COMTECH TELECOMMUNICATIONS CORP /DE/

Transformation Plan

On January 13, 2025, we announced an expanded plan to transform our business (herein after referred to as our "transformation plan"). Our expanded transformation plan includes, but is not limited to, the initiatives set forth below:

•improve corporate governance;

•strengthen executive leadership;

•upgrade talent in key positions;

•reinvigorate corporate culture that emphasizes transparency, empowerment and accountability;

•align accountability throughout the organization;

•optimize cash flow including disciplined working capital management;

•invest in next-generation solutions for our customers' expanding and emerging needs;

•enhance operational efficiency;

•streamline product lines with a focus on strategic, higher operating margin products;

•improve production efficiency;

•reduce cost structures;

•enhance customer satisfaction;

•improve contractual terms with customers and vendors;

•improve capital structure through amended and improved terms with creditors and reduction of principal and interest amounts due; and

•explore strategic alternatives for our various businesses and product lines, including the potential sale or divestiture of assets or business lines such as those described below.

Cumulatively, such expanded transformation plan initiatives have resulted in us taking the following actions, among others:

•On November 7, 2023, we completed the divestiture of our solid-state RF microwave high power amplifiers and control components product line, which was included in our S&S segment, pursuant to a stock sale agreement entered into on October 11, 2023 (the "PST Divestiture"). Net proceeds from the PST Divestiture in fiscal 2024 were $33.2 million and used in part to repay a portion of our outstanding debt at the time, as well as to fund working capital needs.

•We have undertaken a detailed evaluation of our S&S segment's product portfolio to identify further opportunities to divest, separate and/or rationalize businesses or facilities that are not core to our go-forward focus. Consistent with this effort, in our fourth quarter of fiscal 2024, we made the decision to exit our underperforming operations in Basingstoke, United Kingdom. Such operations were established in connection with the fiscal 2020 acquisition of CGC Technology Limited. Taking into consideration the significant ongoing investment, as well as unfavorable contract terms on prospective antenna sales, we concluded such operations would not generate an attractive return on invested capital and made the decision to exit these operations. Furthermore, we conducted an intensive review of our product portfolio to focus future investment on our most strategic, high-margin revenue opportunities within the S&S segment. Upon completion of such review, we recorded a non-cash charge of $11.4 million primarily related to the write down of inventory during the first quarter of fiscal 2025 associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued.

•In September 2025, we initiated a process to further optimize our operations within our S&S segment. Such actions include reducing our facility footprint and migrating the manufacturing of certain products to our Chandler, Arizona facility, resulting in approximately $3.0 million of anticipated annualized cost savings.

•We implemented multiple reductions in force throughout our entire organization. Inclusive of actions taken since August 2025 (i.e., the start of our fiscal 2026), such reductions approximated 7% of our total workforce as of July 31, 2025, or approximately $15.0 million in annualized labor costs.

•On June 14, 2026, we entered into the Purchase Agreement to sell the Disposal Group to 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 a $10.0 million Advance Payment. 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.

•As discussed above in Part 1 - Item 1. Business - Overview, in June and July 2026, we also amended our existing credit facilities and agreed to exchange the existing series of convertible preferred stock with a new series of convertible preferred stock upon consummation of the Strategic Transaction. These actions not only provide the necessary consents to the Strategic Transaction, but also deliver immediate enhancements to our financial flexibility.

Our improved operational and financial performance resulting from our transformation plan afforded us the opportunity to enter into the Strategic Transaction, as well as to obtain the various amendments to our Credit Facility, Subordinated Credit Facility and convertible preferred stock agreements. Collectively, the Strategic Transaction and fiscal 2026 amendments to our Credit Facility, Subordinated Credit Facility and convertible preferred stock agreements, at a time when we were in compliance with our covenants, represent a successful outcome of our previously announced strategic review processes, and position us to prepay significant portions of our Credit Facility and Subordinated Credit Facility and enhance our overall financial flexibility as we seek to further address our capital structure. Upon closing the Strategic Transaction, we will use the net cash proceeds to substantially reduce debt and then seek to recapitalize the business and reduce the cost of capital, in order to provide a stronger and healthier financial position for the remaining Allerium operations.

As we await regulatory approval of the Strategic Transaction, we will be executing a transformation plan to further 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 by directing investment, innovation, and execution around a single mission-critical market with significant long-term demand drivers as public safety solutions continue to evolve from voice-based connections to data-centric communication, coordination and real-time AI-enhanced decision-making. With a simpler operating model, a strengthened balance sheet and a single strategic focus, Allerium hopes to accelerate its growth of recurring software and services revenue and expand margins and operating leverage while investing more decisively in the innovation its public safety customers depend upon.

There can be no assurance that our plans will result in acquisitions, divestitures or other strategic changes or outcomes. Also, while anticipated to improve our profitability in future periods, such actions will likely result in near-term restructuring charges.