Please standby, your program is about to begin. Ladies and gentlemen, thank you for standing by. Welcome to Comtech Telecommunications Corp.’s Third Quarter Fiscal 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded, Friday, June 6, 2014. I would now like to turn the conference over to Ms. Maria Salerno of Comtech Telecommunications. Please go ahead, ma’am.

Thank you and good morning. Welcome to the Comtech Telecommunications Corp. conference call for the third quarter of fiscal year 2014. With us on the call this morning are Fred Kornberg, President and Chief Executive Officer of Comtech; Michael Porcelain, Senior Vice President and Chief Financial Officer; and Rob Rouse, Senior Vice President, Strategy and M&A. Before we proceed, I need to remind you of the company’s Safe Harbor language. Certain information presented in this call will include, but not be limited to, information relating to the future performance and financial condition of the company; the company’s plans, objectives and business outlook; and the plans, objectives and business outlook of the company’s management. The company’s assumptions regarding such performance, business outlook and plan are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statements contained in the company’s Securities and Exchange Commission filings. I am pleased now to introduce the President and Chief Executive Officer of Comtech, Fred Kornberg. Fred?

Thank you, Maria. Good morning, everyone, and thank you for joining us on this call. As announced yesterday afternoon, we reported our third quarter results of $88.9 million in revenues, GAAP diluted EPS of $0.32 and adjusted EBITDA of $14.8 million. We are extremely pleased with our third quarter financial results. Our third quarter financial results were solid and bookings during the third quarter were at the highest level all year. Our third quarter results benefited from an increased revenue and profits as a result of our performance on certain large over-the-horizon microwave contracts, some of which we originally expected to be recognized during our fourth quarter. Based on our year-to-date results and our anticipated fourth quarter performance, we are increasing our fiscal 2014 revenue guidance to a new range of $342 million to $346 million. We are also increasing our -- EBITDA guidance to a new range of $58 million to $60 million. And as a result of better than expected fiscal year 2014 performance, we're also increasing our GAAP diluted EPS guidance to be in the range of a $1.25 to a $1.30. The increase in EPS guidance is net of $0.02 of dilution related to the impact of the conversion of approximately $50 million of our 3% convertible notes, the remaining $150 million of notes were paid off in full on May 5, 2014. As such, we are now debt free and our annual interest expense for 2015 will be reduced by $6 million. During the third quarter of fiscal 2014, we also repurchased approximately 915 shares of our common stock at an aggregate cost of $29 million, pursuant to our current $100 million stock repurchase program as authorized by our Board of Directors. From inception to date, we have repurchased approximately $436 million of our common stock under our stock repurchase programs and we currently have approximately 14.3 million available for additional repurchases, pursuant to our current authorizations. In light of our long-term expectations our Board of Directors also this week approved a dividend for the fourth quarter of fiscal 2014 of $0.30 per common share, this dividend which is our 16th quarterly dividend is expected to be paid on August 19, 2014 to stockholders of record on July 18, 2014. To date and since the inception of our dividend program, we have paid out approximately $80.3 million of dividends and continue to believe our dividend program is an excellent way to return capital to our stockholders. Now let me turn it over to Mike Porcelain to provide an overview of our third quarter financial results and then I will return to talk more specifically about each of our three business segments. Mike?

Thanks, Fred, and good morning, everyone. I’ll walk through the Q3 results and provide some commentary on our updated fiscal 2014 business outlook. During Q3, we generated revenues of $88.9 million, of which 27.4% were for U.S. government end users, 62.3% were for international end users, with the remaining being for domestic, commercial end customers. Excluding net sales in our Mobile Data Communications segment Q3 2014 sales to U.S. government customers were 23.2%. Net sales in our Telecom Transmission segment were $61.2 million in Q3 of fiscal 2014, as compared to the $45.4 million we achieved in Q3 of last year, representing an increase of 34.8%. This significant increase was driven by higher sales in our over-the-horizon microwave system product line, partially offset by lower net sales of our satellite earth station product line. Let me talk first about our satellite earth station product sales which for Q3 of fiscal 2014 were lower than sales in Q3 of last year. As discussed on our last conference call, order flow for this product line was impacted by volatility in market conditions where many of our customers are located. We are pleased that during the third quarter and through today, we have recently booked a number of large contracts. In fact, backlog for this product line at April 30, 2014 was at its highest level on over two years. We expect that bookings for our satellite earth station products in the fourth quarter will be strong and our fourth quarter sales for this product line will be at a peak level for the year. Given expected order flow, we expect that net sales for this product line in fiscal 2014 will be slightly higher than the level we achieved in fiscal 2013. Sales of our over-the-horizon microwave system in Q3 of fiscal…

Thanks, Mike. Now let me discuss some of the growth drivers and recent developments in each of our three business segments, which will provide some color regarding our updated outlook for the balance of the fiscal year. As always, let's start with our largest business segment, Telecommunications Transmission. This segment is comprised of two product lines, satellite earth station products and over-the-horizon microwave systems. We remain the undisputed leader in the satellite earth station area, driven primarily by our proven ability to deliver the most bandwidth efficient modems to our end customers. We've maintained our reputation as the innovation leader in this space by introducing ground-breaking technologies that have enabled applications for our end customers that at one time were not considered possible. Our Carrier-in-Carrier technology allows our modems to use the same satellite bandwidth over both the transmit and receive links simultaneously thereby potentially doubling the bandwidth efficiency. We continue to offer more Carrier-in-Carrier enabled modems every year. We believe there continues to be a pent-up demand for this product offering, which should be realized once economic conditions improve in a more sustained and meaningful way. We are increasingly more excited about our new line of products called Advanced VSAT. These products combine a variety of technologies within our IP portfolio to provide an integrated solution including advanced forward error correction, advanced coding modulation, header and lossless payload compression, RAN and WAN Optimization and our managed bandwidth technology. By listening closely to our end customers, we've been able to offer our Advanced VSAT Solutions into markets that have traditionally been served by TDMA solutions. Although we just started our major marketing efforts relating to these products a little more than a year ago, we have already begun to see our efforts pay off. Recently, we've seen certain TDMA users…

(Operator Instructions) Our first question is from Mark Jordan from Noble Financial. Your line is open.

Thank you. A question relative to cash -- use of cash and now that you finished obviously the major repurchases of the $150 million of bonds and also about 1.3 million shares over the last months I think. Has the Board taken a position with regards to what percent of free cash flow moving forward they plan to disseminate to shareholders via buybacks and your dividend?

I think, Mark, in terms of the cash outstanding at this point, I think we’re going to take a breather from the purchasing program and look at our opportunities out there with our present cash and our line that we have, plus that we are debt free, so we always raise some more cash for some opportunities and providing further dividends to our shareholders.

Okay. Mike, could you give us also a breakdown of backlog in the segment?

Sure, Mark. Backlog for the quarter in total was $160.7 million and in telecom was $102.7 million, RF was $46 million and the remaining $12 million was in our mobile data communications segment.

Okay. Final question for me, in the RF amplifier space, at one point in time the next generation accrued system was potentially going to be a significant program for you. Is that program given the budget cuts and a pulling out of Afghanistan completely dormant or do you think that there is an opportunity for the DoD to add some systems inventory?

I think for the present time what we see is that’s a program because of the funding issues and is pretty well dormant, not to say that it can’t come back, the Army seems to be evaluating their path forward. And I am not exactly sure exactly where or when and how that path will finally determine.

Okay. And a final question for me, Fred, you alluded to some the expectation that you would have some meaningful international tropo orders outside of your primary customer in fiscal ’15. Do you believe that those will be major installations or the type that you are currently doing which would be three to four year type large installations or are these still in the phase of sort of initial trial transaction?

I think we can safely say that in our pipeline we have a number of large programs similar to our North African customer programs that you’ve seen that we’ve booked periodically from year-to-year. So I think the answer is yes, we have some large programs and we do expect to book these, at least one of these in 2015. Saying that given our experience in the past you know how those things go and stretch out here and there, but I think we're confident that one of them will come in.

Thank you.

Our next question is from Joe Nadol from JPMorgan. Your line is open.

Thanks. Good morning. I’d like to start out just on the earth station bookings and sales. So I think your book-to-bill has been over one for six straight quarters and your backlog is at a recent high, but your sales were down during the quarter. And I just wanted to delve into why that would be since bookings have been pretty strong consistently. Is it just customer timing and when they wanted their shipments or what else that have been?

Sure, Joe. Yes, some of the programs that are in backlog are little less traditional than we normally receive, let’s say for example the ATIP contract from the U.S. government extends over multi periods and some of the orders with Harris CapRock, these things will ship out over multiple quarters. So as we move to more increased sales of advanced VSATs, our book to ship percentage in any given quarter will likely go down, but we are still a true book to ship type business as the way to still view the business.

And your expectations for growth next fiscal year, I think you said are driven by telecom segments. Is that just mostly because of your specific enthusiasm regarding over-the-horizon or does that also extend to satellite earth station as your visibility go out that far?

I think our visibility that is really in both. We certainly see, as I mentioned, the tropospheric scatter business is really booming at this point and lots of opportunities out there and we do see the bounce back in the satellite earth station area as well.

Okay. And then just one more sort of nitty one on the quarter and in over-the-horizon. So the timing pull forward, Mike, is that just recognition of sales and earnings because of subcontractor buy or is that actual labor that you executed in the quarter that led to the timing switch?

It’s really both. I mean, we do use cost to cost method in the percentage of completion. So most of the work we do is, you know we’re using a lot of internal labor as well as third-party components as well as our own stuff. So it’s really just a combination, but we’re making good progress on the contract and we had earlier customer acceptance than what we’re really anticipating. So work just got shuffle ahead from Q4 to Q3 which was really good news from all aspects.

Okay. And then following up on the question about cash deployments. I thought I heard in your answer right and quite understand, but I thought that you are looking more at acquisitions now. Is that the case and could you maybe, if that's the case, give us a little more context for what at this point you’d be looking at and what you think the valuations out there and just a little more color.

I don't think I intended to kind of give you that feeling. But to say that we’ve always looked at the acquisitions for the past few years. We’ve looked at a number of targets and you obviously have not pulled the trigger on any of those targets. So we are still in that same mode that we have been for the last couple of years, but as obviously in a much more conservative manner than some of the items out there. Targets being what they are, things are expensive out there. So, we’ll be looking at it, but I think at this point in time I don't need to give you the impression that we have something in the pipeline.

Is that -- just to make sure I fully understand, is it more that you have now in your view reached the right capital structure for the company at this time and you're going to continue to pay your dividends, which is a good chunk of your earnings? But you are not looking at really shrinking a material way your net cash position at this point.

That’s correct. I think, I mentioned that I think we’re going to take a breather right now and just see what things to build in the near-term. And we may come back to some further stock purchase programs but at the moment, I think we will just take a breather.

Okay. Thank you.

Our next question is from Tyler Hojo from Sidoti. Your line is open.

Yeah. Hi. Good morning. Just firstly, I was hoping you could maybe quantify some details just in regards to the OTH MS product line. I think you guys said in your prepared comments that you saw a pull forward out of 4Q into the third quarter. Could you quantify what that was?

It was significant. We don’t want to put -- obviously, the revenue in the contracts or subject to confidentiality. But it was a significant pulling for us to talk about. And when you look at the change in annual EPS, you could kind of see that the extra EPS we had was just new business performance and we’ve got contracts and the rest was just a shift.

Okay. That makes sense. And, I guess, when we talk about your North Africa contract, that's a three-year contract I believe. Is it possible that we’re going to see additional pull forward? Is that contract moving at a faster clip than one might have anticipated a couple months ago?

It definitely for this year, as I mentioned earlier on the Q&A, we definitely had earlier a customer acceptance on the contract. But once we did that and we're performing that work in Q3 and Q4, things should most be steady-state for the rest of the contract.

Got it. Okay. And then, I guess on something else just in regards to ATIP. Could you maybe provide a little bit more detail in regards to where we are on the development of that? And I guess it's been a bit of a headwind in terms of telecom segment profitability. I don't know if you could maybe quantify what the headwind was from that program?

I'm not sure it’s a headwind. I think we're in the development phase of the program, which obviously has a lower gross margin than usual since it is NRE. We expect to be finished with the development probably by the end of July and reach our production orders in ‘15.

Okay. All right. Great. Thanks for that. And just one more I guess, included in the updated EPS guidance, what is the diluted share count for 4Q?

There’s still be a little bit of waiting, Tyler, from the shares. We have one month of the converts outstanding. So you have to kind of wait the quarter but I think if you looked at the front page of our 10-Q, we have a basic share of about 16 million of shares or so. So when you do the averaging for Q4, you probably come up with diluted share of a little bit over 18 million shares for the quarter. Given the dilution of the stock awards, which is disclosed in our footnote in our 10-Q. So we have about 300,000 to 400,000 of dilution from existing stock options that are out there. But you just have to do the weight properly in your Q4.

Got it. Okay. Thanks.

Yeah. And obviously if you look at, think about 2015, we’ll get the full benefit of the elimination of the convertible notes in both our basic and our diluted EPS calculations.

Understood. Thanks a lot.

Our next question is from Chris Quilty from Raymond James. Your line is open.

Thanks. Mike, a clarification, I think the book-to-bill in the telecom was about 0.6 which is the weakest you’ve seen in years. And I think that just reflects the order timing on the over-the-horizon side. But can you give us a sense of where more specifically, the earth station bookings have been on a book-to-bill basis, both in the quarter and sort of relative over the last several quarters?

Sure. I thought we may have said it in the script book, maybe not. But our book-to-bill in satellite earth station for Q3 was over one. So and if you go back it's been a number of quarters that we had consecutively book-to-bill over one in our backlog in that segment, as I mentioned, is almost at a two-year high. So the disconnect as you see between the book-to-bill for the segment is solely attributable to the OTH over-the-horizon work, as that contract pulls out of backlog and as we recognize the revenue.

Okay. And can you talk about the Advanced VSAT product line. You’ve got one very good anchor customer there. But what sort of interest or uptake are you seeing from other customers out there?

I think generally on a broad basis, we’re seeing a lot of interest from all of our customers that traditionally used SCPC and TDMA. And for the most part it seems to be having a replacement effect for some of the TDMA applications that are out there. So the interest has been high and as I mentioned, it's relatively early but having at least the Harris connection as the first step has given us some real confidence.

And specifically on the product line, the chief attribute that customers are looking at our price point performance cost per bid transmission capability, we’re at throughput …

It’s really all of the above. But the main performance issues really are the higher throughput that they can get versus a TDMA system, the lower latency effect or the non-existing latency effect. So it's really performance issues in price points.

Got you. Thanks gentlemen.

I would like to now turn the call back over to the company for any closing remarks.

Okay. Well, thank you very much. And we’ll speak to you again in three months. Thanks.