COMTECH TELECOMMUNICATIONS CORP DE

Note: As used in this Annual Report on Form 10-K ("Form 10-K"), the terms "Comtech," "we," "us," "our" and "our Company" mean Comtech Telecommunications Corp. and its subsidiaries.

Note About Forward-Looking Statements

Certain information in this Form 10-K contains, and oral statements made by our representatives from time to time may contain, forward-looking statements. Forward-looking statements can be identified by words such as: "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "outlook," "intend," "likely," "may," "plan," "potential," "predict," "project," "seek," "should," "strategy," "target," "will," "would," and similar references to future periods. Forward-looking statements include, among others, statements regarding our expectations for the strategic alternatives process regarding our Terrestrial and Wireless Networks segment, our expectations for further portfolio-shaping opportunities, our expectations for other operational initiatives, the intended use of proceeds from the amended Credit Facility and new subordinated term loan facility, our expectations for completing further financing initiatives, our future performance and financial condition, our plans to address our ability to continue as a going concern, the plans and objectives of our management and our assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under our control which may cause our actual results, future performance and financial condition, and achievement of our plans and objectives of our management to be materially different from the results, performance or other expectations implied by these forward-looking statements. Factors that could cause actual results to differ materially from current expectations include, among other things: the outcome and effectiveness of the aforementioned strategic alternatives process regarding our Terrestrial and Wireless Networks segment, further portfolio-shaping opportunities, other operational initiatives, and the completion of further financing activities; our ability to access capital and liquidity so that we are able to continue as a going concern; our ability to implement changes in our executive leadership; the possibility that the expected synergies and benefits from our strategic activities will not be fully realized, or will not be realized within the anticipated time periods; the risk that acquired businesses will not be integrated successfully; impacts from and uncertainties regarding future actions that may be taken by Michael Porcelain and stockholders affiliated with him in furtherance of their nominations of director candidates for election at our Fiscal 2024 Annual Meeting of Stockholders; the possibility of disruption from acquisitions or dispositions, making it more difficult to maintain business and operational relationships or retain key personnel; the risk that we will be unsuccessful in implementing a tactical shift in our Satellite and Space Communications segment away from bidding on large commodity service contracts and toward pursuing contracts for our niche products and solutions with higher margins; the nature and timing of our receipt of, and our performance on, new or existing orders that can cause significant fluctuations in net sales and operating results; the timing and funding of government contracts; adjustments to gross profits on long-term contracts; risks associated with international sales; rapid technological change; evolving industry standards; new product announcements and enhancements; changing customer demands and/or procurement strategies and our ability to scale opportunities and deliver solutions to current and prospective customers; changes in prevailing economic and political conditions, including as a result of Russia's military incursion into Ukraine, the Israel-Hamas war and attacks in the Red Sea region; changes in the price of oil in global markets; changes in prevailing interest rates and foreign currency exchange rates; risks associated with our legal proceedings, customer claims for indemnification, and other similar matters; risks associated with our obligations under our credit facilities; risks associated with our large contracts; risks associated with supply chain disruptions; and other factors described in this and our other filings with the Securities and Exchange Commission ("SEC"). However, the risks described in this Form 10-K are not the only risks that we face. Additional risks and uncertainties, not currently known to us or that do not currently appear to be material, may also materially adversely affect our business, financial condition and/or operating results in the future. We describe risks and uncertainties that could cause actual results and events to differ materially in the "Risk Factors" (Part I, Item 1A of this Form 10-K), "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (Part II, Item 7 of this Form 10-K) and "Quantitative and Qualitative Disclosures about Market Risk" (Part II, Item 7A of this Form 10-K). We do not intend to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise, except as required by law.

Part I

Founded in 1967, we have a longstanding history of providing critical communications infrastructure technology and solutions to customers around the world. We serve two core end-markets: secure satellite and wireless communications via our Satellite and Space Communications segment, and next-generation 911 and public safety via our Terrestrial and Wireless Networks segment. In both cases, we are at the forefront of the technologies that solve extraordinarily complex communications problems – whether it’s a 911 call captured, routed, and data-enhanced to optimize the public safety result in situations where every second matters, or providing communications infrastructure that ensures people, businesses, and governments can connect anywhere on earth, under any conditions – including on the battlefield. We believe the demand for more, and better, connectivity is only growing as more devices become connected via the cloud, as growing constellations of communications satellites enable ubiquitous connectivity, and more data is created, shared and acted upon by increasingly powerful tools (including AI). This demand will come from government and commercials customers alike, as both private enterprises and government actors increasingly see the need for, and value of, next-generation communications capabilities.

Fiscal 2024 marked a year of change for our organization.

Our fiscal 2024 results were impacted by refinancing and liquidity headwinds, which in turn weighed on our supply chain, and lengthened product development and delivery cycles. Despite this commercial overhang, both of our business segments performed in terms of winning business. The Satellite and Space Communications segment secured competitive contracts on next-generation modem platforms with government customers, such as the Enterprise Digital Intermediate Frequency Multi-Carrier (“EDIM”) modem contract with the U.S. Army and a sole-source follow-on contract to support the U.S. Air Force and Army Anti-Jam Modem (“A3M”) initiative. We concluded a significant product R&D cycle, culminating with the launch in September 2024 of our new Digital Common Ground (“DCG”) portfolio of modems, which we believe will provide our Satellite and Space Communications segment with a significant technology advantage. The DCG family of products are expected to provide our customers with truly next-generation capabilities, including software defined, virtualized communications networks.

Additionally, over the course of fiscal 2024, we continued to review our operations, streamlining under-performing legacy products, lines of business and/or legacy growth initiatives that have not met our return expectations, or are no longer core to our strategic plans. For example, in November 2023, we announced the divestiture of our Power Systems Technology solid-state power amplifier product line to Stellant Systems, Inc. More recently, we re-evaluated our operations at our Basingstoke facility in the UK and determined the path to profitable operations was both unclear and expensive. As a result, we made the decision to exit this product line.

Our Terrestrial and Wireless Networks segment underwent a transformation of its own in fiscal 2024. Led by Jeff Robertson, who joined Comtech as Terrestrial and Wireless Networks’s President in March 2024, Terrestrial and Wireless Networks saw improved profitability and achieved a book-to-bill ratio of 1.70x in fiscal 2024. The segment also delivered a strong win rate for major public safety projects, as evidenced through more than doubling year-over-year bookings of orders for next-generation solutions. The Terrestrial and Wireless Networks segment recorded multiple key wins, including multi-year renewals for maintenance of NG-911 systems with longstanding customers, such as the Commonwealth of Massachusetts, the State of Washington and the North Central Texas Emergency Communications District.

Comtech exited fiscal 2024 with a record funded consolidated backlog of $798.9 million.

Amended Credit Agreement and New Subordinated Term Loan Facility

While revenue generation was healthy, and we were able to grow our backlog, our Adjusted EBITDA in the fourth quarter of fiscal 2024 was significantly below expectations primarily due to underperformance in our Satellite and Space Communications segment, causing us to enter into an amendment to our credit facility, dated June 17, 2024. Among other things, the amendment waives certain defaults or events of default in connection with certain covenants, including the Net Leverage Ratio and Fixed Charge Coverage Ratio covenants for the fourth quarter of fiscal 2024.

Additionally, the amendment added a consent right that limits our borrowing capacity under the revolver portion of our credit facility. To eliminate the event of default, address the reduced borrowing capacity and bolster liquidity, we entered into a new $25.0 million subordinated unsecured term loan facility with the existing holders of our convertible preferred stock. Additional information related to the amended credit facility and new subordinated unsecured term loan facility can be found in a Form 8-K that was filed with the Securities and Exchange Commission ("SEC") on October 17, 2024, as well as throughout this Form 10-K.

Transformation Strategy to Become a Pure-Play Satellite and Space Communications Company

At the beginning of fiscal 2024, we made a commitment to our shareholders to be a more forward-looking organization. To that end, on October 17, 2024, we announced a transformation strategy to re-shape our Company as a pure-play satellite and space communications company, which we believe will unlock, create and deliver value to our shareholders over time. Ongoing and future actions supporting this transformation strategy include:

•An exploration of strategic alternatives for our Terrestrial and Wireless Networks segment, which is well underway;

•The pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus; and

•The implementation of additional operational initiatives to achieve profitable results from operations and to align our Company's go-forward cost structure with a pure-play focus on satellite and space communications.

In combination, we expect these three complimentary initiatives to create a pure-play leader in a large and growing market. As a U.S.-based provider of modems and high-power amplifiers, and a market leader in troposcatter technologies, we have a history of delivering mission-critical satellite and communications solutions for government and commercial customers. Our goal is to create a competitive, focused and efficient business delivering sustainable and profitable growth while providing customers with best-in-class satellite and space communications infrastructure solutions.