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 the expected completion of, the anticipated benefits of, and our plans, strategies and objectives relating to, the pending transaction with Gilat Satellite Networks Ltd, including the time frame in which such proposed transaction will occur, 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: our ability to consummate the transactions on a timely basis or at all; unexpected costs, liabilities or delays in connection with the proposed transaction; the significant transaction costs associated with the proposed transaction; negative effects of the announcement, pendency or consummation of the transaction on the market price of our common stock or operating results, including as a result of changes in key customer, supplier, employee or other business relationships; the risk of litigation or regulatory actions; our inability to retain and hire key personnel; further portfolio-shaping opportunities, other operational initiatives, and the completion of further financing activities; our ability to access capital and liquidity; changes in our e…

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, as well as both domestic and international customers.

Current wording

We are a leading provider of satellite and space communications technologies, terrestrial and wireless network solutions, Next Generation 9-1-1 ("NG9-1-1") 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 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.

Current wording

Impairment of Long-Lived Assets, Including Goodwill. As of April 30, 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 April 30, 2026, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $158.4 million (of which $37.3 million relates to our Satellite and Space Communications segment and $121.1 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

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.

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 April 30, 2026 and 2025, internal-use software costs capitalized were $1.4 million and $1.2 million, respectively. For the nine months ended April 30, 2026 and 2025, internal-use software costs capitalized were $4.6 million and $2.7 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

Fiscal 2026: Second Quarter Results and Business Outlook

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Fiscal 2026: Third Quarter Results and Business Outlook

Previous wording

Financial results for the second quarter of fiscal 2026 include:

Current wording

Financial results for the third quarter of fiscal 2026 include:

Previous wording

•Consolidated net sales were $106.8 million, compared to $126.6 million in the second quarter of fiscal 2025; as anticipated, the decline in net sales in the Satellite and Space Communications (“S&S”) segment primarily reflects the decision to phase out and eliminate certain low margin and working capital intensive revenues as well as the impact of the recent U.S. government shutdown. Examples include contracts for services, including the Very Small Aperture Terminal (“VSAT”) Satellite Systems and Services Contract and the Global Field Service Representative (“GFSR”) contract, as well as legacy troposcatter related products and services; Allerium reported higher net sales in all three of its product areas compared to the prior year period;

Current wording

•Consolidated net sales were $106.0 million, compared to $126.8 million in the third quarter of fiscal 2025. Approximately 17% of the decrease in consolidated sales occurred in the Allerium segment – Allerium reported net sales consistent with the third quarter of fiscal 2025, excluding $3.0 million of net sales in the prior year period related to a negotiated, retroactive billing event to recover costs incurred in previous quarters. As anticipated, the decline in net sales in the Satellite and Space Communications (“S&S”) segment primarily reflects the decision to phase out and eliminate certain low margin and working capital intensive revenues, such as the Very Small Aperture Terminal (“VSAT”) Satellite Systems and Services contract, as well as the impact of the U.S. government shutdown on funding for certain programs;

Previous 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;

Current wording

•Gross margin increased to 34.0%, compared to 30.7% in our third quarter of fiscal 2025; the improvement in our gross margin percentage builds upon the quarterly trend achieved throughout fiscal 2025 and the first two quarters 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 $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;

Current wording

•GAAP net loss attributable to common stockholders was $14.3 million and included, among other things: (i) non-cash net charges of $11.3 million, of which (a) $10.8 million related to net paid-in-kind dividends associated with our Convertible Preferred Stock; (b) $7.2 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; (c) $4.6 million related to the amortization of intangible assets and (d) $1.2 million related to the amortization of stock-based compensation; offset in part by (e) a $12.5 million benefit related to the remeasurement of warrants and derivatives; and (ii) cash charges of $2.4 million consisting primarily of restructuring costs;

Previous wording

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

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•GAAP EPS net loss of $0.47 and Non-GAAP EPS net loss of $0.22;

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•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;

Current wording

•Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $8.2 million, compared to $12.6 million for the third quarter of fiscal 2025;

Previous 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;

Current wording

•New bookings (also referred to as orders) of $70.5 million, resulting in a quarterly book-to-bill ratio of 0.67x (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 $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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•Backlog of $696.1 million as of April 30, 2026, compared to $672.1 million as of July 31, 2025 and $708.1 million as of April 30, 2025;

Previous 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

Current wording

•Revenue visibility of approximately $1.1 billion as of April 30, 2026; we measure this revenue visibility as the sum of our $696.1 million of funded backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders; and

Previous wording

•Cash flows 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.

Current wording

•Cash flows provided by operating activities were $6.1 million, our fifth consecutive quarter of positive operating cash flows; this includes $2.4 million in aggregate payments for restructuring costs, including severance, and CEO transition costs; cash flows provided by operating activities would have been $8.5 million without these costs; operating cash flows in the third quarter of fiscal 2026 include $4.1 million of total net cash paid principally for interest and, to a much lesser extent, 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 January 31, 2026 and 2025” and “Comparison of the Results of Operations for the Six Months Ended January 31, 2026 and 2025.”

Current wording

Non-GAAP financial measures discussed above are reconciled to the most directly comparable GAAP financial measures in the table included in the below section “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended April 30, 2026 and 2025” and “Comparison of the Results of Operations for the Nine Months Ended April 30, 2026 and 2025.”

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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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•approximately $6.0 million in incremental funding for ongoing training and support of complex cybersecurity operations for U.S. government customers;

Previous 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.

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, which has since been terminated for convenience and for which we have submitted a termination claim. Total receivables related to such contract were $10.5 million as of April 30, 2026. While we believe that we have meritorious termination claims, some or all of our receivable 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 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.

Current wording

With strategic wins in the U.S., Canada and Australia, we believe Allerium's position as a trusted leader in 9-1-1, NG9-1-1 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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During the second quarter of fiscal 2026, we were awarded various orders including:

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During the third quarter of fiscal 2026, we were awarded various orders including:

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While business conditions and our operational and financial performance have improved over the past several quarters, the operating environment remains largely unpredictable due to many factors, including but not limited to those matters discussed throughout this Form 10-Q and in our Cautionary Statement Regarding Forward-Looking Statements in this Form 10-Q. Such conditions and factors have caused and could cause variability in our financial results from period to period. Accordingly, we are not providing forward-looking guidance on a GAAP or Non-GAAP basis.

Current wording

While our operational and financial performance have improved over the past several quarters, the operating environment remains largely unpredictable due to many factors, including but not limited to those matters discussed throughout this Form 10-Q and in our Cautionary Statement Regarding Forward-Looking Statements in this Form 10-Q. Such conditions and factors have caused and could cause variability in our financial results from period to period. Accordingly, we are not providing forward-looking guidance on a GAAP or Non-GAAP basis.

Previous wording

Additional information related to our Business Outlook for Fiscal 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.”

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 April 30, 2026 and 2025” and “Comparison of the Results of Operations for the Nine Months Ended April 30, 2026 and 2025.”

Previous 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.

Current wording

Net Sales. Consolidated net sales were $106.0 million and $126.8 million for the three months ended April 30, 2026 and 2025, respectively, representing a decrease of $20.8 million, or 16.4%. Such decrease primarily reflects lower net sales in our Satellite and Space Communications segment and, to a lesser extent, our Allerium segment.

Previous wording

Net sales in our Satellite and Space Communications segment were $50.6 million for the three months ended January 31, 2026, as compared to $73.7 million for the three months ended January 31, 2025, a decrease of $23.1 million, or 31.3%. As anticipated, the decline in net sales in the S&S segment primarily reflects the decision to phase out and eliminate certain low margin and capital intensive revenues as well as the impact of the recent U.S. government shutdown. Examples include contracts for services, including the Very Small Aperture Terminal (“VSAT”) Satellite Systems and Services Contract and the Global Field Service Representative (“GFSR”) contract, as well as legacy troposcatter related products and services. As part of this repositioning, S&S is pursuing sales of innovative, higher-margin solutions such as digital common ground modems, network solutions and rapidly deployable multi-path radios ("MPRs"). This segment represented 47.4% of consolidated net sales for the three months ended January 31, 2026, as compared to 58.2% for the three months ended January 31, 2025. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended January 31, 2026 and 2025 was 0.68x and 0.64x, respectively, and reflects the aforementioned decision to phase out and eliminate certain low margin revenues, as well as order delays related to the recent U.S. government shutdown.

Current wording

Net sales in our Satellite and Space Communications segment were $50.3 million for the three months ended April 30, 2026, as compared to $67.6 million for the three months ended April 30, 2025, a decrease of $17.3 million, or 25.6%. As anticipated, the decline in net sales primarily reflects the decision to phase out and eliminate certain low margin and working capital intensive revenues, such as the Very Small Aperture Terminal (“VSAT”) Satellite Systems and Services contract, as well as the impact of the U.S. government shutdown on funding for certain programs. As part of this repositioning, S&S is pursuing sales of innovative, higher-margin solutions such as digital common ground modems, network solutions and rapidly deployable troposcatter Modular Transportable Transmission Systems ("MTTS") and multi-path radios ("MPRs"). This segment represented 47.5% of consolidated net sales for the three months ended April 30, 2026, as compared to 53.3% for the three months ended April 30, 2025.

Previous wording

Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. For the three months ended January 31, 2026 and 2025, except for the U.S. government, there were no customers that represented 10% or more of consolidated net sales. International sales for the three months ended January 31, 2026 and 2025 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $30.9 million and $24.2 million, respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented 10% or more of consolidated net sales for the three months ended January 31, 2026 and 2025.

Current wording

Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. For the three months ended April 30, 2026 and 2025, except for the U.S. government, there were no customers that represented 10% or more of consolidated net sales. International sales for the three months ended April 30, 2026 and 2025 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $24.8 million and $29.7 million, respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented 10% or more of consolidated net sales for the three months ended April 30, 2026 and 2025.

Previous 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.

Current wording

Gross Profit. Gross profit was $36.1 million and $38.9 million for the three months ended April 30, 2026 and 2025, respectively, a decrease of $2.8 million, or 7.2%. Gross profit, as a percentage of consolidated net sales, for the three months ended April 30, 2026 was 34.0% as compared to 30.7% for the three months ended April 30, 2025. Our gross profit for the three months ended April 30, 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. Consolidated gross profit (both in dollars and as a percentage of consolidated net sales) for the prior year period also reflects Allerium's retroactive billing event discussed above. The improvement in our gross margin percentage builds upon the quarterly trend achieved throughout fiscal 2025 and the first two quarters of fiscal 2026. Gross profit, as a percentage of related segment net sales, is further discussed below.

Previous wording

Our Satellite and Space Communications segment's gross profit, in dollars, for the three months ended January 31, 2026 decreased and, as a percentage of related segment net sales, increased in comparison to the three months ended January 31, 2025. Gross profit in the more recent period reflects changes in products and services mix, 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.

Current wording

Our Satellite and Space Communications segment's gross profit, in dollars, for the three months ended April 30, 2026 was comparable to three months ended April 30, 2025. As a percentage of segment net sales, gross profit increased significantly. Gross profit in the more recent period reflects changes in products and services mix, 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.

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 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.

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 April 30, 2026 decreased in comparison to the three months ended April 30, 2025. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above. Net sales and gross profit for the third quarter of fiscal 2025 also included over $3.0 million of incremental NG9-1-1 services revenue due to reaching an agreement with a statewide customer to retroactively invoice for certain recurring services provided in the past. Such benefit did not repeat in fiscal 2026.

Previous wording

Included in consolidated cost of sales for the three months ended January 31, 2026 and 2025 are provisions for excess and obsolete inventory of $0.9 million and $1.6 million, respectively. As discussed in"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Provisions for Excess and Obsolete Inventory," we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends.

Current wording

Included in consolidated cost of sales for the three months ended April 30, 2026 and 2025 are provisions for excess and obsolete inventory of $0.6 million and $1.0 million, respectively. As discussed in"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Provisions for Excess and Obsolete Inventory," we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $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.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $29.3 million and $30.2 million for the three months ended April 30, 2026 and 2025, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 27.7% and 23.8% for the three months ended April 30, 2026 and 2025, respectively.

Previous wording

During the three months ended January 31, 2026 and 2025, we incurred $1.6 million and $3.4 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). Excluding restructuring costs, selling, general and administrative expenses for the three months ended January 31, 2026 and 2025 would have been $26.1 million, or 24.4%, and $30.4 million, or 24.0%, respectively, of consolidated net sales. The decrease in our selling, general and administrative expenses, in dollars, excluding such items, is primarily due to cost reduction actions within our Unallocated segment. The increase in our selling, general and administrative expenses, as a percentage of consolidated net sales, excluding such items is primarily due to lower consolidated net sales.

Current wording

During the three months ended April 30, 2026 and 2025, we incurred $2.4 million and $4.3 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). Excluding restructuring costs, selling, general and administrative expenses for the three months ended April 30, 2026 and 2025 would have been $26.9 million, or 25.4%, and $25.9 million, or 20.4%, respectively, of consolidated net sales. The increase in our selling, general and administrative expenses, in dollars, excluding such items, is primarily due to increased expenditures in our Allerium and, to a lesser extent, Satellite and Space Communications segments, offset in part by lower expenditures in our Unallocated segment. The increase in our selling, general and administrative expenses, as a percentage of consolidated net sales, excluding such items, is primarily due to lower consolidated net sales in the more recent period.

Previous wording

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $0.3 million in the three months ended January 31, 2026, as compared to $1.0 million in the three months ended January 31, 2025. During the more recent period, we reversed a portion of our stock-based compensation expense related to performance shares due to revised estimates of projected achievement of fiscal 2024 and 2025 performance share goals. Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Current wording

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $1.1 million in the three months ended April 30, 2026, as compared to $1.0 million in the three months ended April 30, 2025. Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Previous wording

Research and Development Expenses. Company-funded research and development expenses were $4.4 million for both the three months ended January 31, 2026 and 2025. As a percentage of consolidated net sales, company-funded research and development expenses were 4.1% and 3.4% for the three months ended January 31, 2026 and 2025, respectively.

Current wording

Research and Development Expenses. For the three months ended April 30, 2026 and 2025, company-funded research and development expenses were $5.2 million and $4.4 million, respectively. As a percentage of consolidated net sales, company-funded research and development expenses were 4.9% and 3.5% for the three months ended April 30, 2026 and 2025, respectively.

Previous wording

For the three months ended January 31, 2026 and 2025, company-funded research and development expenses of $1.8 million and $1.5 million, respectively, related to our Satellite and Space Communications segment, and $2.6 million and $2.8 million, respectively, related to our Allerium segment. The remaining company-funded research and development expenses in each period related to the amortization of stock-based compensation expense.

Current wording

For the three months ended April 30, 2026 and 2025, company-funded research and development expenses of $1.9 million and $1.4 million, respectively, related to our Satellite and Space Communications segment, and $3.3 million and $2.9 million, respectively, related to our Allerium segment. The remaining company-funded research and development expenses in each period related to the amortization of stock-based compensation expense.

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 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.

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 April 30, 2026 and 2025, customers reimbursed us $8.6 million and $7.5 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 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.

Current wording

During the three months ended April 30, 2026 and 2025, we also separately incurred engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $1.9 million and $2.0 million, respectively.

Previous wording

Amortization of Intangibles. Amortization relating to intangible assets with finite lives for both the three months ended January 31, 2026 and 2025 was $5.0 million (of which $1.4 million was for the Satellite and Space Communications segment and $3.6 million was for the Allerium segment), respectively.

Current wording

Amortization of Intangibles. Amortization relating to intangible assets with finite lives for the three months ended April 30, 2026 was $4.6 million (of which $1.1 million was for the Satellite and Space Communications segment and $3.5 million was for the Allerium segment) compared to $5.0 million (of which $1.4 million was for the Satellite and Space Communications segment and $3.6 million was for the Allerium segment) in the three months ended April 30, 2025.

Previous wording

CEO Transition Costs. During the three months ended January 31, 2026, we recorded a $0.3 million net expense associated with our CEO transition-related activities, as compared to a net benefit of $0.3 million for the three months ended January 31, 2025. Such Unallocated activities in both periods consisted primarily of net legal costs related to a former CEO and expense related to a sign-on bonus for our current CEO, and severance costs related to a former CEO in the prior year period. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (19) – Legal Proceedings and Other Matters of this Form 10-Q for information regarding legal proceedings and other matters.

Current wording

CEO Transition Costs. During the three months ended April 30, 2026, we recorded nominal expenses associated with our CEO transition-related activities, as compared to $0.8 million for the three months ended April 30, 2025. Such Unallocated activities in both periods consisted primarily of net legal expenses related to a former CEO and expense related to a sign-on bonus for our current CEO in the prior year period. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (19) – Legal Proceedings and Other Matters of this Form 10-Q for information regarding legal proceedings and other matters.

Previous wording

Operating Income (Loss). Operating loss for the three months ended January 31, 2026 and 2025 was $1.2 million and $10.3 million, respectively. Operating income (loss) by reportable segment is shown in the table below:

Current wording

Operating Income (Loss). Operating loss for the three months ended April 30, 2026 and 2025 was $3.1 million and $1.5 million, respectively. Operating income (loss) by reportable segment is shown in the table below:

Previous wording

Our GAAP operating loss of $10.3 million for the three months ended January 31, 2025 reflects: (i) $5.0 million of amortization of intangibles; (ii) $3.4 million of restructuring costs (of which $1.4 million and $2.0 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $1.2 million of amortization of stock-based compensation; (iv) $1.1 million of proxy solicitation costs; and (v) $0.3 million benefit related to CEO transition activities, as discussed above. Excluding such items, our consolidated operating income for the three months ended January 31, 2025 would have been $0.1 million, or 0.1% of consolidated net sales.

Current wording

Our GAAP operating loss of $1.5 million for the three months ended April 30, 2025 reflects: (i) $5.0 million of amortization of intangibles; (ii) $4.3 million of restructuring costs (of which $0.9 million and $3.4 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $1.2 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 April 30, 2025 would have been $9.9 million, or 7.8% of consolidated net sales.