COMTECH TELECOMMUNICATIONS CORP /DE/

Previous wording

Certain information in this Quarterly Report on Form 10-Q contains, and oral statements made by our representatives from time to time may contain, forward-looking statements. Forward-looking statements can be identified by words such as: "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "outlook," "intend," "likely," "may," "plan," "potential," "predict," "project," "seek," "should," "strategy," "target," "will," "would," and similar references to future periods, or the negative of those words and expressions, as well as statements in future tense. Forward-looking statements include, among others, statements regarding our expectations for our strategic alternatives process, our expectations for further portfolio-shaping opportunities, our expectations for other operational initiatives, our expectations for completing further financing initiatives, our future performance and financial condition, the plans and objectives of our management and our assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under our control which may cause our actual results, future performance and financial condition, and achievement of our plans and objectives of our management to be materially different from the results, performance or other expectations implied by these forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based on information available at the time and/or our good faith belief with respect to future events, and is subject to risks and uncertainties that are difficult to predict and many of which are outside of our control. Factors that could cause actual results to differ materially from current expectations include, among other things: the outcome and effectiveness of the aforementioned strategic alternatives process, further portfolio-shaping opportunities, other operational initiatives, and the completion of further financing activities; our ability to access capital and liquidity; our ability to implement changes in our executive leadership; the possibility that the expected benefits from our strategic activities will not be fully realized, or will not be realized within the anticipated time periods; the risk that acquired businesses will not be integrated successfully; impacts from, and uncertainties regarding, future actions that may be taken by activist stockholders; the possibility of disruption from acquisitions or dispositions, making it more difficult to maintain business and operational relationships or retain key personnel; the risk that we will be unsuccessful in implementing a tactical shift in our Satellite and Space Communications segment away f…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain information in this Quarterly Report on Form 10-Q contains, and oral statements made by our representatives from time to time may contain, forward-looking statements. Forward-looking statements can be identified by words such as: "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "outlook," "intend," "likely," "may," "plan," "potential," "predict," "project," "seek," "should," "strategy," "target," "will," "would," and similar references to future periods, or the negative of those words and expressions, as well as statements in future tense. Forward-looking statements include, among others, statements regarding our expectations for our strategic alternatives process, our expectations for further portfolio-shaping opportunities, our expectations for other operational initiatives, our expectations for completing further financing initiatives, our future performance and financial condition, the plans and objectives of our management and our assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under our control which may cause our actual results, future performance and financial condition, and achievement of our plans and objectives of our management to be materially different from the results, performance or other expectations implied by these forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based on information available at the time and/or our good faith belief with respect to future events, and is subject to risks and uncertainties that are difficult to predict and many of which are outside of our control. Factors that could cause actual results to differ materially from current expectations include, among other things: the outcome and effectiveness of the aforementioned strategic alternatives process, further portfolio-shaping opportunities, other operational initiatives, and the completion of further financing activities; our ability to access capital and liquidity; our ability to implement changes in our executive leadership; the possibility that the expected benefits from our strategic activities will not be fully realized, or will not be realized within the anticipated time periods; the risk that acquired businesses will not be integrated successfully; impacts from, and uncertainties regarding, future actions that may be taken by activist stockholders; the possibility of disruption from acquisitions or dispositions, making it more difficult to maintain business and operational relationships or retain key personnel; the risk that we will be unsuccessful in implementing a tactical shift in our Satellite and Space Communications segment away f…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a leading provider of satellite and space communications technologies, terrestrial and wireless network solutions, Next Generation 911 ("NG-911") and emergency services and cloud native capabilities. This includes the critical communications infrastructure that people, businesses, and governments rely on when durable, trusted connectivity is required, no matter where they are – on land, at sea, or in the air – and no matter what the circumstances – from armed conflict to a natural disaster. Our solutions are designed to fulfill our customers’ needs for secure wireless communications in the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical and other scenarios where performance is crucial. Over the long-term, we anticipate future growth in our end markets due to a trend of increasing demand for global voice, video and data usage in recent years, in addition to the growth of emergency communication networks and related applications. We provide our solutions to both commercial and governmental customers.

Current wording

We are a leading provider of satellite and space communications technologies, terrestrial and wireless network solutions, Next Generation 911 ("NG-911") and emergency services and cloud native capabilities. This includes the critical communications infrastructure that people, businesses, and governments rely on when durable, trusted connectivity is required, no matter where they are – on land, at sea, or in the air – and no matter what the circumstances – from armed conflict to a natural disaster. Our solutions are designed to fulfill our customers’ needs for secure wireless communications in the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical and other scenarios where performance is crucial. Over the long-term, we anticipate future growth in our end markets due to a trend of increasing demand for global voice, video and data usage in recent years, in addition to the growth of emergency communication networks and related applications. We provide our solutions to both commercial and governmental, as well as both domestic and international customers.

Previous wording

Impairment of Long-Lived Assets, Including Goodwill. As of October 31, 2025, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $204.6 million (of which $30.5 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Allerium segment). Additionally, as of October 31, 2025, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $168.1 million (of which $39.8 million relates to our Satellite and Space Communications segment and $128.3 million relates to our Allerium segment). For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (15) - Long-lived Assets, including Goodwillfor further information. Ongoing and future actions supporting our transformation plan could result in a material impairment of our goodwill and/or intangible assets.

Current wording

Impairment of Long-Lived Assets, Including Goodwill. As of January 31, 2026, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $204.6 million (of which $30.5 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Allerium segment). Additionally, as of January 31, 2026, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $163.0 million (of which $38.3 million relates to our Satellite and Space Communications segment and $124.7 million relates to our Allerium segment). For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (15) - Long-lived Assets, including Goodwillfor further information. Ongoing and future actions supporting our transformation plan could result in a material impairment of our goodwill and/or intangible assets.

Previous wording

Our U.S. federal income tax returns for fiscal 2022 through 2025 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state and foreign income tax returns prior to fiscal 2021 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

Current wording

Our U.S. federal income tax returns for fiscal 2022 through 2025 are subject to Internal Revenue Service ("IRS") audit, including our fiscal 2023 income tax return which was recently selected by the IRS for examination. None of our state and foreign income tax returns prior to fiscal 2021 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

Previous wording

Capitalized Engineering Costs. We generally expense all research and development costs. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other personnel-related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Costs incurred internally in researching and developing software to be sold are charged to expense until technological feasibility has been established for the software. Judgment is required in determining when technological feasibility of a product is established. Technological feasibility for our advanced communication software solutions is generally reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to customers and when we are able to validate the marketability of such product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. To date, costs capitalized related to software developed for the purpose of selling to third parties was not material, but could increase in the future.

Current wording

Costs incurred internally in researching and developing software to be sold are charged to expense until technological feasibility has been established for the software. Judgment is required in determining when technological feasibility of a product is established. Technological feasibility for our advanced communication software solutions is generally reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to customers and when we are able to validate the marketability of such product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. To date, costs capitalized related to software developed for the purpose of selling to third parties was not material, but could increase in the future.

Previous wording

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

Current wording

As it relates to software developed for the purpose of internal-use (e.g., hosted "SaaS" applications within our Allerium segment), costs capitalized primarily consist of direct labor and third-party vendor costs associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces. Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which we expect to benefit from the use of that software. For the three months ended January 31, 2026 and 2025, internal-use software costs capitalized were $1.6 million and $0.5 million, respectively. For the six months ended January 31, 2026 and 2025, internal-use software costs capitalized were $3.1 million and $1.5 million, respectively. Capitalized internal use software costs are amortized once the software is placed in service on the straight-line method over the estimated useful life of the software, which is generally three years.

Previous wording

Derivative Instruments and Warrant Liabilities. We evaluate our financial instruments, including our Credit Facility, Subordinated Credit Facility, Convertible Preferred Stock and warrants to issue our common stock pursuant to the terms of such instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Such evaluation considers a qualitative and quantitative assessment of whether the host instrument is more debt or equity-like, and if embedded derivatives should be bifurcated from the host instrument and/or combined for accounting purposes. For derivatives that are accounted for as liabilities, the derivative is initially recorded at its estimated fair value and is then re-valued at each reporting date, with changes in its estimated fair value reported in our Condensed Consolidated Financial Statements. To estimate such fair values, with the assistance of a third party valuation expert, we primarily use Monte Carlo simulation models, on a with and without basis, or Black-Scholes option pricing models, each adjusted for instrument-specific terms. Due to the nature of our derivative instruments and warrant liabilities, we must use Level 3 inputs for estimating fair value, which are unobservable inputs developed using the best available information under the circumstances. Level 3 inputs are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect our assumptions related to how market participants would use similar inputs to price the asset or liability. Accordingly, our estimates and assumptions could prove to be inaccurate. Also, changes in such estimates and assumptions from period to period could be material to our results of operations and financial condition. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (4) - Fair Value Measurements and Financial Instruments for further information.

Current wording

Derivative Instruments and Warrant Liabilities. With the assistance of a third party expert, we evaluate our financial instruments, including our Credit Facility, Subordinated Credit Facility, Convertible Preferred Stock and warrants to issue our common stock pursuant to the terms of such instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Such evaluation considers a qualitative and quantitative assessment of whether the host instrument is more debt or equity-like, and if embedded derivatives should be bifurcated from the host instrument and/or combined for accounting purposes. For derivatives that are accounted for as liabilities, the derivative is initially recorded at its estimated fair value and is then re-valued at each reporting date, with changes in its estimated fair value reported in our Condensed Consolidated Financial Statements. To estimate such fair values, with the assistance of a third party valuation expert, we primarily use Monte Carlo simulation models, on a with and without basis, or Black-Scholes option pricing models, each adjusted for instrument-specific terms. Due to the nature of our derivative instruments and warrant liabilities, we must use Level 3 inputs for estimating fair value, which are unobservable inputs developed using the best available information under the circumstances. Level 3 inputs are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect our assumptions related to how market participants would use similar inputs to price the asset or liability. Accordingly, our estimates and assumptions could prove to be inaccurate. Also, changes in such estimates and assumptions from period to period could be material to our results of operations and financial condition. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (4) - Fair Value Measurements and Financial Instruments for further information.

Previous wording

Fiscal 2026: First Quarter Results and Business Outlook

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Fiscal 2026: Second Quarter Results and Business Outlook

Previous wording

Financial results for the first quarter of fiscal 2026 include:

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Financial results for the second quarter of fiscal 2026 include:

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•Gross margin was 33.1%, compared to 31.2% in our fourth quarter of fiscal 2025 and 12.5% in our first quarter of fiscal 2025; the sequential improvement in our quarterly gross margin percentage builds upon the quarterly trend achieved throughout fiscal 2025, which reflects the impact of actions to reduce cost of goods sold and to improve product mix;

Current wording

•Gross margin was 33.9%, compared to 26.7% in our second quarter of fiscal 2025; the improvement in our quarterly gross margin percentage builds upon the quarterly trend achieved throughout fiscal 2025 and the first quarter of fiscal 2026 to reduce cost of goods sold and to improve overall product mix;

Previous wording

•GAAP net loss attributable to common stockholders was $19.8 million and included, among other things: (i) non-cash charges of $18.0 million, of which (a) $6.6 million related to the amortization of deferred financing costs, debt discount, accreted interest and interest paid-in-kind associated with our senior and subordinated credit facilities; (b) $5.0 million related to the amortization of intangible assets; (c) $3.9 million related to net paid-in-kind dividends associated with our Convertible Preferred Stock; (d) $1.4 million related to the remeasurement of warrants and derivatives; and (e) $1.1 million related to the amortization of stock-based compensation; and (ii) cash charges of $3.2 million, of which (x) $2.4 million related to restructuring costs; and (y) $0.8 million related to CEO transition costs;

Current wording

•GAAP net loss attributable to common stockholders was $20.2 million and included, among other things: (i) non-cash charges of $19.9 million, of which (a) $6.6 million related to the amortization of deferred financing costs, debt discount, accreted interest and interest paid-in-kind associated with our senior and subordinated credit facilities; (b) $6.5 million related to net paid-in-kind dividends associated with our Convertible Preferred Stock; (c) $5.0 million related to the amortization of intangible assets; (d) $1.4 million related to the remeasurement of warrants and derivatives; and (e) $0.4 million related to the amortization of stock-based compensation; and (ii) cash charges of $1.9 million, of which (x) $1.6 million related to restructuring costs; and (y) $0.3 million related to CEO transition costs;

Previous wording

•GAAP EPS net loss of $0.67 and Non-GAAP EPS net loss of $0.18;

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•GAAP EPS net loss of $0.68 and Non-GAAP EPS net loss of $0.18;

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•Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $9.6 million, compared to Adjusted EBITDA of $13.3 million for the fourth quarter of fiscal 2025 and negative $30.8 million for the first quarter of fiscal 2025;

Current wording

•Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $9.1 million, compared to $2.9 million for the second quarter of fiscal 2025;

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•New bookings (also referred to as orders) of $101.9 million, resulting in a quarterly book-to-bill ratio of 0.92x (a measure defined as bookings divided by net sales); as part of our transformation plan, we have refocused and prioritized our sales efforts to target higher margin opportunities in which we have greater differentiation;

Current wording

•New bookings (also referred to as orders) of $175.4 million, resulting in a quarterly book-to-bill ratio of 1.64x (a measure defined as bookings divided by net sales); as part of our transformation plan, we have refocused and prioritized our product development and sales efforts to target higher margin opportunities in which we have greater differentiation;

Previous wording

•Backlog of $663.0 million as of October 31, 2025, compared to $672.1 million as of July 31, 2025 and $811.0 million as of October 31, 2024; new bookings and backlog do not yet include the full value of the $130.0 million plus, multi-year contract extension awarded to us by a U.S. domestic top tier mobile network operator in November 2025;

Current wording

•Backlog of $731.6 million as of January 31, 2026, compared to $672.1 million as of July 31, 2025 and $763.8 million as of January 31, 2025;

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•Revenue visibility of approximately $1.1 billion as of October 31, 2025; we measure this revenue visibility as the sum of our $663.0 million of funded backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders; and

Current wording

•Revenue visibility of approximately $1.1 billion as of January 31, 2026; we measure this revenue visibility as the sum of our $731.6 million of funded backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders; and

Previous wording

•Cash flows provided by operating activities were $8.1 million, our third consecutive quarter of positive operating cash flows; this includes $2.2 million in aggregate payments for restructuring costs, including severance, and CEO transition costs; cash flows provided by operating activities would have been $10.3 million without these restructuring costs; operating cash flows in the first quarter of fiscal 2026 include $4.9 million of total net cash paid for interest and income taxes.

Current wording

•Cash flows provided by operating activities were $4.9 million, our fourth consecutive quarter of positive operating cash flows; this includes $4.2 million in aggregate payments for restructuring costs, including severance, and CEO transition costs; cash flows provided by operating activities would have been $9.1 million without these costs; operating cash flows in the second quarter of fiscal 2026 include $4.9 million of total net cash paid for interest and income taxes.

Previous wording

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

Current wording

Non-GAAP financial measures discussed above are reconciled to the most directly comparable GAAP financial measures in the table included in the below section “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended January 31, 2026 and 2025” and “Comparison of the Results of Operations for the Six Months Ended January 31, 2026 and 2025.”

Previous wording

•over $7.8 million in orders from an international reseller of our troposcatter family of systems ("FoS"), including Modular Transportable Transmission Systems ("MTTS") and Multi-Path Radios ("MPRs") intended for use in multiple international government end user applications;

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•over $5.5 million of funded orders from several international government end customers of our troposcatter Family of Systems ("FoS"), including our rapidly deployable multi-path radios ("MPRs") and Modular Transportable Transmission Systems ("MTTS");

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•incremental funding of approximately $1.3 million for continued, ongoing training and support of complex cybersecurity operations for U.S. government customers.

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•incremental funding in excess of $4.5 million for ongoing training and support of complex cybersecurity operations for U.S. government customers;

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In September 2025, as part of our operational efficiency and cost savings plans, we made the decision to migrate certain production capabilities and operational functions to our manufacturing operations in Chandler, Arizona. Such initiative is expected to: be completed in fiscal 2026, result in increased manufacturing efficiencies, allow us to further optimize our facilities footprint and result in recurring annualized cost savings of approximately $3.0 million.

Current wording

In September 2025, as part of our operational efficiency and cost savings plans, we made the decision to migrate certain production capabilities and operational functions to our manufacturing operations in Chandler, Arizona. Such initiative is expected to be substantially completed in fiscal 2026, result in increased manufacturing efficiencies, allow us to further optimize our facilities footprint and result in recurring annualized cost savings over time of approximately $3.0 million.

Previous wording

In December 2024, we received notice from our prime contractor to stop work associated with a legacy U.S. Marine Corps contract. Such contract was subsequently terminated. We initiated litigation against the prime contractor in order to enforce our rights. As of July 31, 2025, $15.7 million of total receivables related to our contract remained outstanding. After the filing of our Form 10-K on November 10, 2025, we entered into discussions with our prime contractor to explore a comprehensive settlement of our pending litigation. Based on the status of such discussions as of the issuance date of our first quarter fiscal 2026 financial statements, and considering actions identified to further mitigate cost to both our prime contractor and the U.S. Marine Corps, we reduced cumulative net sales and receivables related to this contract in the first quarter of fiscal 2026 by $1.8 million. After taking into account these adjustments to our GAAP results and $0.2 million of cash collections during the first quarter of fiscal 2026, total receivables related to our contract were $13.7 million as of October 31, 2025. To date, no settlement has been reached with our prime contractor and the litigation between the parties remains pending in the courts. While we believe that we have meritorious claims, some or all of our receivables could be at risk of not being collected. Future results of operations related to our troposcatter solutions product line depend, in part, on the nature, timing and amount associated with resolving this matter.

Current wording

In December 2024 (fiscal 2025), we received notice from our prime contractor to stop work associated with a legacy U.S. Marine Corps contract. We initiated litigation against the prime contractor in order to enforce our rights. As of July 31, 2025, $15.7 million of total receivables related to our contract remained outstanding. In November 2025, we entered into discussions with our prime contractor to explore a comprehensive settlement of our pending litigation. Based on a settlement reached in February 2026, along with our cost mitigation actions taken, we reduced cumulative net sales and receivables related to this contract by $2.9 million. Considering these adjustments and $0.2 million of cash collections during the first half of fiscal 2026, total receivables related to our contract were $12.6 million as of January 31, 2026. Litigation related to this matter has been paused while the parties carry out their respective duties under the terms of the settlement agreement, including submission of our termination settlement proposal to the customer. While we believe that we have meritorious claims, some or all of our receivables could be at risk of not being collected. Future results of operations related to our troposcatter solutions product line depend, in part, on the nature, timing and amount associated with resolving this matter.

Previous wording

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

Current wording

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

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In December 2025, as part of our ongoing board refreshment initiatives, our Board of Directors (the “Board”) appointed Mary Jane Raymond as an independent director. Ms. Raymond’s extensive corporate finance, internal control oversight, mergers and acquisitions and operational experience qualifies Ms. Raymond to serve on the Board.

Current wording

In December 2025, as part of our ongoing board refreshment initiatives, our Board of Directors (the “Board”) appointed Mary Jane Raymond as an independent director. Also, in January 2026, Wendi B. Carpenter notified us of her intention to retire as a director from the Board and not stand for re-election at our Fiscal 2025 Annual Meeting of Stockholders, which occurred on March 9, 2026 (the “Fiscal 2025 Annual Meeting”). All seven of the Board's nominees were re-elected at the Annual Meeting.

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Additional information related to our Business Outlook for Fiscal 2026 and a definition and explanation of Adjusted EBITDA is included in the below section Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended October 31, 2025 and 2024.

Current wording

Additional information related to our Business Outlook for Fiscal 2026 and a definition and explanation of Adjusted EBITDA is included in the below section Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended January 31, 2026 and 2025” and “Comparison of the Results of Operations for the Six Months Ended January 31, 2026 and 2025.”

Previous wording

Net Sales. Consolidated net sales were $111.0 million and $115.8 million for the three months ended October 31, 2025 and 2024, respectively, representing a decrease of $4.8 million, or 4.1%. The period-over-period decrease reflects lower net sales in both segments, as further discussed below.

Current wording

Net Sales. Consolidated net sales were $106.8 million and $126.6 million for the three months ended January 31, 2026 and 2025, respectively, representing a decrease of $19.8 million, or 15.6%. The period-over-period decrease reflects lower net sales in our Satellite and Space Communications segment, offset in part by higher sales in our Allerium segment, as further discussed below.

Previous wording

Gross Profit. Gross profit was $36.8 million and $14.5 million for the three months ended October 31, 2025 and 2024, respectively, an increase of $22.3 million, or 153.3% of net sales. Gross profit, as a percentage of consolidated net sales, for the three months ended October 31, 2025 was 33.1% as compared to 12.5% for the three months ended October 31, 2024. Our gross profit for the three months ended October 31, 2025 (both in dollars and as a percentage of consolidated net sales) reflects: (i) overall product mix changes, as discussed above; and (ii) improved operational and financial performance, as a result of our transformation initiatives to, among other things, enhance operational efficiency, streamline product lines with a focus on strategic, higher operating margin products, reduce cost structures and improve contractual terms with customers and vendors. The prior year period also included an $11.4 million non-cash charge related to the write down of certain inventories as a result of restructuring activities within our Satellite and Space Communications segment. The sequential improvement in our quarterly gross margin percentage for the first quarter of fiscal 2026 builds upon the quarterly trend achieved throughout fiscal 2025. Gross profit, as a percentage of related segment net sales, is further discussed below.

Current wording

Gross Profit. Gross profit was $36.2 million and $33.7 million for the three months ended January 31, 2026 and 2025, respectively, an increase of $2.5 million, or 7.4%. Gross profit, as a percentage of consolidated net sales, for the three months ended January 31, 2026 was 33.9% as compared to 26.7% for the three months ended January 31, 2025. Our gross profit for the three months ended January 31, 2026 (both in dollars and as a percentage of consolidated net sales) reflects overall product mix changes, as discussed above, and improved operational and financial performance as a result of our transformation initiatives to, among other things, enhance operational efficiency, streamline product lines with a focus on strategic, higher operating margin products and reduce cost structures. The improvement in our quarterly gross profit percentage for the second quarter of fiscal 2026 builds upon the quarterly trend achieved throughout fiscal 2025 and first quarter of fiscal 2026. Gross profit, as a percentage of related segment net sales, is further discussed below.

Previous wording

Our Allerium segment's gross profit, both in dollars and as a percentage of related segment net sales, for the three months ended October 31, 2025 increased in comparison to the three months ended October 31, 2024. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above. Such gross margins also reflect the continued adoption of our solutions by new customers, as well as the migration of more PSAPs onto our NG-911 core services and platforms, as we progress through initial deployments of our solutions to monthly recurring revenue streams.

Current wording

Our Allerium segment's gross profit, both in dollars and as a percentage of related segment net sales, for the three months ended January 31, 2026 increased in comparison to the three months ended January 31, 2025. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above. In addition to the benefit of cost reduction initiatives, such gross margin also reflects the continued adoption of our solutions by new customers, as well as the migration of more PSAPs onto our NG-911 core services and platforms, as we progress through initial deployments of our solutions to monthly recurring revenue streams.

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Selling, General and Administrative Expenses. Selling, general and administrative expenses were $29.9 million and $51.6 million for the three months ended October 31, 2025 and 2024, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 27.0% and 44.6% for the three months ended October 31, 2025 and 2024, respectively.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $27.7 million and $33.8 million for the three months ended January 31, 2026 and 2025, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 25.9% and 26.7% for the three months ended January 31, 2026 and 2025, respectively.

Previous wording

When appropriate, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the three months ended October 31, 2025 and 2024, customers reimbursed us $6.1 million and $4.8 million, respectively, which is not reflected in the reported research and development expenses, but is included in net sales with the related costs included in cost of sales.

Current wording

When appropriate, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the three months ended January 31, 2026 and 2025, customers reimbursed us $5.7 million and $5.5 million, respectively, which is not reflected in the reported company-funded research and development expenses, but is included in net sales with the related costs included in cost of sales.

Previous wording

During the three months ended October 31, 2025 and 2024, we also incurred engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $1.6 million and $2.1 million, respectively.

Current wording

During the three months ended January 31, 2026 and 2025, we also separately incurred engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $1.7 million and $1.3 million, respectively.

Previous wording

Proxy Solicitation Costs. During the prior year period in fiscal 2025, we incurred $1.6 million of proxy solicitation costs in our Unallocated segment as a result of a now-settled proxy contest.

Current wording

Proxy Solicitation Costs. During the prior year period in fiscal 2025, we incurred $1.1 million of proxy solicitation costs in our Unallocated segment as a result of a now-settled proxy contest.

Previous wording

Our GAAP operating loss of $2.8 million for the three months ended October 31, 2025 reflects: (i) $5.0 million of amortization of intangibles; (ii) $2.4 million of restructuring costs (of which $0.8 million and $1.6 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $1.1 million of amortization of stock-based compensation; and (iv) $0.8 million of CEO transition costs, as discussed above. Excluding such items, our consolidated operating income for the three months ended October 31, 2025 would have been $6.6 million, or 5.9% of net sales.

Current wording

Our GAAP operating loss of $1.2 million for the three months ended January 31, 2026 reflects: (i) $5.0 million of amortization of intangibles; (ii) $1.6 million of restructuring costs (of which $0.7 million and $0.9 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $0.4 million of amortization of stock-based compensation; and (iv) $0.3 million of CEO transition costs, as discussed above. Excluding such items, our consolidated operating income for the three months ended January 31, 2026 would have been $6.2 million, or 5.8% of consolidated net sales.

Previous wording

Change in Fair Value of Warrants and Derivatives. During the three months ended October 31, 2025 and 2024, we recorded a $1.4 million and $5.5 million non-cash expense, respectively, due to the remeasurement of warrants and derivatives related to our Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (9) - Credit Facility, Note (10) - Subordinated Credit Facility and Note (17) - Convertible Preferred Stock for more information.

Current wording

Change in Fair Value of Warrants and Derivatives. During the three months ended January 31, 2026 and 2025, we recorded a non-cash expense of $1.4 million and $28.6 million, respectively, due to the remeasurement of warrants and derivatives related to our Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (4) - Fair Value Measurements and Financial Instruments, Note (9) - Credit Facility, Note (10) - Subordinated Credit Facility and Note (17) - Convertible Preferred Stock for more information.

Previous wording

The increase in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, reflects higher gross profit (both in dollars and as a percentage of related segment net sales) and lower selling, general and administrative expenses, offset in part by higher research and development expenses, as discussed above.

Current wording

The increase in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of segment net sales, primarily reflects lower selling, general and administrative expenses (due to cost reduction actions), partially offset by lower net sales and gross profit, in dollars, and higher research and development expenses, as discussed above.

Previous wording

The change in our Allerium segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, reflects higher gross profit (both in dollars and as a percentage of related segment net sales), offset in part by higher selling, general and administrative expenses and research and development expenses, as discussed above.

Current wording

The increase in our Allerium segment's Adjusted EBITDA, both in dollars and as a percentage of segment net sales, reflects higher net sales and gross profit (both in dollars and as a percentage of segment net sales) and lower research and development expenses, as discussed above, offset in part by higher selling, general and administrative expenses.

Previous wording

Sales to U.S. government customers include sales to the U.S. DoD, intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. For the three months ended October 31, 2025 and 2024, the U.S. government represented 10.0% or more of our consolidated net sales. Also, for the three months ended October 31, 2025, a top tier mobile network operator accounted for 10.6% of our consolidated net sales. For the three months ended October 31, 2024, except for the U.S. government, there were no customers that represented 10.0% or more of consolidated net sales. International sales for the three months ended October 31, 2025 and 2024 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $32.9 million and $18.8 million, respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented 10% or more of consolidated net sales for the three months ended October 31, 2025 and 2024.

Current wording

Sales to U.S. government customers include sales to the U.S. DoD, intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. For the six months ended January 31, 2026 and 2025, the U.S. government represented 10.0% or more of our consolidated net sales. Also, for the six months ended January 31, 2026, a domestic top tier mobile network operator accounted for 10.2% of our consolidated net sales. For the six months ended January 31, 2025, except for the U.S. government, there were no customers that represented 10.0% or more of consolidated net sales. International sales for the six months ended January 31, 2026 and 2025 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $63.9 million and $43.0 million, respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented 10% or more of consolidated net sales for the six months ended January 31, 2026 and 2025.

Previous wording

Our Satellite and Space Communications segment's gross profit, both in dollars and as a percentage of related segment net sales, for the three months ended October 31, 2025 increased significantly in comparison to the three months ended October 31, 2024. Gross profit in the more recent period reflects changes in products and services mix, as well as other segment related items, as discussed above. Gross profit also benefited from this segment's transition from low or no margin non-recurring engineering contracts to higher volume manufacturing orders. Our quarterly gross profit percentage for this segment improved sequentially throughout fiscal 2025, as well as in our first quarter of fiscal 2026.

Current wording

Our Satellite and Space Communications segment's gross profit, both in dollars and as a percentage of segment net sales, for the six months ended January 31, 2026 increased significantly in comparison to the six months ended January 31, 2025. Gross profit in the more recent period reflects changes in products and services mix, as well as other segment related items, as discussed above. Gross profit also benefited from this segment's transition from low or no margin non-recurring engineering contracts to higher volume manufacturing orders. Our quarterly gross profit percentage for this segment improved throughout fiscal 2025 and first half of fiscal 2026.

Previous wording

Included in consolidated cost of sales for the three months ended October 31, 2025 and 2024 are provisions for excess and obsolete inventory of $0.1 million and $12.5 million, respectively. As discussed in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Provisions for Excess and Obsolete Inventory, we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends. As discussed above, in the prior year period, we recorded a non-cash charge of $11.4 million within Cost of Sales on our Condensed Consolidated Statement of Operations related to the write down of inventory associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued. Such prior year period non-cash charge also included the write down of inventory associated with the CGC Divestiture that was no longer considered salable during the period.

Current wording

Included in consolidated cost of sales for the six months ended January 31, 2026 and 2025 are provisions for excess and obsolete inventory of $1.0 million and $13.5 million, respectively. As discussed in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Provisions for Excess and Obsolete Inventory, we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends. As discussed above, in the prior year period, we recorded a non-cash charge of $11.4 million within Cost of Sales on our Condensed Consolidated Statement of Operations related to the write down of inventory associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued. Such prior year period non-cash charge also included the write down of inventory associated with the CGC Divestiture that was no longer considered salable during the period.

Previous wording

Also, during the three months ended October 31, 2025 and 2024, we incurred $2.4 million and $6.5 million, respectively, of restructuring costs within selling, general and administrative expenses primarily to streamline our operations and improve efficiency (including costs related to legal and professional fees associated with our pursuit of strategic alternatives, the wind down of our steerable antenna product line in the U.K. initiated in our fourth quarter of fiscal 2024 and severance costs).

Current wording

Also, during the six months ended January 31, 2026 and 2025, we incurred $4.1 million and $9.9 million, respectively, of restructuring costs primarily to streamline our operations and improve efficiency (including costs related to legal and professional fees associated with our pursuit of strategic alternatives, the wind down of our steerable antenna product line in the U.K. initiated in our fourth quarter of fiscal 2024 and severance costs).