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, or the negative of those words and expressions, as well as statements in future tense. 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 Amended 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. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based on information available at the time and/or our good faith belief with respect to future events, and is subject to risks and uncertainties that are difficult to predict and many of which are outside of our control. 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, ma…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Revenue Recognition. In accordance with FASB ASC 606- Revenue from Contracts with Customers ("ASC 606"), we record revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (4) - Revenue Recognition for further information.

Current wording

Revenue Recognition. In accordance with FASB ASC 606- Revenue from Contracts with Customers ("ASC 606"), we record revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (4) - Revenue Recognition and Part I. - Financial Information - Item 4. Controls and Procedures for further information.

Previous 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.

Current wording

Impairment of Long-Lived Assets, Including Goodwill. As of April 30, 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 April 30, 2025, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $178.1 million (of which $42.6 million relates to our Satellite and Space Communications segment and $135.5 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 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.

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 April 30, 2025 and 2024, capitalized internal-use software costs were $1.2 million and $1.1 million, respectively. For the nine months ended April 30, 2025 and 2024, capitalized internal-use software costs were $2.7 million in each period.. 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

Allowance for Doubtful Accounts. We perform credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information. Generally, we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international customer that we do not do business with regularly. In addition, we seek to obtain insurance for certain domestic and international customers. We monitor billing events, collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. In light of ongoing tight credit market conditions and high interest rates, we continue to see requests from our customers for higher credit limits and longer payment terms. We have, on a limited basis, approved certain customer requests. Also, more recently, we experienced a significant increase in the overall level of contract assets (i.e., unbilled receivables) related to large, long-term contracts with certain U.S. government and international customers. We continue to monitor our accounts receivable credit portfolio. Except as discussed below, to-date, there has been no material changes in our billed accounts receivable credit portfolio as a result of the challenging business conditions. Although our overall credit losses have historically been within the allowances we established, we may not be able to accurately predict our future credit loss experience, given the current poor business environment. Measurement of credit losses requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health of specific customers. Future changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition. As discussed in Part I. - Financial Information - Item 1. - Note (7) - Accounts Receivables, during the first quarter of fiscal 2025, we determined that an unbilled receivable contract asset in the amount of $19.0 million, related to an international customer and reseller of our troposcatter technologies, was at risk of not being invoiced or collected, principally due to the customer's near-term ability to secure certain opportunities in its pipeline. As a result and considering that we offered a price concession (i.e., variable consideration) to our customer in the first quarter of fiscal 2025, we reversed $1.6 million of cumulative revenue and associated unbilled receivable contract assets related to this transaction, and recorded a non-cash charge to fully reserve for the remaining $17.4 million unbilled receivable contract asset within our all…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Allowance for Doubtful Accounts. We perform credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information. Generally, we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international customer that we do not do business with regularly. In addition, we seek to obtain insurance for certain domestic and international customers. We monitor billing events, collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. In light of ongoing tight credit market conditions and high interest rates, we continue to see requests from our customers for higher credit limits and longer payment terms. We have, on a limited basis, approved certain customer requests. Also, more recently, we experienced a significant increase in the overall level of contract assets (i.e., unbilled receivables) related to large, long-term contracts with certain U.S. government, domestic and international customers. We continue to monitor our accounts receivable credit portfolio. Except as discussed below, to-date, there has been no material changes in our billed accounts receivable credit portfolio as a result of the challenging business conditions. Although our overall credit losses have historically been within the allowances we established, we may not be able to accurately predict our future credit loss experience, given the current poor business environment. Measurement of credit losses requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health of specific customers. Future changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition.

Previous wording

Derivative Instruments and Warrant Liabilities. We evaluate our financial instruments, including our Credit Facility, Subordinated Credit Facility, Convertible Preferred Stock and warrants to issue our common stock pursuant to the terms of such instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Such evaluation considers a qualitative and quantitative assessment of whether the host instrument is more debt or equity-like, and if embedded derivatives should be bifurcated from the host instrument and/or combined for accounting purposes. For derivatives that are accounted for as liabilities, the derivative is initially recorded at its estimated fair value and is then re-valued at each reporting date, with changes in its estimated fair value reported in our Condensed Consolidated Financial Statements. To estimate such fair values, with the assistance of a third party valuation expert, we primarily use Monte Carlo simulation models, on a with and without basis, or Black-Scholes option pricing models, each adjusted for instrument-specific terms. Due to the nature of our derivative instruments and warrant liabilities, we must use Level 3 inputs for estimating fair value, which are unobservable inputs developed using the best available information under the circumstances. Level 3 inputs are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect our assumptions related to how market participants would use similar inputs to price the asset or liability. Accordingly, our estimates and assumptions could prove to be inaccurate. Also, changes in such estimates and assumptions from period to period could be material to our results of operations and financial condition. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (5) – Fair Value Measurements and Financial Instruments for further information.

Current wording

Derivative Instruments and Warrant Liabilities. We evaluate our financial instruments, including our Credit Facility, Amended Subordinated Credit Facility, Convertible Preferred Stock and warrants to issue our common stock pursuant to the terms of such instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Such evaluation considers a qualitative and quantitative assessment of whether the host instrument is more debt or equity-like, and if embedded derivatives should be bifurcated from the host instrument and/or combined for accounting purposes. For derivatives that are accounted for as liabilities, the derivative is initially recorded at its estimated fair value and is then re-valued at each reporting date, with changes in its estimated fair value reported in our Condensed Consolidated Financial Statements. To estimate such fair values, with the assistance of a third party valuation expert, we primarily use Monte Carlo simulation models, on a with and without basis, or Black-Scholes option pricing models, each adjusted for instrument-specific terms. Due to the nature of our derivative instruments and warrant liabilities, we must use Level 3 inputs for estimating fair value, which are unobservable inputs developed using the best available information under the circumstances. Level 3 inputs are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect our assumptions related to how market participants would use similar inputs to price the asset or liability. Accordingly, our estimates and assumptions could prove to be inaccurate. Also, changes in such estimates and assumptions from period to period could be material to our results of operations and financial condition. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (5) – Fair Value Measurements and Financial Instruments for further information.

Previous wording

Financial results for the second quarter of fiscal 2025 include:

Current wording

Financial results for the third quarter of fiscal 2025 include:

Previous wording

•Gross margin was 26.7%, compared to 12.5% in our first quarter of fiscal 2025 and 32.2% in our second quarter of fiscal 2024;

Current wording

•Gross margin was 30.7%, compared to 26.7% in our second quarter of fiscal 2025 and 30.4% in our third quarter of fiscal 2024;

Previous wording

•GAAP net loss attributable to common stockholders was $22.4 million and included, among other things: $5.0 million of intangible asset amortization, $3.4 million of restructuring costs, $1.2 million of amortization of stock-based compensation and $1.1 million of proxy solicitation costs;

Current wording

•GAAP net loss attributable to common stockholders was $14.5 million and included, among other things: $5.0 million of intangible asset amortization, $4.3 million of restructuring costs and $1.2 million of amortization of stock-based compensation;

Previous wording

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

Current wording

•GAAP EPS net loss of $0.49 and Non-GAAP EPS net loss of $0.18;

Previous 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;

Current wording

•Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $12.6 million, or 9.9% of consolidated net sales, compared to an Adjusted EBITDA of $2.9 million, or 2.3% of consolidated net sales, for the second quarter of fiscal 2025 and Adjusted EBITDA of $11.9 million, or 9.3% of consolidated net sales, for the third quarter of fiscal 2024;

Previous 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);

Current wording

•Bookings (also referred to as orders) of $71.0 million, representing a quarterly book-to-bill ratio of 0.56x (a measure defined as bookings divided by net sales); bookings in the more recent quarter reflect a $36.4 million debooking related to the low margin U.S. Army GFSR contract that was protested by and ultimately awarded to the incumbent in May 2025 (see below for additional information); gross bookings for the quarter, excluding such debooking, were $107.4 million, representing a quarterly book-to-bill ratio of 0.85x;

Previous 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;

Current wording

•Backlog of $708.1 million as of April 30, 2025, compared to $798.9 million as of July 31, 2024 and $653.4 million as of April 30, 2024;

Previous 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

Current wording

•Revenue visibility of approximately $1.2 billion. We measure this revenue visibility as the sum of our $708.1 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 $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.

Current wording

•Cash flows provided by operating activities were $2.3 million. Excluding $7.0 million in aggregate payments for restructuring costs, including severance, CEO transition costs and third party professional fees related to the modification of the Amended Subordinated Credit Facility on March 3, 2025, cash flows provided by operating activities during the more recent quarter would have been $9.3 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 January 31, 2025 and 2024” and “Comparison of the Results of Operations for the Six Months Ended January 31, 2025 and 2024.”

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 April 30, 2025 and 2024” and “Comparison of the Results of Operations for the Nine Months Ended April 30, 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. 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.

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. The incumbent protested the award of the contract to Comtech several times and we learned on March 12, 2025 that the Government Accountability Office (“GAO”) upheld the most recent protest by the incumbent. In April 2025, we were informed by our customer that it would implement the GAO’s recommendation to reevaluate proposals and make a new award decision. On May 20, 2025, we were informed by the U.S. Army that it awarded the GFSR contract to the incumbent. As a result, we removed all orders associated with the GFSR contract from our backlog as of April 30, 2025.

Previous wording

•additional funding of approximately $4.0 million for continued, ongoing training and support of complex cybersecurity operations for U.S. government customers;

Current wording

•incremental funding of approximately $6.8 million for continued, ongoing training and support of complex cybersecurity operations for U.S. government customers;

Previous 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

Current wording

•in excess of $3.6 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 awarded to Comtech; a decision reaffirmed by the U.S. Army on March 12, 2025; we do not plan any further challenges to the award).

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 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.

Current wording

As it relates to our troposcatter product line, throughout most of fiscal 2024, we experienced elevated levels of receivables due to the timing of our performance and billings/collections related to certain large U.S. government and international customer contracts. During principally the first half 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. In December 2024, however, we received a notice from our prime contractor to stop work associated with the U.S. Marine Corps contract. We remain under a stop work order and believe the end customer may be considering a termination of the contract, in whole or in part. As of April 30, 2025, our billed and unbilled receivables related to the U.S. Marine Corps contract approximate $13.9 million and could be at risk of not being collected. Future results of operations related to our troposcatter solutions product line depend, in part, on the nature, timing and amount associated with resolving this matter.

Previous wording

With strategic wins in the U.S., Canada and Australia, we believe Comtech's position as a trusted leader in 911, NG-911 and public safety applications positions us increasingly well when it comes to delivering similarly sophisticated solutions for other types of emergencies.

Current wording

With strategic wins in the U.S., Canada and Australia, we believe Comtech's position as a trusted leader in 911, NG-911 and public safety applications positions us increasingly well when it comes to delivering similarly sophisticated solutions for other types of emergencies. New emergency requesting devices, such as "wearables," vehicles, smart speakers and AI capable cameras, and new delivery methods, such as through satellite networks, are expected to drive innovation and growth within the public safety market over time.

Previous wording

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

Current wording

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

Previous 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.;

Current wording

•various funded orders, aggregating $1.4 million, primarily for location and maintenance and support services for another large wireless carrier in the U.S.; and

Previous wording

Subsequent to quarter end, on March 3, 2025, we entered into the second amendment to the Credit Facility to: (i) waive all defaults under the Credit Facility, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants for the four fiscal quarter period ended January 31, 2025; and (ii) amend the Credit Facility, as outlined below. As a result of this amendment, there are no ongoing events of default under the Credit Facility. Cumulatively, the Credit Facility as amended through March 3, 2025, among other things: (i) reduced the interest rate margins applicable to the Term Loan (generally, from 13.00% to 10.50% per annum for SOFR Loans); (ii) provided the lenders the right to appoint an independent director to the Board following the earlier to occur of: (x) an event of default, or (y) any date selected by the lenders after May 31, 2025; (iii) permitted the incurrence of $65.0 million of total senior unsecured subordinated debt (as described in further detail below); (iv) suspended testing of the Net Leverage Ratio and the Fixed Charge Coverage Ratio covenants until October 31, 2025; (v) suspended our ability to pay interest in-kind until after the interest rate margins are tested based on net leverage ratios; (vi) provided the lenders a consent right with respect to Revolver Loan borrowings above $29.3 million; and; (vii) reduced the minimum quarterly average liquidity requirement from $20.0 million to $17.5 million.

Current wording

On March 3, 2025, we entered into the Second Amendment to the Credit Facility which, among other things: (i) waived all defaults under the Credit Facility, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of January 31, 2025; (ii) decreased the interest rate margins applicable to the Term Loan from 12.00% per annum to 9.50% per annum for Base Rate Loans and from 13.00% per annum to 10.50% per annum for SOFR Loans; (iii) permitted the incurrence of an additional $40.0 million of total unsecured subordinated debt (as described below); (iv) suspended testing of the Net Leverage Ratio and the Fixed Charge Coverage Ratio covenants until October 31, 2025; (v) suspended our ability to pay interest in-kind until after the interest rate margins are tested based on net leverage ratios; (vi) permitted partial principal repayments of $27.3 million and $9.1 million on the Term Loan and Revolving Loan, respectively, and waived the prepayment fees that would have been payable under the Credit Facility with regard to such repayments; (vii) permanently reduced commitments under the Revolving Loan Facility by $3.2 million and provided the lenders a consent right with respect to Revolver Loan borrowings above $29.3 million; (viii) reduced the minimum quarterly average liquidity requirement from $20.0 million to $17.5 million; and (ix) provided the lenders the right to appoint an independent director to our Board of Directors after May 31, 2025. As a result of this amendment, there are no ongoing events of default under the Credit Facility.

Previous wording

On March 3, 2025, we entered into the first amendment to the Subordinated Credit Facility. In addition to waiving all defaults under the Subordinated Credit Facility, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of January 31, 2025, cumulatively, the Subordinated Credit Facility, among other things: (i) provides for a total $65.0 million facility; and (ii) suspended testing of the Net Leverage Ratio and Fixed Charge Coverage Ratio covenants under the Subordinated Credit Facility until October 31, 2025. The net proceeds of the Subordinated Credit Facility cured our defaults on certain financial covenants under the Credit Facility and were principally used to repay a portion of the Term Loan and Revolving Loan on March 3, 2025 and to fund our general working capital needs.

Current wording

On March 3, 2025, we entered into an amendment to the Subordinated Credit Agreement (“Amended Subordinated Credit Facility”) which, in addition to providing incremental aggregate principal of $40.0 million, waived all defaults under the Subordinated Credit Agreement, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of January 31, 2025, and suspends testing of the Net Leverage Ratio and the Fixed Charge Coverage Ratio covenants under the Subordinated Credit Agreement until October 31, 2025. The net proceeds of the Amended Subordinated Credit Facility were principally used to repay a portion of the Term Loan and Revolving Loan on March 3, 2025 (as discussed above), fund our general working capital needs and enable us to negotiate the Second Amendment to the Credit Facility, including the waiver of existing defaults, as discussed above.

Previous wording

Collectively, we believe the new capital infusion of $40.0 million, immediate reduction in our senior debt and waiver of certain financial covenants through October 31, 2025 provide us with enhanced financial flexibility, as we continue to transform our Company and pursue strategic alternatives. 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 further information.

Current wording

Collectively, we believe these actions provide us with enhanced financial flexibility, as we continue to transform our Company and pursue strategic alternatives. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility, Note (11) - Amended Subordinated Credit Facility, and Note (18) - Convertible Preferred Stock for further information.

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 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.

Current wording

During the third quarter of fiscal 2025, business conditions continued to be challenging, and the operating environment remains 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 directly or indirectly 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"); uncertainties related to the U.S. congressional bill referred to as "H.R. 1" or the "One Big Beautiful Bill Act;" 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 January 31, 2025 and 2024 and Comparison of the Results of Operations for the Six Months Ended January 31, 2025 and 2024.

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 April 30, 2025 and 2024 and Comparison of the Results of Operations for the Nine Months Ended April 30, 2025 and 2024.

Previous wording

Net Sales. Consolidated net sales were $126.6 million and $134.2 million for the three months ended January 31, 2025 and 2024, respectively, representing a decrease of $7.6 million, or 5.7%. The period-over-period decrease reflects lower net sales in both segments, as further discussed below.

Current wording

Net Sales. Consolidated net sales were $126.8 million and $128.1 million for the three months ended April 30, 2025 and 2024, respectively, representing a decrease of $1.3 million, or 1.0%. The period-over-period decrease reflects lower net sales in our Satellite and Space Communications segment, offset in part by higher sales in our Terrestrial and Wireless segment, as further discussed below.

Previous wording

Net sales in our Satellite and Space Communications segment were $73.7 million for the three months ended January 31, 2025 as compared to $78.6 million for the three months ended January 31, 2024, a decrease of $4.9 million or 6.2%. Related segment net sales for the three months ended January 31, 2025 primarily reflect lower net sales of our troposcatter solutions (including progress toward delivering next-generation troposcatter terminals to the U.S. Marine Corps and U.S. Army, as well as COMET terminals to an international customer), offset in part by higher net sales of our SATCOM solutions (including VSAT and similar equipment sales to the U.S. Army) and satellite ground infrastructure solutions. Our Satellite and Space Communications segment represented 58.2% of consolidated net sales for the three months ended January 31, 2025, as compared to 58.6% for the three months ended January 31, 2024. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended January 31, 2025 was 0.64x.

Current wording

Net sales in our Satellite and Space Communications segment were $67.6 million for the three months ended April 30, 2025 as compared to $71.4 million for the three months ended April 30, 2024, a decrease of $3.8 million, or 5.3%. Related segment net sales for the three months ended April 30, 2025 primarily reflect lower net sales of our troposcatter solutions to the U.S. Marine Corps and U.S. Army as those two contracts wind down, offset in part by higher net sales of our SATCOM solutions (including VSAT and similar equipment sales to the U.S. Army and satellite ground infrastructure solutions). Our Satellite and Space Communications segment represented 53.3% of consolidated net sales for the three months ended April 30, 2025, as compared to 55.8% for the three months ended April 30, 2024. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended April 30, 2025 was 0.26x. Excluding the $36.4 million debooking associated with the U.S. Army GFSR contract (see Fiscal 2025: Third Quarter Results and Business Outlook above for further information), our book-to-bill ratio in this segment for the third quarter of fiscal 2025 was 0.80x.

Previous wording

Net sales in our Terrestrial and Wireless Networks segment were $52.9 million for the three months ended January 31, 2025, as compared to $55.6 million for the three months ended January 31, 2024, a decrease of $2.7 million, or 4.9%. Related segment net sales for the three months ended January 31, 2025 primarily reflect lower net sales of our location based solutions and NG-911 services, offset in part by higher net sales of our call handling solutions. Our Terrestrial and Wireless Networks segment represented 41.8% of consolidated net sales for the three months ended January 31, 2025 as compared to 41.4% for the three months ended January 31, 2024. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended January 31, 2025 was 0.61x.

Current wording

Net sales in our Terrestrial and Wireless Networks segment were $59.2 million for the three months ended April 30, 2025, as compared to $56.6 million for the three months ended April 30, 2024, an increase of $2.6 million, or 4.6%. Related segment net sales for the three months ended April 30, 2025 primarily reflect higher net sales of our next-generation 911 ("NG-911") services and location based solutions, offset in part by lower net sales of our call handling solutions. Our Terrestrial and Wireless Networks segment represented 46.7% of consolidated net sales for the three months ended April 30, 2025 as compared to 44.2% for the three months ended April 30, 2024. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended April 30, 2025 was 0.91x.

Previous 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.

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 April 30, 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 April 30, 2025 and 2024 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $29.7 million and $22.4 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 April 30, 2025 and 2024.

Previous wording

Gross Profit. Gross profit was $33.7 million and $43.2 million for the three months ended January 31, 2025 and 2024, respectively. Gross profit, as a percentage of consolidated net sales, for the three months ended January 31, 2025 was 26.7% as compared to 32.2% for the three months ended January 31, 2024. Our gross profit (both in dollars and as a percentage of consolidated net sales) primarily reflects lower net sales and product mix changes within each of our segments, as discussed above. Gross profit, as a percentage of related segment net sales, is further discussed below.

Current wording

Gross Profit. Gross profit was $38.9 million and $39.0 million for the three months ended April 30, 2025 and 2024, respectively. Gross profit, as a percentage of consolidated net sales, for the three months ended April 30, 2025 was 30.7% as compared to 30.4% for the three months ended April 30, 2024. Our gross profit (both in dollars and as a percentage of consolidated net sales) primarily reflects a higher percentage of our consolidated net sales generated by our Terrestrial and Wireless Networks segment, as well as product mix changes within each segment, as discussed above. Gross profit, as a percentage of related segment net sales, is further discussed below.

Previous wording

Our Satellite and Space Communications 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 in the more recent period reflects changes in products and services mix, as discussed above. In particular, net sales for the second quarter of fiscal 2025, as compared to the prior year period, included a higher amount of low margin VSAT and similar equipment sales to the U.S. Army and a lower amount of high margin COMET sales to an international customer.

Current wording

Our Satellite and Space Communications segment's gross profit, in dollars and as a percentage of related segment net sales, for the three months ended April 30, 2025 decreased in comparison to the three months ended April 30, 2024. The gross profit in the more recent period reflects changes in products and services mix, as discussed above. In particular, net sales for the third quarter of fiscal 2025, as compared to the prior year period, included an increase in low margin VSAT and similar equipment sales to the U.S. Army.

Previous 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.

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 April 30, 2025 increased in comparison to the three months ended April 30, 2024. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above. In particular, net sales for the third quarter of fiscal 2025 included over $3.0 million of incremental NG-911 services revenue due to reaching an agreement with a statewide customer to retroactively invoice for certain recurring services provided in the past. Given the cumulative catch up nature of this revenue, we do not anticipate similar adjustments for this customer in the future.

Previous wording

Included in consolidated cost of sales for the three months ended January 31, 2025 and 2024 are provisions for excess and obsolete inventory of $1.6 million and $1.4 million, respectively. As discussed in"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Provisions for Excess and Obsolete Inventory," we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends.

Current wording

Included in consolidated cost of sales for the three months ended April 30, 2025 and 2024 are provisions for excess and obsolete inventory of $1.0 million and $0.8 million, respectively. As discussed in"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Provisions for Excess and Obsolete Inventory," we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends.

Previous 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.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $30.2 million and $28.7 million for the three months ended April 30, 2025 and 2024, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 23.8% and 22.4% for the three months ended April 30, 2025 and 2024, respectively.

Previous wording

During the three months ended January 31, 2025 and 2024, we incurred $3.4 million and $2.7 million, respectively, of restructuring costs primarily to streamline our operations and improve efficiency (including those related to legal and professional fees associated with our pursuit of strategic alternatives, the wind down of our steerable antenna product line in the U.K. initiated in our fourth quarter of fiscal 2024, and severance costs). Excluding restructuring costs, selling, general and administrative expenses for the three months ended January 31, 2025 and 2024 would have been $30.4 million, or 24.0%, and $27.6 million, or 20.5%, respectively. The increase in our selling, general and administrative expenses, as a percentage of consolidated net sales, is primarily due to lower consolidated net sales, as discussed above. The increase in our selling, general and administrative expenses, in dollars, is due to higher legal and professional fees and cash-based incentive compensation, offset in part by lower stock-based compensation, as discussed below.

Current wording

During the three months ended April 30, 2025 and 2024, we incurred $4.3 million and $2.8 million, respectively, of restructuring costs primarily to streamline our operations and improve efficiency (including costs related to legal and professional fees associated with our pursuit of strategic alternatives, the wind down of our steerable antenna product line in the U.K. and severance costs). Excluding restructuring costs, selling, general and administrative expenses for the three months ended April 30, 2025 and 2024 would have been $25.9 million, or 20.4%, and $27.3 million, or 20.0%, respectively.

Previous wording

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $1.0 million in the three months ended January 31, 2025, as compared to $2.0 million in the three months ended January 31, 2024. With respect to stock-based compensation expense reported in the prior year period, we had determined to settle fiscal 2024 non-equity annual incentive awards accrued during such period with stock-based awards in lieu of cash. Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Current wording

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $1.0 million in the three months ended April 30, 2025, as compared to $0.3 million in the three months ended April 30, 2024. The prior year period reflects forfeitures of stock-based awards related to a former CEO. Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Previous wording

Research and Development Expenses. Research and development expenses were $4.4 million and $6.8 million for the three months ended January 31, 2025 and 2024, respectively. As a percentage of consolidated net sales, research and development expenses were 3.4% and 5.1% for the three months ended January 31, 2025 and 2024, respectively.

Current wording

Research and Development Expenses. Research and development expenses were $4.4 million and $5.7 million for the three months ended April 30, 2025 and 2024, respectively. As a percentage of consolidated net sales, research and development expenses were 3.5% and 4.5% for the three months ended April 30, 2025 and 2024, respectively.