Issue Open Letter to Comtech Stockholders Advocating for an Independent Evaluation of Strategic Options for Comtech’s 911 Public Safety Business, the Appointment of an External CEO & COO, and Other Initiatives to Enhance Stockholder Value
Dear Fellow Stockholders:
Our decision to issue this public letter stems from our ongoing commitment to the success of Comtech. After much thought and diligence, we have taken this action to enhance value for all of Comtech’s stakeholders, including, stockholders, employees, customers, and partners.
We are deeply familiar with the Comtech business and are confident that there are significant opportunities to enhance stockholder value through focused strategic actions under the leadership of a new board of directors.
We are fully committed to Comtech’s future success and directly aligned with our fellow common stockholders. Accordingly, Mike has nominated a slate of eight highly qualified director candidates for election to the Board at the upcoming Fiscal 2024 Annual Meeting of Stockholders. The nominees bring a blend of knowledge, expertise, and relevant industry experience that we believe will be invaluable to Comtech’s future. More detailed information about these director candidates is provided below and can be found in a Schedule 13D that was filed with the SEC on Friday, September 20, 2024.
Prior to the March 2024 termination of the CEO and other recent leadership changes, we (and others) reached out to the Board multiple times, offering help in various capacities. We ultimately met with several members of the Board. We offered our operational expertise aimed at increasing profitability, providing suggestions and advice on several topics, including offering to assist with refinancing efforts and in the search for a new CEO. We proposed several disclosures the company should include in its upcoming Form 10-K, particularly concerning all transactions with preferred stockholders, Credit Facility lenders, and related parties. At the suggestion of several stockholders and Wall Street analysts, Mike even offered to return as CEO without cash compensation, aligning his interests solely with common stockholders.
We ask the Board to follow the advice we have given them until new directors are elected.
Our Recommendations
In addition to the guidance we’ve shared privately with the existing Board, we believe the following are critical to Comtech’s future success, and our Nominees are committed to executing them if elected to the Board:
Leadership Change Disclosures: Disclose the specific details and circumstances surrounding the March 2024 CEO termination for cause in the upcoming Form 10-K to be filed with the SEC. Additionally, disclose any internal control and governance changes implemented.
CEO & COO Search Process: Conduct a thorough and transparent search for both an external CEO with relevant industry expertise, considering a wide range of qualified candidates. Many years ago, the Interim CEO worked at Comtech under our direction. We request to meet with the Interim CEO and any current candidates to assess their qualifications and capabilities. We believe a newly elected board should meet with the final list of candidates and appoint the permanent CEO as well as a new COO, who just resigned.
Evaluate Strategic Options: Assess the effectiveness and viability of current strategic initiatives, including the “One Comtech” and “Evoke” strategies. We recommend renaming the “Terrestrial & Wireless Networks” segment to “911 Public Safety” to better highlight its value. As discussed further below, we recommend an independent evaluation of strategic options for Comtech’s 911 Public Safety business.
Assess Capital Structure & Financing: Disclose in upcoming SEC filings detailed information on recent financing activities, including details on costs and the valuation of warrants issued both to the lenders and preferred stockholders. Discuss the Board’s oversight process and provide third-party benchmarks for comparable transactions.
Enhance Core Business Units: Focus on key product lines and markets where Comtech has established strengths, such as its satellite and troposcatter product lines, to drive growth and increase profitability.
Optimize Operational Efficiency: Evaluate corporate costs and align resources with strategic priorities to enhance operational efficiency and support sustainable growth. Assess the X/Y antenna product line and evaluate potential partnership opportunities to continue to participate in the LEO/MEO market. Develop and retain in-house talent rather than engaging outside consultants.
Invest in Innovation: Renew focus on research and development to foster genuine innovation within Comtech’s product offerings. Such a focus is crucial for maintaining a competitive advantage and fostering long-term growth within the Company.
Establish Targeted Profit Centers: Reintroduce independent business units for product lines focused on global commercial sales and government clients to maximize market opportunities. Reinstating this strategy could significantly enhance financial performance and we believe would be well received by customers.
Ensure Consistency in SEC and Marketing Communications: Provide clear and consistent disclosures to stockholders in public statements and regulatory filings.
Call to Evaluate Strategic Alternatives for the 911 Public Safety Business
During our communications with the Board, we have recommended exploring strategic alternatives for the 911 Public Safety business. We believe a carefully planned and well-executed sale process, similar to Rave Mobile Safety, Inc.’s $553.0 million sale to Motorola, could unlock substantial stockholder value. Proceeds from the sale could be used to eliminate all long-term debt and redeem the existing outstanding preferred stock.
We have consulted with a leading industry-specific investment banking firm and spoken with potential buyers. Based on our well-informed analysis, if a bona fide sale process were conducted, we believe that Comtech’s 911 Public Safety business, which is significantly larger than Rave’s, could achieve a sale price well in excess of $553.0 million.
We believe that such an evaluation process would benefit from the oversight of our Nominees once elected at the 2024 Annual Meeting of Stockholders.
TheFutureComtech.com
We are excited to announce that we have created a new website at TheFutureComtech.com, where you can send us your thoughts. Soon, you’ll be able to stay-up to-date on what we have to say, and we will also make it easy to access important information including our SEC filings.
Stay tuned for the official launch – we can’t wait to share it with you.
Conclusion
We believe the recommendations we made to the Board and the election of the new director candidates listed at the end of this letter are important for positioning Comtech for long-term success and maximizing stockholder value.
As dedicated stakeholders and former leaders of Comtech, we stand ready to assist the Company and help it achieve its full potential. We appreciate the engagement of many stockholders and other stakeholders who share our commitment to Comtech’s success.
We welcome the opportunity to engage in constructive dialogue with the Board and management to collaboratively develop strategies that are in the best interests of all stockholders.
Sincerely,
Fred Kornberg
Fellow Stockholder and Former CEO and Chairman of the Board
Michael Porcelain
Fellow Stockholder and Former CEO, CFO, President, COO and Director
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