COMTECH TELECOMMUNICATIONS CORP /DE/
For the period ended Jul 31, 2025. Filed Nov 10, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Nov 10, 2025
CMTL$1.13-4.2%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-07-31; filed 2024-10-30.
0000023197-24-000104
Item 1A. RISK FACTORSCurrent report: 10-K
Period ended 2025-07-31; filed 2025-11-10.
0000023197-25-000080
Item 1A. RISK FACTORSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 332 previous paragraphs and 328 current paragraphs.
220 unchanged; 79 reworded; 28 added; 31 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
•Our cash and liquidity projections may not materialize as anticipated.
Current report
In addition, the U.S. recently implemented further changes to trade policies, including adding new or modifying existing tariffs on imports, in some cases significantly. The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available. Although some of these tariffs have been paused or reduced, there is significant uncertainty as trade negotiations are ongoing and outcomes are unpredictable. Tariffs and any retaliatory actions, if implemented, could significantly increase the cost of our products and result in lower demand for our products, delivery delays, and terminations of orders by customers. The uncertainty in the trade environment may also contribute to broader macroeconomic and financial market weakness and volatility, such as inflationary pressures affecting interest rates and volatility in the stock market affecting the price of our common stock. While we continue to evaluate the potential impact of the new tariffs on our business, given the volatility and uncertainty regarding the scope and duration of such tariffs and other aspects of U.S. and foreign government trade policies, their ultimate impact on our operations and financial results remains uncertain.
Current report
The conflict between Russia and Ukraine impacted our sales pipeline and continues to have repercussions for our business. As a result of the economic sanctions against Russia, we stopped accepting new orders in Russia and wound down our Russian operations in fiscal 2024. We intend to repatriate proceeds from former operations in Russia as permitted by law; however, our ability to do so may be negatively impacted by continuing sanctions against Russia, as well as by the laws within Russia.
Current report
Our cash and liquidity projections may not materialize as anticipated.
Current report
In fiscal 2025, 2024 and 2023, we reported operating losses of $139.1 million, $79.9 million and $14.7 million, respectively, and net cash used in operating activities of $8.3 million, $54.5 million and $4.4 million, respectively. At July 31, 2025 and November 7, 2025 (the date closest to the issuance date), total outstanding borrowings under our Credit Facility were $133.9 million and $135.0 million, respectively. Of such amounts, $17.6 million was drawn on the Revolver Loan at both dates.
Current report
At July 31, 2025, October 31, 2025 and November 7, 2025, our available sources of liquidity totaled $47.0 million, $51.0 million and $50.3 million, respectively, which includes qualified cash and cash equivalents of $37.4 million, $41.4 million and $40.7 million, respectively, and the remaining available portion of the Revolver Loan of $9.6 million as of each such date.
Current report
As of the issuance date, we expect cash and cash equivalents and cash flows from both operating and financing activities to be our principal sources of liquidity. We also believe these sources of liquidity will be sufficient to fund our operating and cash commitments for investing and financing activities over the next year beyond the issuance date.
Current report
During fiscal 2025 and through the issuance date, we have taken the following actions, and implemented the following plans, to improve our operational and financial performance, enhance our liquidity and financial condition and ability to meet our financial covenants contained in our credit facilities:
Current report
•Engaged in portfolio-shaping opportunities to enhance profitability, efficiency and focus, including the elimination of legacy solutions that were not contributing meaningfully to net sales and or gross profits;
Current report
•Prioritized efforts to complete low or no margin non-recurring engineering contracts in order to accelerate our migration to higher volume and higher margin manufacturing related orders with improved cash conversion cycles;
Current report
•Through new leadership and improved accountability and process disciplines implemented throughout the organization, reduced our investments in working capital (e.g., accounts receivable and inventory), as well as capital expenditures; and
Current report
•Through a series of capital injections, aggregating $100.0 million in the form of subordinated debt, and amendments to our credit facilities: (i) significantly reduced senior debt and related cash interest payments due under our Credit Facility; (ii) increased the available portion of our Revolver Loan; (iii) deferred the scheduled repayment of a portion of the Term Loan and the scheduled payment of certain fees due under the Credit Facility; (iv) suspended testing of our Net Leverage Ratio, Fixed Charge Coverage Ratio and Minimum EBITDA covenants under our credit facilities until January 31, 2027; and (v) reduced the minimum quarterly average liquidity requirement under our credit facilities.
Current report
Based on the foregoing, over the next year beyond the issuance date, we believe that we will: (i) be able to generate sufficient positive cash inflows and maximize our borrowing capacity under our Credit Facility to continue as a going concern, and (ii) comply with the covenants contained in our credit facilities. However, our ability to do so may also be affected by general economic, financial and other factors which are beyond our control. As such, there can be no assurances that our plans will be successful or that our projections will materialize.
Current report
Further, elections have introduced increased regulatory and economic uncertainty, including shifts in the spending priorities of the U.S. presidential administration and Congress and what challenges budget reductions will present for us and our industry generally. For example, in January 2025, President Trump announced an executive order establishing the Department of Government Efficiency, or "DOGE," to reform federal government processes and reduce expenditures. The U.S. government has and may continue to implement initiatives focused on efficiencies, affordability and cost reductions, such as those pursued by the DOGE, which may impact the availability of funding for U.S. government customers as a result of the elimination of departments and personnel. Changes in federal policy by the executive branch and regulatory agencies may occur over time through the new presidential administration’s and/or Congress’s policy and personnel changes, which could lead to changes involving the defense industry. However, the nature, timing and economic and political effects of such potential changes remain highly uncertain. Any future changes in U.S. policy and the response of the U.S. to global geopolitical developments could affect us in substantial and unpredictable ways. At this time, it is unclear whether and how any future changes or uncertainty surrounding future changes will adversely affect our operating environment and, therefore, demand for our products, our business, financial condition and results of operations.
Current report
On June 17, 2024, we entered into a senior credit facility with a syndicate of lenders, which was subsequently amended on October 17, 2024, March 3, 2025 and July 21, 2025 (the "Credit Facility"). The Credit Facility consists of a term loan and an asset-based revolver loan. As of July 31, 2025 and November 7, 2025, total borrowings outstanding under the Credit Facility were $133.9 million and $135.0 million, respectively. See Notes to Consolidated Financial Statements - Note (8) Credit Facility included in Part II - Item 8. Financial Statements and Supplementary Data for more information.
Current report
On October 17, 2024, we entered into a subordinated credit facility with the existing holders of our convertible preferred stock, which was subsequently amended on March 3, 2025 and July 21, 2025 (the “Subordinated Credit Facility”). As of July 31, 2025 and November 7, 2025, total borrowings outstanding under the Subordinated Credit Facility were $100.1 million and $101.5 million, respectively. Such amount does not include the $25.7 million make-whole amount associated with the $65.0 million portion of the Subordinated Credit Facility. See Notes to Consolidated Financial Statements - Note (9) Subordinated Credit Facility included in Part II - Item 8. Financial Statements and Supplementary Data for more information.
Current report
As part of our transformation plan, we are exploring strategic alternatives for our various business and product lines, including the potential sale or divestiture of assets or businesses.
Current report
•result in contract termination liabilities with customers and or vendors; or
Current report
•result in insolvencies of the entities being divested.
Current report
On August 1, 2025 (the first day of fiscal 2026), we performed our annual quantitative assessment using market participant assumptions to determine if the fair value of each of our reporting units with goodwill exceeded its carrying value. Ultimately, based on our quantitative evaluation, we determined that our Satellite and Space Communications and Allerium reporting units had estimated fair values in excess of their carrying values of at least 19.9% and 7.3%, respectively, and concluded that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment.
Current report
In addition, privacy legislation may regulate the use of artificial intelligence and machine learning within our product development, testing, deployment, or other business functions, including the use of algorithms and automated processing, in ways that could materially affect our business, or which may lead to significant increases in the cost of compliance.
Current report
An international component of our Allerium segment also had ineffective controls. Specifically, we did not design and maintain effective general information technology controls (“GITCs”) and business process controls in the following areas: (i) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to financial applications, programs and data to appropriate company personnel; (ii) program change management controls to ensure that changes to information technology (“IT”) programs and data affecting financial applications and underlying accounting records are properly identified, tested, authorized and implemented with appropriate segregation of duties; and (iii) business process controls to ensure that journal entries were not amended prior to posting, as the enterprise resource planning (“ERP”) system which the international component operates did not restrict approvers from changing journal entries prior to posting. While no material misstatements were identified with respect to this international component in fiscal 2025, these deficiencies impact control activities over all financial statement account balances, classes of transactions and disclosures and contributed to the potential for there to have been material misstatements within the international component. Such international component accounted for 5.7%, 4.1% and 3.3% of our consolidated total assets and 7.6%, 5.9% and 4.6% of our consolidated net sales as of and for the three fiscal years ended July 31, 2025, 2024 and 2023, respectively.
Current report
We may face infringement claims in connection with our use of artificial intelligence and machine learning within our product development, testing, and deployment, or other business functions. Such claims may arise in the context of both third-party litigation and regulatory exposure from use of third-party content contained in generation results from large-language models or other algorithmic results or outcomes that are utilized in our products or services without required attribution or permission. Such claims, if successful, may combine to (a) make it more costly for us to apply artificial intelligence and machine learning within our business, (b) lead to regulatory fines or penalties, (c) result in payments of monetary damages, or (d) require us to alter our product offerings or business practices.
Current report
In September 2024, shareholders Fred Kornberg, Michael Porcelain and Oleg Timoshenko (the "Investor Group") nominated eight candidates to stand for election at our fiscal 2024 annual meeting of stockholders. On November 17, 2024, we entered into a Cooperation Agreement with the Investor Group, the terms of which are described in the Company’s Form 8-K filed with the SEC on November 18, 2024. In September 2025, we provided notice to the Investor Group regarding our intention to renominate Michael Hildebrandt at our fiscal 2025 annual meeting of stockholders, thus extending the Cooperation Agreement until 30 days prior to the director nomination deadline for our fiscal 2026 annual meeting of stockholders.
Removed paragraphs (31)
Previous report
•Our current cash and liquidity projections raise substantial doubt about our ability to continue as a going concern.
Previous report
The military conflict between Russia and Ukraine has impacted our sales pipeline and continues to have repercussions for our business. Although sales into Russia represented approximately 1% of our consolidated net sales in fiscal 2024 and 2023, consolidated net sales into Russia in fiscal 2025 and beyond had been expected to grow. As a result of the economic sanctions against Russia, however, we have stopped accepting new orders in Russia and initiated a wind down of operations in fiscal 2024.
Previous report
Prior to this conflict, we maintained a small group of employees who supported certain UHP-branded satellite communications products. In fiscal 2024, we continued to expand our operations and shift certain commercial software development and support activities to Canada. However, as we are currently in an environment where software engineering talent is already in high demand and commands a premium, we expect to incur additional annual expenses in connection with this personnel shift for our UHP products. We may not be able to timely ramp up our operations in Canada or elsewhere on a sufficient scale to support anticipated growth of our UHP products, which could adversely impact future revenues, gross margins and operations.
Previous report
Our current cash and liquidity projections raise substantial doubt about our ability to continue as a going concern.
Previous report
Pursuant to the requirements of ASC Topic 205-40, "Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern," we are required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern. This evaluation does not take into consideration the potential mitigating effect of our plans that have not been fully implemented or are not within our control as of the date the audited Consolidated Financial Statements are issued. When substantial doubt exists, we are required to evaluate whether the mitigating effect of our plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of our plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the Consolidated Financial Statements are issued, and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.
Previous report
As of the date these financial statements were issued (the "issuance date"), we evaluated whether the following adverse conditions, when considered in the aggregate, raise substantial doubt about our ability to continue as a going concern over the next twelve months beyond the issuance date.
Previous report
As discussed further in "Notes to Consolidated Financial Statements - Note (8) - Credit Facility" included in "Part II - Item 8. Financial Statements and Supplementary Data," included in this Form 10-K (which discussion is incorporated herein by reference), on June 17, 2024, we entered into a $222.0 million credit facility with a new syndicate of lenders, which replaced our prior credit facility. As further discussed below, we subsequently amended the credit facility on October 17, 2024 (the "Credit Facility"). The Credit Facility consists of a committed $162.0 million term loan (“Term Loan”) and $60.0 million revolver loan (“Revolver Loan”). At July 31, 2024 and October 25, 2024 (the date closest to the issuance date), total outstanding borrowings under the Credit Facility were $194.2 million and $199.1 million, respectively. At both July 31, 2024 and October 25, 2024, $32.5 million was drawn on the Revolver Loan. As of the issuance date, our available sources of liquidity approximate $28.7 million, consisting solely of qualified cash and cash equivalents. That is, our available sources of liquidity do not include the remaining portion of the committed Revolver Loan due to the lenders' consent right, discussed below, to any borrowings that exceed $32.5 million.
Previous report
The Credit Facility, among other things, requires compliance with new restrictive and financial covenants, including: a maximum allowable Net Leverage Ratio of 3.25x for the fiscal quarter ending January 31, 2025; a minimum Fixed Charge Coverage Ratio of 1.20x for the fiscal quarter ending January 31, 2025; a minimum Average Liquidity requirement at each quarter end of $20.0 million; and a minimum EBITDA of $35.0 million for the fiscal quarter ending October 31, 2025. Such ratios adjust under the Credit Facility in future periods.
Previous report
The Credit Facility was amended on October 17, 2024 to waive certain defaults or events of default, including in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of July 31, 2024. The amendment also provides for, among other things: (i) increases the interest rate margins applicable to the loans; (ii) modifies certain financial and collateral reporting requirements; (iii) provides a lender consent right with respect to $27.5 million of Revolver Loan borrowings above $32.5 million; (iv) permits the incurrence of $25.0 million of senior unsecured subordinated debt (as described below); (v) amends the maturity date to the earlier of (x) July 31, 2028 or (y) 90 days prior to the earliest date that the debt under the Subordinated Credit Agreement (as defined below) becomes due and payable; and (vi) suspends financial covenant testing through the end of our fiscal quarter ending January 31, 2025.
Previous report
In addition, we entered into a Subordinated Credit Agreement with the existing holders of our Convertible Preferred Stock (the “Subordinated Credit Agreement”) on October 17, 2024, which provides a subordinated unsecured term loan facility in the aggregate principal amount of $25.0 million (the “Subordinated Credit Facility”). The proceeds of the Subordinated Credit Facility: (i) cured our default on certain financial covenants under the Credit Facility, as discussed above; (ii) provides additional liquidity to us; and (iii) funds our general working capital needs, including support of our strategic transformation initiatives, as discussed below.
Previous report
Our ability to meet our current obligations as they become due may be impacted by our ability to remain compliant with the financial covenants required by the Credit Facility, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained. While we believe we will be able to secure such waivers or amendments, as needed, there can be no assurance such waivers or amendments will be secured or on terms that are acceptable to us. If we are unable to secure waivers or amendments, the lenders may declare an event of default, which would cause an immediate acceleration and repayment of all outstanding principal, interest and fees due under our Credit Facility. Absent our ability to repay the forgoing amounts upon the declaration of an event of default, the lenders may exercise their rights and remedies under the Credit Facility, which may include, among others, a seizure of substantially all of our assets and/or the liquidation of our operations. If an event of default occurs that allows the lenders to exercise these rights and remedies over the next year beyond the issuance date, we will be unable to continue as a going concern.
Previous report
•executing a strategy to transform Comtech into a pure-play satellite and space communications company (ongoing and future actions supporting our transformation strategy include: an exploration of strategic alternatives for our Terrestrial and Wireless Networks segment, which is well underway; the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus; and the implementation of additional operational initiatives to both achieve profitable results from operations as well as to align our go-forward cost structure with a pure-play focus on satellite and space communications), as discussed further in Note (18) – “Cost Reduction Activities;”
Previous report
•reevaluating our business plans to identify opportunities (e.g., within our Satellite and Space Communications segment) to focus future investment on our most strategic, high-margin revenue opportunities;
Previous report
•seeking opportunities to improve liquidity through any combination of debt and/or equity financing (including possibly restructuring our Credit Facility, Convertible Preferred Stock and/or Subordinated Credit Agreement); and
Previous report
While we believe the implementation of some or all of the elements of our plans over the next year beyond the issuance date will be successful, these plans are not all solely within management’s control and, as such, we can provide no assurance our plans are probable of being effectively implemented as of the issuance date. Therefore, the adverse conditions and events described above are uncertainties that raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
Previous report
In addition, the perception that we may not be able to continue as a going concern may cause customers, vendors and others to review and alter their business relationships and terms with us, and may affect our credit rating. If we seek additional financing to fund operations and there remains substantial doubt about our ability to continue as a going concern, financing sources may be unwilling to provide such funding to us on commercially reasonable terms, or at all. Uncertainty regarding our ability to continue as a going concern could also have a material and adverse impact on the price of our common stock, which could negatively impact our ability to obtain additional stock-based financing or enter into strategic transactions.
Previous report
On June 17, 2024, we entered into a new $222.0 million credit facility with a syndicate of lenders (the "Credit Facility"). As of July 31, 2024, total borrowings outstanding under the Credit Facility were $194.2 million, of which $190.1 million is reflected in the non-current portion of long-term debt on our Consolidated Balance Sheet.
Previous report
Subsequent to year end, to enhance our liquidity while we pursue strategic alternatives, other restructuring related activities and the collection of our unbilled receivables, we amended our Credit Facility to, among other things, relax certain financial and non-financial covenants. We also entered into a $25.0 million senior subordinated unsecured loan agreement with our existing preferred shareholders. See "Notes to Consolidated Financial Statements" included in "Part II - Item 8. Financial Statements and Supplementary Data" included in this Form 10-K, for further information.
Previous report
We expect to pursue strategic alternatives for our Terrestrial and Wireless Networks segment while evaluating further portfolio shaping opportunities.
Previous report
After completing restructuring activities and related expenses, our decision to cease operations of our steerable antenna product line in Basingstoke, UK is expected to result in future annual cash savings relative to the past three fiscal years. If we are unsuccessful in negotiating termination liabilities with our customers or vendors, however, our UK entity may become insolvent and our assumptions with respect to the liquidity of our Basingstoke operations may not materialize.
Previous report
During the fourth quarter of fiscal year 2024, our lower-than-expected financial performance, cured default on certain credit facility covenants and sustained decrease in our stock price since August 1, 2023 were each considered triggering events requiring an interim quantitative impairment test as of July 31, 2024. Based on our quantitative evaluation, we determined that our Terrestrial and Wireless Networks reporting unit had an estimated fair value in excess of its carrying value of at least 24.7% and concluded that our goodwill in this reporting unit was not impaired. However, we determined that our Satellite and Space Communications reporting unit had an estimated fair value below its carrying value and concluded that our goodwill in this reporting unit was impaired. As a result, in the fourth quarter of fiscal 2024, we recognized a non-cash $48,925,000 goodwill impairment charge in our Satellite and Space Communications reporting unit. Such loss is included in the “Impairment of long-lived assets, including goodwill" line item on our Consolidated Statements of Operations. Due to their proximity, the quantitative impairment test as of July 31, 2024 is deemed to satisfy our annual goodwill impairment test requirement as of August 1, 2024 (the first day of fiscal 2025).
Previous report
Accordingly, in addition to testing goodwill associated with our Satellite and Space Communications reporting unit for impairment, during the fourth quarter of fiscal year 2024, we also assessed the recoverability of the carrying values of our other long-lived assets, including identifiable intangible assets with finite useful lives. Such testing also considered our decision in the fourth quarter of fiscal year 2024 to cease our steerable antenna operations located in the United Kingdom. Based on our evaluation, we determined that the fair value of the asset group related to such operations was lower than its carrying value and recorded a non-cash $15,600,000 long-lived asset impairment charge in our Satellite and Space Communications segment. Such loss is included in the “Impairment of long-lived assets, including goodwill" line item on our Consolidated Statements of Operations. Of the total amount, $9,925,000 relates to net intangible assets with finite lives, $1,151,000 relates to operating lease right-of-use assets, $2,651,000 relates to property, plant and equipment and $1,873,000 relates to other assets. We determined that the carrying values of our remaining net intangibles were recoverable as of July 31, 2024. Any impairment charges that we may record in the future could be material to our results of operations and financial condition.
Previous report
Campaigns by activist stockholders to effect changes at publicly traded companies can result in different types of demands, such as that companies undertake or pursue financial restructuring, increase debt, issue special dividends, repurchase shares, or undertake sales of assets or other transactions, including strategic transactions. Activist stockholders who disagree with the composition of a company’s board of directors, or with its strategy or leadership often seek to involve themselves or their designees in the governance and strategic direction of a company through various activities, including the nomination of director candidates.
Previous report
In September 2024, Michael Porcelain, a former Chief Executive Officer and President of the Company, nominated a group of eight candidates to stand for election at our fiscal 2024 annual meeting of stockholders. During the course of our Board's discussions with Mr. Porcelain and in public communications, Mr. Porcelain has made certain proposals for our Board’s consideration regarding the composition of the Board and management team. We expect to continue to engage with Mr. Porcelain and certain stockholders associated with him on these and related topics.
Previous report
Responding to proxy contests and other actions by activist stockholders, including the current campaign by Mr. Porcelain, can be costly and time-consuming, and could divert the attention of our Board of Directors, management team and employees from the management of our operations and the pursuit of our business strategies. Further, actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. Also, we could be required to incur significant expenses related to any activist stockholder matters, including the current campaign by Mr. Porcelain, or accompanying litigation (including but not limited to legal fees, fees for financial advisors, fees for public relation advisors and proxy solicitation expenses). As a result, activist stockholder campaigns could adversely affect our business, results of operations, financial condition and/or share price in ways that can be difficult to predict.
Previous report
Even if we are successful in any proxy contest or other activism campaign, any such proxy contest or activist stockholder campaign could adversely affect our business due to:
Previous report
•perceived uncertainties as to future direction, strategy or leadership that may result in the loss of potential business opportunities, acquisitions, collaborations or other strategic opportunities, and that may make it more difficult to attract and retain qualified personnel, investors, customers, suppliers, and other business partners; and
Previous report
•the risk that individuals may be elected to our Board of Directors with a specific agenda or who do not agree with our strategic plan, adversely affecting the ability of our Board of Directors to function effectively, which could in turn adversely affect our ability to effectively and timely implement our strategic plan and create additional value for our stockholders, and/or adversely affect our business, results of operations and financial condition.
Previous report
We cannot predict, and no guarantees can be given, as to the outcome or timing of any matters relating to the foregoing actions by activist stockholders and our responses thereto or the ultimate impact on our business, results of operations or financial condition. Any of these matters or any further actions by activist stockholders and our responses thereto may impact the trading value of our securities.
Reworded paragraphs (79)
Previous wording
•New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results.
Current wording
•New and ongoing challenges relating to current supply chain constraints, including for satellite ground station and troposcatter components, and impacts from inflation and any new or increased tariffs on imports and other trade restrictions, could adversely impact our revenue, gross margins and financial results.
Previous wording
•Ongoing instability and conflicts in global markets, including in the Ukraine and Eastern Europe, Israel, Lebanon, the Gaza Strip and the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.
Current wording
•Ongoing instability and conflicts in global markets, including in Ukraine, the Gaza Strip, Israel, Lebanon and other countries in the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.
Previous wording
•We may fail to realize all of the anticipated benefits of our operational initiatives, including the strategic alternatives for our Terrestrial and Wireless Networks segment and further portfolio-shaping opportunities, or those benefits may take longer to realize than expected.
Current wording
•We may fail to realize all of the anticipated benefits of our strategic and operational initiatives, or those benefits may take longer to realize than expected.
Previous wording
•Our transformation strategy may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
Current wording
•Our transformation plan may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
Previous wording
•Our efforts to invoice and collect unbilled receivables may be unsuccessful.
Current wording
•Our efforts to invoice and collect unbilled accounts receivable may be unsuccessful.
Previous wording
•Divestitures of portions of our business in the course of pursuing strategic alternatives and revisiting our portfolio could prove difficult to carve out, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock.
Current wording
•Divestitures of portions of our business in the course of carrying out our transformation plan and reshaping our product portfolio could prove difficult to carve out, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock.
Previous wording
•Our investments in recorded goodwill and other intangible assets have been impaired and may be further impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure as we pursue strategic alternatives.
Current wording
•Our investments in recorded goodwill and other intangible assets have been impaired and may be further impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure for any reason.
Previous wording
New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results.
Current wording
New and ongoing challenges relating to current supply chain constraints, including for satellite ground station and troposcatter components, and impacts from inflation and any new or increased tariffs on imports and other trade restrictions, could adversely impact our revenue, gross margins and financial results.
Previous wording
The effects of inflation and labor challenges have caused, and we expect will continue to cause further delays in the supply chain. Despite our attempts to mitigate the impact on our business, constrained supply chain conditions have and are expected to continue to adversely impact our costs of goods sold and may impact the timing and amount of revenue we realize. During fiscal 2024, we experienced disruptions in our supply chain relating to later-than-expected delivery of certain key components from several suppliers that adversely impacted our revenue in fiscal 2024. In addition, the ongoing supply chain issues have affected the quality of the components we receive. Certain parts received in fiscal 2024 did not meet our quality specifications and we were unable to use them.
Current wording
The effects of inflation and labor challenges have caused, and we expect will continue to cause further delays in the supply chain. Despite our attempts to mitigate the impact on our business, constrained supply chain conditions have and are expected to continue to adversely impact our costs of goods sold and may impact the timing and amount of revenue we realize. In our recent past, we experienced disruptions in our supply chain relating to later-than-expected delivery of certain key components from several suppliers that adversely impacted our revenues. In addition, supply chain issues have affected the quality of the components we receive, which in some cases caused such components to not meet our specifications.
Previous wording
We obtain certain components and subsystems from a single source or a limited number of sources. Some of our single source suppliers, particularly those that provide satellite ground station and troposcatter components, have reported to us that they are having disruptions in their respective supply chains. These single source components, which include items such as RF filters and custom fiber connectors are in limited supply with very long lead times. In some cases, we have now depleted our stock inventory and we are on waiting lists to obtain additional components. In order to ship certain items during fiscal 2024, we must obtain additional components to produce certain finished goods. We continue to seek new suppliers and inventory elsewhere. In light of current challenges in the supply chain, we may not be able to qualify alternate suppliers for our components.
Current wording
We obtain certain components and subsystems from a single source or a limited number of sources. Some of our single source suppliers, particularly those that provide satellite ground station and troposcatter components, have in the past reported to us that they are having disruptions in their respective supply chains. These single source components, which include items such as RF filters and custom fiber connectors are in limited supply with very long lead times. In some cases, we have now depleted our stock inventory and we are on waiting lists to obtain additional components. In order to ship certain items in the future, we must obtain additional components to produce certain finished goods. We continue to seek new suppliers and inventory elsewhere. In light of current challenges in the supply chain, we may not be able to qualify alternate suppliers for our components timely, or at all.
Previous wording
Heading into our fiscal 2025, we have a significant portion of our targeted revenues in our backlog. However, if shipments from our backlog are delayed or we are unable to obtain expected orders or components, our business outlook will prove to be inaccurate. These aforementioned supply chain constraints, and their related challenges could result in future shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could adversely impact our revenue, gross margins and financial results. There can be no assurance that the impacts of all the aforementioned conditions will not continue, or worsen, in the future.
Current wording
Heading into fiscal 2026, we have a significant portion of our anticipated revenues in funded backlog. However, if shipments from our backlog are delayed, we are unable to perform as expected on orders accounted for over time, or we are unable to obtain expected orders or components, we may not achieve our business outlook. The aforementioned supply chain constraints, and their related challenges could result in, among other things, future shortages, increased material costs or use of cash, engineering design changes, late delivery penalties and delays in new product introductions, each of which could adversely impact our revenue, gross margins and financial results. There can be no assurance that the impacts of any or all the aforementioned conditions will not continue, or worsen, in the future.
Previous wording
Many of the end-markets for our products and services may be significantly impacted for other issues that result in adverse global economic conditions. For example, many of our international end-customers are in emerging and developing countries that are subject to sweeping economic and political changes. Many governments around the world are under pressure to reduce their spending. From time to time, global oil and natural gas prices have been volatile and have significantly impaired the ability of certain of our government customers in the oil and gas producing regions of the world to invest in telecommunications products and infrastructure. Additionally, from time to time, the relative strength of the U.S. dollar against many international currencies has negatively impacted the purchasing power for many of our international end-customers because most of our sales are denominated in U.S. dollars. We generate significant sales from many emerging and developing countries and any such reduced purchasing power of our customers could adversely impact our sales and backlog.
Current wording
Many of the end-markets for our products and services may be significantly impacted by other issues that result in adverse global economic conditions. For example, many of our international end-customers are in emerging and developing countries that are subject to sweeping economic and political changes. Many governments around the world are under pressure to reduce their spending. From time to time, global oil and natural gas prices have been volatile and have significantly impaired the ability of certain of our government customers in the oil and gas producing regions of the world to invest in telecommunications products and infrastructure. Additionally, from time to time, the relative strength of the U.S. dollar against many international currencies has negatively impacted the purchasing power for many of our international end-customers because most of our sales are denominated in U.S. dollars. We generate significant sales from many emerging and developing countries and any such reduced purchasing power of our customers could adversely impact our sales and backlog.
Previous wording
We design and manufacture our over-the-horizon microwave equipment and systems in Florida, where major hurricanes have occurred in the past, and amplifiers in Santa Clara, California, an area close to major earthquake fault lines. Additionally, certain of our Terrestrial and Wireless Networks segment activities are conducted in Washington State near a fault line. We maintain operations in Maryland near a U.S. Navy facility which may be more prone to a terrorist attack. Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Arizona), could be subject to natural disasters or other significant disruptions, including hurricanes, tornadoes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts, telecommunications failures, and other natural and man-made disasters or disruptions.
Current wording
We design and manufacture our over-the-horizon microwave equipment and systems in Florida, where major hurricanes have occurred in the past, and amplifiers in Santa Clara, California, an area close to major earthquake fault lines. Additionally, certain of our Allerium segment activities are conducted in Washington State near a fault line. We maintain operations in Maryland near a U.S. Navy facility which may be more prone to a terrorist attack. Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Arizona), could be subject to natural disasters or other significant disruptions, including hurricanes, tornadoes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts, telecommunications failures, and other natural and man-made disasters or disruptions.
Previous wording
We cannot be sure that our systems will operate appropriately if we experience hardware or software failure, intentional disruptions of service by third parties, an act of God or an act of war. A failure in our systems could cause delays in transmitting data, and as a result we may lose customers or face litigation that could involve material costs and distract management from operating our business.
Current wording
We cannot be sure that our systems will operate appropriately if we experience hardware or software failures, intentional disruptions of service by third parties, an act of God or an act of war. A failure in our systems could cause delays in transmitting data, and as a result we may lose customers or face litigation that could involve material costs and distract management from operating our business.
Previous wording
Ongoing instability and conflicts in global markets, including in the Ukraine and Eastern Europe, Israel, Lebanon, the Gaza Strip and the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.
Current wording
Ongoing instability and conflicts in global markets, including in Ukraine, the Gaza Strip, Israel, Lebanon, and other countries in the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.
Previous wording
Accordingly, it has become difficult to predict the timing or dollar amount of our contract awards in the region. For example, we anticipated being awarded several opportunities to provide wireless communication systems (including troposcatter systems) to Ukraine and neighboring countries for a variety of both defense and communications uses. However, while we continue to track such opportunities and believe that they will ultimately be awarded to us, such opportunities continue to be delayed. Additionally, funding for opportunities with other customers that we expected to book and ship has also been shifted to other programs and/or temporarily delayed as a result of changes in defense spending priorities.
Current wording
As a result of this conflict, from time to time since February 2023, we believe that certain customers (including the U.S. government, Ukraine and neighboring countries) paused procurement and deployment of satellite and troposcatter communication systems, and instead began purchasing war-fighting equipment. Accordingly, it has become difficult to predict the timing or dollar amount of our contract awards in the region. Additionally, funding for opportunities with other customers that we expected to book and ship has also been shifted to other programs and/or temporarily delayed as a result of changes in defense spending priorities.
Previous wording
We may fail to realize all of the anticipated benefits of our operational initiatives, including the strategic alternatives for our Terrestrial and Wireless Networks segment and further portfolio-shaping opportunities, or those benefits may take longer to realize than expected.
Current wording
We may fail to realize all of the anticipated benefits of our strategic and operational initiatives, or those benefits may take longer to realize than expected.
Previous wording
On October 17, 2024, we announced that we are executing a strategy to transform Comtech into a pure-play satellite and space communications company. There can be no assurance that the exploration of strategic alternatives will result in a transaction on terms acceptable to us or other strategic changes or outcomes. Even if a transaction or series of transactions were completed, there can be no assurance as to the timing of completing these activities. Moreover, we may not realize any or all of the anticipated benefits from our pursuit of strategic alternatives for our Terrestrial and Wireless Networks segment, or the anticipated benefits from further portfolio-shaping opportunities, and related transactions could in fact adversely affect our business. Our ability to realize the anticipated benefits of our transformation strategy and further portfolio-shaping opportunities will depend, to a large extent, on our ability to continue to focus on satellite and space communications and to achieve more predictable growth in the absence of any divested businesses, including the Terrestrial and Wireless Networks segment. Some of the anticipated benefits may not occur for a significant period of time. In addition, we may retain certain liabilities or obligations related to our Terrestrial and Wireless Networks segment or other businesses that may arise under contract or law, or may have difficulties enforcing our rights, contractual or otherwise, against the buyer. The focus on becoming a pure-play satellite and space communications company and the related transactions may not enhance long-term stockholder value as anticipated. Further, our strategic transformation could result in near term restructuring charges and a material impairment of our goodwill and/or intangible assets, among other things.
Current wording
We are continuing to execute a plan to transform Comtech through the exploration of strategic alternatives for our various businesses and product lines, the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus, and the implementation of additional operational initiatives to both achieve profitable results from operations, as well as to align our go-forward cost structure with our future state business. There can be no assurance that any of these initiatives will result in outcomes on terms acceptable to us or at all. Even if any of these initiatives were completed, there can be no assurance as to the timing of completing these activities. Moreover, we may not realize any or all of the anticipated benefits from our pursuit of these initiatives, and related transactions could in fact adversely affect our business. Our ability to realize the anticipated benefits of our transformation plan will depend, to a large extent, on our ability to continue to focus on, and to achieve, more predictable growth related to our remaining business. Some of the anticipated benefits may not occur for a significant period of time. In addition, we may retain certain liabilities or obligations related to any disposed businesses that may arise under contract or law, or may have difficulties enforcing our rights, contractual or otherwise, against the buyer. The outcome of these initiatives and the related transactions may not enhance long-term stockholder value as anticipated. Further, our transformation plan could result in near-term restructuring charges and a material impairment of our goodwill and/or intangible assets, among other things.
Previous wording
Many of these factors will be outside of our control and any one of them could result in increased costs, including restructuring charges, decreases in the amount of expected revenues and diversion of management’s time and energy, which could adversely affect our business, financial condition and results of operations. In addition, the process of such strategic transformations, including divesting assets, carries an inherent risk of market fluctuations and economic uncertainties that could undermine the value we expect to realize.
Current wording
Many of these factors will be outside of our control and any one of them could result in increased costs, including restructuring charges, decreases in the amount of expected revenues and diversion of management’s attention, which could adversely affect our business, financial condition and results of operations. In addition, the process of such transformation plan, including divesting assets, carries an inherent risk of market fluctuations and economic uncertainties that could undermine the value we expect to realize.
Previous wording
Our transformation strategy may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
Current wording
Our transformation plan may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
Previous wording
Our management team has spent, and continues to spend, a significant amount of time and effort focusing on our transformation strategy. This diversion of attention may have an adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the time it takes to complete our transformation strategy is protracted. During the pendency of the transformation strategy, our employees may face considerable distraction and uncertainty and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could have a materially adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations. Likewise, we could experience losses of customers who may be concerned about our ongoing long-term viability.
Current wording
Our management team has spent, and continues to spend, a significant amount of time and effort focusing on our transformation plan. This diversion of attention may have an adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the time it takes to complete our transformation plan is protracted. During the pendency of the transformation plan, our employees may face considerable distraction and uncertainty, and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could have a materially adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations. Likewise, we could experience losses of customers who may be concerned about our long-term viability.
Previous wording
Over the past three fiscal years, we incurred operating losses of $79.9 million, $14.7 million and $33.8 million in fiscal 2024, 2023 and 2022, respectively. In addition, over the past three fiscal years, net cash used in operating activities was $54.5 million and $4.4 million in fiscal 2024 and 2023, respectively, and net cash provided by operating activities was $2.0 million in fiscal 2022. Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to generate positive cash inflows from operations, maximize our borrowing capacity under our Credit Facility, as discussed further below, and or secure other sources of outside capital. While we believe we will be able to generate sufficient positive cash inflows, maximize our borrowing capacity and secure outside capital, there can be no assurance our plans will be successfully implemented and, as such, we may be unable to continue as a going concern over the next year beyond the issuance date.
Current wording
Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to execute on our operational strategy, generate positive cash inflows from operations, maximize our borrowing capacity under our Credit Facility and or secure outside capital.
Previous wording
Our efforts to invoice and collect unbilled receivables may be unsuccessful.
Current wording
Our efforts to invoice and collect unbilled accounts receivable may be unsuccessful.
Previous wording
As of July 31, 2024, we had $123.7 million of contract assets recorded on our Consolidated Balance Sheet, commonly referred to as unbilled receivables. Under U.S. generally accepted accounted principles, such contract assets generally result from timing differences between (a) when we must recognize revenue on contracts based on our activities to satisfy performance obligations related to products that have no alternative use and for which we have the right to payment in the event of a contract termination, and (b) when we can invoice our customers under the terms of those associated contracts (i.e., which is often based on our successful achievement of a milestone, such as an acceptance test or physical delivery of a product). Unbilled receivables remain at risk for collection due to several factors, including but not limited to our inability to meet invoicing milestones, customer contracts being terminated for default or actual indirect rates on cost reimbursable contracts ultimately being less than those rates estimated for revenue recognition purposes.
Current wording
As of July 31, 2025, we had $90.7 million of contract assets recorded in Accounts Receivable, Net on our Consolidated Balance Sheet, commonly referred to as unbilled receivables. Under U.S. generally accepted accounting principles, such contract assets generally result from timing differences between (a) when we must recognize revenue on contracts based on our activities to satisfy performance obligations related to products that have no alternative use and for which we have the right to payment in the event of a contract termination, and (b) when we can invoice our customers under the terms of those associated contracts (i.e., which is often based on our successful achievement of a milestone, such as an acceptance test or physical delivery of a product). Unbilled receivables remain at risk for collection due to several factors, including but not limited to our inability to meet invoicing milestones, customer contracts being terminated for default or actual indirect rates on cost reimbursable contracts ultimately being less than those rates estimated for revenue recognition purposes.
Previous wording
During our fiscal years ended July 31, 2024, 2023 and 2022, sales to the U.S. government (including sales to prime contractors to the U.S. government) were $182.3 million, $172.0 million and $132.6 million, or 33.7%, 31.3% and 27.2% of our consolidated net sales, respectively. In addition, a large portion of our existing backlog consists of orders related to U.S. government contracts and our Business Outlook for Fiscal 2025 and beyond depends, in part, on significant new orders from the U.S. government, which undergoes extreme budgetary pressures from time to time.
Current wording
During our fiscal years ended July 31, 2025, 2024 and 2023, sales to the U.S. government (including sales to prime contractors to the U.S. government) were $151.3 million, $182.3 million and $172.0 million, or 30.3%, 33.7% and 31.3% of our consolidated net sales, respectively. In addition, 12.1% of our existing backlog consists of orders related to U.S. government contracts and our Business Outlook depends, in part, on significant new orders from the U.S. government, which undergoes extreme budgetary pressures from time to time.
Previous wording
The federal debt limit continues to be actively debated as plans for long-term national fiscal policy are discussed. The outcome of these discussions, which could be affected by the presidential and congressional elections in 2024, could have a significant impact on defense spending broadly and programs we support in particular. The failure of Congress to approve future budgets and/or increase the debt ceiling of the U.S. on a timely basis could delay or result in the loss of contracts for the procurement of our products and services and we may be asked or required to continue to perform for some period of time on certain of our U.S. government contracts, even if the U.S. government is unable to make timely payments. A decrease in DoD or Department of Homeland Security expenditures, the elimination or curtailment of a material program in which we are involved, or changes in payment patterns of our customers as a result of changes in U.S. government spending could have an adverse effect on our business, results of operations and financial condition.
Current wording
The federal debt limit in the U.S. continues to be actively debated as plans for long-term national fiscal policy are discussed. The outcome of these discussions, now influenced by the new presidential administration and changes in Congress following the 2024 elections, could have a significant impact on defense spending broadly and programs we support in particular. Continued uncertainty around the approval by Congress of future budgets and/or increases in the debt ceiling of the U.S. on a timely basis could delay or result in the loss of contracts for the procurement of our products and services and we may be asked or required to continue to perform for some period of time on certain of our U.S. government contracts, even if the U.S. government is unable to make timely payments. A decrease in U.S. government spending, the elimination or curtailment of a material program in which we are involved, or changes in payment patterns of our customers as a result of changes in U.S. government spending could have an adverse effect on our business, results of operations and financial condition.
Previous wording
On September 25, 2024, the U.S. Senate voted to pass a bipartisan Continuing Resolution (CR; H.R. 9747) to extend federal spending and avert a government shutdown through December 20, 2024. The U.S. House passed the measure that same day and the measure was signed by President Biden prior to the beginning of fiscal year 2025. Accordingly, it is still possible that a partial shutdown of the U.S. government may occur, or additional interim budgets may be adopted. As such, we may experience delayed orders, delayed payments and adverse impacts on our results of operations. We may experience related supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and subcontractors. All of the aforementioned conditions and factors could have a material adverse effect on our business, results of operations and financial condition. Additionally, cost cutting, efficiency initiatives, reprioritization, other affordability analyses, and changes in budgetary priorities by our governmental customers, including the U.S. government, could adversely impact both of our operating segments. We are unable to predict the impact these or similar events could have on our business, financial position, results of operations or cash flows.
Current wording
In October 2025, the U.S. federal government entered a shutdown due to a lapse in appropriations, resulting from a failure by Congress to pass a budget or continuing resolution. The shutdown has led to the suspension of non-essential government operations and services, delays in contract awards and renewals and interruptions in agency communications and decision-making processes. Consequently, the ongoing U.S. federal government shutdown has further heightened uncertainty. Prolonged or repeated shutdowns may result in delayed contract awards, delayed payments and adverse impacts on our results of operations and or cash flows. We may experience related supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and subcontractors. All of the aforementioned conditions and factors could have a material adverse effect on our business, results of operations and financial condition. Additionally, cost cutting, efficiency initiatives, reprioritization, other affordability analyses, and changes in budgetary priorities by our governmental customers, including the U.S. government, could adversely impact our operating segments. We are unable to predict the impact these or similar events could have on our business, financial position, results of operations or cash flows, which could disrupt program execution and impact the timing of payments for government customers.
Previous wording
•Our U.S. government contracts can easily be terminated by the U.S. government - Our U.S. government contracts and subcontracts can be terminated by the U.S. government for its convenience or upon an event of default by us. Termination for convenience provisions provide us with little to no recourse related to: our potential recovery of costs incurred or costs committed, potential settlement expenses and hypothetical profit on work completed prior to termination.
Current wording
•Our U.S. government contracts can easily be terminated by the U.S. government - Our U.S. government contracts and subcontracts can be terminated by the U.S. government for its convenience or upon an event of default by us. Termination for convenience provisions could provide us with little to no recourse related to: our potential recovery of costs incurred or costs committed, potential settlement expenses and hypothetical profit on work completed prior to termination.
Previous wording
•Failure to comply with government contractor obligations can result in adverse consequences for the company - As a supplier to the U.S. government, we must comply with numerous regulations, including those governing security, contracting practices and classified information. Failure to comply with these regulations and practices could result in fines being imposed against us, civil or criminal penalties, termination of contracts, our suspension for a period of time from eligibility for bidding on, or for award of, new government contracts, or other adverse consequences. If we are disqualified as a supplier to government agencies, we would lose most, if not all, of our U.S. government customers and revenues from sales of our products would decline significantly.
Current wording
•Failure to comply with government contractor obligations can result in adverse consequences for us - As a supplier to the U.S. government, we must comply with numerous regulations, including those governing security, contracting practices and classified information. Failure to comply with these regulations and practices could result in fines being imposed against us, civil or criminal penalties, termination of contracts, our suspension for a period of time from eligibility for bidding on, or for award of, new government contracts, or other adverse consequences. If we are disqualified as a supplier to government agencies, we would lose most, if not all, of our U.S. government customers and revenues from sales of our products would decline significantly.
Previous wording
In addition, all of our U.S. government contracts can be audited by the Defense Contract Audit Agency ("DCAA") and other U.S. government agencies and we can be subject to penalties arising from post-award contract audits (sometimes referred to as a Truth in Negotiations Act or "TINA" audit), cost audits in which the value of our contracts may be reduced or increased costs to implement corrective actions. If costs are found to be improperly allocated to a specific contract, those costs will not be reimbursed, and any such costs already reimbursed would be required to be refunded. Although we record contract revenues based upon costs we expect to realize upon final audit, we cannot predict the outcome of any such future audits and adjustments, and we may be required to materially reduce our revenues or profits upon completion and final negotiation of audits. Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of payments, fines and suspension or debarment from U.S. government contracting or subcontracting for a period of time.
Current wording
In addition, all of our U.S. government contracts can be audited by the Defense Contract Audit Agency ("DCAA") and other U.S. government agencies, and we can be subject to penalties arising from post-award contract audits (sometimes referred to as a Truth in Negotiations Act or "TINA" audit), cost audits in which the value of our contracts may be reduced or increased costs to implement corrective actions. If costs are found to be improperly allocated to a specific contract, those costs will not be reimbursed, and any such costs already reimbursed would be required to be refunded. Although we record contract revenues based upon costs we expect to realize upon final audit, we cannot predict the outcome of any such future audits and adjustments, and we may be required to materially reduce our revenues or profits upon completion and final negotiation of audits. Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of or refund of payments, fines and suspension or debarment from U.S. government contracting or subcontracting for a period of time.
Previous wording
Sales for use by international customers (including sales to U.S. companies for inclusion in products that will be sold to international customers) represented approximately 21.5%, 24.0% and 25.0% of our consolidated net sales for the fiscal years ended July 31, 2024, 2023 and 2022, respectively, and we expect that international sales will continue to be a significant portion of our consolidated net sales for the foreseeable future. These sales expose us to certain risks, including barriers to trade, declining trade relations, fluctuations in foreign currency exchange rates (which may make our products less price-competitive), political, legal, social and economic instability, exposure to public health epidemics, availability of suitable export financing, tariff regulations, and other U.S. and foreign regulations that may apply to the export of our products. Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks. Although we take steps to mitigate our risk with respect to international sales, we may not be able to do so in every instance for any of the following reasons, among others:
Current wording
Sales for use by international customers (including sales to U.S. companies for inclusion in products that will be sold to international customers) represented approximately 21.0%, 21.5% and 24.0% of our consolidated net sales for the fiscal years ended July 31, 2025, 2024 and 2023, respectively, and we expect that international sales will continue to be a significant portion of our consolidated net sales for the foreseeable future. These sales expose us to certain risks, including barriers to trade, declining trade relations, fluctuations in foreign currency exchange rates (which may make our products less price-competitive), political, legal, social and economic instability, exposure to public health epidemics, availability of suitable export financing, tariff regulations and other U.S. and foreign regulations that may apply to the export of our products. Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks. Although we take steps to mitigate our risk with respect to international sales, we may not be able to do so in every instance for any of the following reasons, among others:
Previous wording
•We must comply with all applicable export control laws and regulations of the U.S., the U.K. and other countries - Certain of our products and systems may require licenses from U.S. government agencies for export from the U.S., and some of our products are not permitted to be exported. In addition, in certain cases, U.S. export controls also severely limit unlicensed technical discussions, such as discussions with any persons who are foreign nationals. As a result, in cases where we may need a license, our ability to compete against a non-U.S. domiciled foreign company that may not be subject to the same U.S. laws may be materially adversely affected. U.S. laws and regulations applicable to us include the Arms Export Control Act, the IEEPA, the ITAR, the EAR and the trade sanctions laws and regulations administered by the U.S. Treasury Department's OFAC. We are also subject to similar restrictions in the U.K. and other countries.
Current wording
•We must comply with all applicable export control laws and regulations of the U.S. and other countries - Certain of our products and systems may require licenses from U.S. government agencies for export from the U.S., and some of our products are not permitted to be exported. In addition, in certain cases, U.S. export controls also severely limit unlicensed technical discussions, such as discussions with any persons who are foreign nationals. As a result, in cases where we may need a license, our ability to compete against a non-U.S. domiciled foreign company that may not be subject to the same U.S. laws may be materially adversely affected. U.S. laws and regulations applicable to us include the Arms Export Control Act, the IEEPA, the ITAR, the EAR and the trade sanctions laws and regulations administered by the U.S. Treasury Department's OFAC. We are also subject to similar restrictions in other countries. Additionally, changes in regulatory requirements which could restrict our ability to deliver services to our international customers, including the addition of a country to the list of sanctioned countries under the IEEPA or similar legislation could negatively impact our business. For the fiscal years ended July 31, 2025, 2024 and 2023, we conducted no business with states designated as sponsors of terrorism.
Previous wording
•We must comply with the FCPA and similar laws elsewhere - We are subject to the FCPA and other foreign laws prohibiting corrupt payments to government officials, which generally bar bribes or unreasonable gifts to foreign governments or officials. Violations of these laws or regulations could result in significant sanctions, including disgorgement of profits, fines, criminal sanctions against us, our officers, our directors, or our employees, more onerous compliance requirements, more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our international business. A violation of any of the regulations enumerated above could materially adversely affect our business, financial condition and results of operations. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, agents, or subsidiaries will not commit acts that violate these laws for which we may be ultimately held responsible. Additionally, changes in regulatory requirements which could restrict our ability to deliver services to our international customers, including the addition of a country to the list of sanctioned countries under the IEEPA or similar legislation could negatively impact our business. For the fiscal years ended July 31, 2024, 2023 and 2022, we conducted no business with states designated as sponsors of terrorism.
Current wording
•We must comply with the FCPA and similar laws elsewhere - We are subject to the FCPA and other foreign laws prohibiting corrupt payments to government officials, which generally bar bribes or unreasonable gifts to foreign governments or officials. Violations of these laws or regulations could result in significant sanctions, including disgorgement of profits, fines, criminal sanctions against us, our officers, our directors, or our employees, more onerous compliance requirements, more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our international business. A violation of any of the regulations enumerated above could materially adversely affect our business, financial condition and results of operations. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, agents, or subsidiaries will not commit acts that violate these laws for which we may be ultimately held responsible.
Previous wording
•We must maintain a company-wide Office of Trade Compliance - In the past, we have self-reported violations of export control laws or regulations to the U.S. Department of State, Directorate of Defense Trade Controls ("DDTC"), DoC, OFAC and similar regulatory authorities in the jurisdictions where we have operations, including His Majesty's Revenue & Customs ("HMRC") in the United Kingdom. In addition, we have made various commitments to U.S. government agencies that oversee trade and export matters and have committed that we will maintain certain policies and procedures including maintaining a company-wide Chief Trade Compliance Officer and Office of Trade Compliance and conducting ongoing internal assessments and reporting of any future violations to those agencies. Even though we take precautions to avoid engaging in transactions that may violate U.S. export control laws or regulations and their foreign counterparts, including trade sanctions, those measures may not be effective in every instance. If it is determined that we have violated export control laws or regulations or trade regulations in any jurisdictions, civil and criminal penalties could apply, and we may suffer reputational harm.
Current wording
•We must maintain a company-wide Office of Trade Compliance - In the past, we have self-reported violations of export control laws or regulations to the U.S. Department of State, Directorate of Defense Trade Controls ("DDTC"), Department of Commerce ("DoC"), OFAC and similar regulatory authorities in the jurisdictions where we have operations, including His Majesty's Revenue & Customs ("HMRC") in the U.K. We have a pending self-disclosure with the DDTC regarding exports of certain variants of our modems, as further described in "Notes to Consolidated Financial Statements - Note (14)(a) - Commitments and Contingencies - Legal Proceedings and Other Matters - U.S. Export Matter" included in "Part II - Item 8. Financial Statements and Supplementary Data," included in this Form 10-K. In addition, we have made various commitments to U.S. government agencies that oversee trade and export matters and have committed that we will maintain certain policies and procedures including maintaining a company-wide Chief Trade Compliance Officer and Office of Trade Compliance and conducting ongoing internal assessments and reporting of any future violations to those agencies. Even though we take precautions to avoid engaging in transactions that may violate U.S. export control laws or regulations and their foreign counterparts, including trade sanctions, those measures may not be effective in every instance. If it is determined that we have violated export control laws or regulations or trade regulations in any jurisdictions, civil and criminal penalties could apply, and we may suffer reputational harm.
Previous wording
•We may be affected by the future imposition of tariffs and trade restrictions - The current U.S. administration has generally not amended the trade policies and tariffs on imported products from the prior administration, and has increased sanctions against Russia. Our inability to effectively manage the negative impacts of U.S. and foreign trade policies, including, in connection with our business with customers outside of the United States or with newly sanctioned entities could adversely affect our business and financial results.
Current wording
•We may be affected by current and future impositions of tariffs and trade restrictions - The U.S. has continued to adjust its trade policies in recent years, including adding new or modifying existing tariffs on imports, in some cases significantly, and other restrictive trade policies. Although some of these tariffs have been paused or reduced, there is significant uncertainty as trade negotiations are ongoing and outcomes are unpredictable. Our inability to effectively manage the negative impacts of U.S. and foreign trade policies, including, in connection with our business with customers outside of the U.S. or with newly sanctioned entities could adversely affect our business and financial results.
Previous wording
Our subcontractors and key suppliers are essential members of our team. Nevertheless, we may occasionally have commercial disputes with them (e.g., over the quality, timeliness or cost of their products or payment patterns in connection with rendered goods and services). As suppliers evaluate our financial condition on an ongoing basis, they may also take steps to revise payment terms (e.g., by requiring payment in advance of delivery or payment milestones) that may negatively impact the anticipated timing of components required for the assembly of our products or services rendered in support of our programs. Additionally, our subcontractors and suppliers may experience financial difficulties which may impact their ability to execute against their contractual commitments and delay or otherwise disrupt deliveries. In such instances, we may not receive the components or subsystems for which we have contracted. Taken together, each of the risks set forth herein may have a material adverse effect on our results of operations and financial condition.
Current wording
Our subcontractors and key suppliers are essential members of our team. Nevertheless, we may occasionally have commercial disputes with them (e.g., over the quality, timeliness or cost of their products or payment patterns in connection with rendered goods and services). Suppliers may also take steps to revise payment terms (e.g., by requiring payment in advance of delivery or payment milestones) that may negatively impact the anticipated timing of components required for the assembly of our products or services rendered in support of our programs. Additionally, our subcontractors and suppliers may experience financial difficulties which may impact their ability to execute against their contractual commitments and delay or otherwise disrupt deliveries. In such instances, we may not receive the components or subsystems for which we have contracted. Taken together, each of the risks set forth herein may have a material adverse effect on our results of operations and financial condition.
Previous wording
Our products are complex, and we cannot ensure that our extensive testing will detect all defects. Quality issues reported by our customers for products covered under warranty could adversely impact our reputation and negatively affect our operating results. If significant warranty obligations arise due to reliability or quality issues arising from such defects, our reputation and operating results could be negatively impacted.
Current wording
The solutions we provide customers are complex. We cannot ensure that our extensive testing of our solutions will detect all defects. Quality issues reported by our customers for products covered under warranty could adversely impact our reputation and negatively affect our operating results. If significant warranty obligations arise due to reliability or quality issues arising from such defects, our reputation and operating results could be negatively impacted.
Previous wording
•We may not be ultimately successful in transformation activities - The pursuit of strategic alternatives and portfolio reshaping is a complex undertaking. Managing the disposition of multiple production facilities and their attending employee populations is difficult and may negatively impact business prospects in the short and long term. Additionally, in the course of evaluating our portfolio, we determined that our Satellite and Space Communications reporting unit had an estimated fair value below its carrying value and concluded that our goodwill in this reporting unit was impaired, as noted in the “Impairment of long-lived assets, including goodwill" line item on our Consolidated Statements of Operations.
Current wording
•We may not be ultimately successful in transformation activities - Carrying out our transformation plan, including portfolio reshaping, is a complex undertaking. Managing the restructuring of multiple production facilities and their attending employee populations is difficult and may negatively impact business prospects in the short and long term. Additionally, in the course of evaluating our portfolio, we may determine that one or both of our reporting units has an estimated fair value below its carrying value and conclude that goodwill in such reporting unit is impaired.
Previous wording
•The loss of key technical and/or management personnel in the course of our restructuring could adversely affect our business - The pursuit of strategic alternatives and reshaping of our portfolio businesses will require the continued contributions of key technical and management personnel. The management skills that have been appropriate for us in the past may not continue to be appropriate if we grow and diversify. Filling new positions may be difficult in the current competitive labor market. Moreover, many of our key and technical management personnel would be difficult to replace and are not subject to employment or non-competition agreements. We currently have research and development employees in areas that are located a great distance away from our U.S. headquarters and some work out of their respective homes. Managing remote product development operations is difficult and we may not be able to manage the employees in these remote centers successfully. Our expected growth and future success will depend, in large part, upon our ability to attract and retain highly qualified engineering, sales and marketing personnel. Competition for such personnel from other companies, academic institutions, government entities and other organizations is intense. Although we believe that we have been successful to date in recruiting and retaining key personnel, we may not be successful in attracting and retaining the personnel we will need to grow and operate profitably, especially in the current competitive labor market.
Current wording
•The loss of key technical and/or management personnel in the course of restructuring could adversely affect our business - Carrying out our transformation plan, including portfolio reshaping, will require the continued contributions of key technical and management personnel. The management skills that have been appropriate for us in the past may not continue to be appropriate if we grow and diversify. Filling new positions may be difficult in the current competitive labor market. Moreover, many of our key and technical management personnel would be difficult to replace and are not subject to employment or non-competition agreements. We currently have research and development employees in areas that are located a great distance away from our U.S. headquarters and some work out of their respective homes. Managing remote product development operations is difficult and we may not be able to manage the employees in these remote centers successfully. Our expected growth and future success will depend, in large part, upon our ability to attract and retain highly qualified engineering, sales and marketing personnel. Competition for such personnel from other companies, academic institutions, government entities and other organizations is intense. Although we believe that we have been successful to date in recruiting and retaining key personnel, we may not be successful in attracting and retaining the personnel we will need to grow and operate profitably, especially in the current competitive labor market.
Previous wording
•We may not be able to improve our processes and systems to keep pace with anticipated growth - The future growth of our business may place significant demands on our managerial, operational, production and financial resources. In order to manage that growth, we must be prepared to improve and expand our management, operational and financial systems and controls, as well as our production capabilities. We also need to continue to recruit and retain personnel and train and manage our employee base. We must carefully manage research and development capabilities and production and inventory levels to meet product demand, new product introductions and product and technology transitions. If we are not able to timely and effectively manage our growth and maintain the quality standards required by our existing and potential customers, it could have an adverse effect on our business, results of operations and financial condition. Additionally, in light of various factors including but not limited to our announcement to pursue strategic alternatives, we have postponed and or re-prioritized certain initiatives (e.g., our drive toward an common company-wide ERP tool), which may result in certain inefficiencies and or increased costs in the future.
Current wording
•We may not be able to improve our processes and systems to keep pace with anticipated growth - The future growth of our business may place significant demands on our managerial, operational, production and financial resources. In order to manage that growth, we must be prepared to improve and expand our management, operational and financial systems and controls, as well as our production capabilities. We also need to continue to recruit and retain personnel and train and manage our employee base. We must carefully manage research and development capabilities and production and inventory levels to meet product demand, new product introductions and product and technology transitions. If we are not able to timely and effectively manage our growth and maintain the quality standards required by our existing and potential customers, it could have an adverse effect on our business, results of operations and financial condition. Additionally, in light of various factors including but not limited to our announced transformation plan, we have postponed or re-prioritized certain initiatives (e.g., our drive toward a common company-wide ERP tool), which may result in certain inefficiencies or increased costs in the future.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
On January 13, 2025, we announced that Mr. Kenneth Traub was appointed to serve as our President and CEO, in addition to his role as our Chairman. The loss or limited availability of the services of one or more of our executive officers or other key personnel, or our inability to recruit and retain qualified executive officers or other key personnel in the future, could, at least temporarily, have an adverse effect on our operating results and financial condition. Leadership transitions can be inherently difficult to manage, and an inadequate transition may cause disruption to our business and growth plans, including to our relationships with our customers and employees.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
As a result of this conflict, from time to time over the past two years, we believe that certain customers (including the U.S. government, Ukraine and neighboring countries) paused procurement and deployment of satellite and troposcatter communication systems, and instead began purchasing war-fighting equipment.
Previous report — wording carried elsewhere
Also, as announced on October 17, 2024, we are executing a strategy to transform Comtech into a pure-play satellite and space communications company. Ongoing and future actions supporting our transformation strategy include: an exploration of strategic alternatives for our Terrestrial and Wireless Networks segment, which is well underway; the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus; and the implementation of additional operational initiatives to both achieve profitable results from operations as well as to align our go-forward cost structure with a pure-play focus on satellite and space communications. Such activities could result in a material impairment of our goodwill and/or intangible assets. See "Strategic Transformation" section above for more information.