What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-06-08 compared with 2021-03-11 · 388 added, 336 removed, 560 unchanged (56% of the section changed)

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government) that have requirements for off-the-shelf commercial equipment.

• Government Solutions - provides mission-critical technologies (such as tactical satellite-based networks and ongoing support for complicated communication networks) and high-performance transmission technologies (such as troposcatter systems and solid-state, high-power amplifiers) to large government end-users (including those of foreign countries), large international customers and domestic prime contractors.

• Government Solutions - provides tactical satellite-based networks and ongoing support for complicated communication networks and troposcatter systems and solid-state, high-power amplifiers to large government end-users (including those of foreign countries), large international customers and domestic prime contractors.

Our Quarterly Financial Information

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Contract revenue and cost estimates for significant contracts are generally reviewed and reassessed at least quarterly.

The cost-to-cost method is principally used to account for contracts in our mission-critical technologies and high-performance transmission technologies product lines and, to a lesser extent, certain location-based and messaging infrastructure contracts in our public safety and location technologies product line.

For service-based contracts in our public safety and location technologies product line, we recognize revenue over time.

The cost-to-cost method is principally used to account for contracts in our Government Solutions segment and, to a lesser extent, certain location-based and messaging infrastructure contracts in our public safety and location technologies product line within our Commercial Solutions segment.

For service-based contracts in our public safety and location technologies product line, we also recognize revenue over time.

These services are typically recognized as a series of services performed over the contract term using the straight-line method, or based on our customers’ actual usage of the networks and platforms which we provide.

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Modifications to such contracts and or purchase orders, which typically provide for additional quantities or services, are accounted for as a new contract because the pricing for these additional quantities or services are based on standalone selling prices.

Point in time accounting is principally applied to contracts in our satellite ground station technologies product line (which includes satellite modems, solid-state and traveling wave tube amplifiers) and certain contracts for our solid-state, high-power amplifiers in our high-performance transmission technologies product line.

Point in time accounting is also applied to certain contracts in our mission-critical technologies product line.

Point in time accounting is principally applied to contracts in our satellite ground station technologies product line in our Commercial Solutions segment (which includes satellite modems, solid-state and traveling wave tube amplifiers) and certain contracts for our solid-state, high-power RF amplifiers in our Government Solutions segment.

The contracts related to these product lines do not meet the requirements for over time revenue recognition because our customers cannot utilize the equipment for its intended purpose during any phase of our manufacturing process;

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and, although many of our contracts have termination for convenience clauses and or an enforceable right to payment for performance completed to date, our performance creates an asset with an alternative use through the point of delivery.

In determining that our equipment has alternative use, we considered the underlying manufacturing process for our products.

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If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions, including geographic or regional specific factors, competitive positioning, internal costs, profit objectives and internally approved pricing guidelines related to the performance obligations.

Almost all of our contracts with customers are denominated in U.S.

Substantially all of our contracts with customers are denominated in U.S.

dollars and typically are either firm fixed-price or cost reimbursable type contracts (including fixed-fee, incentive-fee and time-and-material type contracts).

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Impairment of Goodwill and Other Intangible Assets .

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).

As of April 30, 2021, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $347.8 million (of which $270.5 million relates to our Commercial Solutions segment and $77.3 million relates to our Government Solutions segment).

Additionally, as of April 30, 2021, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $274.0 million (of which $226.9 million relates to our Commercial Solutions segment and $47.1 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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Based on our quantitative evaluation, we determined that our Commercial Solutions and Government Solutions reporting units had estimated fair values in excess of their carrying values of at least 8.4% and 78.0%, respectively, and concluded that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment.

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

It is possible that, during the remainder of 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 fluctuate.

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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 January 31, 2021.

We believe that the carrying values of our net intangible assets were recoverable as of April 30, 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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If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations and financial condition.

Our federal income tax returns for fiscal 2017 through 2019 are subject to potential future Internal Revenue Service ("IRS") audit.

federal income tax returns for fiscal 2017 through 2020 are subject to potential future Internal Revenue Service ("IRS") audit.

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

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We continue to monitor our accounts receivable credit portfolio.

To-date, there has been no material changes in our credit portfolio as a result of the COVID-19 pandemic and related worldwide restrictions on business activities.

To-date, there has been no material changes in our credit portfolio as a result of the COVID-19 pandemic on worldwide business activities.

Although our overall credit losses have historically been within the allowances we established, we cannot accurately predict our future credit loss experience, given the current poor business environment.

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Impact of COVID-19 and Business Outlook for Fiscal 2021

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

During the third quarter of fiscal 2021, we achieved solid operating performance and generated consolidated:

• Net sales of $139.4 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;

• GAAP operating income of $2.4 million and GAAP net income of $0.8 million;

• Non-GAAP operating income of $8.9 million and Non-GAAP net income of $6.8 million.

These Non-GAAP financial measures are reconciled to the most directly comparable GAAP financial measures in the table included in the below section " Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended April 30, 2021 and 2020 ";

• GAAP net cash provided by operating activities of $6.8 million;

• Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $17.7 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.

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 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 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.

As of April 30, 2021, our cash and cash equivalents were $39.2 million and our total debt outstanding was $215.0 million.

We achieved a consolidated book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.83 and finished the third quarter with consolidated backlog of $636.5 million.

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 the SEC and the total value of multi-year contracts that we have received is substantially higher than our reported backlog.

When adding our backlog and the total unfunded value of multi-year contracts that we have received and for which we expect future orders, our revenue visibility approximates $1.1 billion.

Based on our strong pipeline and year-to-date business momentum, we anticipate achieving a final book-to-bill ratio in excess of 1.0 for the current year.

During the third quarter of fiscal 2021, we incurred $0.3 million of strategic emerging technology costs for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations.

We are evaluating this new market in relation to our long-term business strategies, and we may incur additional costs over the next twelve months.

At the start of our fourth quarter of fiscal 2021, we entered into a multi-year agreement enabling a customer to potentially order hundreds of millions of dollars of our next-generation satellite earth station technology.

Shortly after we signed this agreement, we received our first order valued at more than $13.0 million to make certain customizations on behalf of this customer.

Work on these efforts has commenced immediately.

We incurred an aggregate of $5.3 million of acquisition plan expenses due to the April 2021 settlement of litigation related to our 2019 acquisition of GD NG-911, as well as the March 2021 closing of our acquisition of UHP Networks Inc.

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

We believe that UHP's revolutionary technology is transforming the growing Very Small Aperture Terminal (“VSAT”) market and its unique time divisional multiple access (“TDMA”) technology has software defined network functionality that offers best-in-class support for very large networks.

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.

The integration of UHP into our satellite ground station product line in our Commercial Solutions segment is well underway and we do not expect to incur any significant acquisition plan expenses for the remainder of fiscal 2021.

Looking forward, we expect a strong finish to fiscal 2021 and estimate that fiscal 2021 consolidated net sales will be within a range of $580.0 million to $590.0 million.

This updated target primarily reflects a change in anticipated revenues in our Government Solutions segment due to the U.S.

government’s April 2021 announcement to fully withdraw troops from Afghanistan as well as other program changes.

We continue our efforts on streamlining our operations including the consolidation of certain administrative and operating functions in our Government Solutions segment and the shifting of 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 as well as the combination of certain related functions.

We believe these streamlining efforts are paying off and we continue to target Adjusted EBITDA in a range of $74.0 million to $76.0 million for fiscal 2021.

We continue to operate our business under difficult conditions.

Spikes in COVID-19 infection rates are suppressing orders and purchases from many of our international end-customers.

We also continue to experience residual impacts from the forced closure of our antenna design and manufacturing center in the United Kingdom in December 2020 due to COVID-19.

Most of our global non-production related operations continue to use remote working arrangements, have not yet resumed international business travel, and are maintaining social distancing safeguards in our workplaces.

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

In addition to order delays, we have experienced production delays, lower levels of factory utilization and higher logistics and operational costs.

Supply chain issues are becoming more prevalent as lead times for certain parts has significantly increased.

If we are unable to timely secure parts or receive certain anticipated orders from customers, our fiscal 2021 financial targets will likely be impacted.

Although the COVID-19 pandemic is by no means over and additional waves of COVID-19 could again alter the business landscape, our long-term fundamentals remain strong as we continue to believe we are well-positioned for growth as business conditions meaningfully improve.

Because of the pandemic's continuing impact on global business conditions, 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 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.

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.

On June 8, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on August 20, 2021 to stockholders of record at the close of business on July 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 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.

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.

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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended April 30, 2021 and 2020 " and " Comparison of the Results of Operations for the Nine Months Ended April 30, 2021 and 2020 ."

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2021 AND 2020

Consolidated net sales were $139.4 million and $135.1 million for the three months ended April 30, 2021 and 2020, respectively.

The period-over-period increase in net sales reflects higher net sales in our Commercial Solutions segment, offset in part by lower net sales in our Government Solutions segment.

Net sales by operating segment are discussed below.

Commercial Solutions

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.

Net sales in our Commercial Solutions segment were $91.4 million for the three months ended April 30, 2021, as compared to $78.3 million for the three months ended April 30, 2020, an increase of $13.1 million, or 16.7%.

Our Commercial Solutions segment represented 65.6% of consolidated net sales for the three months ended April 30, 2021 as compared to 58.0% for the three months ended April 30, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) for this segment was 0.82.

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 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, $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.

Net sales in the three months ended April 30, 2021 of our satellite ground station technologies were higher than the three months ended April 30, 2020.

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

However, we benefited this quarter from a number of awards, including:

(i) a contract valued at more than $3.0 million for QV-band traveling wave tube amplifiers (“TWTAs”) to support a new high-speed satellite network;

(ii) an order valued at more than $2.0 million for state-of-the-art 500W Ka-band high power amplifiers supporting a leading high throughput satellite customer;

(iii) a $2.0 million order for rugged Ka-band high power TWTAs for a U.S.

military communications system;

(iv) an order exceeding $1.0 million for our Falcon 50Ka solid-state power amplifiers (“SSPAs”) for an in-flight connectivity ("IFC") application;

and (v) an order exceeding $1.0 million for X-band SSPAs and block up converters for a transportable military satellite communications system.

In addition, demand for our HEIGHTS technology solutions is strong and we recently received a multi-million-dollar award from an international customer.

The most recent quarter included a nominal amount of net sales related to our acquisition of UHP Networks Inc.

("UHP") on March 2, 2021.

Net sales in the three months ended April 30, 2021 of our public safety and location technology solutions were higher than the three months ended April 30, 2020, reflecting the benefit of incremental sales of our next-generation 911 and location-based solutions, offset in part by the absence of 911 wireless call routing sales to AT&T.

During the three months ended April 30, 2021, we received contract awards, including:

(i) a $9.8 million contract with a major tier-one mobile network operator ("MNO") for a broad suite of new capabilities and services centered around virtualized applications and 5G products;

(ii) over $4.5 million in follow on orders related to a previously awarded statewide NG-911 contract;

(iii) orders exceeding $3.8 million with a tier-one MNO for additional capabilities related to our Virtual Mobility Location Center platform;

(iv) a $1.6 million NG-911 services contract to provide Solacom’s Guardian call management solution to the Toronto Paramedic Services, the largest municipal paramedic service in Canada;

(v) a $1.3 million contract renewal with a tier-one MNO to support messaging services;

and (vi) our first international 5G services contract with a leading tier-one MNO in Australia.

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.

Overall, we remain optimistic that fiscal 2021 net sales for this segment will be slightly higher than 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 $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.

Net sales in our Government Solutions segment were $48.0 million for the three months ended April 30, 2021 as compared to $56.8 million for the three months ended April 30, 2020, a decrease of $8.8 million or 15.5%.

Our Government Solutions segment represented 34.4% of consolidated net sales for the three months ended April 30, 2021 as compared to 42.0% for the three months ended April 30, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for our third quarter of fiscal 2021 was 0.85.

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.

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.

The most recent quarter primarily reflects lower sales of global field support services and other programs to the U.S.

Army, offset in part by higher sales of our solid-state, high-power amplifiers and high reliability Electrical, Electronic and Electromechanical (“EEE”) satellite-based space components.

Notable orders awarded to us during the third quarter of fiscal 2021 include:

(i) $9.2 million of orders 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;

(ii) $6.5 million of funding 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.

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.

(iii) $6.2 million of funding to support the U.S.

Army’s Project Manager Mission Command (“PM MC”) Blue Force Tracking (“BFT-1”) program;

(iv) a $3.0 million order from an overseas agency for maintenance of down range tracking stations;

(v) a $2.0 million order to provide the U.S.

Marine Corps with rugged baseband command and control modules for Program Manager Light Armored Vehicles;

and (vi) a $1.6 million contract for RF microwave solid-state amplifiers from a major domestic prime contractor.

In April 2021, the U.S.

government announced that it intended to fully withdraw troops from Afghanistan by September 2021.

This change will result in lower revenues than previously anticipated for certain programs we currently participate in.

In addition, the U.S.

presidential administration released its fiscal 2022 budget request.

This budget request includes less money for certain legacy programs but additional funding for modernization and new programs.

We believe these budget changes will benefit us over the longer-term, but it will result in revenues in our Government Solutions segment to be significantly lower than the amount we achieved in fiscal 2020.

We are seeing strong interest across the board for our recently introduced Comtech COMET terminals and other new solutions we are discussing with our customers.

During the third quarter, we conducted successful in-field demonstrations including our industry leading troposcatter solution that we are currently providing to the U.S.

Other military commands have shown strong interest.

In addition, as we enter our fourth quarter of fiscal 2021, in support of the U.S.

Army's network modernization efforts, we have been working to respond to a new proposal request related to the development of the Mounted Mission Command-Transport ("MMC-T") terminal, which is the successor to the U.S.

Army's Blue Force Tracking-2 ("BFT-2") terminal.

We estimate that there are over 120,000 legacy BFT terminals across the Army and Joint services.

Over the years, we have been providing BFT-1 sustainment services to the U.S.

Army, along with other development and engineering type services and we believe that we are well-positioned to meaningfully participate on this new program.

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.

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Geography and Customer Type

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,

Sales by geography and customer type, as a percentage of related sales, for the three months ended April 30, 2021 and 2020 are as follows:

Three months ended April 30,

2021 2020 2021 2020 2021 2020

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Included in domestic sales are sales to Verizon Communications Inc.

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

("Verizon"), which accounted for 11.4% of consolidated net sales for the three months ended April 30, 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 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.

government, there were no customers that represented more than 10.0% of consolidated net sales during the three months ended April 30, 2020.

International sales for the three months ended April 30, 2021 and 2020 (which include sales to U.S.

domestic companies for inclusion in products that are sold to international customers) were $28.2 million and $32.8 million, respectively.

Except for the U.S., no individual country (including sales to U.S.

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

domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for the three months ended April 30, 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 was $53.0 million for both the three months ended April 30, 2021 and 2020.

Gross profit, as a percentage of consolidated net sales, for the three months ended April 30, 2021 was 38.0% as compared to 39.2% for the three months ended April 30, 2020.

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

Our gross profit during the most recent quarter also reflects a benefit of $2.0 million from the refund of historical excise tax paid, which was recorded in our Unallocated segment.

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.

Our Commercial Solutions segment's gross profit, as a percentage of related segment net sales, for the three months ended April 30, 2021 decreased in comparison to the three months ended April 30, 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 services and an increase of sales related to a recently awarded statewide NG-911 deployment (which has lower margins than our 911 wireless call routing services).

Our Government Solutions segment's gross profit, as a percentage of related segment net sales, for the three months ended April 30, 2021 decreased in comparison to the three months ended April 30, 2020.

The decrease in gross profit percentage primarily reflects lower net sales.

Also, during the most recent quarter, we incurred $0.4 million of incremental operating costs for our antenna facility in the United Kingdom due to the impact of the COVID-19 pandemic.

Although operations in the United Kingdom have largely resumed, we continue to experience lingering impacts from the shut-down.

Included in consolidated cost of sales for the three months ended April 30, 2021 and 2020 are provisions for excess and obsolete inventory of $0.8 million and $0.3 million, respectively.

As discussed in "Item 2.

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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.

Selling, general and administrative expenses were $27.0 million and $32.3 million for the three months ended April 30, 2021 and 2020, respectively.

As a percentage of consolidated net sales, selling, general and administrative expenses were 19.4% and 23.9% for the three months ended April 30, 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 April 30, 2021 would have been $26.4 million, or 18.9% of consolidated net sales.

Excluding $0.5 million of estimated contract settlement costs, selling, general and administrative expenses for the three months ended April 30, 2020 would have been $31.8 million, or 23.6% of consolidated net sales.

The decrease in our selling, general and administration expenses is largely attributable to the benefit from our efforts to streamline business operations in both of our segments.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $1.1 million in the three months ended April 30, 2021 as compared to $0.9 million in the three months ended April 30, 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.

Research and development expenses were $13.1 million and $12.3 million for the three months ended April 30, 2021 and 2020, respectively, representing an increase of $0.8 million, or 6.5%.

As a percentage of consolidated net sales, research and development expenses were 9.4% and 9.1% for the three months ended April 30, 2021 and 2020, respectively.

For the three months ended April 30, 2021 and 2020, research and development expenses of $10.9 million and $10.8 million, respectively, related to our Commercial Solutions segment, and $2.1 million and $1.4 million, respectively, related to our Government Solutions segment.

The remaining research and development expenses of $0.1 million in both the three months ended April 30, 2021 and 2020 related to the amortization of stock-based compensation expense.

During the most recent fiscal quarter, our Government Solutions segment incurred $0.3 million of strategic emerging technology costs for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations.

We are evaluating this new market in relation to our long-term business strategies, and we may incur additional costs over the next twelve months.

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.

During the three months ended April 30, 2021 and 2020, customers reimbursed us $3.7 million and $3.1 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 $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.

Amortization relating to intangible assets with finite lives was $5.3 million (of which $4.2 million was for the Commercial Solutions segment and $1.1 million was for the Government Solutions segment) for the three months ended April 30, 2021 and $5.5 million (of which $4.3 million was for the Commercial Solutions segment and $1.2 million was for the Government Solutions segment) for the three months ended April 30, 2020.

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.

During the three months ended April 30, 2021, we incurred $5.3 million of acquisition plan expenses due to the April 2021 settlement of litigation related to our 2019 acquisition of GD NG-911 as well as the March 2021 closing of our acquisition of UHP.

During the three months ended April 30, 2020, we incurred $6.0 million of acquisition plan expenses primarily related to our acquisitions of CGC Technology Limited and UHP, as well as Gilat Satellite Networks Ltd.

which was terminated in October 2020.

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,

We do not expect to incur any significant acquisition plan expenses in the remainder of fiscal 2021.

Operating Income (Loss).

Operating income for the three months ended April 30, 2021 was $2.4 million as compared to an operating loss of $3.1 million for the three months ended April 30, 2020.

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

Three months ended April 30,

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

Operating income (loss) $ 9.3 4.0 0.8 4.2 (7.7) (11.4) $ 2.4 (3.1)

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;

net sales 10.2 % 5.1 % 1.7 % 7.4 % NA NA 1.7 % NA

The increase in our Commercial Solutions segment operating income, both in dollars and as a percentage of related segment net sales, for the three months ended April 30, 2021 was driven primarily by higher net sales, offset in part by a lower gross profit percentage and $0.6 million of restructuring costs, as discussed above.

The decrease in our Government Solutions segment operating income for the three months ended April 30, 2021, both in dollars and as a percentage of related segment net sales, was driven primarily by lower net sales, a lower gross profit percentage and higher research and development expenses, as discussed above.

The decrease in unallocated expenses for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 reflects lower overall spending during the most recent quarter, including a decrease in legal and professional fees and, as discussed above, a benefit of $2.0 million from the refund of historical excise tax paid.

Amortization of stock-based compensation was $1.2 million and $1.0 million, respectively, for the three months ended April 30, 2021 and 2020.

(i) $5.3 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.

(iii) $0.4 million of incremental operating costs due to the impact of COVID-19;

and (iv) $0.3 million of strategic emerging technology costs, consolidated operating income for the three months ended April 30, 2021 would have been $8.9 million, or 6.4% of consolidated net sales.

$6.0 million of acquisition plan expenses and $0.5 million of estimated contract settlement costs, consolidated operating income for the three months ended April 30, 2020 would have been $3.3 million, or 2.5% of consolidated net sales.

The increase in operating income, both in dollars and as a percentage of consolidated net sales, was due primarily to higher consolidated net sales and lower selling, general and administrative expenses during the most recent quarter, 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%.

Interest expense was $1.5 million for both the three months ended April 30, 2021 and 2020.

Our effective interest rate (including amortization of deferred financing costs) in the three months ended April 30, 2021 was approximately 3.0%.

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.

Interest (income) and other for both the three months ended April 30, 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.

Provision for (Benefit from) 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.

For the three months ended April 30, 2021, we recorded a tax expense of $0.3 million as compared to a tax benefit of $0.8 million for the three months ended April 30, 2020.

Our effective tax rate (excluding discrete tax items) for the three months ended April 30, 2021 and 2020 was 11.5% and 31.0%, respectively.

The decrease from 31.0% to 11.5% is primarily due to expected product and geographical mix changes reflected in our Business Outlook for Fiscal 2021.

For purposes of determining our 11.5% 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.

In addition, no financial statement benefit was recorded for the $70.0 million payment to Gilat.

During the three months ended April 30, 2021, we recorded a net discrete tax expense of $0.2 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 U.S.

federal income tax return.

Such items were offset, in part, by the release of valuation allowances previously established on the deferred tax assets of one of our Canadian subsidiaries.

During the three months ended April 30, 2020, we recorded a net discrete tax expense of $0.7 million primarily related to updating our fiscal 2020 effective tax rate.

federal income tax returns for fiscal 2017 through 2020 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.

Net Income (Loss).

During the three months ended April 30, 2021, consolidated net income was $0.8 million as compared to a net loss of $4.0 million during the three months ended April 30, 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,

Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the three months ended April 30, 2021 and 2020 are shown in the table below (numbers in the table may not foot due to rounding):

Three months ended April 30,

2021 2020 2021 2020 2021 2020 2021 2020

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COVID-19 related costs — — 0.4 — — — 0.4 —

Strategic emerging technology costs — — 0.3 — — — 0.3 —

Adjusted EBITDA $ 15.9 11.5 3.0 5.8 (1.2) (4.9) $ 17.7 12.5

Percentage of related net sales 17.4 % 14.7 % 6.3 % 10.3 % NA NA 12.7 % 9.2 %

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.

The increase in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 is primarily attributable to higher consolidated net sales and lower selling, general and administrative expenses, partially offset by a lower gross profit percentage and higher research and development expenses, as discussed above.

The increase in our Commercial Solutions segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to higher net sales, offset in part by a lower gross profit percentage, 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, 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.

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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

Reconciliations of our GAAP consolidated operating income (loss), net income (loss) and net income (loss) per diluted share for the three months ended April 30, 2021 and 2020 to the corresponding non-GAAP measures are shown in the tables below (numbers and per share amounts in the tables may not foot due to rounding).

In addition, non-GAAP income per diluted share adjustments for the three months ended April 30, 2020 were computed using 25,058,000 weighted average diluted shares outstanding during the respective period:

Three months ended April 30, 2021

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

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COVID-19 related costs 0.4 0.4 0.01

Net discrete tax benefit

— (0.8) (0.03)

Strategic emerging technology costs

Net discrete tax expense

Non-GAAP measures $ 8.9 $ 6.8 $ 0.26

Three months ended January 31, 2020

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

Three months ended April 30, 2020

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

Diluted Share

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Estimated contract settlement costs

(0.3) (0.2) (0.01)

Net discrete tax expense

Non-GAAP measures $ 3.3 $ 1.2 $ 0.05

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 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, strategic emerging technology costs (for next-generation satellite technology), 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.

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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%.

We have not quantitatively reconciled our fiscal 2021 Adjusted EBITDA target to the most directly comparable GAAP measure because items such as stock-based compensation, adjustments to the provision for income taxes, amortization of intangibles and interest expense, which are specific items that impact these measures, have not yet occurred, are out of our control, or cannot be predicted.

For example, quantification of stock-based compensation expense requires inputs such as the number of shares granted and market price that are not currently ascertainable.

Accordingly, reconciliations to the Non-GAAP forward looking metrics are not available without unreasonable effort and such unavailable reconciling items could significantly impact our financial results.

COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 2021 AND 2020

Consolidated net sales were $435.9 million and $467.0 million for the nine months ended April 30, 2021 and 2020, respectively, representing a decrease of $31.1 million, or 6.7%.

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.

Net sales in our Commercial Solutions segment were $261.0 million for the nine months ended April 30, 2021, as compared to $268.8 million for the nine months ended April 30, 2020, a decrease of $7.8 million, or 2.9%.

Our Commercial Solutions segment represented 59.9% of consolidated net sales for the nine months ended April 30, 2021 as compared to 57.5% for the nine months ended April 30, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) for this segment was 1.23.

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:

Net sales in the nine months ended April 30, 2021 of our satellite ground station technologies were lower than the nine months ended April 30, 2020.

However, we benefited during the nine months ended April 30, 2021 from a number of awards, 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.

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

(ii) a contract valued at more than $3.0 million for QV-band TWTAs to support a new high-speed satellite network;

(iii) an order valued at more than $2.0 million for state-of-the-art 500W Ka-band high power amplifiers supporting a leading high throughput satellite customer;

(iv) a $2.0 million order for rugged Ka-band high power TWTAs for a U.S.

military communications system;

(v) $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;

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

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

(viii) 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;

(ix) an order exceeding $1.0 million for our Falcon 50Ka SSPAs for an IFC application;

and (x) an order exceeding $1.0 million for X-band SSPAs and block up converters for a transportable military satellite communications system.

In addition, demand for our HEIGHTS technology solutions remain strong and we recently received a multi-million-dollar award from an international customer.

The most recent period included a nominal amount of net sales related to our acquisition of UHP on March 2, 2021.

Net sales in the nine months ended April 30, 2021 of our public safety and location technology solutions were lower than the nine months ended April 30, 2020, reflecting the absence of 911 wireless call routing sales to AT&T, offset in part by increased sales of our location-based technology solutions.

During the nine months ended April 30, 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.

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, for which we received over $7.5 million of additional funding.

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

(i) a $9.8 million contract with a major tier-one MNO for a broad suite of new capabilities and services centered around virtualized applications and 5G products;

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

(iii) orders exceeding $3.8 million with a tier-one MNO for additional capabilities related to our Virtual Mobility Location Center platform;

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

(v) a contract 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;

(vi) a $1.6 million NG-911 services contract to provide Solacom’s Guardian call management solution to the Toronto Paramedic Services, the largest municipal paramedic service in Canada;

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

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

(ix) a $1.3 million contract renewal by a tier-one MNO to support messaging services;

and (x) our first international 5G services contract with a leading tier-one MNO in Australia.

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.

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

Overall, we remain optimistic that fiscal 2021 net sales for this segment will be slightly higher than 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 $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.

Net sales in our Government Solutions segment were $174.9 million for the nine months ended April 30, 2021 as compared to $198.2 million for the nine months ended April 30, 2020, a decrease of $23.3 million or 11.8%.

Our Government Solutions segment represented 40.1% of consolidated net sales for the nine months ended April 30, 2021 as compared to 42.5% for the nine months ended April 30, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the nine months ended April 30, 2021 was 0.77.

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.

The most recent period primarily reflects lower sales of advanced VSAT products and other programs to the U.S.

Army, offset in part by higher sales of our solid-state, high-power amplifiers.

Sales during the nine months ended April 30, 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.

During the nine months ended April 30, 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 nine months ended April 30, 2021, we were awarded $20.7 million of orders 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.

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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.

Other notable orders awarded during the nine months ended April 30, 2021 include:

(i) $16.1 million of 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.

(ii) a $10.4 million contract from the U.S.

military for the first phase of a full-motion large aperture antenna tracking system;

(iii) $6.2 million of funding to support the U.S.

Army’s PM MC's BFT-1 program;

(iv) $5.9 million of 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.

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

(vi) $3.0 million of 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;

(vii) a $3.0 million order from an overseas agency for maintenance of down range tracking stations;

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

(ix) 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;

(x) $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 (xi) a $2.0 million order to provide the U.S.

Marine Corps with rugged baseband command and control modules for Program Manager Light Armored Vehicles.

In April 2021, the U.S.

government announced that it intended to fully withdraw troops from Afghanistan by September 2021.

This change will result in lower revenues than previously anticipated for certain programs we currently participate in.

In addition, the U.S.

presidential administration released its fiscal 2022 budget request.

This budget request includes less money for certain legacy programs but additional funding for modernization and new programs.

We are seeing strong interest across the board for our recently introduced Comtech COMET terminals and other new solutions we are discussing with our customers.

During the third quarter, we conducted successful in-field demonstrations including our industry leading troposcatter solution that we are currently providing to the U.S.

Other military commands have shown strong interest.

In addition, as we enter our fourth quarter of fiscal 2021, in support of the U.S.

Army's network modernization efforts, we have been working to respond to a new proposal request related to the development of the MMC-T terminal, which is the successor to the U.S.

Army's BFT-2 terminal.

We estimate that there are over 120,000 legacy BFT terminals across the Army and Joint services.

Over the years, we have been providing BFT-1 sustainment services to the U.S.

Army, along with other development and engineering type services and we believe that we are well-positioned to meaningfully participate on this new program.

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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,

Sales by geography and customer type, as a percentage of related sales, for the nine months ended April 30, 2021 and 2020 are as follows:

Nine months ended April 30,

2021 2020 2021 2020 2021 2020

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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.

Included in domestic sales are sales to Verizon, which accounted for 11.2% of consolidated net sales for the nine months ended April 30, 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.

government, there were no customers that represented more than 10.0% of consolidated net sales during the nine months ended April 30, 2020.

International sales for the nine months ended April 30, 2021 and 2020 (which include sales to U.S.

domestic companies for inclusion in products that are sold to international customers) were $98.1 million and $107.5 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 six months ended January 31, 2021 and 2020.

domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for the nine months ended April 30, 2021 and 2020.

Gross Profit.

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

Gross profit was $158.9 million and $177.2 million for the nine months ended April 30, 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 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 consolidated net sales, for the nine months ended April 30, 2021 was 36.5% as compared to 37.9% for the nine months ended April 30, 2020.

Our gross profit during the nine months ended April 30, 2021 also reflects significant increases in costs due to production delays, minor supply chain disruptions, lower levels of factory utilization and higher logistics and operational costs resulting from the COVID-19 pandemic.

Our gross profit during the most recent nine month period also reflects a benefit of $2.0 million from the refund of historical excise tax paid, which was recorded in our Unallocated segment.

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 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.

Our Commercial Solutions segment's gross profit, as a percentage of related segment net sales, for the nine months ended April 30, 2021 decreased in comparison to the nine months ended April 30, 2020.

Our Government Solutions segment's gross profit, as a percentage of related segment net sales, for the nine months ended April 30, 2021 decreased in comparison to the nine months ended April 30, 2020.

The decrease in gross profit percentage primarily reflects lower net sales.

Also, during the most recent period, we incurred $0.6 million of incremental operating costs for our antenna facility in the United Kingdom due to the impact of the COVID-19 pandemic.

Although operations in the United Kingdom have largely resumed, we continue to experience lingering impacts from the shut-down.

Included in consolidated cost of sales for the nine months ended April 30, 2021 and 2020 are provisions for excess and obsolete inventory of $3.2 million and $1.2 million, respectively.

As discussed in "Item 2.

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Selling, General and Administrative Expenses .

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.

Selling, general and administrative expenses were $84.0 million and $93.5 million for the nine months ended April 30, 2021 and 2020, respectively, representing a decrease of $9.5 million, or 10.2%.

As a percentage of consolidated net sales, selling, general and administrative expenses were 19.3% and 20.0% for the nine months ended April 30, 2021 and 2020, respectively.

Excluding $1.2 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 nine months ended April 30, 2021 would have been $82.8 million, or 19.0% of consolidated net sales.

Excluding $0.4 million of estimated contract settlement costs principally related to the repositioning of our location technologies solutions offerings in our Commercial Solutions segment, selling, general and administrative expenses for the nine months ended April 30, 2020 would have been $93.1 million, or 19.9% of consolidated net sales.

The decrease in our selling, general and administration expenses, both in dollars and as a percentage of consolidated net sales, is largely attributable to the benefit from our efforts to streamline business operations in both of our segments.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $2.8 million in the nine months ended April 30, 2021 as compared to $2.7 million in the nine months ended April 30, 2020.

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

Research and Development Expenses.

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.

Research and development expenses were $37.4 million and $40.9 million for the nine months ended April 30, 2021 and 2020, respectively, representing a decrease of $3.5 million, or 8.6%.

As a percentage of consolidated net sales, research and development expenses were 8.6% and 8.8% for the nine months ended April 30, 2021 and 2020, respectively.

For the nine months ended April 30, 2021 and 2020, research and development expenses of $30.7 million and $35.7 million, respectively, related to our Commercial Solutions segment, and $6.5 million and $5.1 million, respectively, related to our Government Solutions segment.

The remaining research and development expenses of $0.2 million in both the nine months ended April 30, 2021 and 2020 related to the amortization of stock-based compensation expense.

During the most recent period, our Government Solutions segment incurred $0.3 million of strategic emerging technology costs for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations.

We are evaluating this new market in relation to our long-term business strategies, and we may incur additional costs over the next twelve months.

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

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.

During the nine months ended April 30, 2021 and 2020, customers reimbursed us $11.0 million and $8.2 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 $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.

Amortization relating to intangible assets with finite lives was $15.7 million (of which $12.8 million was for the Commercial Solutions segment and $2.9 million was for the Government Solutions segment) for the nine months ended April 30, 2021 and $16.0 million (of which $13.0 million was for the Commercial Solutions segment and $2.9 million was for the Government Solutions segment) for the nine months ended April 30, 2020.

Acquisition Plan Expenses.

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.

During the nine months ended April 30, 2021 and 2020, we incurred $99.8 million and $14.4 million, respectively, of acquisition plan expenses.

For the nine months ended April 30, 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 April 2021 settlement of litigation associated with our 2019 acquisition of GD NG-911 as well as the March 2021 closing of our acquisition of UHP.

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.

We do not expect to incur any significant acquisition plan expenses in the remainder of fiscal 2021.

Operating (Loss) Income.

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 loss for the nine months ended April 30, 2021 was $78.0 million as compared to operating income of $12.4 million for the nine months ended April 30, 2020.

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

Six months ended January 31,

Nine months ended April 30,

2021 2020 2021 2020 2021 2020 2021 2020

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net sales 10.5 % 9.9 % 5.0 % 8.2 % NA NA NA 2.7 %

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.

The increase in our Commercial Solutions segment operating income, both in dollars and as a percentage of the related segment net sales, for the nine months ended April 30, 2021 primarily reflects the benefit of cost saving measures previously implemented, offset in part by lower segment net sales and gross profit percentage and $1.2 million of restructuring costs, as discussed above.

The decrease in our Government Solutions segment operating income, both in dollars and as a percentage of related segment net sales, for the nine months ended April 30, 2021 was driven primarily by lower net sales and gross profit percentage, as discussed above.

The increase in unallocated expenses for the nine months ended April 30, 2021 as compared to the nine months ended April 30, 2020 is primarily due to acquisition plan expenses, as discussed above.

Amortization of stock-based compensation was $3.2 million and $3.1 million, respectively, for the nine months ended April 30, 2021 and 2020.

Excluding (i) $99.8 million of acquisition plan expenses;

(ii) $1.2 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.

(iii) $0.6 million of incremental operating costs due to the impact of COVID-19;

and (iv) $0.3 million of strategic emerging technology costs, consolidated operating income for the nine months ended April 30, 2021 would have been $23.9 million, or 5.5% of consolidated net sales.

Excluding $14.4 million of acquisition plan expenses and $0.4 million of estimated contract settlement costs, consolidated operating income for the nine months ended April 30, 2020 would have been $27.2 million, or 5.8% 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 selling, general and administrative expenses and research and development expenses, as discussed above.

Interest Expense and Other.

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%.

Interest expense was $5.2 million and $4.9 million for the nine months ended April 30, 2021 and 2020, respectively.

Interest expense for the nine months ended April 30, 2021 includes $1.2 million of incremental interest expense 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 nine months ended April 30, 2021 was approximately 2.8%.

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 six months ended January 31, 2021 and 2020 was nominal.

Interest (income) and other for both the nine months ended April 30, 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 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.

For the nine months ended April 30, 2021, we recorded a tax benefit of $2.1 million as compared to a tax provision of $1.5 million for the nine months ended April 30, 2020.

Our effective tax rate (excluding discrete tax items) for the nine months ended April 30, 2021 and 2020 was 11.5% and 31.0%, respectively.

The decrease from 31.0% to 11.5% is primarily due to expected product and geographical mix changes reflected in our Business Outlook for Fiscal 2021.

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.

In addition, no financial statement benefit was recorded for the $70.0 million payment to Gilat.

During the nine months ended April 30, 2021, we recorded a net discrete tax benefit of $0.6 million, primarily related to the release of valuation allowances previously established on the deferred tax assets of one of our Canadian subsidiaries.

This benefit was offset, in part, by the finalization of certain tax accounts in connection with the filing of our fiscal 2020 U.S.

federal income tax return.

During the nine months ended April 30, 2020, we recorded a net discrete tax benefit of $0.8 million, primarily related to stock-based awards that were settled during the period and the finalization of certain tax deductions in connection with the filing of our fiscal 2019 U.S.

federal income tax return.

federal income tax returns for fiscal 2017 through 2020 are subject to potential future IRS audit.

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

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Net (Loss) Income.

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.

During the nine months ended April 30, 2021, consolidated net loss was $80.8 million as compared to net income of $5.9 million during the nine months ended April 30, 2020.

Adjusted EBITDA.

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,

Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the nine months ended April 30, 2021 and 2020 are shown in the table below (numbers in the table may not foot due to rounding):

Nine months ended April 30,

2021 2020 2021 2020 2021 2020 2021 2020

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Depreciation 5.7 6.4 1.3 1.1 0.3 0.6 7.3 8.0

Estimated contract settlement costs — 0.4 — — — — — 0.4

Acquisition plan expenses (1.1) 0.7 — — 100.9 13.7 99.8 14.4

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COVID-19 related costs — — 0.6 — — — 0.6 —

Strategic emerging technology costs — — 0.3 — — — 0.3 —

Adjusted EBITDA $ 46.1 47.1 13.9 20.3 (9.9) (13.1) $ 50.1 54.3

Percentage of related net sales 17.7 % 17.5% 7.9% 10.2% NA NA 11.5% 11.6 %

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.

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the nine months ended April 30, 2021 as compared to the nine months ended April 30, 2020 is primarily attributable to lower consolidated net sales and a lower gross profit percentage, offset in part by lower selling, general and administrative expenses and lower research and development expenses, as discussed above.

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

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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 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

Reconciliations of our GAAP consolidated operating income (loss), net income (loss) and net income (loss) per diluted share for the nine months ended April 30, 2021 and 2020 to the corresponding non-GAAP measures are shown in the tables below (numbers and per share amounts in the tables may not foot due to rounding).

In addition, non-GAAP income per diluted share adjustments for the nine months ended April 30, 2021 were computed using 26,016,000 weighted average diluted shares outstanding during the respective period:

Nine months ended April 30, 2021

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

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COVID-19 related costs

Strategic emerging technology costs 0.3 0.3 0.01

Interest expense — 1.0 0.04

Net discrete tax benefit

— (0.6) (0.02)

Non-GAAP measures $ 23.9 $ 17.8 $ 0.69

Six months ended January 31, 2020

Nine months ended April 30, 2020

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

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Acquisition plan expenses

14.4 9.9 0.40

Estimated contract settlement costs

Net discrete tax benefit

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Non-GAAP measures $ 27.2 $ 15.3 $ 0.62

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, strategic emerging technology costs (for next-generation satellite technology), facility exit costs, strategic alternatives analysis expenses and other.

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

For example, quantification of stock-based compensation expense requires inputs such as the number of shares granted and market price that are not currently ascertainable.

LIQUIDITY AND CAPITAL RESOURCES

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.

Our cash and cash equivalents decreased $8.7 million from $47.9 million at July 31, 2020 to $39.2 million at April 30, 2021.

The decrease in cash and cash equivalents during the nine months ended April 30, 2021 was driven by the following:

• Net cash used in operating activities was $56.6 million for the nine months ended April 30, 2021 as compared to net cash provided by operating activities of $39.0 million for the nine months ended April 30, 2020.

During the nine months ended April 30, 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 $13.4 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 period-over-period decrease in cash flow from operating activities (excluding the $70.0 million payment to Gilat) reflects lower consolidated net sales and overall changes in net working capital requirements, principally the timing of shipments, billings and payments.

• Net cash used in investing activities for the nine months ended April 30, 2021 and 2020 was $7.6 million and $16.4 million, respectively.

During the nine months ended April 30, 2021 and 2020, we paid $0.8 million and $11.2 million, respectively, in connection with our acquisition of CGC Technology Limited, net of cash acquired.

During the nine months ended April 30, 2020, we paid $0.8 million in connection with our acquisition of NG-911 Inc.

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.

Also, offsetting cash used during the most recent period is $1.4 million of net cash acquired from our acquisition of UHP, as discussed further in " Notes to Condensed Consolidated Financial Statements - Note (2) - Acquisitions - UHP Networks Inc.

• Net cash provided by financing activities was $55.5 million for the nine months ended April 30, 2021 as compared to net cash used in financing activities of $17.6 million for the nine months ended April 30, 2020.

During the nine months ended April 30, 2021, we had net borrowings under our Credit Facility of $65.5 million, primarily due to the $70.0 million payment we made to Gilat.

During the nine months ended April 30, 2021 and 2020, we paid $7.7 million and $7.6 million, respectively, in cash dividends to our stockholders.

We also made $2.8 million and $5.3 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during the nine months ended April 30, 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 January 31, 2021, our material short-term cash requirements primarily consist of:

As of April 30, 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.

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.

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

Pursuant to the stock purchase agreement, the initial up-front payment of approximately $23.9 million was paid mostly in shares of our common stock, with a nominal amount paid in cash.

An additional $5.0 million, payable at our option in cash and or shares of common stock, was placed in escrow and 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.

The shelf registration statement was declared effective by the SEC as of March 15, 2021.

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.

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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 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.

There were no repurchases of our common stock during the nine months ended April 30, 2021 and 2020.

On September 29, 2020, December 9, 2020 and March 11, 2021, our Board of Directors declared a dividend of $0.10 per common share, which were paid on October 27, 2020, February 19, 2021 and May 21, 2021, respectively.

On June 8, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on August 20, 2021 to stockholders of record at the close of business on July 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 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.

As of April 30, 2021, the amount outstanding under our Credit Facility was $215.0 million, which is reflected in the non-current portion of long-term debt on our Condensed Consolidated Balance Sheet.

At April 30, 2021, we had $2.0 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 the nine months ended April 30, 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 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.

As of April 30, 2021, our Secured Leverage Ratio was 2.78x TTM Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA.

Our Interest Expense Coverage Ratio as of April 30, 2021 was 13.78x 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").

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Off-Balance Sheet Arrangements

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.

As of April 30, 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 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:

We do not expect that these commitments, as of April 30, 2021, will materially adversely affect our liquidity.

At April 30, 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 (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 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.

At April 30, 2021, we have approximately $2.0 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 further in " Notes to Condensed Consolidated Financial Statements - Note (17) - Stockholders’ Equity ," on June 8, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on August 20, 2021 to stockholders of record at the close of business on July 21, 2021.

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

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

Pursuant to a stock purchase agreement, the initial up-front payment of approximately $23.9 million was paid mostly in shares of our common stock, with a nominal amount paid in cash.

Shortly after we signed this agreement, we received our first order valued at more than $13.0 million to make certain customizations on behalf of this customer.

Work on these efforts has commenced immediately.

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

Pursuant to these agreements, we have agreed to indemnify, hold harmless and reimburse the indemnified party for certain losses suffered or incurred by the indemnified party, including but not limited to losses related to third-party intellectual property claims.

It is not possible to determine the maximum potential amount under these agreements due to a history of nominal claims in the Comtech legacy business and the unique facts and circumstances involved in each particular agreement.

It is not possible to determine the maximum potential amount under these agreements due to a history of nominal claims and the unique facts and circumstances involved in each particular agreement.

As discussed further in " Notes to Condensed Consolidated Financial Statements - Note (18) - Legal Proceedings and Other Matters ," we are subject to a number of indemnification demands and we are incurring ongoing legal expenses in connection with these matters.

Our insurance policies may not cover the cost of defending indemnification claims or providing indemnification.

As a result, pending or future claims asserted against us by a party that we have agreed to indemnify could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition.

As a result, pending or future claims asserted against us by a party that we may agree or have agreed to indemnify could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition.

We have change in control agreements, severance agreements and indemnification agreements with certain of our executive officers and certain key employees.

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 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.

Our Condensed Consolidated Balance Sheet at April 30, 2021 includes total liabilities of $9.2 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 six months ended January 31, 2021, we adopted:

As further discussed in " Notes to Condensed Consolidated Financial Statements – Note (3) - Adoption of Accounting Standards and Updates " during the nine months ended April 30, 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 January 31, 2021:

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 April 30, 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