Maria Salerno - Investor Relations Fred Kornberg - President and CEO Michael Porcelain - SVP and Chief Financial Officer.

Joe Nadol - J.P. Morgan Tyler Hojo - Sidoti & Company Mark Jordan - Noble Financial Chris Quilty - Raymond James.

Ladies and gentlemen, thank you for standing by. Welcome to Comtech Telecommunications Corp’s Second 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, March 7, 2014.

I would now like to turn the conference over to Ms. Maria Salerno of Comtech Telecommunications. Please go ahead..

Thank you, and good morning. Welcome to the Comtech Telecommunications Corp conference call for the second 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; 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. 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?.

Thanks Maria, and good morning everyone, and thank you for joining us on this call. As we announced yesterday afternoon we reported our second quarter results of $85.5 million in revenues, GAAP diluted EPS of $0.32 and adjusted EBITDAR of $15.5 million.

Although market conditions still remain difficult we’re very pleased with our second quarter financial results. During the quarter we benefited from increased revenues and profits as a result of our ongoing work on certain large over the horizon microwave contracts which were originally expected to occur later in the year.

On the other hand bookings in certain areas have been softer than expected in recent months. All things considered, we are maintaining our fiscal 2014 revenue guidance of $325 million to $345 million and we are maintaining our adjusted EBITDA guidance of $55 million to $59 million.

However, as a result of the ongoing repurchase of our common stock that we made during the last quarter. We are increasing our GAAP diluted EPS guidance to a range of $1.14 to the $1.26.

During the second quarter of fiscal 2014, we repurchased approximately 811,000 shares of our common stock at an aggregate cost of $25.5 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 $406 million of our common stock under our stock repurchase programs and we currently have approximately $44 million available for additional for repurchases pursuing to that our authorization.

In line of our long-term growth expectations our Board of Directors also approved a dividend for the third quarter of fiscal 2014 of $0.30 per common share. This dividend which is our 15th consecutive quarterly dividend is expected to be paid at May 30, 2014 to stockholders of record on May 7, 2014.

To date and since the inception of our dividend program, we have paid approximately $75.5 million of dividend and continue to believe our dividend program is an excellent way to return capital to our shareholders. Now let me turn it over to Mike Porcelain to provide a brief overview of our second quarter financial results.

And then I will return to talk more specifically about each of our 3 business segments..

Thanks, Fred, and good morning, everyone. I'll walk you through the Q2 results and provide some commentary on our updated fiscal 2014 business outlook. During Q2, we generated revenues of $85.5 million of which 31.2% were for U.S.

government end users, 57.5% were for international end users, with the remainder being for domestic, commercial end customers. Excluding net sales on our mobile data communication segment, Q2 2014 sales to U.S. government and customers were 25.7%.

Net sales in our Telecom Transmission segment were $56.5 million in Q2 of fiscal 2014 as compared to the $45.8 million we achieved in Q2 of last year, representing an increase of 23.4%. This significant increase was almost entirely driven by higher sales on our over-the-horizon microwave system product line.

First, let me talk about our Satellite Earth Station product sales which for Q2 of fiscal 2014 was slightly higher than the sales in Q2 of last year. Given the number of large contracts we have recently booked, our related backlog at the end of the second quarter was at its highest level on over two years.

For example, during Q2 of fiscal 2014, we received a $5.4 million order and signed a purchasing agreement with Harris Corporation against which we anticipate receiving additional orders for the supply of our advanced VSAT solutions. Our book-to-bill ratio for the quarter for this product line was slightly over 1.

However, recent customer order flows appears to be significantly impacted by volatility in market conditions particularly in emerging markets where many of our customers are located as well as the timing of certain large orders that have not yet come in.

For now, we are expecting market conditions to improve and are anticipating that order flow will increase from current levels. Ultimately, we expect that net sales on this product line in fiscal 2014 to be slightly higher than the level we achieved in fiscal 2013.

Sales of our over-the-horizon microwave systems in Q2 of fiscal 2014 were significantly higher than sales in Q2 of fiscal 2013, primarily related to performance on both our three year $58.6 million contract and our four year $57.4 million contract to design and supply over-the-horizon microwave systems and equipment for use in a North African government’s communication network.

The timing of performance and revenue recognition for our contracts are generally lumpy and fiscal 2014 will not be any different. Our second quarter of fiscal 2014 looks like it will be the peak quarter of sales in fiscal 2014 and our third quarter of fiscal 2014 will be significantly lower than the second quarter.

Net sales for this product line in the second half of fiscal 2014 are expected to be slightly lower than the first half of fiscal 2014. For the full year, we expect that over-the-horizon microwave system sales to be significantly higher as compared to fiscal 2013.

Net sales in our RF microwave amplifier segment were $22 million in Q2 of fiscal 2014 as compared to $20.4 million in Q2 of last year, an increase of 7.8%. We experienced a significant period over period and slight sequential quarterly increase in bookings in Q2 and our book to bill ratio for the second quarter of fiscal 2014 was slightly below 1.

Based on discussions with our customers, we believe that end markets for RF microwave amplifier products have stabilized and we're optimistic that bookings in the second half of fiscal 2014 will be significantly higher than the first half with a large majority of these bookings expected to shift in fiscal 2015.

Although overall market conditions remain difficult based on the current level of our backlog and the timing of orders we expect to receive, we expect sales on the segment in fiscal 2014 to be slightly higher than the level we achieved in fiscal 2013. Turning to our mobile data communications segment.

Sales in Q2 of fiscal 2014 were $6.9 million as compared to $8.4 million in Q2 of fiscal 2013, a decrease of 17.9%. This anticipated decrease is primarily attributable to a decline in BFT-1 sustainment sales to the U.S. Army. Sales in both periods include $2.5 million of revenue related to our annual $10 million BFT-1 intellectual property license fee.

As Fred will discuss in a bit we are expecting to receive a new BFT-1 sustainment contract by March 21, 2014. Based on our assessment and anticipated timing of performance related to expected BFT-1 sustainment orders sales of our mobile data communication products in the third quarter of fiscal 2014 will be lower than our most recent quarter.

For the year and as discussed on prior conference calls, we expect mobile data communications segment revenues to be significantly lower in fiscal 2014 as compared to fiscal 2013. Now let me walk you through our gross margin and operating expense line items and provide some operating metrics to give you some perspective on our results.

Our gross profit in Q2 of fiscal 2014 as a percentage of consolidated net sales was 43.7% versus the 43.2% we achieved in Q2 of last year. Our gross profit percentage this quarter reflects changes in overall sales mix when compared to prior periods.

Looking forward and despite all the various mix changes that are more thoroughly described in our Form 10-Q filed with the SEC yesterday afternoon, we believe gross profit as a percentage of consolidated net sales in fiscal 2014 and except for a slight dip in Q3 will be comparable to the percentage we achieved in fiscal 2013.

On the expense side, SG&A expenses were $16.3 million or 19.1% of Q2 of fiscal 2014 net sales as compared to the $15.4 million or 20.6% we achieved in Q2 of last year.

As a reminder, during Q2 of fiscal 2013, we recorded a benefit of $900,000 associated with a change in the fair value of a contingent earn out liability associated with Stampede technology and also recorded a benefit of $200,000 related to the reversal of previously accrued cost associated with the wind down of our micro satellite product line.

Excluding these amounts in Q2 of fiscal 2013 SG&A expenses would have been $16.5 million or 22.1% of sales. The decrease from 22.1% to 19.1% is primarily related to an increase in consolidated net sales in our ongoing efforts to contain cost.

In light of expected consolidated sales growth SG&A expenses in dollars are expect to be higher in fiscal 2014 as compared to fiscal 2013. SG&A expenses as a percentage of consolidated net sales of fiscal 2014 are expected to be comparable.

Research and development expenses were $8.3 million or 9.7% of consolidated net sales in Q2 of fiscal 2014 versus $9.3 million or 12.5% in Q2 of fiscal 2013. We expect that R&D expenses in dollars for the year will be lower than the amount we reported during fiscal 2013.

As a reminder both periods do not reflect customer funded R&D projects which approximated $3.6 million in Q2 of 2014 as compared to $800,000 in Q2 of last year. The increase in customer funded R&D projects is largely driven by our ATIP development work for the U.S. Navy.

Total stock based compensation expense which is recorded in our unallocated segment was $1.1 million for the second quarter of fiscal 2014 as compared to $800,000 for the second quarter of fiscal 2013. Amortization of intangibles was finalized as $1.6 million for both second quarter periods.

Consolidated operating income in Q2 of fiscal 2014 was $11.2 million or 13.1% of consolidated net sales as compared to $5.9 million or 7.9% in the second quarter of last year.

Based on the level and composition of sales that we expect to achieve in fiscal 2014, we anticipate that operating income as a percentage of consolidated net sales was slightly increased from the 10.8% we achieved in fiscal 2013.

Given expected product mix changes and the expected lumpiness of our sales, we expect operating income as a percentage of net sales in Q3 of fiscal 2014 to approximate 8% and we should speak for the year in Q4. For full year we are still targeting deliver operating income as a percentage of net sales of at least 11%.

Interest expense was $2 million for both the second quarter of fiscal 2014 and 2013, assuming our 3% convertible senior notes are converted, redeemed and repurchased in May of 2014, interest expense will decline in Q4 as compared to the first three quarters of fiscal 2013.

Interest income and other was $228,000 in the second quarter of fiscal 2014 compared to $315,000 last Q2 or second quarter of last year. Turning to income taxes.

Our GAAP effective tax rate for the second quarter of fiscal 2014 was 36.4% excluding the impact of any discrete tax items or estimated effective tax rate for fiscal 2014 is expected to be 36.5%. This rate reflects the expiration of the federal research and experimentation credit on December 31, 2013.

Adjusted EBITDA as defined at the end of our press release that we issued yesterday was $15.5 million in Q2 of fiscal 2014. Heading it all up on the bottom line and as Fred mentioned, we delivered GAAP diluted EPS of $0.32 for the quarter.

At January 31, 2014, our backlog was $168 million compared to $189.7 million at July 31, 2013 and $126.4 million at January 31, 2013. Our balance sheet remains strong. As of January 31, 2014, we had $318 million of cash and cash equivalents.

Cash flows from operating activities during the second quarter of fiscal 2014 were positive and we continue to expect to generate significant positive net cash from operating activities for fiscal 2014.

The ultimate amount, we generate will largely be dependent on the impact of timing associated with the overall sales efforts including our efforts related to our two large over-the-horizon microwave system contracts. Finally, before turning it back to Fred, I just wanted to provide two additional comments relating to our fiscal 2014 EPS guidance.

First, given the lumpiness of our expected sales on the timing of anticipated orders, we expect that Q3 consolidated sales will be south of $80 million before increasing significantly in Q4.

Second, our guidance does not reflect any additional stock repurchases that we may make pursuant to our share repurchase plan or any onetime items and assumes that our 3% convertible senior notes which have a May 1st put date and a May 5th call date are redeemed to repurchase for cash in May.

If the 3% convertible senior notes are converted into common stock in May 2014, our full year fiscal 2014 GAAP diluted EPS guidance would be reduced by approximately $0.08 to reflect the issuance of additional shares of common stock.

Either way, if the bonds convert are redeemed or repurchased in May 2014 that will save us about $6 million a year in annual interest expense. Our Board has not made decisions related to our call rate and if it does, we will make an appropriate announcement. Now let me turn it back to Fred, who will discuss our business and outlook in further detail.

Fred?.

Thanks Mike. At this point, I will discuss some of the growth drivers and recent developments in each of our three business segments, which will add some color regarding our updated outlook for the balance of the 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 were not considered possible.

Our Carrier-in-Carrier technology allows our modems to use satellite bandwidth over both transmit and receive links simultaneously thereby potentially doubling bandwidth efficiency. We continue to offer more Carrier-in-Carrier enabled modems every year.

And since this game changing technique was introduced during the economic downturn, we believe there is also a pent-up demand for this product offering, which should be realized once the economic conditions improve in a more meaningful way. We're increasingly excited about new product lines. One of them which is 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 and managed bandwidth technology.

By listening closely to our end customers, we have 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 about a year ago, we have begun to see our efforts pay-off.

In fact recently, we have seen certain TDMA users move away from that technology since many of their ultimate customers are demanding a more dedicated, reliable bandwidth and are willing to tolerate -- are unwilling to tolerate the latency issues associated with TDMA.

In fact just last week, we’ve made another announcement which further solidified our relationship with Harris CapRock. We have entered into an agreement which will provide our advanced VSAT solutions to some of Harris CapRock’s energy, maritime and government customers.

We also received the first order against this agreement for about $5.5 million and we’re proud of our relationship with Harris CapRock and expect it to grow in lockstep with their end user demands. Ultimately, we expect to receive additional significant orders soon to this agreement.

As you know, the majority of our commercial satellite earth station product sales are outside of the United States and certain of our international markets have continued to be impacted by macroeconomic conditions and in some cases, political and civil unrest.

Europe has been particularly impacted and in recent months, certain emerging markets in Latin America and Asia have also been hit hard, by anticipated changes in global central bank policies. As a result, satellite earth station bookings during the past couple of months have been softer than we expected. On the U.S.

government side of the satellite earth station product line, procurement of our products practically came to a dead stop in the middle of fiscal 2013. Congress’s agreement on an overall federal spending budget and to extend the debt limit should help to facilitate such a return to normalcy in the coming months.

In fact, we are seeing a lot of proposal activity for government terminal upgrades and are waiting some significant U.S. government related orders which we expect to receive before the end of fiscal 2014. Despite the overall downward pressure on government spending during the past year, we did receive a very significant contract from the U.S.

Navy with a potential value of almost $30 million which we will be developing and then manufacturing, the Advanced Time Division Multiple Access Interface Processor or otherwise known as ATIP for the Space and Naval Warfare Systems Command. This contract is strategically important to as it enters us into the protected MILSATCOM market.

So in the satellite earth station area, we have experienced economic, political, regulatory, and market specific headwinds for the past year. We have adjusted our operating expense levels accordingly while continuing to invest heavily in R&D.

As a result, we believe that we are nicely positioned to capitalize on market opportunities as conditions further stabilize and eventually improve. Turning to the component of our telecommunications transmission segment, we believe fiscal 2014 will be a better year for our tropo over-the-horizon business.

Anchored by very strong backlog, we see a significant increase in revenues over fiscal 2013. There are also additional large opportunities with our North African customer which we believe will materialize in the years ahead.

Beyond our traditional customer base, we are addressing and in some cases already have bid on large opportunities in the Middle East, Asia, South America and Africa. We are increasingly confident that one or more of these opportunities could result in sizable contract awards in our fiscal 2014 and 2015 year.

Our goal is to find the few large long term customers that can serve as significant and steady revenue contributors similar to our current North African end customers. On the U.S. government side of the tropo business, bookings have been very soft for the past year or so.

However, our tropo system is now undergoing additional network integration evaluation or as it’s called NIE testing by the U.S. Military, which could significantly increase the potential number of future deployable tropo units by standardizing the DoD on our product portfolio.

On the commercial front, we continue to receive orders from industry leading oil companies for tropo systems that are used in drilling and exploration platform.

Our optimism about our tropo business in fiscal 2014 and beyond is based on the substantial amount of backlog we have relating to our large end customer as well as significant additional and international opportunities that we have fit in the pipeline. And two, our government business has nowhere to go but up.

All-in-all, we remain confident that our telecommunications transmission segment will return to growth in fiscal 2014. Turning now to our RF microwave amplifier segment, here too we expect revenues to be slightly higher in fiscal 2014 as compared to fiscal 2013.

However, we are expecting to receive certain large awards before fiscal year end which should provide solid backlog going into our fiscal 2015. In traveling wave tube amplifier product line or TWTs; in December, we received our fund -- first order relating to WIN-T Increment 2 for about $7 million.

We’re optimistic that the FAB-T winning bidder will also be announced in the near future. We are the amplifiers provider to both the FAB-T finalists Boeing and Raytheon. And WIN-T and FAB-T programs are expected to provide us with multi-million dollar revenue streams for several years to come.

On a commercial side of the TWT product line, we see the broadband high throughput satellite market, most notably the Ka-band area and then direct-to-home TV market or DTH as very exciting growth opportunities for us.

We have sold our products into most of the large North American and European Ka-band platforms and are now bidding on the next generation platforms for the same customers, such as Hughes, with their Jupiter program and the ViaSat with ViaSat 2, as well as opportunities with new customers in new geographies.

The direct-to-home or DTH market is poised for dramatic growth in the next few years as broadcasters are looking to replace aged, bandwidth deficient klystron amplifiers in their existing networks with high power, more efficient broadband TWTs to support higher definition and ultra high definition program offerings.

In addition, these broadcasters as well other new broadcasters for the DTH market are looking for emerging markets as significant growth drivers in these same services as these services are rolled out to a brand new group of potential end users.

We believe that our product offerings would be uniquely positioned to serve these dynamic market opportunities. On the solid-state power amplifier side, our SSPA product line, our business has been dramatically impacted by the weak U.S. government spending for IED amplifiers.

We’ve also experienced delays in receipt to certain international SSPA orders as a result of the end customers being in the areas of the world that are now experiencing volatile political conditions and in some cases unrest. However, we signs that activity maybe heating up again in certain foreign markets.

And we remain optimistic that we will receive some sizable amplifier bookings in the second half of fiscal 2014. Although a smaller part of the SSPA business, our commercial product line service, the aviation and medical communities have continued to do well.

Much of our projected RF microwave amplifier sales for the remainder of fiscal 2014 are already in backlog. And similar to our telecommunications transmission segment, we have reduced operating expenses while at the same time, maintaining our R&D investments. As such we believe we’re well positioned to benefit as market conditions improve.

In our third segment, mobile data communications, the largest revenue contributor remains the sustainment work we’re performing for the U.S. Army under the BFT-1 contract.

These activities continue to be funded despite ongoing government spending pressures, which is a continuing intangible evidence of the important role our technology plays with the U.S. Army. We are providing these sustainment services pursuant to a 2 year contract which expires at the end of this month.

Under this contract, we received a $10 million annual fee with the Army’s ongoing use of our intellectual property, as well as just north of $10 million of engineering and other support services per year, which have billed on a cost-plus basis. Although we have not yet received the contract, we’ve been formally now notified by the U.S.

Army that it intends to awards us a new multiyear contract for BFT sustainment services including the $10 million annual IP. That will be effective when our existing contract ends at the end of this month. Our primary goal of the mobile data communications segment at this point continues to be to provide the U.S. Army with outstanding support.

And doing so, should position us well to participate in any next generation BFT platform if and when the U.S. Army pursues that [depth]. With that I would like to proceed to the question-and-answer part of our conference call.

Operator?.

(Operator Instructions). We’ll go first to Joe Nadol with J.P. Morgan. Please go ahead..

Thanks, good morning. So just on the -- and Fred thanks for all that commentary at the end on end market demand.

But just on the emerging market demand for earth stations, is this about currency, the volatility in particularly or is economic volatility in particular customers, is there any -- I know it’s a whole bunch of different things, but is there any one underlying condition that’s really kind of giving you a bit of a slowdown here?.

I think it’s a little of all that that you’ve mentioned. I think probably at the top of the list what we seem to see is a funding problem. As you probably realized a lot of the satellite earth station funding for Latin America, Africa comes from Europe. And as Europe goes, not only for Europe but for those two areas in particular, things slow down.

And that’s I think what we are experiencing right now. The kind of a slowdown I know Europe is going through -- I guess going into a stress test mode hopefully in the next few weeks and maybe that will reverse the trend, but that’s what we are seeing right now..

Okay. Yes, it’s a little -- it’s a change from last quarter a little bit and your numbers look -- your bookings certainly have been better. So I guess it’s a little surprising to hear that. Just….

I think just to add some more color….

Yes..

I think if you look at our bookings, if you look at the let’s say the last part of fiscal ‘13 and beginning of fiscal ‘14, we saw a very nice booking trend going into -- going kind of in the upward direction. And we kind of hit the bump in the road right now and bookings trend reversed itself in the second quarter and is kind of down.

This is not unusual; I mean it’s happened before. We were hoping that this trend would finally continue and some stability would come into this market, but it doesn’t appear that it’s just there yet. However, we feel that this trend will again reverse in the second half of this year and we are hoping that the bookings will kind of catch up.

We have a lot of various large programs in the satellite area that are in the pipeline, some that should have been booked in the second quarter and will hopefully be booked in the second half of the year, and some that may actually flowed into FY15..

Okay..

So, it’s difficult to tell on timing..

Okay, just one more detail on that.

Could you characterize I guess your average size order, are you more dependent on larger orders than you used to be, has it changed over time, just specifically in terms of commercial emerging market demand for earth stations?.

As far as earth stations are concerned, yes I think the problem that we are seeing right now is the large orders tend to moving to the right..

Okay. And then just one more from me, which is taking a look at balance sheet; obviously you guys have a couple of important dates coming up over the next couple of months for your convert.

I understand you not -- haven’t made any decisions yet and obviously it’s not all in your hands, because it’s in the hands of the [convert] holders to some degree as well.

But can you give us a sense of when you come out the other side of these dates here in May, what you think the appropriate capital structure for the companies should look like, should we be thinking about less of a cash balance than we have been carrying for the last several years or just give us some sense what you are thinking?.

Yes, a couple of comments Joe. We have about $44 million or so left of our buyback program, so I think there is really just simply two ways to really look at it is, we have as of January 31st, we had $317 million in cash.

So if you assume that the bonds you are going to be netted out, 317 minus 200, you are looking at a balance sheet of $117 million of cash. And when we do have a program of $44 million left to go, how fast we proceed against that that’s something that we'll take a look at it.

I think if you reverse that and you said the convertibles are going to convert and we'll have the cash, I think the 317 cash number would be in excess of what the company needs on a day-to-day basis outside of an acquisition need and we'll continue to look at buyback and dividend programs accordingly.

But it’s a decision that we'll have to make in the future; we haven't made any decisions yet..

Okay. Thank you..

We'll go next to Tyler Hojo with Sidoti & Company. Please go ahead..

Yes. Hi, good morning. Firstly, I just wanted to touch on the [OTH MH] opportunities, Fred I appreciate the color that you provided there. But maybe you could provide us a little bit of detail in regard to kind of the scope of these opportunities.

I guess you are thinking in terms of timing, sometime in the back half of this year maybe 2015?.

I think as you’ve probably seen the -- our systems, our tropo business is kind of lumpy and it comes in big chunks. I think one country that I will mention; I think we expect another $35 million order from our North African customer. Hopefully that would be the second half of the year, but most likely it will come into FY15.

We have about three or four other countries which I would rather not name, but where we have opportunities that go anywhere from $10 million for projects that start at $10 million and some go as high as about $200 million.

When and where those come in? I think the $10 million ones are likely to come in, in the second half or maybe early in the FY15 timeframe. The $200 million as you’ve seen in many of the large contracts from the emerging countries, take some time.

Now we may be wrong that may happen quicker than we think, but we're kind of saying that that’s a two -- that’s an FY15 situation.

So the real emphasis that we're having right now and doing right now is to try to have those countries that will start at $10 million eventually turn out to be like our North African customer and lead to $15 million chunk on an annual basis.

And so if we can turn another one or two of those countries into those kinds of customers, we would be very happy..

Okay, great. Thanks for that. And then just moving over to ATIP, could you just update us in terms of kind of delivery timing.

I think you guys were indicating kind of expected shipments on that program starting late this year, is that correct?.

Yes. I think it’s expected that it will shipped by the end of this fiscal year..

Okay, great. And may be just lastly from me, just in regard to the cash generation, free cash flows has been negative over the last couple of quarters. And I guess Mike you indicated in your prepared remarks expectations for a big ramp in the back half.

Could you just maybe go over some of the puts and takes in terms of achieving that goal?.

Sure. Tyler, just to put things in perspective, in Q4 of last year we did generate significant cash, our only quarter of negative cash flow was in Q1 of 2014, which is traditionally the quarter that we would have a negative cash flow. So, in Q2 we did generate I think about $1.5 million of significant positive cash flow.

So, when you look at the six months, call it a breakeven $54,000 worth of cash flow from operations. But we have started to generate cash in Q2 of 2014, and we have a few things on the balance sheet.

We made some large payments to some of our vendors that will kind of run off at the end of the year so we don’t have cash use, we’ll have the expense and you will start to see the balance sheet turnaround and we’ll generate cash flow I think what I would say, the same way I said last year, look at last year’s free cash flow from operations and given where we are in guidance, call it plus or minus..

Got it.

And actually just one more, Mike, do you have the backlog by segment here?.

Sure. As of Q2, our backlog in our telecom segment was $124.8 million; our backlog in RF was $39.5 million and our backlog in mobile data comm was only $3.7 million..

Perfect. I’ll hop back in the queue. Thanks a lot..

And we’ll go next to Mark Jordan with Noble Financial. Please go ahead..

Thank you. Two questions on the mobile data unit.

Number one, can you talk about [supporting] the Army to be around for the next generation is too bad in your view? And second question on mobile data is, once we back out of Afghanistan here later this year, will that impact the level of sort of $10 million plus services that you’re currently on an annualized run rate?.

I don’t think so, Mark. I think from what we understand from the U.S. Army, they expect to use BFT-1 through -- we’ve heard anywhere between 2018 and 2022. So I think we expect to continue it. Obviously if they leave Afghanistan, a number of units will obviously be put into the warehouse similar to what happened with Iraq.

But I think the sustainment services, whether it’s 100,000 units or whether it’s 20,000 units; they need those, they the bandwidth and they need the sustainment contract to operate. Specifically one of the large areas where we are very strong and still needed by the U.S. Army is the aviation part of the BFT-1 situation.

That area has just not been serviced yet by BFT-2 and it doesn’t look like it’s going to be serviced by BFT-2 for quite a while. So we are pretty strong in that area. That’s an area that needs some special transceiver work and specifically in the antenna area here because we have to kind of cut holes in the helicopters.

So I think, I guess too many words here, but I think we’re in for that ride for at least another five to almost eight years..

Okay. You mentioned that the U.S.

Army is utilizing your tropo equipment for NIE testing; is there other competitive units out in that NIE process or you’re the only vendor?.

From what we understand, last year’s NIE had a team of General Dynamics and Raytheon trying to compete with us in the NIE testing last year. Since that was not successful, what we’ve heard to-date and that could change tomorrow that the NIE testing right now on the tropo area is solely onto the Comtech [that’s worth it]..

Okay. Final question from me, you mentioned that you are expecting significant orders in the latter part of this fiscal year on RF.

Could you tell us the applications that these orders would relate to?.

As I mentioned, two major programs, actually three major programs that we are looking at for the second half are the WIN-T, the FAB-T and the Jupiter 2 system, ViaSat 2 kind of rolls into FY15, but I think if you look at the WIN-T, FAB-T and the Jupiter programs alone, I think you are looking at approximately $15 million of bookings just in the second half of the year for XICOM for instance..

Okay. Thank you very much..

And we will go next to Chris Quilty with Raymond James. Please go ahead..

Hey gentlemen.

I was hoping if you could give a little more color on the advanced VSAT product line, I know you had grown on the capabilities, but can you talk about where that position relative to other products in the market and does it have any kind of a distinct either price or margin profile relative to your traditional products?.

Well, it’s a new product, it’s really in that -- the advanced VSAT is really meant to kind of get us into the markets that we have not been in similar to what I mentioned in passing that, primarily the TDMA market. We have traditionally been in the SCPC, SCPC type of market. The TDMA market is something that we haven't entered into.

However, we think we've developed a product that actually solves some of the TDMA problems of for instance just latency and other performance parameters that makes that product superior to TDMA in certain applications. In a very small system basis, I think TDMA still probably is the better way to go.

But SCPC has been in the wideband; broadband, high data rate transmission system so is the advanced VSAT..

Got you. And switching gears on the tropo product line.

Are you looking at any enhancements or upgrade to the existing systems to try to increase the data rate or in some other way improve the attractiveness of it relative to your more traditional VSAT systems?.

You are talking about the tropo business, right?.

Right..

Okay. Obviously we've historically had probably the leading modem design in that area. We started out at 2 megabits, went to 8 megabits, went to 22 megabits right now. And obviously, I'm not going to give you a number, but we are in the laboratory producing some higher number.

So when and where we will actually introduce that, I think we haven't decided yet. But yes, we do have some additional firepower that we can introduce and make these systems even more efficient than they are today..

Okay, great. And final question, can you -- you haven’t talked about the M&A market and potential there either areas you are looking at or relative opportunities that you are seeing versus a year ago.

Can you just bring us a little bit up to speed?.

I think we're continuing to look at the M&A market, obviously as you probably know there is not many assets out there at least not now it is clear. We are continuously doing some M&A acquisitions of product lines and that’s more likely to happen let’s say in the second half of year there is some outstanding acquisition for large dollar value.

On the other hand, if something does pop-up and it make sense for us; we certainly will look at it..

Okay. Thank you very much..

Okay..

(Operator Instructions). It appears we have no further questions. I’d like to turn the conference back over to the speakers for any closing remarks..

Okay. Well, thank you very much for joining us today. And I guess we’ll speak again in three months. Thanks again..

This concludes today’s conference. You may now disconnect. And have a wonderful day..