COMTECH TELECOMMUNICATIONS CORP /DE/

Comtech Telecommunications Corp., a Delaware corporation ("Comtech" or the "Company"), through its Allerium segment, is a leading provider of mission-critical communications infrastructure and software for public safety and mobile networks worldwide, including technologies that locate, route, deliver and answer 9-1-1 calls and emergency communications, as well as carrier-grade location, messaging and public alerting capabilities, when every connection counts.

We are pleased to report that the transformation plan we first announced in January 2025 has continued to contribute to our improved operational and financial performance, as evidenced by a number of meaningful developments in our business, including: (i) the removal of the substantial doubt regarding our ability to continue as a going concern in November 2025; (ii) achieving positive consolidated operating cash flows for each of the last six quarters, with fiscal 2026 totaling $37.4 million; (iii) increasing our consolidated liquidity as of July 31, 2026 to $61.3 million; (iv) reducing our debt; and (v) securing long-term customer commitments, including a large, multi-year contract extension with a top tier mobile network operator in the U.S., valued in excess of $130.0 million.

Furthermore, on June 14, 2026, we entered into a definitive Securities Purchase Agreement (the "Purchase Agreement," and the transaction contemplated by the Purchase Agreement and related ancillary documents, the "Strategic Transaction") to sell most of our Satellite and Space Communications ("S&S") segment (the "Disposal Group") to Wavestream Corporation ("Buyer"), an affiliate of Gilat Satellite Networks Ltd (together with Buyer, "Gilat"). The Purchase Agreement provides for a base purchase price of $157.5 million in cash, subject to customary adjustments as defined in the Purchase Agreement. Upon execution of the Purchase Agreement, we received $10.0 million of the purchase price (the "Advance Payment"). Comtech will have the right to retain the Advance Payment in the event that the Purchase Agreement is terminated, if at the time of such termination: (i) all closing conditions have been satisfied or waived, other than certain conditions relating to regulatory approval and clearance, and any conditions by their nature are to be satisfied at the closing, and (ii) Sellers, as defined, are not in material breach of the Purchase Agreement. The Strategic Transaction is expected to close in calendar 2026, subject to certain closing conditions and regulatory approvals. The consummation of the Strategic Transaction does not require the approval of our common stockholders.

Contemporaneously with signing the Strategic Transaction during the fourth quarter of fiscal 2026, at a time when we were in compliance with the terms and covenants of each of our credit facilities, we entered into various amendments to our Credit Facility, Subordinated Credit Facility and convertible preferred stock agreements which enhance our overall financial flexibility and reduce our anticipated cost of capital. Such enhanced financial flexibility includes: (i) an extension of the covenant holiday under our Credit Facility and Subordinated Credit Facility to July 31, 2027; (ii) waiver of the fiscal 2026 excess cash flow prepayment under our Credit Facility; (iii) deferral of previously scheduled make whole escalations on portions of the Subordinated Credit Facility until April 1, 2027 if the loans are not prepaid by that time; (iv) a reduction in the prepayment penalty associated with the application of the net proceeds from the sale of most of S&S' business of 1.0%; (v) upon closing of the Strategic Transaction, elimination of a provision that previously provided for the acceleration of the redemption rights of the holders of convertible preferred stock upon a refinancing; (vi) extension of the redemption rights of the holders of convertible preferred stock from October 31, 2028 to October 31, 2029, except upon consummation of certain qualified asset sales by the Company or its subsidiaries or upon a change in control; and (vii) deferring the rights of the holders of convertible preferred stock to require cash dividends until October 31, 2028. Upon closing the Strategic Transaction, we will use the net cash proceeds to substantially reduce debt and then seek a comprehensive recapitalization of the business with the intention to further enhance our financial flexibility and reduce the cost of capital.

Collectively, the Strategic Transaction and fiscal 2026 amendments to our Credit Facility, Subordinated Credit Facility and convertible preferred stock agreements, represent a successful outcome of our previously announced strategic review process.

As we await regulatory approval of the Strategic Transaction, we will be executing a transition plan to align the organization to be purpose-built to support Allerium's anticipated growth from increasing demand for next-generation public safety technologies and services. With an improved capital structure, streamlined organization and a clear strategic focus, Allerium is poised to capitalize on its leadership in the public safety market.

Our operating segments historically consisted of Allerium and S&S. As the Strategic Transaction represents a material strategic shift in our business, the results and net assets of the Disposal Group are presented herein as "discontinued operations" and comparable prior periods have been recast to reflect this change. Through the closing date of the Strategic Transaction, we will continue to operate the Disposal Group in accordance with the terms of the Purchase Agreement. Following the classification of the Disposal Group as discontinued operations, we have one reportable segment, which is also our one operating segment, that constitutes consolidated results consisting of our public safety business. Unless otherwise noted, all activities and amounts reported in this document relate to our continuing operations and exclude activities and amounts related to the Disposal Group. For additional information related to the Strategic Transaction and Disposal Group, see Notes to Consolidated Financial Statements - Note (2) Business Divestiture included in Part II - Item 8. Financial Statements and Supplementary Data.

While our transformation plan has contributed to improved operational and financial performance, our business, financial condition and/or operating results in the future are subject to a number of risks and uncertainties, as further discussed throughout this Form 10-K, including in Item 1A. - Risk Factors, and other filings with the SEC.