Ladies and gentlemen, thank you for standing by. Welcome to Comtech Telecommunication Corp First Quarter Fiscal 2016 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 Thursday, December 10, 2015. I would now like to turn the conference over to Ms. Nancy Stallone of Comtech Telecommunications. Please go ahead, ma’am.

Thank you and good morning. Welcome to the Telecommunications Corp conference call for the first quarter of fiscal year 2016. With us on the call this morning are Dr. Stanton D. Sloane, President and Chief Executive Officer of Comtech and Michael D. Porcelain, Senior Vice President and Chief Financial Officer. 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 plans are forward-looking in nature and involve certain significant risks and uncertainties including among others the risks that the acquisition of Telecommunication Systems Inc. may not be consummated and the risks that Comtech’s and TCS’s businesses will not be integrated successfully. 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, Dr. Stanton Sloane. Stan.

Thank you Nancy and good morning, everyone, thank you for joining us on the call. As announced yesterday afternoon, we reported our first quarter results of $64.1 million in revenue, GAAP diluted earnings per share of $0.09 and adjusted EBITDA $7.5 million. Although market conditions remain challenging, we continue to execute on our business strategies. As we stated in our year-end conference call in September 29, 2015 first quarter of fiscal 2016 is still expected to be our lowest quarter of financial results for 2016. We have many exciting things in the order pipeline and I anticipate that our operating results will slowly improve throughout year as theses orders coming. As such and as we announced yesterday, excluding the impact of Telecommunication Systems Inc or TCS’s post combination results, we are maintaining our fiscal 2016 revenue guidance of $300 million to $310 million and our fiscal 2016 adjusted EBITDA guidance of $50 million to $54 million. In addition, including the $1.4 million of pre-tax expenses we incurred in the first quarter, primarily related to depending acquisition of TCS, GAAP diluted EPS for fiscal 2016 is now expected to be between the $1.28 and $1.44. Once we close the acquisition of TCS, our company will look markedly different and I believe we have put ourselves in position to achieve meaningful sustainable growth. In simple terms, we expect to more than double our annual revenue based, double our employee based and our adjusted EBITDA is expected to increase significantly. I also believe that the acquisition of TCS is a turning point of Comtech and I have decided about the growth opportunities that are ahead of us. With a combination of experience, careful planning and preparation, we are well on our way to bring these two great companies together. I look forward to working with all stakeholders to make this acquisition a success. I'll talk more about the state of the business in TCS later in the call, but first let me turn it over Mike Porcelain, who will talk about Comtech and provide some comments on the TCS acquisition from a financial perspective. Mike.

Thanks Stan and good morning everyone. During Q1, we generated revenues of $64.1 million of which 41.4% were for U.S. government end users, 44% were for international end users, with the remainder being for domestic commercial end customers. Net sales in our telecom transmission segment were $35.2 million in Q1 of fiscal 2016 as compared to the $51.4 million we achieved in Q1 of last year, representing a significant decrease of 31.5%. This decrease is attributable to lower net sales in both our satellite earth station and our over-the-horizon microwave system product lines. This decrease although admittedly large was expected given what is happening in the segments to product lines. In our satellite earth station product line, our international customers continued to be impacted by significant economic challenges. Although, we do not expect market conditions to meaningfully improve in the short-term, we do believe there are some pent up demand in our Heights product which has been well received in the marketplace. Given market conditions and our pipeline, we are still expecting annual satellite earth station product line sale to nominally increase in fiscal 2016 as compared to fiscal 2015, which sales heavily weighted toward the fourth quarter of fiscal 2016. In our over-the-horizon microwave system product line, sales in Q1 of fiscal 2016 were significantly lower as compared to the level we achieved in Q1 of last year. As most of you know, sales on this product line are lumpy and uneven and in this quarter and this year will be no different. The current quarter decrease is largely attributable to the fact that both of our North African countries are nearing completion. Although, we expect sales in fiscal 2016 for this product line to be significantly lower than fiscal 2015 and heavily weighted towards the second half of…

Thanks Mike. Given the fact that not much has changed in our existing business since we announced our initial 2016 guidance back in September 2015, I'll briefly discuss our three business segments and then talk a little bit about TCS. Let me start with our largest segment, telecommunications transmission, which is comprised of two product lines, satellite earth stations and over-the-horizon microwave systems. We remain the undisputed leader in the satellite earth station SCPC modem area, driven primarily by our proven ability to deliver the most bandwidth efficient modems and highest efficiency amplifiers to our end customers. Market conditions remain tough and have not improved. Given the August 2015 retirement of our subsidiary precedent for this product line, we decided to make several personal changes including in our sales and marketing team, do we expect to produce improved bookings, particularly on the international side which has been weak for several quarters. I do believe there is pent up demand and based on our funnel of opportunities, I'm optimistic that we will achieve sequential order and revenue growth for each of the next three quarters as compared to our most recent quarter. I'm also enthusiastic about our new Heights solution. Heights is a scalable networking platform designed with the service provider in mind, it leverages a single user interface with a powerful traffic analytics engine that allows simplified design implementation, monitoring, control and optimization of networks using our hubs and gateways. The Heights platform is designed to support the traffic load of demanding premium enterprises using traditional satellites as well as HTS or High Throughput Satellites. Heights is a successor to our advanced VSAT product line, it will take a little time to establish itself in the market. However, we continue to invest in enhancements, so that the platform can be…

[Operator Instructions] Our first question from Mark Jordan from Noble Financial. Your line is open.

Yes, good morning gentlemen. Mike or Stan, I would like to just on a top - from a high level looking at this acquisition incrementally. If you have a base adjusted EBITDA rate of about $40 million and if you were to exclude in the first 12 months integration and assume that your $8 million of synergies were in place at the start of the year. So if you were to do that you would have about a $48 million basis. It’s fair to say that the interest expense for this transaction should be of which you are borrowing $15 million and $16 million, I know that TCS was at about a $15 million CapEx run rate. So would this imply that you would have incremental positive free cash flow changes and working capital in the $15 million positive impact again giving the assumptions that all the first year synergies were realized?

Yes. I mean I think when use free cash flow, I'll caution you that there is always differences between EBITDA and cash flow. So certainly if you just want to use EBITDA as a proxy, our view would be you will have $40 million some more of adjusted EBITDA plus their synergies. And then of course you have got the interest expense which I think Mark you even had in your report somewhere between $15 million and $17 million or so per year depending on what the final terms and conditions are and the final loan amount that we go with.

Okay. So that thought process is reasonable then?

I think so.

Segment and just compare it to the first quarter also?

Sure. Certainly our backlog in our Telecom segment is down, we went from $54.9 million in Q4 last year to $49 million. Our RF amplifier backlog actually grew given the expected growth that we have and we finished at $45.8 million and our Mobile Data COM as we run off the BFT-1 sustainment option is about $13.1 million for the quarter. So if you take $49 million, $45.8 million, $13.1 million, we finish with backlog of $107.9 million. I mean obviously we do expect to get the next phase if you will of the BFT stuff and our backlog is expected to grow as we get these large orders especially on the over-the-horizon side later in the year.

Okay. Question relative to TCS, I know that at least TCS had size that business opportunity as a $200 million or five year opportunity. For them which obviously would incorporate your modems. Do you have a sense of - think that as a better visibility revenues coming from that product line over the next six and 12 months.

So, I can't comment on how they have sized, you know I can tell you that based on the number of terminals we think that are going to be deployed, the number doesn't sound unreasonable, but that's about all I can tell you. They have been just the terminal, they do support maintenance, training and other things, so I'm I would have differ to them on the details of how they come up with that estimate at this point.

Mark, just to add to Stan's comments as well is, obviously when you combine the two companies. You will lose some of the duplicate revenue, because some other revenue will flow through both companies on a standalone basis, but with one company it will be one number, but obviously the revenue number will be lower, but the margin percentage will be higher. You will still retain the same profit, but one of the things we are still working through is, TCS as of fiscal year December 31, and we are [indiscernible], so the timing of some of things, we just need to kind of sort through, but I think I agree with Stan's comments.

Okay. Question relative to accounting, you mentioned that there was a probability that you were going to recast the way you report results. Would you assume that that would be done with reporting of your fourth fiscal quarter or do you assume that that may be done at the end of the April quarter?

Well it will really be dependent upon the timing of close, so if we do close in the March period our hope would be to get it done in the Q3 period, but we'll see if we could that there are some system of things we got to go through and we need to obviously finalize our decisions in terms of how the segments work, but that would be our goal.

Final question from me. Relative to the integration opportunities, your [attention] manufacturing facility has, I know especially like with the mobile data [indiscernible] almost set up to do [indiscernible] there is a contract manufacturer for outside opportunities in mobile data use them. Is there the opportunity to drive some significant efficiencies using that as a large manufacturing base that you could leverage TCS activities off of?

I would anticipate that the answer of that is yes. Obviously at the moment, TCS is outsourcing some things that we see as potentials to bring into in-house. So I think so, we haven't worked through the details obviously, I also think there is opportunities for us to provide components and other things which are currently not being purchased from us. So I think there is potential synergies. I can't quantify it for you yet, we just haven't got to that level of detail.

Okay. Thank you very much.

[Operator Instructions] Our next question is from Chris Quilty from Raymond James. Your line is open.

This is a little bit of a follow-on to Mark's question, but Stan could you give us perhaps your top two or three areas where you think there are operating synergies with TCS either on product line, customers or projects?

So there is the obvious ones right the public company costs and there are some obvious duplication and some of the corporate functions which are potential synergies. So once you get pass that then troposcatter is probably an easy one to look at, we are each marketing independently on troposcatter. So I think getting that together will provide synergy, we have access to some markets where TCS doesn't have marketing coverage necessarily. So I think there is synergies there. The other one I think that's pretty exciting, we've talked about the public safety stuff, the 911 call routing and next-gen and those sorts of things. We have customer relationships in a lot of places in the world with particularly mobile carriers that are potentials for us to provide entrees to TCS folks. So that to me looks like some good synergies. There is the manufacturing stuff we talked about, there is some of the engineering things that I think we can do for TCS that would provide some synergy as well.

Great. Great. On the Troposcatter, do you anticipate any issues there with Hart-Scott Rodino because I don't think other than Raytheon got a whole bunch of other companies out there offering solutions?

Yes. I do not, there are in fact several companies offering troposcatter modems, Raytheon is one, there is others outside of the U.S. and there is one or two other U.S. manufacturers as well. I don't think there is going to be an issue there.

Gotcha. On the RF Amplifier and in-flight connectivity opportunity, can you talk specifically about how you are sizing and attacking a market and what you are doing different in terms of product?

So the amplifier for that is very challenging technically. It has to be very compact. Obviously the technical performance has to be very good, but you have size, weight, power and other issues associated with mounting it structurally in the aircraft having it qualified for flight. So those are not just your father’s amplifiers, they are pretty technical. The efficiency is really where we think we have the advantage that's in terms of power output and in the package. So we are going to continue to do that. We are looking at other potential frequencies and other providers of the end system. So we expect that to be a good area for growth. Did that answer to your question?

I was going to ask a quick question for Mike. I know you haven’t yet done the purchase accounting, but do you have any sense of two things, what the split between good and intangibles might look like and just a clarification is it fair to assume the deal intangibles will probably amortized over like seven, eight year time frame?

Well we have not completed the analysis Chris and I would even say it’s very preliminary. I mean I have used a rule of form when I do my initial modeling and I almost say if you look at the net intangible book value of TCS today, you will find it almost all of the purchase price will be ascribed to either the intangibles or the goodwill bucket. So we are talking about a pretty large bucket that will be allocated to those two groupings. And then from a rule of thumb, yes I think if you just rule of thumb it for the time being at 50% go into intangibles and 50% go into goodwill. That's our initial straw that we're using for our modeling. Once we go through the process we will obviously adjust that and that could change significantly, it's just a [straw man] (ph) number. But yes, I think if you look at what the norm is and what acquisitions of the size and this type of technologies, I think if you look at a six or seven or eight year life that's probably good guess.

Gotcha and can you also talk about the deal of finance and I think you said you have at least an initial commitment for $400 million, how would you look to structure of long-term financing for the deal?

Sure, we have a $400 million of committed credit facility that we've entered into. It consist of two types of structures, a $250 million term loan and with the remainder being a revolving credit line. So the term loan will be pretty much filled up when we close the transaction, the remaining pieces is going to be what comes out of the revolver. We are looking at a few other things to see if it make sense to get lower interest cost, but we do think that the - we have a LIBOR base interest rate that we think is pretty reasonable. The total number will be in the fours, by the time we get so somewhere around 4.5% or something like that we will wind up with, but we are still trying work through some of the final details and final structuring and we will do that before close.

Gotcha. Thanks guys.

[Operator Instructions] And it appears we have no following questions at this time.

Great. Thanks again for joining us today. We will look forward to speaking with you again in March.

This does conclude today's program. You may now disconnect at any time.