would they they certainly want backward compatibility which is something that come thick is uniquely positioned to provide is a really to do some of the aviation type equipment that still using our equipment today i so lavishly will have l then we previously announced a couple years ago a partnership with iridium a
spk_13: and i think that you'd be looking to see the iridium out there and yet you may see some expand out there so i think the government's idea as they don't want to be stuck with one particular satellite band or one particular solid system
spk_6: they want the ability that have one part of the system gets jammed that to see mostly move over to another within the same would in the same product so you know we we we we have that capability to have multiple we forms and multiple a modem technologies in the same transceiver and no do well final question on next and nine eleven lot of money being thrown around by the government nowadays odyssey the infrastructure bill hasn't made it's way through but any indication that you're seeing that there might be additional money set aside for those that to systems
spk_17: on everyone's was talking about and crush so so i guess i guess we agree with the philosophy which opened up and it's a question of where that funding or winds up on some states i think it's fair to say are waiting to see read the state does are going to announce that that their own funding if they can get the funding from the federal government so that's nice
spk_18: think this a little bit a pause by some states but at the same time there were other states that do not want to wait their local constituents want to move forward arizona's an example of it ohio's an example of it we saw it would pennsylvania was short with south carolina so i would say is all do news either way if there's more funding it is what we should benefit
spk_19: from it great thanks as next icing comes from us
spk_20: go ahead
spk_19: great thank you
spk_6: the question any given all these initiatives that you're talking about in a to think about the ground a drivers and sort of even and growth said numbers for twenty two as it relates to the government and commercial solution and mean should we expect given be significant job and government of course it's the hopefully grow with insistence weekend but what kind of levels are we talking about can be combat at some point you were they wearing fiscal twenty given all the various initiatives and hopefully the be a t opportunity materialized movements well i think the be of t opportunity you know which is probably don't get enough outside of additional work or dead will be doing you know assuming we we win the so initial opportunity thirds of that revenue is really gonna be twenty three twenty four type type revenue
spk_19: dad you know that is it is can take some time my might be a booking in twenty twenty two in in the hundreds of millions one yeah that's a possibility of in the government is giving all signs right now that they're moving forward sitting here in the month on the i think it's june
spk_20: and said states there's way too early for us to give you some some clarity here we normally don't give our are you or guidance to september i think look one thing i can say about the government yeah it's it's it's not i don't think it's gonna grow much year is is in is what i would say based on what we he bought it again it's too early to tell as the
spk_6: programs common wheatley if they come in on the earlier side yeah we might be able to do that but i think given the afghanistan afghanistan withdrawals and what we're seeing on the budget side i think the government business it's ya as a segment will be tough to tough to grow on versus the say this year and in terms of our commercial business i i think yeah i declare rather for signs are positive the growth as international come back you know given sort at the midpoint of your guide and of he gets down its and death is it reasonable to own high single digit growth into next year for the commercial oh of town again that yeah i'm familiar with and colbert now yeah i i i think that that possible we need international markets to come back in and you know it's she did should get should calm whether or not it's gonna will come on the first six months to of twenty twenty two it's too early for for us to tell you
spk_20: me and i'll put the i think i think we eventually as you're saying and in the united states the market is starting to turn you know unfortunately all get areas of the world like india i mean india's close a bomb you know there there's just there's pockets of the world right now where nobody's doing anything and it's it's it's a lot different than what's happening in the us
spk_6: even canada com you know surprisingly so are we have we have business operations of there in the it just shut down so that being said you know when you look at the staying on on a twelve to eighteen month basis
spk_19: this very positive signs and or salad or station business this this new contract that i mentioned to you you know what we're we're we're talking about hundreds of millions of dollars and you know when that comes you know it it's it'll come after we think that development part of a program but we we have to kind of work through that
spk_20: and what competitive dying dynamic there
spk_6: tom i'll let my competitors share their their aspects to it i get i can't comment
spk_2: and anything if you can talk about like you know how we should think about margins year across the two segments
spk_6: you know if government kind of hang in there may be no growth but what kind of margins are we now expecting in that segment and curly we go know take them down relative to where we were before ah but know office eight nine percent margin
spk_21: for the yeah yeah i think i think what we we're i think our focus for this year was to get higher than ten percent just the the our margins in a when we started the year i think
spk_19: it gives me as we will as we've witnessed with this shove in a sudden change by the by the government would withdraw the troops it is going to impact or goal i don't think we're going to do ten percent for just that he be done margins in in the segment so you may be closer to eight or nine percent i think when the nuts with issue as i think as again as i look forward to next year's i'd like to get us back
spk_0: to the ten percent that's the target bomb or commercial segment bomb you know we we we've done pretty well i'm each of the first recorders we've done north of and seventeen percent just that he would ah margins you know we start getting incremental volume on some of these large opportunities that we're talking about bomb it will
spk_22: come on you know normally when you do development work dumb such as customization or customer funding type barn the margins on those initial programs or relatively low you get the benefit of production and you know that olds a little ways off but in all again we're talking very large amounts of
spk_6: of hardware common great thank you and next class and comes from my glad i'm i i'm from northland capital is open i'd this is other the own behalf of my blog commode ah could you tell me are you facing any component shortages are your current business environment and if so how much impact as the timing on the margin or revenue
spk_2: sure i'm we we are experiencing
spk_6: what i would call industrywide shortages we're not seeing anything specific to our sins more in the lead time
spk_23: but issue right now we're not saying on available and availability of parts were you know
spk_24: factory as burnt one on fire and to some simply delays and getting parts so your some of the results in inefficiency or facility as we just we build a product and we have to wait until low we could deliver it till we get the parts but the you know it has negatively impacted on gross margins i prefer not to tell you you know specific dollar amount
spk_6: a but it is impacting on margins which we hope will go on bug in or dublin seeing increase the parts and and the miss similar to what you're you're reading about on the industry
spk_23: free for just another example mean for a cost in some areas of the world have trouble
spk_0: i'm mad and you know really we we we obviously just need to those think we obviously need to see those come down we hope that when i lived experience the cost in some parts of the world that we are saying right now we think that's part due to the shut down on availability of labor in certain parts of the world but down mean it's is real and it's out there
spk_25: or it on it on my next question on be the pennsylvania nine one one deal of can be expected to start contributing to the revenue from for you
spk_3: yeah you you we we we are expecting some queue for revenue from our our pennsylvania contract but but not a whole heck of a lot is it it's really going to turn on and and you for it or it's fine thank you
spk_26: once again as a star one question
spk_25: jeffrey as his column for george an answer the question when a sci fi you can parse through the at the again for the full year and bit more and with implied for queue for ah how much their guidance is now driven by the inclusion of you hp revenue an ad for the step down versus the preview
spk_27: yes guy for the four year is that all related to the us government ah make kind of the budget update there are there other put in takes to consider in other parts for business
spk_6: hi kyle in terms of the first question it with the u h p i would say the nominal amount in the year in terms of you for your second question it was mostly in the government segment and i was driven by the recent changes that like was referring to earlier directory
spk_28: in the this is one kind of piggyback on the logistics constraints comment but i'm you mentioned kind of impact on gross margin but is there any way you can frame it you know what the wraith may be to net revenue if
spk_25: the see difficulty with the supply chain issues like of it in our percent of revenue a couple percent
spk_27: or not really that much of a of a headwind to our revenue as you can do next couple quarters
spk_25: yeah i think i think the way i would thus characterize
spk_6: the impact to let's say the rest of the sheer is really not on the revenue cyber probably on the margin side so you know within our guidance number you know what we were thinking is going to be somewhere between seventy four and seventy six as if the component call as if the imports continue to increase or they don't disappear him a we might we might be on the lower side of that seventy four million but depending on that's how i would characterize the the impact it's not we don't necessarily see it on the revenue side it it's really on the costs i'd were saying it's and i think that awful and one last one for me this is regarding the timing and outlook of the as got sales
spk_2: with the budget changes in associate head when the talked about harm or they persistent who are three twenty twenty two which seems to be the natural conclusion on and you also mention the various next and programs and yeah he talked about the be a t to one but i'm sure there's others and wonder if you can add anything in terms of the time frame of those and when they will beep
spk_6: addition to come in are there any the could be as early as impacting twenty twenty two or are these all kind of twenty twenty three and beyond yea it's it's it's it's it's a mixed it's a mixed answer come in a look we we we have these like would be a t three i guess which i have to start learning the new ak or them which is in near the thank you for the at the be of t three program you know it's is there and it's it's gonna be an initial development for program that will take some time to to work but the government has indicated died shortly after completion of that work they intend to the issue production awards and so you know you simply do the math and you're talking about hundreds of millions of dollars of of production available so we could be in a situation where none of that occur as and twenty twenty two or we get big orders and that's a twenty three revenue or we get the revenue and twenty two that's why we always say it's just too early
spk_12: especially with the be of tea the three club program a comet is another example palm comment
spk_6: we we were expecting again earlier in this year some some orders to come in like you for and this is a sort of a quick ship product so with the funding situation still not been fully clear yet yeah we're not expecting any orders for the product into for so we're not or think and to your points gonna carry overload of that into the school year twenty twenty two until things get sorted away would have comet order start to come quickly then you know then that will be a big benefit
spk_29: to to the to the bottom line i mean these are these were computer hardware products that we make in internally the got good margins and an uber seems very very strong interest both from the us government and and foreign customers
spk_30: october scout a program is another example right now you know we we've been working with the marines with the program that we won with a partner
spk_0: some people have asked us time and time again while the have an opportunity to go back to the us army and we said well as ultimate thought he only has on the diet
spk_31: the thing i can tell you right now is we not demonstrated the solution to the us army does very recently so we we we believe that there's a lot of upside for us what what in in our government segment despite the decline in revenues that we we see today by at the same time it is just too early for me to tell you but when i
spk_2: sit back and i look at it as i asked the question earlier that kind of think our government segment of be flat it's gonna be tough to grow next year when i think about everything oh we'll see we'll see we'll see what happens it's gonna come down to funding and and whatever the government does will get clarity over out of the next few months and will will
spk_0: give you an update as well as we learn

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