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Item 2. Management’s Discussion and Analysis

2021-03-11 compared with 2020-12-09 · 458 added, 219 removed, 438 unchanged (61% of the section changed)

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this Quarterly Report on Form 10-Q contains forward-looking statements, including but not limited to, information relating to our future performance and financial condition, potential transactions, 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 to be materially different from the results, performance or other expectations implied by these forward-looking statements.

Certain information in this Quarterly Report on Form 10-Q contains forward-looking statements, including but not limited to, information relating to our future performance and financial condition, 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 to be materially different from the results, performance or other expectations implied by these forward-looking statements.

These factors include, among other things:

the risk that the acquisition of UHP Networks Inc.

and its sister company (together, "UHP") may not be consummated for reasons including that the conditions precedent to the completion of this acquisition may not be satisfied or the occurrence of any event, change or circumstance could give rise to the termination of the agreement;

the risk that the regulatory approval related to UHP will not be obtained;

the possibility that the expected synergies from recent or pending acquisitions will not be fully realized, or will not be realized within the anticipated time periods;

the risk that acquired businesses will not be integrated with Comtech successfully;

the possibility of disruption from recent or pending acquisitions, making it more difficult to maintain business and operational relationships or retain key personnel;

the possibility that the expected synergies and benefits from recent acquisitions will not be fully realized, or will not be realized within the anticipated time periods;

the risk that the acquired businesses will not be integrated with Comtech successfully;

the possibility of disruption from recent acquisitions, making it more difficult to maintain business and operational relationships or retain key personnel;

the risk that Comtech will be unsuccessful in implementing a tactical shift in its Government Solutions segment away from bidding on large commodity service contracts and toward pursuing contracts for its niche products with higher margins;

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Impairment of Goodwill and Other Intangible Assets .

As of October 31, 2020, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $331.5 million (of which $256.5 million relates to our Commercial Solutions segment and $75.0 million relates to our Government Solutions segment).

Additionally, as of October 31, 2020, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $252.5 million (of which $203.8 million relates to our Commercial Solutions segment and $48.7 million relates to our Government Solutions segment).

As of January 31, 2021, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $333.8 million (of which $256.5 million relates to our Commercial Solutions segment and $77.3 million relates to our Government Solutions segment).

Additionally, as of January 31, 2021, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $247.8 million (of which $199.5 million relates to our Commercial Solutions segment and $48.3 million relates to our Government Solutions segment).

Each of our two operating segments constitutes a reporting unit and we must make various assumptions in determining their estimated fair values.

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It is possible that, during fiscal 2021 or beyond, business conditions (both in the U.S.

and internationally) could deteriorate from the current state, our current or prospective customers could materially postpone, reduce or even forgo purchases of our products and services to a greater extent than we currently anticipate, or our common stock price could decline further.

Such deterioration could be caused by uncertainty about the severity and length of the COVID-19 pandemic, and its impact on global business activity.

A significant decline in our customers' spending that is greater than we anticipate or a shift in funding priorities may also have a negative effect on future orders, sales, income and cash flows and we might be required to perform a quantitative assessment during fiscal 2021 or beyond.

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In addition to our impairment analysis of goodwill, we also review net intangible assets with finite lives when an event occurs indicating the potential for impairment.

We believe that the carrying values of our net intangible assets were recoverable as of October 31, 2020.

We believe that the carrying values of our net intangible assets were recoverable as of January 31, 2021.

Any impairment charges that we may record in the future could be material to our results of operations and financial condition.

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Impact of COVID-19 and Business Outlook for Fiscal 2021

Despite the second wave of the COVID-19 pandemic, fiscal 2021 is off to a good start, as our net sales and Adjusted EBITDA exceeded our expectations.

During the first quarter of fiscal 2021, we generated consolidated:

During the second quarter of fiscal 2021, we exceeded our business expectations and generated consolidated:

• Net sales of $161.3 million;

• GAAP operating loss of $85.7 million, or Non-GAAP operating income of $5.5 million when excluding $91.2 million of acquisition plan expenses;

• GAAP net loss of $85.8 million, or Non-GAAP net income of $3.7 million when excluding acquisition plan expenses of $88.3 million (net of tax), incremental interest expense associated with ticking fees of $1.0 million (net of tax) and a net discrete tax expense of $0.2 million;

• Net cash used in operating activities of $74.2 million;

• GAAP operating income of $5.4 million, or Non-GAAP operating income of $9.5 million when excluding $3.4 million of acquisition plan expenses, $0.6 million of restructuring costs and $0.2 million of additional operating costs for our antenna facility in the United Kingdom due to the impact of the COVID-19 pandemic, which is discussed below;

• GAAP net income of $4.2 million, or Non-GAAP net income of $6.8 million when excluding acquisition plan expenses of $2.8 million (net of tax), restructuring costs of $0.5 million (net of tax), COVID-19 related costs of $0.1 million (net of tax) and a net discrete tax benefit of $0.8 million;

• Net cash provided by operating activities of $10.9 million;

• Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $18.1 million.

We achieved a consolidated book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.91 and finished the first quarter with consolidated backlog of $605.5 million.

As of January 31, 2021, our cash and cash equivalents were $30.9 million and our total debt outstanding was $208.0 million.

We achieved a consolidated book-to-bill ratio (a measure defined as bookings divided by net sales) of 1.34 and finished the second quarter with consolidated backlog of $660.0 million (an increase of approximately 9.0% from the level on October 31, 2020).

Our backlog (sometimes referred to herein as orders or bookings) is more fully defined in our most recent Annual Report on Form 10-K filed with SEC and the total value of multi-year contracts that we have received is substantially higher than our reported backlog.

As of October 31, 2020, our cash and cash equivalents were $32.5 million and our total debt outstanding was $217.0 million.

Our second quarter of fiscal 2021 has started off strong.

As announced on November 23, 2020, we were awarded a statewide contract valued at up to $175.1 million to design, deploy, and operate NG-911 services for the Commonwealth of Pennsylvania.

Our pipeline remains strong and if business momentum continues, we would anticipate a book-to-bill ratio in excess of 1.0 for fiscal 2021.

Nevertheless, COVID-19 is still impacting our business and we are seeing increased spikes of COVID-19 in almost all of the geographic areas in which we operate.

As such, we continue to conduct most of our non-production related operations using remote working arrangements, have curtailed most business travel, and have established social distancing safeguards.

These precautions and business practices are expected to remain in effect so long as government advisories recommend.

Our pipeline remains strong and if business momentum continues, we anticipate a book-to-bill ratio in excess of 1.0 for fiscal 2021.

During the second quarter, we operated our business under difficult conditions as a second wave of COVID-19 resulted in regional spikes of infection rates in many of the geographic areas in which we operate.

This second wave impacted many of our international end-customers, a number of whom purchase our satellite earth station technology products.

COVID-19 also significantly impacted our operations in the United Kingdom, forcing the complete closure of our antenna design and manufacturing center for several days in December 2020.

During our second fiscal quarter, we continued to conduct most of our global non-production related operations using remote working arrangements, curtailed most business travel, and maintained social distancing safeguards in our workplaces.

These precautions and business practices are continuing and are expected to remain in effect so long as government advisories recommend.

Additionally, we have experienced order delays, production delays, minor supply chain disruptions, lower levels of factory utilization and higher logistics and operational costs.

Although the COVID-19 pandemic is by no means over and additional waves of COVID-19 could again alter the business landscape, we believe that the pandemic’s worst impact on our business is largely behind us.

As the vaccine for COVID-19 becomes widely available, we believe that business conditions will improve.

With our diversified customer base, product leadership positions and mounting prospects, we still expect that consolidated net sales in fiscal 2021 will be higher than the amount we achieved in fiscal 2020.

Given overall mix changes and increased costs associated with operating our business during the COVID-19 pandemic, we now expect Adjusted EBITDA in fiscal 2021 to be similar to the amounts we achieved in fiscal 2020.

Although the COVID-19 pandemic is by no means over and additional waves of COVID-19 could again alter the business landscape, we believe that growing COVID-19 vaccine inoculations will lead to improved business conditions.

Given overall mix changes and increased costs associated with operating our business during the COVID-19 pandemic, we continue to expect Adjusted EBITDA in fiscal 2021 to be similar to the amounts we achieved in fiscal 2020.

Our long-term fundamentals remain strong as we continue to believe we are well-positioned for growth as business conditions meaningfully improve.

Because the amount of acquisition plan expenses remains largely unpredictable and given the pandemic's continued impact on global business conditions, we are not providing any GAAP operating income, GAAP net income or GAAP EPS guidance or a reconciliation of our projected results to the most comparable GAAP measure, as such a reconciliation cannot be prepared without unreasonable effort.

Because of the pandemic's continuing impact on global business conditions, and the difficulty of estimating ongoing acquisition plan expenses, we are not providing guidance on GAAP operating income, GAAP net income or GAAP EPS or a reconciliation of our projected Adjusted EBITDA to the most comparable GAAP measure, as such a reconciliation cannot be prepared without unreasonable effort.

For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

Our Business Outlook for Fiscal 2021 does not consider the financial impact of the pending UHP acquisition or other expenses related to future actions we may take in order to achieve our strategic objectives.

The UHP acquisition is discussed in the below section entitled “ Acquisition Plan Update .” Additionally, during the remainder of fiscal 2021, we expect to shift production of many of our key satellite earth station products from our existing Tempe, Arizona locations to a new 146,000 square foot facility in Chandler, Arizona.

Our Business Outlook for Fiscal 2021 does not consider the financial impact of other expenses related to future actions we may take in order to achieve our strategic objectives.

At the start of our third quarter of fiscal 2021, we initiated an effort to improve efficiencies and streamline operations in our Government Solutions segment.

Such efforts include the consolidation of certain administrative and operating functions in both our Florida and Maryland locations and the elimination of certain duplicate functions.

In addition, we expect to continue shifting production of many of our key satellite earth station products from our existing Tempe, Arizona locations to a new 146,000 square foot facility in Chandler, Arizona.

This new facility, which is located less than 10 miles from our current facilities, is expected to support our anticipated growth and long-term business goals for our satellite earth station product line.

In November 2020, we also signed a 10-year facility lease in the United Kingdom to expand our Government Solutions segment's manufacturing capabilities for high precision full motion fixed and mobile X/Y satellite tracking antennas, RF feeds, reflectors and radomes.

In connection with these new leases, we expect to incur restructuring costs of approximately $2.0 million in fiscal 2021, the majority of which are expected to be recorded as cost of sales.

On December 9, 2020, our Board of Directors declared a dividend of $0.10 per common share, payable on February 19, 2021 to stockholders of record at the close of business on January 20, 2021.

Over time, such efforts are expected to improve Adjusted EBITDA margins.

Additionally, in November 2020, we also signed a 10-year facility lease in the United Kingdom to expand our Government Solutions segment's manufacturing capabilities for our high precision full motion fixed and mobile X/Y satellite tracking antennas, RF feeds, reflectors and radomes.

In connection with our new facilities, we expect to incur restructuring costs of approximately $2.1 million in fiscal 2021, the majority of which are expected to be recorded as either cost of sales or selling, general and administrative expenses.

On March 11, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on May 21, 2021 to stockholders of record at the close of business on April 21, 2021.

Future Common Stock dividends remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval.

Additional information related to our Business Outlook for Fiscal 2021 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, 2020 and 2019."

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, 2021 and 2020 " and " Comparison of the Results of Operations for the Six Months Ended January 31, 2021 and 2020 ."

Acquisition Plan Update

UHP Networks Inc.

In November 2019, we entered into an agreement to acquire UHP Networks Inc.

and its sister company (together, “UHP”), a leading provider of innovative and disruptive satellite ground station technology solutions.

UHP is based in Canada and has developed revolutionary technology that we believe is transforming the Very Small Aperture Terminal (“VSAT”) market.

With end-markets for high-speed satellite-based networks significantly growing, our acquisition of UHP, if consummated, will allow us to enhance our solution offerings with low cost time division multiple access (“TDMA”) satellite modems which we do not currently offer.

In June 2020, we agreed with UHP to amend the terms of our purchase agreement which resulted in the total aggregate purchase price being reduced by approximately 24% from $50.0 million to $38.0 million (of which $5.0 million will be paid in cash, with the remainder in shares of our common stock, cash, or a combination of both, as we may elect at the time of closing).

The transaction is subject to customary closing conditions, including regulatory approval to allow us to purchase UHP's sister company which is headquartered in Moscow.

In August 2020, at the request of the Federal Antimonopoly Service ("FAS") of the Russian Federation we submitted an application for regulatory approval to the FAS and the Commission for Supervising Foreign Investments in the Russian Federation (the "Russian Commission") pursuant to Russia’s Foreign Investment Law ("FIL").

In order to purchase UHP’s sister company, which is based in Moscow, approval by the Russian Commission and the FAS is required.

If we do not receive approval by December 31, 2020, either we or UHP may terminate the purchase agreement.

Acquisition Plan Expenses.

During the three months ended October 31, 2020 and 2019, we incurred $91.2 million and $2.4 million, respectively, of acquisition plan expenses.

For the more recent fiscal quarter, $88.3 million related to the previously announced litigation and merger termination with Gilat, including $70.0 million paid in cash to Gilat.

The remaining costs primarily related to the pending acquisition of UHP and GD NG-911 acquisition-related litigation.

Additionally, we recorded $1.2 million of incremental interest expense for ticking fees related to a now terminated financing commitment letter.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2020 AND 2019

Consolidated net sales were $135.2 million and $170.3 million for the three months ended October 31, 2020 and 2019, respectively, representing a decrease of $35.1 million, or 20.6%.

The period-over-period decrease in net sales reflects lower net sales in both of our segments, as is further discussed below.

On March 2, 2021, we completed our acquisition of UHP Networks Inc.

(“UHP”), a leading provider of innovative and disruptive satellite ground station technology solutions.

We believe UHP's revolutionary technology may transform the growing Very Small Aperture Terminal (“VSAT”) market.

UHP’s unique time divisional multiple access (“TDMA”) technology used in its VSAT platforms has software defined network functionality that offers best-in-class support for very large networks.

The UHP acquisition allows our customers to more cost-effectively provide end-users with wireless service backed by the quality and reassurance of the Comtech brand and service offerings.

UHP's technology platform furthers our strategy of offering our global customers the most robust and advanced wireless communications solutions to meet the growing need for high-speed satellite-based networks serving the mobile backhaul, maritime, enterprise and defense/government markets.

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 2021 AND 2020

Consolidated net sales were $161.3 million and $161.7 million for the three months ended January 31, 2021 and 2020, respectively.

The period-over-period fluctuations of net sales in our segments is further discussed below.

Commercial Solutions

Net sales in our Commercial Solutions segment were $81.8 million for the three months ended October 31, 2020, as compared to $94.3 million for the three months ended October 31, 2019, a decrease of $12.5 million, or 13.3%.

Our Commercial Solutions segment represented 60.5% of consolidated net sales for the three months ended October 31, 2020 as compared to 55.4% for the three months ended October 31, 2019.

Net sales in our Commercial Solutions segment were $87.8 million for the three months ended January 31, 2021, as compared to $96.1 million for the three months ended January 31, 2020, a decrease of $8.3 million, or 8.6%.

Our Commercial Solutions segment represented 54.4% of consolidated net sales for the three months ended January 31, 2021 as compared to 59.5% for the three months ended January 31, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) for this segment was 2.04.

Period-to-period fluctuations in bookings is normal for this segment.

Net sales in the three months ended October 31, 2020 of our satellite ground station technologies were lower than the three months ended October 31, 2019.

Although we have seen a recent spike of COVID-19 in many of the geographic markets where we sell our satellite ground station technologies, we continue to believe that the pandemic’s worst impact on our business is largely behind us.

Although bookings of our satellite ground station technologies during the most recent quarter were below the comparable quarter of the prior year (which was not significantly impacted by COVID-19), bookings in the first quarter of fiscal 2021 were higher than the bookings achieved in each of our previous two quarters.

During the period, we were awarded a number of important orders including:

(i) $1.7 million in orders from a large government entity in Asia, who selected our equipment to support a significant network upgrade, replacing a mix of vendors’ installed equipment;

(ii) a $1.5 million order for Single Channel Per Carrier (“SCPC”) satellite modems from a tier-one defense contractor to upgrade and expand an existing network with our CDM-625A advanced satellite modems;

(iii) $1.0 million in delivery orders from the U.S.

Naval Information Warfare Systems Command for our latest generation SLM-5650B satellite modems and firmware upgrades;

and (iv) a $1.0 million order for satellite ground station equipment from the largest telecommunications company in Africa, who specified our Heights™ Networking Platform and complementary block up converters to enhance and improve its mobile backhaul capabilities and to launch additional enterprise services.

Net sales in the three months ended October 31, 2020 of our public safety and location technology solutions were lower than the three months ended October 31, 2019.

Period-to-period fluctuations in bookings are normal for this segment.

Net sales in the three months ended January 31, 2021 of our satellite ground station technologies were lower than the three months ended January 31, 2020.

This product line continues to be impacted by the COVID-19 pandemic's effect on customer demand, particularly in international markets, which represent a large majority of end-users for this product line.

Total bookings for this product line were higher than the bookings achieved in our prior fiscal quarter as we benefited from the receipt of an $11.4 million delivery order from the U.S.

Naval Information Warfare Systems Command for our latest generation SLM-5650B satellite modems and firmware upgrade.

Other notable orders received during our most recent quarter include a $1.6 million follow-on order for Ka-band solid-state power amplifiers that use state-of-the-art Gallium Nitride ("GaN") technology for an in-flight connectivity ("IFC") application and $1.5 million in orders for satellite modems and optimization equipment from a North American communication service provider.

Net sales in the three months ended January 31, 2021 of our public safety and location technology solutions were lower than the three months ended January 31, 2020.

As previously disclosed, we anticipated that AT&T would cease purchasing our 911 wireless call routing solutions as a result of our receipt of a large contract from another large U.S.

mobile network operator.

Our first quarter of fiscal 2021 reflected the absence of such sales to AT&T, offset, in part, by increased sales of our 5G virtual mobile location-based technology solutions.

Also, during the most recent fiscal quarter, we have commenced work related to our recently awarded $54.0 million contract to design, deploy, and operate NG-911 services for the State of South Carolina.

To-date, the business impact of COVID-19 on our public safety and location technology solutions has been relatively muted and long-term demand for our products appears strong.

Although COVID-19 has resulted in the cancellation of several key public safety trade shows and some states and municipalities have announced budget constraints, we believe that other potential customers are increasing their funding for next-generation 911 ("NG-911") solutions, recognizing the critical importance of upgrading their 911 systems.

In fact, our second quarter of fiscal 2021 has started off strong.

As announced in November 2020, we were awarded a statewide contract valued at up to $175.1 million to design, deploy, and operate NG-911 services for the Commonwealth of Pennsylvania.

Our second quarter of fiscal 2021 reflected the absence of such sales to AT&T, offset, in part, by increased sales of our 5G virtual mobile location-based technology solutions.

During the second quarter of fiscal 2021, we were awarded a statewide contract valued at up to $175.1 million to design, deploy, and operate next-generation 911 ("NG-911") services for the Commonwealth of Pennsylvania.

The total contract value includes multi-year contract extension options.

The Commonwealth of Pennsylvania initially funded the contract at $137.4 million, of which we booked $111.6 million during our second quarter of fiscal 2021.

Based on our anticipated timing of performance, we expect meaningful revenue contribution from this contract to begin in fiscal 2022.

During our first quarter of fiscal 2021, we also received a number of other important orders and offering enhancements relating to our public safety and location technology solutions, including:

(i) a contract renewal for location and mapping technologies worth $4.2 million with a tier-one MNO;

(ii) a contract award valued at up to $2.4 million to provide NG-911 services, including our Solacom Guardian Intelligent 911 Workstations, to the City of Edmonton’s police and fire rescue services;

(iii) a five-year multi-million dollar upgrade contract to provide a tier-one MNO in Saudi Arabia with both active and passive location services supporting 2G, 3G and 4G networks;

(iv) a contract renewal for location-based services (“LBS”) with Telefonica Digital, a Madrid-based research and development company which uses our global location services solution for its machine-to-machine communication requirements and customer use cases;

and (v) contracts with Indian Motorcycle to expand coverage for the Ride Command feature in Europe, the Middle East and Africa, providing maps and Points of Interest (“POIs”) data, as well as support for Doppler Radar service for its customers in the U.S.

In aggregate, we remain optimistic that fiscal 2021 net sales for this segment will be slightly higher than the amount we achieved in fiscal 2020.

The Commonwealth of Pennsylvania initially funded the contract at $137.4 million, $111.6 million of which was booked during our second quarter of fiscal 2021.

This contract was awarded to us shortly after we announced the receipt of a $54.0 million contract to design, deploy and operate NG-911 services for the State of South Carolina.

Based on our anticipated timing of performance, we expect meaningful revenue contribution from these contracts to begin in fiscal 2022.

Other notable public safety and location technology solution orders received during the second quarter of fiscal 2021 include:

(i) a contract award valued at up to $2.9 million to provide NG-911 services, including our Solacom Guardian Intelligent 911 Workstations, to the Toronto Police Service in Canada;

(ii) a one-year contract renewal valued at up to $1.6 million to provide hosted location-based services ("LBS") platforms to a tier-one U.S.

mobile network operator ("MNO");

(iii) a contract renewal valued at up to $1.3 million to provide maintenance and support services to a Canadian MNO;

and (iv) a contract renewal valued at up to $1.1 million to provide maintenance and support services for LBS platforms to a tier-one U.S.

To-date, the business impact of COVID-19 on our public safety and location technology solutions has been relatively muted and long-term demand for our products and services appears strong.

Although COVID-19 has resulted in the cancellation of several key public safety trade shows and some states and municipalities have announced budget constraints, we believe that other potential customers are increasing their funding for NG-911 solutions, recognizing the critical importance of upgrading their 911 systems.

Overall, we remain optimistic that fiscal 2021 net sales for this segment will be similar to the amount we achieved in fiscal 2020.

Bookings, sales and profitability in our Commercial Solutions segment can fluctuate from period-to-period due to many factors, including changes in the general business environment.

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Government Solutions

Net sales in our Government Solutions segment were $53.4 million for the three months ended October 31, 2020 as compared to $76.0 million for the three months ended October 31, 2019, a decrease of $22.6 million or 29.7%.

Our Government Solutions segment represented 39.5% of consolidated net sales for the three months ended October 31, 2020 as compared to 44.6% for the three months ended October 31, 2019.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for our first quarter of fiscal 2021 was 1.07.

Period-to-period fluctuations in bookings is normal for this segment.

Net sales of our mission-critical technologies during the three months ended October 31, 2020 were lower as compared to the three months ended October 31, 2019, primarily due to the timing of and performance on orders related to our Global Tactical Advanced Communication Systems ("GTACS") contract and high reliability Electrical, Electronic and Electromechanical (“EEE”) satellite based space components.

During our most recent quarter, we generated a nominal amount of sales from our January 2020 acquisition of CGC Technology Limited ("CGC").

Receipt of new orders for our mission-critical technologies during the first quarter fiscal 2021 include:

(i) $5.9 million of additional funding on our previously announced contract to provide the U.S.

Army with global field support services for military satellite communication (“SATCOM”) terminals around the world;

(ii) $5.4 million of additional orders from the U.S.

government for our Joint Cyber Analysis Course (“JCAC”) training solutions;

(iii) $3.0 million of additional funding for a 12-month extension on an existing contract to provide the State of Maryland’s Department of Human Services with statewide information technology (“IT”) services;

(iv) $2.7 million of orders to provide ongoing sustainment services to the U.S.

Army for the AN/TSC-198A SNAP (Secret Internet Protocol Router ("SIPR") and Non-classified Internet Protocol Router ("NIPR") Access Point), Very Small Aperture Terminals ("VSATs");

(v) $2.6 million of orders to supply Manpack Satellite Terminals, networking equipment and other advanced VSAT products to the U.S.

and (vi) $1.9 million of additional funding to continue to provide critical IT staffing and support to multiple agencies within the City of Baltimore, including the Baltimore City of Information Technology and Baltimore City Police Department.

Net sales of our high-performance transmission technologies during the three months ended October 31, 2020 were lower as compared to the three months ended October 31, 2019.

During the first quarter of fiscal 2021, we continued to make progress to ship initial orders on our 10-year, $211.0 million IDIQ contract awarded to us by a prime contractor to provide next generation troposcatter systems in support of the U.S.

Net sales in our Government Solutions segment were $73.5 million for the three months ended January 31, 2021 as compared to $65.5 million for the three months ended January 31, 2020, an increase of $8.0 million or 12.2%.

Our Government Solutions segment represented 45.6% of consolidated net sales for the three months ended January 31, 2021 as compared to 40.5% for the three months ended January 31, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for our second quarter of fiscal 2021 was 0.50.

Period-to-period fluctuations in bookings are normal for this segment.

Net sales of both our mission-critical technologies and our high-performance transmission technologies during the three months ended January 31, 2021 were higher as compared to the three months ended January 31, 2020, primarily due to the timing of and performance on orders related to our high reliability Electrical, Electronic and Electromechanical (“EEE”) satellite based space components and cyber security training solutions and ongoing performance on our 10-year $211.0 million IDIQ contract awarded to us by a prime contractor to provide next generation troposcatter systems in support of the U.S.

Marine Corps.

We believe this multi-year opportunity validates Comtech’s market leading troposcatter technologies and expertise and we continue to see strong interest from both the U.S.

military and foreign governments for our recently introduced Comtech COMET terminals.

During the second quarter, we also benefited from the inclusion of nominal sales of X/Y antenna products that we now offer as a result of our January 2020 acquisition of CGC Technology Limited ("CGC").

During the second quarter of fiscal 2021, we received initial orders of $11.5 million related to a new multi-year contract valued at up to $235.7 million to provide ongoing system refurbishment, sustainment services and baseband equipment to the U.S Army, which will support the sustainment of the U.S.

Army's AN/TSC-198 Secret Internet Protocol Router ("SIPR") and Non-secure Internet Protocol Router ("NIPR") Access Point ("SNAP") family of ground satellite terminals, to include spare parts, repairs, upgrades, refurbishments, logistics and engineering services and training.

This multi-year contract includes a base year award and three one-year option periods exercisable by the U.S.

We expect that additional funding will be authorized over the remaining contract period.

Other notable orders received during the second quarter of fiscal 2021 include:

(i) $4.2 million of orders from the U.S.

government for our Joint Cyber Analysis Course ("JCAC") training solutions;

(ii) a $3.5 million contract for solid-state, high-power RF amplifiers from a major domestic medical instrumentation provider;

(iii) a $2.8 million contract for high-power amplifier systems from an international prime contractor to be incorporated into electronic warfare systems;

(iv) a $2.7 million contract from a major international oil and gas company which will provide the first over-the-horizon system for a floating liquefied natural gas facility utilizing our software-defined CS67PLUS radio/modem;

(v) a $1.1 million follow-on order from a commercial space company to provide a pair of full motion large aperture antenna systems for its satellite ground system and radar projects;

(vi) a follow-on order from a multinational infrastructure company to provide a 21.5m radome for its satellite ground system and radar project;

and (vii) a contract with NASA's Glenn Research Center to provide a Ka/S-band antenna system and radome which will be installed at its new Aerospace Communications Facility in Cleveland, OH, supporting high bandwidth space and aeronautics communications research.

We believe COVID-19 has resulted in some of our international customers delaying potential order awards and we are seeing fielding and order delays from U.S.

military customers.

In addition, in early December 2020, we temporarily closed our antenna production facility in the United Kingdom due to a spike in COVID-19 cases in that area and we have informed impacted customers that certain orders previously expected to ship will be delayed.

Nevertheless, we believe these issues are temporary and long-term demand for our Government Solutions products and technologies remains strong.

As such, looking forward, and despite the lingering impact of COVID-19, we believe fiscal 2021 net sales for this segment will be similar to or slightly higher than the amount we achieved in fiscal 2020.

At the same time, we continue to see strong interest from both the U.S.

military and foreign governments for our recently introduced Comtech COMET terminals, which may result in orders that would benefit our fiscal 2022.

During the second quarter of fiscal 2021, we temporarily closed our antenna production facility in the United Kingdom due to a spike in COVID-19 cases in that area and we have informed impacted customers that the shipment of certain orders will be delayed.

Long-term demand for our Government Solutions products and technologies remains strong.

As such, looking forward, and despite the lingering impact of COVID-19, we believe fiscal 2021 net sales for this segment will be similar to the amount we achieved in fiscal 2020.

Bookings, sales and profitability in our Government Solutions segment can fluctuate dramatically from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by our U.S.

2 unchanged sentences

Geography and Customer Type

Sales by geography and customer type, as a percentage of related sales, for the three months ended October 31, 2020 and 2019 are as follows:

Three months ended October 31,

Sales by geography and customer type, as a percentage of related sales, for the three months ended January 31, 2021 and 2020 are as follows:

Three months ended January 31,

2021 2020 2021 2020 2021 2020

11 unchanged sentences

Included in domestic sales are sales to Verizon Communications Inc.

("Verizon"), which accounted for 12.5% of consolidated net sales for the three months ended October 31, 2020.

("Verizon"), which accounted for 10.0% of consolidated net sales for the three months ended January 31, 2021.

Except for the U.S.

government, there were no customers that represented more than 10.0% of consolidated net sales during the three months ended October 31, 2019.

International sales for the three months ended October 31, 2020 and 2019 (which include sales to U.S.

government, there were no customers that represented more than 10.0% of consolidated net sales during the three months ended January 31, 2020.

International sales for the three months ended January 31, 2021 and 2020 (which include sales to U.S.

domestic companies for inclusion in products that are sold to international customers) were $35.3 million for both periods.

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 more than 10% of consolidated net sales for three months ended January 31, 2021 and 2020.

Gross Profit.

Gross profit was $55.7 million and $60.6 million for three months ended January 31, 2021 and 2020, respectively, a decrease of $4.9 million.

Gross profit, as a percentage of consolidated net sales, for the three months ended January 31, 2021 was 34.5% as compared to 37.5% for the three months ended January 31, 2020.

The decrease in our gross profit, both in dollars and as a percentage of consolidated net sales, is almost entirely driven by the period-to-period decrease of net sales in our Commercial Solutions segment, as discussed above, which historically achieves higher gross margins than our Government Solutions segment.

Our gross profit during the second quarter of fiscal 2021 reflects significant increases in costs due to order delays, production delays, minor supply chain disruptions, lower levels of factory utilization and higher logistics and operational costs resulting from the COVID-19 pandemic.

In particular, gross margins in our Government Solutions segment were negatively impacted by the complete shut-down of our U.K.

facility where we design and manufacture our X/Y antenna products.

Gross profit, as a percentage of related segment net sales, is further discussed below.

Our Commercial Solutions segment's gross profit, as a percentage of related segment net sales, for the three months ended January 31, 2021 decreased in comparison to the three months ended January 31, 2020.

The decrease in gross profit percentage primarily reflects changes in products and services mix, including the cessation of sales to AT&T for 911 wireless call routing and lower net sales of our satellite ground station technologies.

Our Government Solutions segment's gross profit, as a percentage of related segment net sales, for the three months ended January 31, 2021 slightly decreased in comparison to the three months ended January 31, 2020.

The decrease in gross profit percentage primarily reflects changes in products and service mix.

As discussed above, gross margins in this segment were impacted by the shut-down of our antenna manufacturing facility.

This facility is now reopened and beginning to resume normal operations.

Included in consolidated cost of sales for the three months ended January 31, 2021 and 2020 are provisions for excess and obsolete inventory of $1.4 million and $0.6 million, respectively.

As discussed in "Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - 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.

Our consolidated gross profit, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each segment, and therefore is inherently difficult to forecast.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $29.5 million and $29.4 million for the three months ended January 31, 2021 and 2020, respectively.

As a percentage of consolidated net sales, selling, general and administrative expenses were 18.3% and 18.2% for the three months ended January 31, 2021 and 2020, respectively.

Excluding $0.6 million of restructuring costs related to the relocation of certain of our satellite earth station production facilities to a new 146,000 square foot facility in Chandler, Arizona, selling, general and administrative expenses for the three months ended January 31, 2021 would have been $28.9 million, or 17.9% of consolidated net sales.

Excluding a $0.3 million benefit related to the reversal of certain estimated contract settlement costs, selling, general and administrative expenses for the three months ended January 31, 2020 would have been $29.7 million, or 18.4% of consolidated net sales.

The decrease in our selling, general and administration expenses is largely attributable to the benefit from cost saving measures previously implemented.

Amortization of stock-based compensation expenses recorded as selling, general and administrative expenses was $1.2 million in the three months ended January 31, 2021 as compared to $1.1 million in the three months ended January 31, 2020.

Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Research and Development Expenses.

Research and development expenses were $12.7 million and $13.7 million for the three months ended January 31, 2021 and 2020, respectively, representing a decrease of $1.0 million, or 7.3%.

As a percentage of consolidated net sales, research and development expenses were 7.9% and 8.5% for the three months ended January 31, 2021 and 2020, respectively.

For the three months ended January 31, 2021 and 2020, research and development expenses of $10.3 million and $11.9 million, respectively, related to our Commercial Solutions segment, and $2.3 million and $1.7 million, respectively, related to our Government Solutions segment.

The remaining research and development expenses of $0.1 million in both the three months ended January 31, 2021 and 2020 related to the amortization of stock-based compensation expense.

Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements.

During three months ended January 31, 2021 and 2020, customers reimbursed us $3.9 million and $2.4 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.

Amortization of Intangibles.

Amortization relating to intangible assets with finite lives was $4.8 million (of which $4.3 million was for the Commercial Solutions segment and $0.5 million was for the Government Solutions segment) for the three months ended January 31, 2021 and $5.2 million (of which $4.3 million was for the Commercial Solutions segment and $0.9 million was for the Government Solutions segment) for the three months ended January 31, 2020.

In connection with our acquisition of UHP Network Inc.

("UHP") on March 2, 2021, we expect to record approximately $1.0 million related to the amortization of intangible assets in the second half of fiscal 2021.

Acquisition Plan Expenses.

During the three months ended January 31, 2021 and 2020, we incurred $3.4 million and $6.0 million, respectively, of acquisition plan expenses related to the acquisition of UHP and to GD NG-911 acquisition-related litigation.

These expenses are primarily recorded in our Unallocated segment.

During the third quarter of fiscal 2021, we expect to incur approximately $3.4 million of acquisition plan expenses.

We do not expect to incur significant acquisition plan expenses in the remainder of fiscal 2021, other than those associated with the GD NG-911 acquisition-related litigation matters.

Operating Income.

Operating income for the three months ended January 31, 2021 was $5.4 million as compared to operating income of $6.2 million for three months ended January 31, 2020.

Operating income by reportable segment is shown in the table below:

Three months ended January 31,

2021 2020 2021 2020 2021 2020 2021 2020

($ in millions) Commercial Solutions Government Solutions Unallocated Consolidated

Operating income $ 9.4 12.6 5.5 5.0 (9.4) (11.4) $ 5.4 6.2

Percentage of related

net sales 10.7 % 13.1 % 7.5 % 7.6 % NA NA 3.3 % 3.8 %

The decrease in our Commercial Solutions segment operating income, both in dollars and as a percentage of related segment net sales, for the three months ended January 31, 2021 was driven primarily by lower net sales, a lower gross profit percentage and $0.6 million of restructuring charges, offset in part by lower research and development expenses, as discussed above.

The slight decrease in our Government Solutions segment operating income for the three months ended January 31, 2021 as a percentage of related segment net sales, was driven primarily by a lower gross profit percentage and higher research and development expenses, offset in part by lower amortization of intangibles, as discussed above.

In addition, our Government Solutions segment operating income for the three months ended January 31, 2021 reflects $0.2 million of additional operating costs for our antenna facility in the United Kingdom due to the impact of the COVID-19 pandemic.

The decrease in unallocated expenses for the three months ended January 31, 2021 as compared to the three months ended January 31, 2020 is primarily due to lower acquisition plan expenses, as discussed above.

Amortization of stock-based compensation was $1.3 million and $1.2 million, respectively, for the three months ended January 31, 2021 and 2020.

Excluding the (i) $3.4 million of acquisition plan expenses;

(ii) $0.6 million of restructuring costs;

and (iii) $0.2 million of additional operating costs due to the impact of COVID-19, consolidated operating income for the three months ended January 31, 2021 would have been $9.5 million, or 5.9% of consolidated net sales.

Excluding the $6.0 million of acquisition plan expenses and a $0.3 million benefit related to the reversal of certain estimated contract settlement costs, consolidated operating income for three months ended January 31, 2020 would have been $12.0 million, or 7.4% of consolidated net sales.

The decrease, both in dollars and as a percentage of consolidated net sales, was due primarily to a lower gross profit percentage, as discussed above.

Unallocated expenses in fiscal 2021 will be impacted by ongoing acquisition plan expenses, as discussed above.

Interest Expense and Other.

Interest expense was $1.4 million and $1.6 million for the three months ended January 31, 2021 and 2020, respectively.

Our effective interest rate (including amortization of deferred financing costs) in three months ended January 31, 2021 was approximately 2.7%.

Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our existing Credit Facility approximates 2.4%.

Interest (Income) and Other.

Interest (income) and other for both the three months ended January 31, 2021 and 2020 was nominal.

All of our available cash and cash equivalents are currently invested in bank deposits and money market deposit accounts which, at this time, are currently yielding an immaterial interest rate.

(Benefit from) Provision for Income Taxes.

Our income tax provision or benefit is computed by applying an estimated annual effective tax rate for the full fiscal year to “ordinary” income or loss for the reporting period (“ordinary” is generally defined as pre-tax income or loss excluding unusual or infrequently occurring discrete tax items).

For the three months ended January 31, 2021, we recorded a tax benefit of $0.2 million as compared to a tax provision of $1.1 million for the three months ended January 31, 2020.

Our effective tax rate (excluding discrete tax items) for the three months ended January 31, 2021 and 2020 was 17.0% and 23.0%, respectively.

The decrease from 23.0% to 17.0% is primarily due to expected product and geographical mix changes reflected in our Business Outlook for Fiscal 2021.

For purposes of determining our 17.0% estimated annual effective tax rate for fiscal 2021, the $70.0 million of acquisition plan expense paid to Gilat, during our first quarter of fiscal 2021, was considered an unusual and infrequently occurring discrete tax item and excluded from the computation of our effective tax rate.

In addition, no financial statement benefit was recorded for the $70.0 million portion of acquisition plan expenses.

During the three months ended January 31, 2021, we recorded a net discrete tax benefit of $0.8 million, primarily related to updating our effective tax rate for the fiscal year, as well as the finalization of certain tax accounts in connection with the filing of our fiscal 2020 Canadian income tax returns.

During the three months ended January 31, 2020, we recorded a net discrete tax expense of approximately $0.1 million.

Our federal income tax returns for fiscal 2017 through 2019 are subject to potential future IRS audit.

None of our state income tax returns prior to fiscal 2016 are subject to audit.

Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

During the three months ended January 31, 2021, consolidated net income was $4.2 million as compared to net income of $3.5 million during the three months ended January 31, 2020.

Adjusted EBITDA.

Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the three months ended January 31, 2021 and 2020 are shown in the table below (numbers in the table may not foot due to rounding):

Three months ended January 31,

2021 2020 2021 2020 2021 2020 2021 2020

($ in millions) Commercial Solutions Government Solutions Unallocated Consolidated

Net income (loss) $ 9.3 12.7 5.7 5.0 (10.8) (14.2) $ 4.2 3.5

Provision for (benefit from) income taxes 0.2 (0.1) (0.3) — (0.1) 1.2 (0.2) 1.1

Interest (income) and other

(0.1) — — — — — (0.1) —

Interest expense — — — — 1.4 1.6 1.4 1.6

Amortization of stock-based compensation

— — — — 1.3 1.2 1.3 1.2

Amortization of intangibles

4.3 4.4 0.5 0.9 — — 4.8 5.2

Depreciation 1.9 2.2 0.4 0.3 0.1 0.2 2.5 2.7

Estimated contract settlement costs

— (0.3) — — — — — (0.3)

Acquisition plan expenses

— — — — 3.4 6.0 3.4 6.0

Restructuring costs 0.6 — — — — — 0.6 —

COVID-19 related costs — — 0.2 — — — 0.2 —

Adjusted EBITDA $ 16.2 18.9 6.6 6.2 (4.7) (3.9) $ 18.1 21.2

Percentage of related net sales 18.5 % 19.7 % 9.0 % 9.4 % NA NA 11.2 % 13.1 %

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the three months ended January 31, 2021 as compared to the three months ended January 31, 2020 is primarily attributable to a lower gross profit percentage, as discussed above.

The decrease in our Commercial Solutions segment's Adjusted EBITDA, as a percentage of related segment net sales, is primarily due to lower net sales and a lower gross profit percentage, offset in part by cost saving measures, as discussed above.

The decrease in our Government Solutions segment's adjusted EBITDA, as a percentage of related segment net sales, is primarily due to a lower gross profit percentage and higher research and development expenses, as discussed above.

Because our consolidated Adjusted EBITDA, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each segment as well as unallocated spending, it is inherently difficult to forecast.

A reconciliation of our fiscal 2020 GAAP Net Income to Adjusted EBITDA is shown in the table below (numbers in the table may not foot due to rounding):

($ in millions) Fiscal Year 2020

Reconciliation of GAAP Net Income to Adjusted EBITDA:

Net income $ 7.0

Provision for income taxes 2.3

Interest (income) and other (0.2)

Interest expense 6.1

Amortization of stock-based compensation 9.3

Amortization of intangibles 21.6

Depreciation 10.6

Estimated contract settlement costs 0.4

Acquisition plan expenses 20.8

Adjusted EBITDA $ 77.8

Reconciliations of our GAAP consolidated operating income, net income and net income per diluted share for the three months ended January 31, 2021 and 2020 to the corresponding non-GAAP measures are shown in the tables below (numbers and per share amounts in the table may not foot due to rounding):

Three months ended January 31, 2021

($ in millions, except for per share amount) Operating Income Net Income Net Income per

Diluted Share

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported

$ 5.4 $ 4.2 $ 0.17

Acquisition plan expenses

Restructuring costs

COVID-19 related costs 0.2 0.1 0.01

Net discrete tax benefit

— (0.8) (0.03)

Non-GAAP measures $ 9.5 $ 6.8 $ 0.27

Three months ended January 31, 2020

($ in millions, except for per share amount) Operating Income Net Income Net Income per

Diluted Share

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported

$ 6.2 $ 3.5 $ 0.14

Acquisition plan expenses

Estimated contract settlement costs

(0.3) (0.2) (0.01)

Net discrete tax expense

Non-GAAP measures $ 12.0 $ 8.0 $ 0.32

Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before income taxes, interest (income) and other, write-off of deferred financing costs, interest expense, amortization of stock-based compensation, amortization of intangibles, depreciation expense, estimated contract settlement costs, settlement of intellectual property litigation, acquisition plan expenses, restructuring costs, COVID-19 related costs, facility exit costs, strategic alternatives analysis expenses and other.

Our definition of Adjusted EBITDA may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and therefore may not be comparable to similarly titled measures used by other companies.

Adjusted EBITDA is also a measure frequently requested by our investors and analysts.

We believe that investors and analysts may use Adjusted EBITDA, along with other information contained in our SEC filings, in assessing our performance and comparability of our results with other companies.

Our Non-GAAP measures for consolidated operating income, net income and net income per diluted share reflect the GAAP measures as reported, adjusted for certain items as described.

These Non-GAAP financial measures have limitations as an analytical tool as they exclude the financial impact of transactions necessary to conduct our business, such as the granting of equity compensation awards, and are not intended to be an alternative to financial measures prepared in accordance with GAAP.

These measures are adjusted as described in the reconciliation of GAAP to Non-GAAP in the above tables, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring.

Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP.

Investors are advised to carefully review the GAAP financial results that are disclosed in our SEC filings.

COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JANUARY 31, 2021 AND 2020

Consolidated net sales were $296.5 million and $331.9 million for the six months ended January 31, 2021 and 2020, respectively, representing a decrease of $35.4 million, or 10.7%.

The period-over-period decrease in net sales reflects lower net sales in both of our segments, as further discussed below.

Commercial Solutions

Net sales in our Commercial Solutions segment were $169.6 million for the six months ended January 31, 2021, as compared to $190.4 million for the six months ended January 31, 2020, a decrease of $20.8 million, or 10.9%.

Our Commercial Solutions segment represented 57.2% of consolidated net sales for the six months ended January 31, 2021 as compared to 57.4% for the six months ended January 31, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) for this segment was 1.45.

Period-to-period fluctuations in bookings are normal for this segment.

Net sales in the six months ended January 31, 2021 of our satellite ground station technologies were lower than the six months ended January 31, 2020.

Bookings of our satellite ground station technologies during the most recent six-month period were similar to the comparable period of the prior year (which was only partially impacted by COVID-19).

During the six months ended January 31, 2021, we were awarded a number of important orders including:

(i) $11.4 million in delivery orders from the U.S.

Naval Information Warfare Systems Command for our latest generation SLM-5650B satellite modems and firmware upgrade;

(ii) $1.7 million in orders from a large government entity in Asia, who selected our equipment to support a significant network upgrade, replacing a mix of vendors’ installed equipment;

(iii) a $1.6 million follow-on order for Ka-band solid-state power amplifiers that use state-of-the-art GaN technology for an IFC application;

(iv) $1.5 million in orders for satellite modems and optimization equipment from a North American communication service provider;

and (v) a $1.5 million order for Single Channel Per Carrier (“SCPC”) satellite modems from a tier-one defense contractor to upgrade and expand an existing network with our CDM-625A advanced satellite modems.

Net sales in the six months ended January 31, 2021 of our public safety and location technology solutions were lower than the six months ended January 31, 2020.

As previously disclosed, we anticipated that AT&T would cease purchasing our 911 wireless call routing solutions as a result of our receipt of a large contract from another large U.S.

mobile network operator.

Our first half of fiscal 2021 reflected the absence of such sales to AT&T, offset, in part, by increased sales of our 5G virtual mobile location-based technology solutions.

During the six months ended January 31, 2021, we were awarded a statewide contract valued at up to $175.1 million to design, deploy, and operate NG-911 services for the Commonwealth of Pennsylvania.

The total contract value includes multi-year contract extension options.

The Commonwealth of Pennsylvania initially funded the contract at $137.4 million, $111.6 million of which was booked during our second quarter of fiscal 2021.

This contract was awarded to us shortly after we announced the receipt of a $54.0 million contract to design, deploy and operate NG-911 services for the State of South Carolina.

Based on our anticipated timing of performance, we expect meaningful revenue contribution from these contracts to begin in fiscal 2022.

Other notable public safety and location technology solutions orders received during the first six months of fiscal 2021 include:

(i) a contract renewal for location and mapping technologies worth $4.2 million with a tier-one MNO;

(ii) a contract award valued at up to $2.9 million to provide NG-911 services, including our Solacom Guardian Intelligent 911 Workstations, to the Toronto Police Service in Canada;

(iii) a contract award valued at up to $2.4 million to provide NG-911 services, including our Solacom Guardian Intelligent 911 Workstations, to the City of Edmonton’s police and fire rescue services;

(iv) a one-year contract renewal valued at up to $1.6 million to provide the hosted LBS platforms to a tier-one U.S.

(v) a contract renewal valued at up to $1.3 million to provide maintenance and support services to a Canadian MNO;

and (vi) a contract renewal valued at up to $1.1 million to provide maintenance and support services for LBS platforms to a tier-one U.S.

To-date, the business impact of COVID-19 on our public safety and location technology solutions has been relatively muted and long-term demand for our products and services appears strong.

Although COVID-19 has resulted in the cancellation of several key public safety trade shows and some states and municipalities have announced budget constraints, we believe that other potential customers are increasing their funding for NG-911 solutions, recognizing the critical importance of upgrading their 911 systems.

Overall, we remain optimistic that fiscal 2021 net sales for this segment will be similar to the amount we achieved in fiscal 2020.

Bookings, sales and profitability in our Commercial Solutions segment can fluctuate from period-to-period due to many factors, including changes in the general business environment.

As such, period-to-period comparisons of our results may not be indicative of a trend or future performance.

Government Solutions

Net sales in our Government Solutions segment were $126.9 million for the six months ended January 31, 2021 as compared to $141.5 million for the six months ended January 31, 2020, a decrease of $14.6 million or 10.3%.

Our Government Solutions segment represented 42.8% of consolidated net sales for the six months ended January 31, 2021 as compared to 42.6% for the six months ended January 31, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for our first half of fiscal 2021 was 0.74.

Period-to-period fluctuations in bookings are normal for this segment.

Net sales of both our mission-critical technologies and our high-performance transmission technologies during the six months ended January 31, 2021 were lower as compared to the six months ended January 31, 2020, primarily due to the timing of and performance on orders related to our (i) Global Tactical Advanced Communication Systems ("GTACS") contract;

(ii) the U.S.

Army's AN/TSC-198 SNAP program;

and (iii) high reliability EEE satellite based space components.

Sales during the six months ended January 31, 2021 include ongoing performance on our 10-year, $211.0 million IDIQ contract awarded to us by a prime contractor to provide next generation troposcatter systems in support of the U.S.

Marine Corps.

During the six months ended January 31, 2021, we benefited from the inclusion of nominal sales of X/Y antenna products that we now offer as a result of our January 2020 acquisition of CGC.

During the six months ended January 31, 2021, we received initial orders of $11.5 million related to a new multi-year contract valued at up to $235.7 million to provide ongoing system refurbishment, sustainment services and baseband equipment to the U.S Army, which will support the sustainment of the U.S.

Army's AN/TSC-198 SNAP family of ground satellite terminals, to include spare parts, repairs, upgrades, refurbishments, logistics and engineering services and training.

This multi-year contract includes a base year award and three one-year option periods exercisable by the U.S.

We expect that additional funding will be authorized over the remaining contract period.

Other notable orders received during the six months ended January 31, 2021 include:

(i) a $10.4 million contract award from a U.S.

military service branch for the first phase of a multi antenna program that consists of multiple full-motion large aperture antenna tracking systems;

(ii) $9.6 million of additional orders from the U.S.

government for our JCAC training solutions;

(iii) $5.9 million of additional funding on our contract to provide the U.S.

Army with global field support services for military satellite communication (“SATCOM”) terminals around the world;

(iv) a $3.5 million contract for solid-state, high-power RF amplifiers from a major domestic medical instrumentation provider;

(v) $3.0 million of additional funding for a 12-month extension on an existing contract to provide the State of Maryland’s Department of Human Services with statewide information technology (“IT”) services;

(vi) a $2.8 million contract for high-power amplifier systems from an international prime contractor to be incorporated into electronic warfare systems;

(vii) a $2.7 million contract from a major international oil and gas company which will provide the first over-the-horizon system for a floating liquefied natural gas facility utilizing our software-defined CS67PLUS radio/modem;

(viii) $2.6 million of orders to supply Manpack Satellite Terminals, networking equipment and other advanced VSAT products to the U.S.

Army under our GTACS contract;

(ix) a $1.1 million follow-on order from a commercial space company to provide a pair of full motion large aperture antenna systems for its satellite ground system and radar projects;

and (x) a follow-on order from a multinational infrastructure company to provide a 21.5m radome for its satellite ground system and radar project.

We believe COVID-19 has resulted in some of our international and military customers delaying potential order awards and shifting fielding schedules from fiscal 2021 to 2022.

At the same time, we continue to see strong interest from both the U.S.

military and foreign governments for our recently introduced Comtech COMET terminals, which may result in orders that would benefit our fiscal 2022.

During the six months ended January 31, 2021, we temporarily closed our antenna production facility in the United Kingdom due to a spike in COVID-19 cases in that area and we have informed impacted customers that the shipment of certain orders will be delayed.

Long-term demand for our Government Solutions products and technologies remains strong.

As such, looking forward, and despite the lingering impact of COVID-19, we believe fiscal 2021 net sales for this segment will be similar to the amount we achieved in fiscal 2020.

and international government customers.

As such, period-to-period comparisons of our results may not be indicative of a trend or future performance.

Geography and Customer Type

Sales by geography and customer type, as a percentage of related sales, for the six months ended January 31, 2021 and 2020 are as follows:

Six months ended January 31,

2021 2020 2021 2020 2021 2020

Commercial Solutions Government Solutions Consolidated

government 15.5 % 17.8 % 70.1 % 72.5 % 38.8 % 41.2 %

Domestic 57.3 % 56.4 % 11.1 % 9.4 % 37.6 % 36.3 %

72.8 % 74.2 % 81.2 % 81.9 % 76.4 % 77.5 %

International 27.2 % 25.8 % 18.8 % 18.1 % 23.6 % 22.5 %

Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

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.

Included in domestic sales are sales to Verizon Communications Inc.

("Verizon"), which accounted for 11.1% of consolidated net sales for the six months ended January 31, 2021.

Except for the U.S.

government, there were no customers that represented more than 10.0% of consolidated net sales during the six months ended January 31, 2020.

International sales for the six months ended January 31, 2021 and 2020 (which include sales to U.S.

domestic companies for inclusion in products that are sold to international customers) were $69.9 million and $74.7 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 more than 10% of consolidated net sales for three months ended October 31, 2020 and 2019.

domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for six months ended January 31, 2021 and 2020.

Gross Profit.

Gross profit was $50.2 million and $63.6 million for three months ended October 31, 2020 and 2019, respectively.

Gross profit was $105.9 million and $124.2 million for six months ended January 31, 2021 and 2020, respectively.

The decrease of $18.3 million primarily reflects the decrease in consolidated net sales, as discussed above.

Gross profit, as a percentage of consolidated net sales, for the three months ended October 31, 2020 was 37.1% as compared to 37.3% for the three months ended October 31, 2019.

Our gross profit during the first quarter of fiscal 2021 also reflects minor increases in costs due to order delays, production delays, minor supply chain disruptions, lower levels of factory utilization and higher logistics and operational costs resulting from the COVID-19 pandemic.

Gross profit, as a percentage of consolidated net sales, for the six months ended January 31, 2021 was 35.7% as compared to 37.4% for the six months ended January 31, 2020.

Our gross profit during the first half of fiscal 2021 also reflects significant increases in costs due to order delays, production delays, minor supply chain disruptions, lower levels of factory utilization and higher logistics and operational costs resulting from the COVID-19 pandemic.

In particular, gross margins in our Government Solutions segment were negatively impacted by the complete shut-down of our U.K.

facility where we design and manufacture our X/Y antenna products.

Gross profit, as a percentage of related segment net sales, is further discussed below.

Our Commercial Solutions segment's gross profit, as a percentage of related segment net sales, for the three months ended October 31, 2020 decreased in comparison to the three months ended October 31, 2019.

The decrease in gross profit percentage in the three months ended October 31, 2020 primarily reflects changes in products and services mix, including the cessation of sales to AT&T for 911 wireless call routing and lower net sales of our satellite ground station technologies.

Our Government Solutions segment's gross profit, as a percentage of related segment net sales, for the three months ended October 31, 2020 increased in comparison to the three months ended October 31, 2019.

The increase in gross profit percentage primarily reflects an overall more favorable product mix.

Gross margins in this segment were impacted by production delays in our antenna manufacturing facility located in the United Kingdom, primarily due to a spike in COVID-19.

Included in consolidated cost of sales for the three months ended October 31, 2020 and 2019 are provisions for excess and obsolete inventory of $1.0 million and $0.4 million, respectively.

Our Commercial Solutions segment's gross profit, as a percentage of related segment net sales, for the six months ended January 31, 2021 decreased in comparison to the six months ended January 31, 2020.

The decrease in gross profit percentage in the six months ended January 31, 2021 primarily reflects changes in products and services mix, including the cessation of sales to AT&T for 911 wireless call routing and lower net sales of our satellite ground station technologies.

Our Government Solutions segment's gross profit, as a percentage of related segment net sales, for the six months ended January 31, 2021 is comparable to the six months ended January 31, 2020.

As discussed above, gross margins in this segment were impacted by the shut-down of our antenna manufacturing facility which was offset by other favorable product mix changes within the segment.

The facility in the United Kingdom is now reopened and normal operations are beginning to resume.

Included in consolidated cost of sales for the six months ended January 31, 2021 and 2020 are provisions for excess and obsolete inventory of $2.4 million and $0.9 million, respectively.

As discussed in "Item 2.

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Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $27.5 million and $31.9 million for the three months ended October 31, 2020 and 2019, respectively, representing a decrease of $4.4 million, or 13.8%.

As a percentage of consolidated net sales, selling, general and administrative expenses were 20.3% and 18.7% for the three months ended October 31, 2020 and 2019, respectively.

The increase, as a percentage of consolidated net sales, is primarily attributable to lower consolidated net sales.

Our selling, general and administrative expenses for the three months ended October 31, 2020 reflect the benefit from certain cost saving measures taken in fiscal 2020, and that are still in place, in response to the negative business impacts of COVID-19.

In addition to the elimination of certain discretionary expenses, we continue to conduct most of our non-production related operations through remote working arrangements, curtailed most business travel, and have established social distancing safeguards.

These precautions and business practices will remain in effect as long as government advisories recommend.

Although we have incurred lower travel expenses in the first quarter of fiscal 2021 than we did in the first quarter of fiscal 2020, there has been a corresponding increase in information technology cost and COVID-19 safety related expenses.

During the three months ended October 31, 2019, we incurred estimated contract settlement costs of $0.2 million related to the repositioning of our public safety and location technologies solutions offerings in our Commercial Solutions segment.

Amortization of stock-based compensation expenses recorded as selling, general and administrative expenses was $0.5 million in the three months ended October 31, 2020 as compared to $0.7 million in the three months ended October 31, 2019.

Selling, general and administrative expenses were $57.0 million and $61.2 million for the six months ended January 31, 2021 and 2020, respectively, representing a decrease of $4.2 million, or 6.9%.

As a percentage of consolidated net sales, selling, general and administrative expenses were 19.2% and 18.4% for the six months ended January 31, 2021 and 2020, respectively.

Excluding $0.6 million of restructuring costs related to the relocation of certain of our satellite earth station production facilities to a new 146,000 square foot facility in Chandler, Arizona, selling, general and administrative expenses for the six months ended January 31, 2021 would have been $56.4 million or 19.0% of consolidated net sales.

The increase in selling, general and administrative expenses, as a percentage of consolidated net sales, from 18.4% to 19.0% is primarily attributable to lower consolidated net sales during the period.

In addition, we also have increased expenses associated with our January 2020 acquisition of CGC.

Amortization of stock-based compensation expenses recorded as selling, general and administrative expenses was $1.7 million in the six months ended January 31, 2021 as compared to $1.8 million in the six months ended January 31, 2020.

Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Research and Development Expenses.

Research and development expenses were $11.6 million and $14.9 million for the three months ended October 31, 2020 and 2019, respectively, representing a decrease of $3.3 million, or 22.1%.

As a percentage of consolidated net sales, research and development expenses were 8.6% and 8.7% for the three months ended October 31, 2020 and 2019, respectively.

For the three months ended October 31, 2020 and 2019, research and development expenses of $9.4 million and $12.9 million, respectively, related to our Commercial Solutions segment, and $2.1 million and $1.9 million, respectively, related to our Government Solutions segment.

The remaining research and development expenses of $0.1 million in both the three months ended October 31, 2020 and 2019 related to the amortization of stock-based compensation expense.

Research and development expenses were $24.3 million and $28.6 million for the six months ended January 31, 2021 and 2020, respectively, representing a decrease of $4.3 million, or 15.0%.

As a percentage of consolidated net sales, research and development expenses were 8.2% and 8.6% for the six months ended January 31, 2021 and 2020, respectively.

For the six months ended January 31, 2021 and 2020, research and development expenses of $19.7 million and $24.8 million, respectively, related to our Commercial Solutions segment, and $4.4 million and $3.6 million, respectively, related to our Government Solutions segment.

The remaining research and development expenses of $0.2 million in both the six months ended January 31, 2021 and 2020 related to the amortization of stock-based compensation expense.

Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements.

During three months ended October 31, 2020 and 2019, customers reimbursed us $3.4 million and $2.7 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.

During six months ended January 31, 2021 and 2020, customers reimbursed us $7.2 million and $5.1 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.

Amortization of Intangibles.

Amortization relating to intangible assets with finite lives was $5.6 million (of which $4.3 million was for the Commercial Solutions segment and $1.3 million was for the Government Solutions segment) for the three months ended October 31, 2020 and $5.2 million (of which $4.4 million was for the Commercial Solutions segment and $0.8 million was for the Government Solutions segment) for the three months ended October 31, 2019.

The increase of $0.4 million was primarily due to our completed fiscal 2020 acquisitions.

Amortization relating to intangible assets with finite lives was $10.4 million for both the six months ended January 31, 2021 and 2020.

For the six months ended January 31, 2021 and 2020, amortization expenses of $8.6 million and $8.7 million, respectively, related to our Commercial Solutions segment, and $1.8 million and $1.7 million, respectively, related to our Government Solutions segment.

In connection with our acquisition of UHP on March 2, 2021, we expect to record approximately $1.0 million related to the amortization of intangible assets in the second half of fiscal 2021.

Acquisition Plan Expenses.

During the three months ended October 31, 2020 and 2019, we incurred $91.2 million and $2.4 million, respectively, of acquisition plan expenses.

For the more recent fiscal quarter, $88.3 million related to the previously announced litigation and merger termination with Gilat, including $70.0 million paid in cash to Gilat.

The remaining costs primarily related to the pending acquisition of UHP and GD NG-911 acquisition-related litigation.

During the six months ended January 31, 2021 and 2020, we incurred $94.5 million and $8.4 million, respectively, of acquisition plan expenses.

For the six months ended January 31, 2021, $88.3 million related to the previously announced litigation and merger termination with Gilat, including $70.0 million paid in cash to Gilat.

The remaining costs primarily related to the acquisition of UHP and to GD NG-911 acquisition-related litigation.

These expenses are primarily recorded in our Unallocated segment.

During the second quarter of fiscal 2021, we expect to incur approximately $3.5 million of acquisition plan expenses.

Once the pending UHP acquisition and GD NG-911 acquisition-related litigation matters are completed, we expect acquisition plan expenses to decline significantly.

During the third quarter of fiscal 2021, we expect to incur approximately $3.4 million of acquisition plan expenses.

We do not expect to incur significant acquisition plan expenses in the remainder of fiscal 2021, other than those associated with the GD NG-911 acquisition-related litigation matters.

Operating (Loss) Income.

Operating loss for the three months ended October 31, 2020 was $85.7 million as compared the operating income of $9.3 million for three months ended October 31, 2019.

Operating loss for the six months ended January 31, 2021 was $80.3 million as compared to operating income of $15.5 million for six months ended January 31, 2020.

Operating income (loss) by reportable segment is shown in the table below:

Three months ended October 31,

Six months ended January 31,

2021 2020 2021 2020 2021 2020 2021 2020

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net sales 10.7 % 11.8 % 6.3 % 8.6 % NA NA NA 4.7 %

The decrease in our Commercial Solutions segment operating income, in dollars, for the three months ended October 31, 2020 was driven primarily by lower net sales and a lower gross profit percentage, offset in part by lower research and development expenses and amortization of intangibles, as discussed above.

The decrease in our Government Solutions segment operating income for the three months ended October 31, 2020, both in dollars and as a percentage of related segment net sales, was driven primarily by lower net sales and an increase in both research and development expenses and amortization of intangibles, offset in part by an increase in this segment’s gross profit percentage, as discussed above.

The increase in unallocated expenses for the three months ended October 31, 2020 as compared to the three months ended October 31, 2019 is primarily due to litigation settlement costs, as discussed above.

Amortization of stock-based compensation was $0.7 million and $0.9 million, respectively, for the three months ended October 31, 2020 and 2019.

Excluding the $91.2 million of acquisition plan expenses, consolidated operating income for the three months ended October 31, 2020 would have been $5.5 million, or 4.0% of consolidated net sales.

Excluding $0.2 million of estimated contract settlement costs and $2.4 million of acquisition plan expenses, consolidated operating income for three months ended October 31, 2019 would have been $11.9 million, or 7.0% of consolidated net sales.

The decrease, both in dollars and as a percentage of consolidated net sales, was due primarily to lower consolidated net sales, as discussed above.

The decrease in our Commercial Solutions segment operating income, both in dollars and as a percentage of the related segment net sales, for the six months ended January 31, 2021 was driven primarily by lower net sales and a lower gross profit percentage and $0.6 million of restructuring charges, offset in part by lower research and development expenses, as discussed above.

The decrease in our Government Solutions segment operating income for the six months ended January 31, 2021, both in dollars and as a percentage of related segment net sales, was driven primarily by lower net sales and higher research and development expenses, as discussed above.

In addition, our Government Solutions segment operating income for the six months ended January 31, 2021 reflects $0.2 million of additional operating costs for our antenna facility in the United Kingdom due to the impact of the COVID-19 pandemic.

The increase in unallocated expenses for the six months ended January 31, 2021 as compared to the six months ended January 31, 2020 is primarily due to the acquisition plan expenses, as discussed above.

Amortization of stock-based compensation was $2.0 million and $2.1 million, respectively, for the six months ended January 31, 2021 and 2020.

Excluding (i) $94.5 million of acquisition plan expenses;

(ii) $0.6 million of restructuring costs;

and (iii) $0.2 million of additional operating costs due to the impact of COVID-19, consolidated operating income for the six months ended January 31, 2021 would have been $15.0 million, or 5.1% of consolidated net sales.

Excluding $8.4 million of acquisition plan expenses, consolidated operating income for the six months ended January 31, 2020 would have been $23.9 million, or 7.2% of consolidated net sales.

The decrease, both in dollars and as a percentage of consolidated net sales, was due primarily to lower consolidated net sales and a lower gross profit percentage, offset in part by lower research and development expenses, as discussed above.

Unallocated expenses in fiscal 2021 will be impacted by ongoing acquisition plan expenses, as discussed above.

Interest Expense and Other.

Interest expense was $2.3 million and $1.8 million for three months ended October 31, 2020 and 2019, respectively.

Interest expense during the most recent fiscal quarter includes $1.2 million of incremental interest expense for ticking fees related to a now terminated financing commitment letter.

Excluding the $1.2 million, our effective interest rate (including amortization of deferred financing costs) in three months ended October 31, 2020 was approximately 2.7%.

Interest expense was $3.7 million and $3.4 million for the six months ended January 31, 2021 and 2020, respectively.

Interest expense for the six months ended January 31, 2021 includes $1.2 million of incremental interest expense for ticking fees related to a now terminated financing commitment letter.

Excluding the $1.2 million, our effective interest rate (including amortization of deferred financing costs) in the six months ended January 31, 2021 was approximately 2.7%.

Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our existing Credit Facility approximates 2.4%.

Interest (Income) and Other.

Interest (income) and other for both the three months ended October 31, 2020 was nominal.

Interest (income) and other for both the six months ended January 31, 2021 and 2020 was nominal.

All of our available cash and cash equivalents are currently invested in bank deposits and money market deposit accounts which, at this time, are currently yielding an immaterial interest rate.

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For the three months ended October 31, 2020, we recorded a tax benefit of $2.2 million as compared to a tax provision of $1.1 million for the three months ended October 31, 2019.

Our effective tax rate (excluding discrete tax items) for the three months ended October 31, 2020 and October 31, 2019 was 13.75% and 23.0%, respectively.

For the six months ended January 31, 2021, we recorded a tax benefit of $2.4 million as compared to a tax provision of $2.3 million for the six months ended January 31, 2020.

Our effective tax rate (excluding discrete tax items) for the six months ended January 31, 2021 and 2020 was 17.0% and 23.0%, respectively.

The decrease from 23.0% to 17.0% is primarily due to expected product and geographical mix changes reflected in our Business Outlook for Fiscal 2021.

For purposes of determining our 13.75% estimated annual effective tax rate for fiscal 2021, the $70.0 million of acquisition plan expense paid to Gilat, as discussed above, was considered an unusual and infrequently occurring discrete tax item and excluded from the computation of our effective tax rate.

No financial statement benefit was recorded for the $70.0 million portion of acquisition plan expenses.

Our tax benefit for the three months ended October 31, 2020 was partially offset by a net discrete tax expense of $0.2 million, primarily related to the stock-based awards that were settled during the quarter.

During the three months ended October 31, 2019, we recorded a net discrete tax benefit of $0.6 million, primarily related to stock-based awards that were settled during the quarter.

In addition, no financial statement benefit was recorded for the $70.0 million portion of acquisition plan expenses.

During the six months ended January 31, 2021, we recorded a net discrete tax benefit less than $0.1 million.

During the six months ended January 31, 2020, we recorded a net discrete tax benefit of $0.5 million, primarily related to stock-based awards that were settled during the period.

Our federal income tax returns for fiscal 2017 through 2019 are subject to potential future IRS audit.

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Net (Loss) Income.

During the three months ended October 31, 2020, consolidated net loss was $85.8 million as compared to a net income of $6.4 million during the three months ended October 31, 2019.

During the six months ended January 31, 2021, consolidated net loss was $81.6 million as compared to net income of $9.9 million during the six months ended January 31, 2020.

Adjusted EBITDA.

Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the three months ended October 31, 2020 and 2019 are shown in the table below (numbers in the table may not foot due to rounding):

Three months ended October 31,

Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the six months ended January 31, 2021 and 2020 are shown in the table below (numbers in the table may not foot due to rounding):

Six months ended January 31,

2021 2020 2021 2020 2021 2020 2021 2020

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Interest (income) and other — — — — — — — (0.1)

0.1 (0.1) — — — — 0.1 (0.1)

Interest expense — — 0.1 — 3.7 3.4 3.7 3.4

Amortization of stock-based compensation — — — — 2.0 2.1 2.0 2.1

— — — — 0.7 0.9 0.7 0.9

Amortization of intangibles 8.6 8.7 1.8 1.7 — — 10.4 10.4

4.3 4.4 1.3 0.8 — — 5.6 5.2

Depreciation 3.9 4.4 0.8 0.6 0.2 0.4 5.0 5.4

Estimated contract settlement costs

— 0.2 — — — — — 0.2

Acquisition plan expenses (1.1) — — — 95.6 8.4 94.5 8.4

(1.1) — — — 92.2 2.4 91.2 2.4

Restructuring costs 0.6 — — — — — 0.6 —

COVID-19 related costs — — 0.2 — — — 0.2 —

Adjusted EBITDA $ 30.2 35.5 10.8 14.4 (8.7) (8.2) $ 32.3 41.8

Percentage of related net sales 17.8 % 18.7% 8.5% 10.2% NA NA 10.9% 12.6 %

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the three months ended October 31, 2020 as compared to the three months ended October 31, 2019 is primarily attributable to lower consolidated net sales, as discussed above.

The decrease in our Commercial Solutions segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to lower net sales, as discussed above.

The decrease in our Government Solutions segment's adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to lower net sales, as discussed above.

Because our consolidated Adjusted EBITDA, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each individual segment as well as unallocated spending, it is inherently difficult to forecast.

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the six months ended January 31, 2021 as compared to the six months ended January 31, 2020 is primarily attributable to lower consolidated net sales and a lower gross profit percentage, offset in part by lower research and development expenses, as discussed above.

The decrease in our Commercial Solutions segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to lower net sales and a lower gross profit percentage, offset in part by lower research and development expenses, offset in part by cost savings measures, as discussed above.

The decrease in our Government Solutions segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is driven primarily by lower net sales and higher research and development expenses, as discussed above.

A reconciliation of our fiscal 2020 GAAP Net Income to Adjusted EBITDA is shown in the table below (numbers in the table may not foot due to rounding):

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Adjusted EBITDA $ 77.8

Reconciliations of our GAAP consolidated operating income (loss), net income (loss) and net income (loss) per diluted share for the three months ended October 31, 2020 and 2019 to the corresponding non-GAAP measures are shown in the tables below (numbers and per share amounts in the table may not foot due to rounding).

In addition, non-GAAP income per diluted share adjustments for the three months ended October 31, 2020 were computed using 25,315,000 weighted average diluted shares outstanding during the respective period:

Three months ended October 31, 2020

Reconciliations of our GAAP consolidated operating income (loss), net income (loss) and net income (loss) per diluted share for the six months ended January 31, 2021 and 2020 to the corresponding non-GAAP measures are shown in the tables below (numbers and per share amounts in the table may not foot due to rounding).

In addition, non-GAAP income per diluted share adjustments for the six months ended January 31, 2021 were computed using 25,365,000 weighted average diluted shares outstanding during the respective period:

Six months ended January 31, 2021

($ in millions, except for per share amount) Operating (Loss) Income Net (Loss) Income Net (Loss) Income per

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94.5 90.4 3.56

Restructuring costs

COVID-19 related costs

Interest expense — 1.0 0.04

Net discrete tax expense

Non-GAAP measures $ 15.0 $ 10.3 $ 0.41

Three months ended October 31, 2019

Six months ended January 31, 2020

($ in millions, except for per share amount) Operating Income Net Income Net Income per

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Acquisition plan expenses

Estimated contract settlement costs

Net discrete tax benefit

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Non-GAAP measures $ 23.9 $ 15.8 $ 0.63

Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before income taxes, interest (income) and other, write-off of deferred financing costs, interest expense, amortization of stock-based compensation, amortization of intangibles, depreciation expense, estimated contract settlement costs, settlement of intellectual property litigation, acquisition plan expenses, facility exit costs and strategic alternatives analysis expenses and other.

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LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents decreased $15.4 million from $47.9 million at July 31, 2020 to $32.5 million at October 31, 2020.

The decrease in cash and cash equivalents during the three months ended October 31, 2020 was driven by the following:

• Net cash used in operating activities was $74.2 million for the three months ended October 31, 2020 as compared to net cash provided by operating activities of $5.4 million for the three months ended October 31, 2019.

Because we did not complete the Gilat acquisition, we presented the $70.0 million payment to Gilat made during the three months ended October 31, 2020 as a reduction to cash flows from operating activities for the current period rather than as a cash outflow stemming from investing activities.

Additionally, the period-over-period decrease in cash flow from operating activities reflects lower net sales and overall changes in net working capital requirements, principally the timing of shipments, billings and payments.

Excluding the $70.0 million payment to Gilat, net cash used in operating activities would have been $4.2 million.

We expect to generate a significant amount of positive operating cash flows during the remainder of fiscal 2021.

• Net cash used in investing activities for the three months ended October 31, 2020 and 2019 was $0.9 million and $1.3 million, respectively.

Net cash used in both periods relates to expenditures for property, plant and equipment upgrades and enhancements.

• Net cash provided by financing activities was $59.7 million for the three months ended October 31, 2020 as compared to net cash used in financing activities of $2.9 million for the three months ended October 31, 2019.

During the three months ended October 31, 2020, we had net borrowings under our Credit Facility of $67.5 million, primarily due to the $70.0 million payment we made to Gilat.

During the three months ended October 31, 2020 and 2019, we paid $5.2 million and $2.7 million, respectively, in cash dividends to our stockholders.

We also made $2.7 million and $4.6 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during the three months ended October 31, 2020 and 2019, respectively.

Our cash and cash equivalents decreased $16.9 million from $47.9 million at July 31, 2020 to $30.9 million at January 31, 2021.

The decrease in cash and cash equivalents during the six months ended January 31, 2021 was driven by the following:

• Net cash used in operating activities was $63.4 million for the six months ended January 31, 2021 as compared to net cash provided by operating activities of $31.3 million for the six months ended January 31, 2020.

During the six months ended January 31, 2021, in connection with an agreement to terminate our acquisition of Gilat, we made a $70.0 million payment to Gilat.

Excluding such payment, net cash provided by operating activities would have been $6.6 million.

The period-over-period decrease in cash flow from operating activities (excluding the $70.0 million payment to Gilat) reflects lower net sales and overall changes in net working capital requirements, principally the timing of shipments, billings and payments.

We expect strong operating cash flows during the remainder of fiscal 2021.

• Net cash used in investing activities for the six months ended January 31, 2021 and 2020 was $4.4 million and $13.7 million, respectively.

During the six months ended January 31, 2021 and 2020, we paid $0.8 million and $11.2 million, respectively, in connection with the acquisition of CGC Technology Limited, net of cash acquired.

The remaining portion of net cash used in both periods relates to expenditures for property, plant and equipment upgrades and enhancements.

• Net cash provided by financing activities was $50.9 million for the six months ended January 31, 2021 as compared to net cash used in financing activities of $16.7 million for the six months ended January 31, 2020.

During the six months ended January 31, 2021, we had net borrowings under our Credit Facility of $58.5 million, primarily due to the $70.0 million payment we made to Gilat.

During the six months ended January 31, 2021 and 2020, we paid $5.2 million and $5.1 million, respectively, in cash dividends to our stockholders.

We also made $2.7 million and $5.2 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during the six months ended January 31, 2021 and 2020, respectively.

The Credit Facility is discussed below and in " Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility.

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Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.

As of October 31, 2020, our material short-term cash requirements primarily consist of:

As of January 31, 2021, our material short-term cash requirements primarily consist of:

(i) interest payments under our Credit Facility;

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and (iv) payment of accrued quarterly dividends.

We also have other short-term cash requirements related to our pending acquisition of UHP, as discussed in Part 1 Item.

- " Notes to Condensed Consolidated Financial Statements - Note (2) - Acquisitions.

As discussed in " Notes to Condensed Consolidated Financial Statements - Note (2) - Acquisitions - Subsequent Event - UHP Networks Inc .," we completed our acquisition of UHP on March 2, 2021.

Pursuant to a stock purchase agreement, initially entered into in November 2019 and amended in June 2020 and on March 2, 2021, we paid the initial up-front payment of approximately $24.0 million in shares of our common stock.

An additional $5.0 million, payable at our option in cash or shares of common stock, is subject to certain conditions that we expect will be satisfied within twelve months after the acquisition.

The stock purchase agreement also provides for an earn-out payment of up to an additional $9.0 million, also payable at our option in cash and or common stock, if specified sales milestones are reached during the eighteen-month period ending September 30, 2022.

We issued 1,026,567 shares of our common stock at closing, based on a volume weighted average price of approximately $28.14 per share, to satisfy initial payment and escrow arrangements under the terms of the stock purchase agreement.

On March 3, 2021, we filed a shelf registration statement with the SEC for the sale of 1,381,567 shares of our common stock by the selling shareholder of UHP.

To-date, we have issued 1,026,567 shares pursuant to this shelf registration statement to satisfy initial payment and escrow arrangements under the terms of the stock purchase agreement.

In December 2018, we filed a $400.0 million shelf registration statement with the SEC for the sale of various types of securities, including debt.

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The new $100.0 million stock repurchase program has no time restrictions and repurchases may be made from time to time in open-market or privately negotiated transactions, or by other means in accordance with federal securities laws.

There were no repurchases of our common stock during three months ended October 31, 2020 and 2019.

On September 29, 2020, our Board of Directors declared a dividend of $0.10 per common share, which was paid on October 27, 2020.

On December 9, 2020, our Board of Directors declared a dividend of $0.10 per common share, payable on February 19, 2021 to stockholders of record at the close of business on January 20, 2021.

There were no repurchases of our common stock during six months ended January 31, 2021 and 2020.

On September 29, 2020 and December 9, 2020, our Board of Directors declared a dividend of $0.10 per common share, which were paid on October 27, 2020 and February 19, 2021, respectively.

On March 11, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on May 21, 2021 to stockholders of record at the close of business on April 21, 2021.

Future dividends remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval.

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If we issue new unsecured debt in excess of $5.0 million with a maturity date that is less than 91 days from October 31, 2023, the Revolving Maturity Date would automatically accelerate so that it would be 91 days earlier than the maturity date of the new unsecured debt.

As of October 31, 2020, the amount outstanding under our Credit Facility was $217.0 million, which is reflected in the non-current portion of long-term debt on our Condensed Consolidated Balance Sheet.

At October 31, 2020, we had $3.0 million of standby letters of credit outstanding under our Credit Facility related to our guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit.

During three months ended October 31, 2020, we had outstanding balances under the Credit Facility ranging from $125.0 million to $217.0 million.

As of January 31, 2021, the amount outstanding under our Credit Facility was $208.0 million, which is reflected in the non-current portion of long-term debt on our Condensed Consolidated Balance Sheet.

At January 31, 2021, we had $3.0 million of standby letters of credit outstanding under our Credit Facility related to our guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit.

During six months ended January 31, 2021, we had outstanding balances under the Credit Facility ranging from $125.0 million to $217.0 million.

Borrowings under the Credit Facility shall be either:

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and (iii) a Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA.

As of October 31, 2020, our Secured Leverage Ratio was 3.31x TTM Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA.

Our Interest Expense Coverage Ratio as of October 31, 2020 was 11.42x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA.

As of January 31, 2021, our Secured Leverage Ratio was 3.00x TTM Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA.

Our Interest Expense Coverage Ratio as of January 31, 2021 was 12.45x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA.

The obligations under the Credit Facility are guaranteed by certain of our domestic subsidiaries (the "Guarantors").

As collateral security under the Credit Facility and the guarantees thereof, we and the Guarantors have granted to the administrative agent, for the benefit of the lenders, a lien on, and first priority security interest in, substantially all of our tangible and intangible assets.

On December 6, 2018, we entered into the first amendment to the Credit Facility.

The purpose of the amendment is to provide for a mechanism to replace the LIBO Rate for Eurodollar borrowings with an alternative benchmark interest rate, should the LIBO Rate generally become unavailable in the future on an other-than-temporary basis.

Capitalized terms used but not defined herein have the meanings set forth for such terms in the Credit Facility and the Prior Credit Facility, which have been documented and filed with the SEC.

Capitalized terms used but not defined herein have the meanings set forth for such terms in the Credit Facility, which has been documented and filed with the SEC.

Off-Balance Sheet Arrangements

As of October 31, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

As of January 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

In the normal course of business, other than as discussed below, we routinely enter into binding and non-binding purchase obligations primarily covering anticipated purchases of inventory and equipment.

We do not expect that these commitments, as of October 31, 2020, will materially adversely affect our liquidity.

At October 31, 2020, cash payments due under long-term obligations (including estimated interest expense on our Credit Facility), excluding purchase orders that we entered into in our normal course of business, are as follows:

We do not expect that these commitments, as of January 31, 2021, will materially adversely affect our liquidity.

At January 31, 2021, cash payments due under long-term obligations (including estimated interest expense on our Credit Facility), excluding purchase orders that we entered into in our normal course of business, are as follows:

Obligations Due by Fiscal Years or Maturity Date (in thousands)

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In addition, if we issue new unsecured debt in excess of $5.0 million with a maturity date that is less than 91 days from October 31, 2023, the Revolving Maturity Date would automatically accelerate so that it would be 91 days earlier than the maturity date of the new unsecured debt.

As discussed further in " Notes to Condensed Consolidated Financial Statements - Note (11) - Leases ," in September 2020, we signed a 15-year lease commencing in December 2020 for a facility in Chandler, Arizona to support our anticipated growth and long-term business goals for our satellite earth station product line.

We anticipate that all of our existing Tempe, Arizona operations will be fully relocated to this facility in the second half of our fiscal 2021.

Such amounts are not included in the above table, as the related commitment has not commenced as of October 31, 2020.

As discussed further in " Notes to Condensed Consolidated Financial Statements - Note (17) - Stockholders’ Equity ," on December 9, 2020, our Board of Directors declared a dividend of $0.10 per common share, payable on February 19, 2021 to stockholders of record at the close of business on January 20, 2021.

As discussed further in " Notes to Condensed Consolidated Financial Statements - Note (17) - Stockholders’ Equity ," on March 11, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on May 21, 2021 to stockholders of record at the close of business on April 21, 2021.

Future dividends remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval.

At October 31, 2020, we have approximately $3.0 million of standby letters of credit outstanding under our Credit Facility related to our guarantees of future performance on certain customer contracts.

At January 31, 2021, we have approximately $3.0 million of standby letters of credit outstanding under our Credit Facility related to our guarantees of future performance on certain customer contracts.

Such amounts are not included in the above table.

As discussed in " Notes to Condensed Consolidated Financial Statements - Note (2) - Acquisitions ," we have a potential short-term cash commitments of $5.0 million to fund the acquisition of UHP.

This cash commitment and related transaction expenses are not included in the above table.

In the ordinary course of business, we include indemnification provisions in certain of our customer contracts.

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All of these agreements may require payments by us, in certain circumstances, including, but not limited to, a change in control of our Company or an involuntary termination of employment without cause.

Our Condensed Consolidated Balance Sheet at October 31, 2020 includes total liabilities of $8.5 million for uncertain tax positions, including interest, any or all of which may result in a cash payment.

Our Condensed Consolidated Balance Sheet at January 31, 2021 includes total liabilities of $8.7 million for uncertain tax positions, including interest, any or all of which may result in a cash payment.

The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of any potential cash settlement with the taxing authorities.

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generally accepted accounting principles, which is commonly referred to as "GAAP." The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates ("ASUs").

As further discussed in " Notes to Condensed Consolidated Financial Statements – Note (3) - Adoption of Accounting Standards and Updates " during three months ended October 31, 2020, we adopted:

As further discussed in " Notes to Condensed Consolidated Financial Statements – Note (3) - Adoption of Accounting Standards and Updates " during six months ended January 31, 2021, we adopted:

• FASB ASU No.

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Our adoption of this ASU did not have any impact on our condensed consolidated financial statements or disclosures.

In addition, the following FASB ASUs have been issued and incorporated into the FASB ASC and have not yet been adopted by us as of October 31, 2020:

In addition, the following FASB ASUs have been issued and incorporated into the FASB ASC and have not yet been adopted by us as of January 31, 2021:

• FASB ASU No.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis