COMTECH TELECOMMUNICATIONS CORP DE

Previous wording

Certain information in this Quarterly Report on Form 10-Q 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 our strategic alternatives process, our expectations for further portfolio-shaping opportunities, our expectations for other operational initiatives, the intended use of proceeds from the Credit Facility and Subordinated Credit 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, 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 activist 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 con…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain information in this Quarterly Report on Form 10-Q 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 our strategic alternatives process, our expectations for further portfolio-shaping opportunities, our expectations for other operational initiatives, the intended use of proceeds from the Credit Facility and Subordinated Credit 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, 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 activist 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 con…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We consider certain accounting policies to be critical due to the estimation process involved in each.

Current wording

We consider certain accounting estimates to be critical due to the estimation process involved in each.

Previous wording

Impairment of Long-Lived Assets, Including Goodwill. As of October 31, 2024, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $204.6 million (of which $30.5 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Terrestrial and Wireless Networks segment). Additionally, as of October 31, 2024, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $188.2 million (of which $45.5 million relates to our Satellite and Space Communications segment and $142.7 million relates to our Terrestrial and Wireless Networks segment). For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our Satellite and Space Communications and Terrestrial and Wireless Networks segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values. During our first quarter of fiscal 2025, we recorded a $79.6 million non-cash impairment charge in our Satellite and Space Communications segment related to long-lived assets, including goodwill. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (16) - Long-lived Assets, including Goodwillfor further information. Ongoing and future actions supporting our transformation strategy could result in a material impairment of our goodwill and/or intangible assets.

Current wording

Impairment of Long-Lived Assets, Including Goodwill. As of January 31, 2025, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $204.6 million (of which $30.5 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Terrestrial and Wireless Networks segment). Additionally, as of January 31, 2025, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $183.2 million (of which $44.1 million relates to our Satellite and Space Communications segment and $139.1 million relates to our Terrestrial and Wireless Networks segment). For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our Satellite and Space Communications and Terrestrial and Wireless Networks segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values. During our first quarter of fiscal 2025, we recorded a $79.6 million non-cash impairment charge in our Satellite and Space Communications segment related to long-lived assets, including goodwill. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (16) - Long-lived Assets, including Goodwillfor further information. Ongoing and future actions supporting our transformation strategy could result in a material impairment of our goodwill and/or intangible assets.

Previous wording

As it relates to software developed for the purpose of internal-use (e.g., hosted "SaaS" applications within our Terrestrial and Wireless Networks segment), costs capitalized primarily consist of direct labor and third-party vendor costs associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces. Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which we expect to benefit from the use of that software. For the three months ended October 31, 2024 and 2023, capitalized internal-use software costs were $1.0 million and $0.6 million, respectively. Capitalized internal use software costs are amortized once the software is placed in service on the straight-line method over the estimated useful life of the software, which is generally three years.

Current wording

As it relates to software developed for the purpose of internal-use (e.g., hosted "SaaS" applications within our Terrestrial and Wireless Networks segment), costs capitalized primarily consist of direct labor and third-party vendor costs associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces. Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which we expect to benefit from the use of that software. For the three months ended January 31, 2025 and 2024, capitalized internal-use software costs were $0.5 million and $1.0 million, respectively. For the six months ended January 31, 2025 and 2024, capitalized internal-use software costs were $1.5 million and $1.6 million, respectively. Capitalized internal use software costs are amortized once the software is placed in service on the straight-line method over the estimated useful life of the software, which is generally three years.

Previous wording

Provisions for Excess and Obsolete Inventory. We record a provision for excess and obsolete inventory based on historical and projected usage trends. Other factors may also influence our provision, including decisions to restructure or exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued, we would be required to recognize such costs in our financial statements at the time of such determination. Any such charge could be material to our results of operations and financial condition. As discussed in Part I. - Financial Information - Item 1. - Note (8) - Inventories, in connection with our initiatives to transform our Company (e.g., reevaluating our business plans to identify opportunities to focus future investment on our most strategic, high-margin revenue opportunities), during the three months ended October 31, 2024, we recorded a non-cash charge of $11.4 million within Cost of Sales on our Condensed Consolidated Statement of Operations. Such non-cash charge related to the write down of inventory associated with approximately 70 products within our satellite ground infrastructure product line that were either discontinued or being de-emphasized going forward. Such non-cash charge also included the write down of inventory associated with the CGC Divestiture, which was determined during the first quarter of fiscal 2025 to no longer be salable.

Current wording

Provisions for Excess and Obsolete Inventory. We record a provision for excess and obsolete inventory based on historical and projected usage trends. Other factors may also influence our provision, including decisions to restructure or exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued, we would be required to recognize such costs in our financial statements at the time of such determination. Any such charge could be material to our results of operations and financial condition. As discussed in Part I. - Financial Information - Item 1. - Note (8) - Inventories, in connection with our initiatives to transform our Company (e.g., reevaluating our business plans to identify opportunities to focus future investment on our most strategic, high-margin revenue opportunities), during the first quarter of fiscal 2025, we recorded a non-cash charge of $11.4 million within Cost of Sales on our Condensed Consolidated Statement of Operations. Such non-cash charge related to the write down of inventory associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued. Such non-cash charge also included the write down of inventory associated with the CGC Divestiture, which was determined during the first quarter of fiscal 2025 to no longer be salable.

Previous wording

Fiscal 2025: First Quarter Results and Business Outlook

Current wording

Fiscal 2025: Second Quarter Results and Business Outlook

Previous wording

Financial results for the first quarter of fiscal 2025 include:

Current wording

Financial results for the second quarter of fiscal 2025 include:

Previous wording

•GAAP EPS net loss of $5.29 and Non-GAAP EPS net loss of $1.27;

Current wording

•GAAP EPS net loss of $0.76 and Non-GAAP EPS net loss of $0.35;

Previous wording

•Adjusted EBITDA loss (a Non-GAAP financial measure discussed below) of $19.4 million, compared to Adjusted EBITDA income of $0.3 million, or 0.2% of consolidated net sales for the fourth quarter of fiscal 2024 and $18.4 million, or 12.1% of consolidated net sales for the first quarter of fiscal 2024;

Current wording

•Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $2.9 million, or 2.3% of consolidated net sales, compared to an Adjusted EBITDA loss of $19.4 million for the first quarter of fiscal 2025 and Adjusted EBITDA of $15.1 million, or 11.3% of consolidated net sales, for the second quarter of fiscal 2024;

Previous wording

•New bookings (also referred to as orders) of $127.9 million, representing a quarterly book-to-bill ratio of 1.10x (a measure defined as bookings divided by net sales);

Current wording

•New bookings (also referred to as orders) of $79.4 million, representing a quarterly book-to-bill ratio of 0.63x (a measure defined as bookings divided by net sales);

Previous wording

•Backlog of $811.0 million as of October 31, 2024, compared to $798.9 million as of July 31, 2024 and $695.9 million as of October 31, 2023;

Current wording

•Backlog of $763.8 million as of January 31, 2025, compared to $798.9 million as of July 31, 2024 and $680.1 million as of January 31, 2024;

Previous wording

•Revenue visibility of approximately $1.6 billion. We measure this revenue visibility as the sum of our $811.0 million of funded backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders;

Current wording

•Revenue visibility of approximately $1.6 billion. We measure this revenue visibility as the sum of our $763.8 million of funded backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders; and

Previous wording

•Cash flows used in operating activities were $21.8 million, due primarily to a decrease in net sales and gross profit during the more recent quarter, in addition to the significant increase in the overall level of contract assets (i.e., unbilled receivables) in fiscal 2024 related to our progress on large, long-term "over-time" contracts awarded to us by certain U.S. government and international customers, as well as the timing of payments to our suppliers as we execute on our backlog. As experienced in the latter part of fiscal 2024, we expect the level of our unbilled receivables to decline throughout fiscal 2025, for instance, as we invoice our U.S. government and domestic customers upon physical delivery of products or the achievement of specified contractual milestones. Additionally, cash flows used in operating activities during the more recent quarter include $5.8 million in aggregate payments for restructuring costs, including severance, CEO transition, proxy solicitation and strategic emerging technology costs for next-generation satellite technology.

Current wording

•Cash flows used in operating activities were $0.2 million. Excluding $5.6 million in aggregate payments for restructuring costs, including severance, CEO transition costs and proxy solicitation costs, cash flows provided by operating activities during the more recent quarter would have been $5.4 million.

Previous wording

Non-GAAP financial measures discussed above are reconciled to the most directly comparable GAAP financial measures in the table included in the below section “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended October 31, 2024 and 2023.”

Current wording

Non-GAAP financial measures discussed above are reconciled to the most directly comparable GAAP financial measures in the table included in the below section “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended January 31, 2025 and 2024” and “Comparison of the Results of Operations for the Six Months Ended January 31, 2025 and 2024.”

Previous wording

In September 2023, we were awarded a large, multi-year GFSR contract by the U.S. Army with a total potential value of $544.0 million. Through this program, we would provide ongoing communications and IT infrastructure support for the U.S. Army, Air Force, Navy, Marine Corps and NATO. The incumbent protested (and lost) the award of the contract to Comtech several times. In November 2024, the most recent protest had been decided in our favor; however, shortly thereafter, the incumbent once again protested the matter and the award remains under protest.

Current wording

In September 2023, we were awarded a large, multi-year GFSR contract by the U.S. Army with a total potential value of $544.0 million. Through this program, we would provide ongoing communications and IT infrastructure support for the U.S. Army, Air Force, Navy, Marine Corps and NATO. The incumbent protested (and lost) the award of the contract to Comtech several times. We learned on March 12, 2025, that the Government Accountability Office had upheld the most recent protest by the incumbent; we have taken the matter under review pending receipt of further details.

Previous wording

During the three months ended October 31, 2024, we were awarded in excess of $16.0 million of funded orders calling for the supply of VSAT equipment and related services for the U.S. Army. In November 2024, the follow-on contract (referred to as "VSAT IV") was not awarded to Comtech; however, we protested the matter and our protest remains pending.

Current wording

•in excess of $2.0 million in funded orders calling for the supply of Very Small Aperture Terminal (“VSAT”) equipment and related services for the U.S. Army (in November 2024, the follow-on contract, referred to as "VSAT IV," was not initially awarded to Comtech; a decision reaffirmed by the U.S. Army on March 12, 2025; we are in the process of reviewing potential remedies); and

Previous wording

As it relates to our troposcatter product line, throughout most of fiscal 2024, we experienced elevated levels of unbilled receivables due to the timing of our performance and billings related to certain large U.S. government and international customer contracts. During the first quarter of fiscal 2025, we maintained deliveries of next-generation troposcatter terminals related to our U.S. Marine Corps and U.S. Army contracts, contributing to a meaningful reduction of our consolidated unbilled receivables (before allowances for doubtful accounts), from $123.7 million at July 31, 2024 to $111.7 million at October 31, 2024. In December 2024, however, we received a notice from our prime contractor to stop work associated with the U.S. Marine Corps contract. While information is limited at this point in time, we believe the end customer may be considering a possible termination of the contract, in whole or in part. As of December 31, 2024, our unbilled receivables related to the U.S. Marine Corps contract approximated $10.8 million. Future results of operations related to our troposcatter solutions product line will depend on the nature, timing and amounts associated with resolving this matter.

Current wording

As it relates to our troposcatter product line, throughout most of fiscal 2024, we experienced elevated levels of unbilled receivables due to the timing of our performance and billings related to certain large U.S. government and international customer contracts. During the six months ended January 31, 2025, we maintained deliveries of next-generation troposcatter terminals related to our U.S. Marine Corps and U.S. Army contracts, contributing to a meaningful reduction of our consolidated unbilled receivables (before allowances for doubtful accounts), from $123.7 million at July 31, 2024 to $86.1 million at January 31, 2025. In December 2024, however, we received a notice from our prime contractor to stop work associated with the U.S. Marine Corps contract. While information remains limited at this point in time, we believe the end customer may be considering a possible termination of the contract, in whole or in part. As of February 28, 2025, our unbilled receivables related to the U.S. Marine Corps contract approximated $9.7 million. Future results of operations related to our troposcatter solutions product line will depend, in part, on the nature, timing and amounts associated with resolving this matter.

Previous wording

During the first quarter of 2025, we were pleased to have been awarded the following:

Current wording

During the second quarter of fiscal 2025, we were pleased to have been awarded the following:

Previous wording

•Renewal of critical enhanced 911 call routing services, valued in excess of $30.0 million, for one of the largest wireless carriers in the U.S.;

Current wording

•various funded orders, in excess of $3.0 million, primarily for location and maintenance and support services for one of the largest wireless carriers in the U.S.;

Previous wording

•Incremental funding related to our NG-911 deployment in South Carolina in excess of $1.0 million. During the quarter, we were successful in expanding the number of PSAPs and counties being serviced by our solutions within the state.

Current wording

•incremental funding related to our NG-911 deployment in South Carolina, valued in excess of $2.0 million (during the quarter, we were again successful in expanding the number of PSAPs and counties being serviced by our solutions within the state);

Previous wording

In November 2024, we announced that our Board of Directors (the “Board”) unanimously elected Kenneth H. Traub as the Executive Chairman of our Company. Mark Quinlan stepped down from his role as Chairman of the Board and will continue serving on the Board. Former U.S. Army Chief Information Officer, Lieutenant General (Retired) Bruce T. Crawford, was also elected to serve as Lead Independent Director. Additionally, the Board has named Mr. Traub as President and Chief Executive Officer, effective as of January 13, 2025, in addition to his current role as Chairman, replacing Mr. Ratigan effective immediately. Pursuant to his separation agreement and release, Mr. Ratigan resigned from his position as President and Chief Executive Officer and as a director.

Current wording

In November 2024, we announced that our Board of Directors (the “Board”) unanimously elected Kenneth H. Traub as the Executive Chairman of our Company. Additionally, the Board named Mr. Traub as President and Chief Executive Officer, effective as of January 13, 2025.

Previous wording

In November 2024, we announced that our Board entered into a cooperation agreement with Fred Kornberg, Michael Porcelain, and Oleg Timoshenko (the “Investor Group”). Pursuant to the agreement: we appointed Michael Hildebrandt, Senior Investment Professional at Freshford Capital Management, to the Board, effective immediately; the Board will appoint an additional new independent director mutually acceptable to both our Board and the Investor Group (the “Additional Director”); two of our current directors will not stand for reelection at the 2024 Annual Meeting; the Investor Group will support our slate of directors for election at the 2024 Annual Meeting and will withdraw its nomination of eight directors for election at the meeting; the Investor Group has agreed to customary standstill restrictions and voting commitments until the nomination deadline for our Fiscal 2025 Annual Meeting of Stockholders, or until the nomination deadline for our Fiscal 2026 Annual Meeting of Stockholders if we nominate Mr. Hildebrandt and the Additional Director for reelection at the Fiscal 2025 Annual Meeting of Stockholders.

Current wording

In November 2024, we announced that our Board entered into a cooperation agreement with certain investors (the “Investor Group”). Pursuant to the agreement, we appointed Michael Hildebrandt, Senior Investment Professional at Freshford Capital Management, to the Board, effective immediately. Also, among other things: the Board will appoint an additional new independent director mutually acceptable to both our Board and the Investor Group (the “Additional Director”); and the Investor Group agreed to customary standstill restrictions and voting commitments until the nomination deadline for our Fiscal 2025 Annual Meeting of Stockholders, or until the nomination deadline for our Fiscal 2026 Annual Meeting of Stockholders if we nominate Mr. Hildebrandt and the Additional Director for reelection at the Fiscal 2025 Annual Meeting of Stockholders.

Previous wording

During the second quarter of fiscal 2025, business conditions continue to be challenging, and the operating environment is largely unpredictable, due to many factors including, but not limited to: uncertainties related to our recently announced transformation strategy and associated actions we may take; uncertainties related to our ability to operate as going concern, fluctuations in interest rates; inflation; continuing resolutions associated with the U.S. Federal budget; repercussions of military conflicts in Russia, Ukraine and the Middle East; and a potential global recession. Order and production delays, contract protests and/or terminations, delayed cash collections from customers, disruptions in component availability and/or quality, increased pricing both for labor and parts, lower levels of factory utilization and higher logistics and operational costs resulting from such conditions have or could impact our business as well. In light of these business conditions and resulting challenges, we anticipate variability from time to time as we move through our transformation strategy. Accordingly, we are not providing forward-looking guidance on a GAAP or Non-GAAP basis.

Current wording

During the second quarter of fiscal 2025, business conditions continue to be challenging, and the operating environment is largely unpredictable, due to many factors including, but not limited to: uncertainties related to our recently announced transformation strategy and associated actions we may take; uncertainties related to our ability to operate as a going concern; fluctuations in interest rates; inflationary pressures, including those related to actual or potential tariffs imposed on our supply chain; continuing resolutions associated with the U.S. Federal budget, as well as reduced or eliminated spending by the U.S. government as a result of the formation of the Department of Government Efficiency (the "DOGE"); repercussions of military conflicts in Russia, Ukraine and the Middle East; and a potential global recession. Order and production delays, contract protests and/or terminations, delayed cash collections from customers, disruptions in component availability and/or quality, increased pricing both for labor and parts, lower levels of factory utilization and higher logistics and operational costs resulting from such conditions have or could impact our business as well. In light of these business conditions and resulting challenges, we anticipate variability from time to time as we move through our transformation strategy. Accordingly, we are not providing forward-looking guidance on a GAAP or Non-GAAP basis.

Previous wording

Additional information related to our Business Outlook for Fiscal 2025 and a definition and explanation of Adjusted EBITDA is included in the below section Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended October 31, 2024 and 2023.

Current wording

Additional information related to our Business Outlook for Fiscal 2025 and a definition and explanation of Adjusted EBITDA is included in the below section Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended January 31, 2025 and 2024 and Comparison of the Results of Operations for the Six Months Ended January 31, 2025 and 2024.

Previous wording

Sales to U.S. government customers include sales to the DoD, intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. For the three months ended October 31, 2024 and 2023, except for the U.S. government, there were no customers that represented 10% or more of consolidated net sales. International sales for the three months ended October 31, 2024 and 2023 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $18.8 million and $37.2 million, respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented 10% or more of consolidated net sales for the three months ended October 31, 2024 and 2023.

Current wording

Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. For the three months ended January 31, 2025 and 2024, except for the U.S. government, there were no customers that represented 10% or more of consolidated net sales. International sales for the three months ended January 31, 2025 and 2024 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $24.2 million and $34.3 million, respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented 10% or more of consolidated net sales for the three months ended January 31, 2025 and 2024.

Previous wording

Our Terrestrial and Wireless Networks segment's gross profit, in dollars, increased and, as a percentage of related segment net sales, decreased for the three months ended October 31, 2024 in comparison to the three months ended October 31, 2023. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above.

Current wording

Our Terrestrial and Wireless Networks segment's gross profit, in dollars and as a percentage of related segment net sales, for the three months ended January 31, 2025 decreased in comparison to the three months ended January 31, 2024. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $51.6 million and $32.7 million for the three months ended October 31, 2024 and 2023, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 44.6% and 21.5% for the three months ended October 31, 2024 and 2023, respectively.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $33.8 million and $30.3 million for the three months ended January 31, 2025 and 2024, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 26.7% and 22.6% for the three months ended January 31, 2025 and 2024, respectively.

Previous wording

Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the three months ended October 31, 2024 and 2023, customers reimbursed us $1.5 million and $4.0 million, respectively, which is not reflected in the reported research and development expenses but is included in net sales with the related costs included in cost of sales.

Current wording

Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the three months ended January 31, 2025 and 2024, customers reimbursed us $4.6 million and $2.5 million, respectively, which is not reflected in the reported research and development expenses but is included in net sales with the related costs included in cost of sales.

Previous wording

In addition to increases in customer-funded research and development activities in recent years, during the three months ended October 31, 2024 and 2023, we also experienced an increase in engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $2.1 million and $1.1 million, respectively. As a result of these trends, a more focused prioritization of resources across various programs and the impact of prior reductions in force announced in fiscal 2023, our research and development expenses for financial reporting purposes has significantly decreased more recently as compared to historical periods.

Current wording

In addition to increases in customer-funded research and development activities in recent years, during the three months ended January 31, 2025 and 2024, we also experienced an increase in engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $1.3 million and $1.8 million, respectively. As a result of these trends, a more focused prioritization of resources across various programs and the impact of prior reductions in force announced in fiscal 2023, our research and development expenses for financial reporting purposes has significantly decreased more recently as compared to historical periods.

Previous wording

Amortization of Intangibles. Amortization relating to intangible assets with finite lives for the three months ended October 31, 2024 and 2023 was $6.6 million (of which $3.0 million was for the Satellite and Space Communications segment and $3.6 million was for the Terrestrial and Wireless Networks segment) compared to $5.3 million (of which $1.7 million was for the Satellite and Space Communications segment and $3.6 million was for the Terrestrial and Wireless Networks segment), respectively. The increase in our Satellite and Space Communications segment's amortization during the more recent quarter reflects the acceleration of amortization of CGC's intangibles due to the impact of the CGC Divestiture.

Current wording

Amortization of Intangibles. Amortization relating to intangible assets with finite lives for the three months ended January 31, 2025 was $5.0 million (of which $1.4 million was for the Satellite and Space Communications segment and $3.6 million was for the Terrestrial and Wireless Networks segment) compared to $5.3 million (of which $1.7 million was for the Satellite and Space Communications segment and $3.6 million was for the Terrestrial and Wireless Networks segment), respectively. The decrease in our Satellite and Space Communications segment's amortization during the more recent quarter reflects the impact of our decision to wind down our steerable antenna product line in the U.K.

Previous wording

Proxy Solicitation Costs. During three months ended October 31, 2024, we incurred $1.6 million of proxy solicitation costs (including legal and advisory fees) in our Unallocated segment as a result of a now-settled proxy contest. There were no similar costs in the prior year.

Current wording

Proxy Solicitation Costs. During the three months ended January 31, 2025, we incurred $1.1 million of proxy solicitation costs (including legal and advisory fees) in our Unallocated segment as a result of a now-settled proxy contest. There were no similar costs in the prior year.

Previous wording

Operating Income (Loss). Operating loss for the three months ended October 31, 2024 was $129.2 million, as compared to operating income of $2.1 million for the three months ended October 31, 2023. Operating income (loss) by reportable segment is shown in the table below:

Current wording

Operating Income (Loss). Operating loss for the three months ended January 31, 2025 was $10.3 million, as compared to operating income of $3.0 million for the three months ended January 31, 2024. Operating income (loss) by reportable segment is shown in the table below:

Previous wording

Our GAAP operating income of $2.1 million for the three months ended October 31, 2023 reflects: (i) $5.3 million of amortization of intangibles; (ii) $3.7 million of restructuring costs (of which $0.8 million and $2.9 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $2.6 million of amortization of stock-based compensation; (iv) $1.4 million of strategic emerging technology costs; and (v) $0.2 million of amortization of cost to fulfill assets, as discussed above. Excluding such items, our consolidated operating income for the three months ended October 31, 2023 would have been $15.3 million, or 10.1% of consolidated net sales.

Current wording

Our GAAP operating income of $3.0 million for the three months ended January 31, 2024 reflects: (i) $5.3 million of amortization of intangibles; (ii) $2.7 million of restructuring costs (of which $1.5 million and $1.3 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $2.2 million of amortization of stock-based compensation; (iv) $1.0 million of strategic emerging technology costs; (v) $0.2 million of amortization of cost to fulfill assets, and (vi) a $2.2 million estimated gain on the PST Divestiture reported in our Unallocated segment, as discussed above. Excluding such items, our consolidated operating income for the three months ended January 31, 2024 would have been $12.2 million.

Previous wording

Excluding the impact of proxy solicitation costs, CEO transition costs and its respective portion of restructuring charges in each period, Unallocated expenses for the three months ended October 31, 2024 would have been $9.5 million, as compared to $9.2 million for the three months ended October 31, 2023. The increase in Unallocated expenses, excluding such items, was primarily due to higher selling, general and administrative expenses, as discussed above.

Current wording

Excluding the impact of proxy solicitation costs, CEO transition costs, the gain on the PST Divestiture and its respective portion of restructuring charges in each period, Unallocated expenses for the three months ended January 31, 2025 would have been $12.1 million, as compared to $7.9 million for the three months ended January 31, 2024. The increase in Unallocated expenses, excluding such items, was primarily due to higher selling, general and administrative expenses, as discussed above.

Previous wording

Interest Expense and Other. Interest expense was $9.5 million and $4.9 million for the three months ended October 31, 2024 and 2023, respectively. The increase is primarily due to higher interest rates and fees under our Credit Facility entered into on June 17, 2024 and subsequently amended on October 17, 2024 (the "Credit Facility"), as discussed in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facilityand, to a lesser extent, a higher average debt balance outstanding during the more recent period. Our effective interest rate (including amortization of deferred financing costs) in the three months ended October 31, 2024 was approximately 19.0%, as compared to 10.5% in the prior year period. Our cash borrowing rate (which excludes the amortization of deferred financing costs) under our Credit Facility approximated 16.6%, as compared to 9.2% in the prior year period.

Current wording

Interest Expense and Other. Interest expense was $11.0 million and $5.3 million for the three months ended January 31, 2025 and 2024, respectively. The increase during the more recent period is primarily due to: higher average debt balances outstanding during the more recent period; higher interest rates and fees under our Credit Facility; and accreted interest on our Subordinated Credit Facility, as discussed further in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facilityand Note (11) - Subordinated Credit Facility. Our effective interest rate (including amortization of deferred financing costs) in the three months ended January 31, 2025 was approximately 21.5%, as compared to 11.3% in the prior year period. Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our Credit Facility approximates 14.2%, which reflects the benefit of the March 3, 2025 waiver and amendment to the Credit Facility, as compared to 9.4% in the prior year period.

Previous wording

Change in Fair Value of Warrants and Derivatives. During the three months ended October 31, 2024, we recorded a $5.5 million non-cash expense due to the remeasurement of warrants and derivatives related to our Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility, Note (11) - Subordinated Credit Facility and Note (18) - Convertible Preferred Stock for more information. These warrants and derivatives were not outstanding in the corresponding period of the prior year.

Current wording

Change in Fair Value of Warrants and Derivatives. During the three months ended January 31, 2025, we recorded a $28.6 million non-cash expense due to the remeasurement of warrants and derivatives related to our Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock. The remeasurement and resulting non-cash expense primarily reflects an increase in the estimated probability of events that could result in additional and/or accelerated payments to holders of our convertible preferred stock. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility, Note (11) - Subordinated Credit Facility and Note (18) - Convertible Preferred Stock for more information. These warrants and derivatives were not outstanding in the corresponding period of the prior year.

Previous wording

Provision for (Benefit from) Income Taxes. For the three months ended October 31, 2024, we recorded a tax expense of $2.1 million, as compared to a tax benefit of $1.3 million recorded in the three months ended October 31, 2023. Our effective tax rate (excluding discrete tax items) for the three months ended October 31, 2024 and 2023 was (3.8)% and 122.00%, respectively. The change in rate from 122.0% to (3.8)% is primarily due to changes in expected product and geographical mix and not providing for tax benefits on U.S. deferred tax assets in the more recent period.

Current wording

(Benefit from) Provision for Income Taxes. For the three months ended January 31, 2025, we recorded a tax benefit of $1.0 million, as compared to a tax expense of $7.4 million for the three months ended January 31, 2024. Our effective tax rate (excluding discrete tax items) for the three months ended January 31, 2025 and 2024 was (1.7)% and (52.0)%, respectively. The change in rate from (52.0)% to (1.7)% is primarily due to changes in expected product and geographic mix and not providing for tax benefits on U.S. deferred tax assets in the more recent period.

Previous wording

For purposes of determining our (3.8)% estimated annual effective tax rate for fiscal 2025, the impairment of long-lived assets, including goodwill, the change in fair value of warrants and derivatives, proxy solicitation costs and CEO transition costs are considered significant, unusual or infrequently occurring discrete tax items and are excluded from the computation of our effective tax rate.

Current wording

For purposes of determining our (1.7)% estimated annual effective tax rate for fiscal 2025, the impairment of long-lived assets, including goodwill, the change in fair value of warrants and derivatives, proxy solicitation costs and CEO transition costs are considered significant, unusual or infrequently occurring discrete tax items and are excluded from the computation of our effective tax rate.

Previous wording

Net Sales. Consolidated net sales were $115.8 million and $151.9 million for the three months ended October 31, 2024 and 2023, respectively, representing a decrease of $36.1 million, or 23.8%. The period-over-period decrease reflects significantly lower net sales in our Satellite and Space Communications segment offset, in part, by higher net sales in our Terrestrial and Wireless Networks segment, as further discussed below.

Current wording

Net Sales. Consolidated net sales were $242.4 million and $286.1 million for the six months ended January 31, 2025 and 2024, respectively, representing a decrease of $43.7 million, or 15.3%. The period-over-period decrease reflects significantly lower net sales in our Satellite and Space Communications segment offset, in part, by higher net sales in our Terrestrial and Wireless Networks segment, as further discussed below.

Previous wording

Net sales in our Satellite and Space Communications segment were $58.9 million for the three months ended October 31, 2024 as compared to $102.4 million for the three months ended October 31, 2023, a significant decrease of $43.5 million or 42.5%. Related segment net sales for the three months ended October 31, 2024 primarily reflect lower net sales of our troposcatter and SATCOM solutions (including progress toward delivering next-generation troposcatter terminals to the U.S. Marine Corps and U.S. Army, VSAT equipment to the U.S. Army and COMET terminals to an international customer), high power solid state amplifiers related to the PST Divestiture (which was completed in November 2023), and satellite ground station solutions (primarily X/Y steerable antennas related to the CGC Divestiture initiated in our fourth quarter of fiscal 2024). Our Satellite and Space Communications segment represented 50.9% of consolidated net sales for the three months ended October 31, 2024 as compared to 67.4% for the three months ended October 31, 2023. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended October 31, 2024 was 0.99x.

Current wording

Net sales in our Satellite and Space Communications segment were $132.7 million for the six months ended January 31, 2025 as compared to $181.0 million for the six months ended January 31, 2024, a significant decrease of $48.3 million, or 26.7%. Related segment net sales for the six months ended January 31, 2025 primarily reflect lower net sales of our troposcatter and SATCOM solutions (including COMET terminals to an international customer, progress toward delivering next-generation troposcatter terminals to the U.S. Marine Corps and U.S. Army and VSAT equipment to the U.S. Army), high-power solid state amplifiers related to the PST Divestiture (which was completed in November 2023) and satellite ground station solutions (primarily EEE space components and antennas related sales, including those related to the CGC Divestiture initiated in our fourth quarter of fiscal 2024). Our Satellite and Space Communications segment represented 54.7% of consolidated net sales for the six months ended January 31, 2025 as compared to 63.3% for the six months ended January 31, 2024. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the six months ended January 31, 2025 was 0.80x.