What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-12-09 compared with 2021-06-08 · 327 added, 581 removed, 367 unchanged (71% of the section changed)

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evolving industry standards;

new product announcements and enhancements, including the risks associated with expanding sales of Comtech's Heights TM Network Platform ("HEIGHTS");

new product announcements and enhancements;

changing customer demands and or procurement strategies;

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risks associated with our large contracts;

risks associated with the COVID-19 pandemic;

risks associated with the COVID-19 pandemic and related supply chain disruptions;

and other factors described in this and our other filings with the Securities and Exchange Commission ("SEC").

We are a leading provider of advanced communications solutions for both commercial and government customers worldwide.

We are a leading global provider of next generation 911 emergency systems and secure wireless communications technologies to commercial and government customers around the world.

Our solutions fulfill our customers' needs for secure wireless communications in some of the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical and other scenarios where performance is crucial.

We manage our business through two reportable operating segments:

• Commercial Solutions - offers satellite ground station technologies (such as modems and amplifiers), public safety and location technologies (such as 911 call routing, 911 call handling and mapping solutions) to commercial customers and smaller government customers, such as state and local governments.

• Commercial Solutions - offers satellite ground station technologies (such as Single Channel per Carrier ("SCPC") and time division multiple access ("TDMA") modems and amplifiers), and public safety and location technologies (such as 911 call routing, 911 call handling and mapping solutions) to commercial customers and smaller government customers, such as state and local governments.

This segment also serves certain large government customers (including the U.S.

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

• 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.

• Government Solutions - provides tactical satellite-based networks and ongoing support for complicated communications networks, 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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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 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.

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 RF amplifiers.

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.

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

Most 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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Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the end of a fiscal period.

Remaining performance obligations, which we refer to as backlog, exclude unexercised contract options and potential orders under indefinite delivery / indefinite quantity ("IDIQ") contracts.

Remaining performance obligations, which we refer to as backlog, exclude unexercised contract options and potential orders under IDIQ contracts.

Impairment of Goodwill and Other Intangible Assets .

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).

As of October 31, 2021, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $347.7 million (of which $270.4 million relates to our Commercial Solutions segment and $77.3 million relates to our Government Solutions segment).

Additionally, as of October 31, 2021, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $263.4 million (of which $218.4 million relates to our Commercial Solutions segment and $45.0 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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In making this assessment, we considered, among other things, expectations of projected net sales and cash flows, assumptions impacting the weighted average cost of capital, trends in trading multiples of comparable companies, changes in our stock price and changes in the carrying values of our reporting units with goodwill.

We also considered overall business conditions, including both the potential short-term and long-term effects of the COVID-19 pandemic.

We also considered overall business conditions.

In performing the quantitative assessment, we estimated the fair value of each of our reporting units using a combination of the income and market approaches.

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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.

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

A significant decline in our customers' spending that is greater than we anticipate or a shift in funding priorities may also have a negative effect on future orders, sales, income and cash flows and we might be required to perform a quantitative assessment during fiscal 2022 or beyond.

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

We believe that the carrying values of our net intangible assets were recoverable as of April 30, 2021.

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

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

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Future changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition.

Impact of COVID-19 and Business Outlook for Fiscal 2021

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

Business Outlook for Fiscal 2022

Despite the ongoing impact of COVID-19 and global supply chain constraints on our business, our first quarter net sales and Adjusted EBITDA exceeded our expectations.

We generated consolidated:

• Net sales of $116.8 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 operating loss of $6.5 million and a GAAP net loss per diluted common share of $0.43.

These results reflect:

(i) $5.2 million for adjustments to reflect the redemption value of convertible preferred stock;

(ii) a $0.3 million benefit for the change in fair value of the convertible preferred stock purchase option liability;

(iii) $2.2 million of proxy solicitation costs;

(iv) $0.7 million of restructuring costs associated with the opening of Comtech’s new high volume technology manufacturing centers;

and (v) $0.7 million of COVID-19 related costs.

In addition, we recorded a $0.01 per diluted common share discrete tax benefit.

Excluding such items, Non-GAAP operating loss was $3.0 million and Non-GAAP net loss per diluted common share was $0.15;

• GAAP net cash provided by operating activities of $4.8 million;

• Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $5.5 million.

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.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended October 31, 2021 and 2020.

In October 2021, we announced that our Board of Directors has appointed Michael D.

Porcelain, our President and Chief Operating Officer, to be Chief Executive Officer, taking over from Fred Kornberg.

The change of leadership is expected to occur by the end of calendar 2021, at which point Mr.

Porcelain will also join our Board of Directors and continue as President.

Kornberg will serve as non-executive Chairman of the Board and is expected to take on a technology advisory role.

Costs associated with this leadership transition will be announced once they are finalized.

Shortly after this leadership change announcement, we secured a $100.0 million strategic growth investment from current stockholder White Hat Capital Partners, LP and Magnetar Capital LLC.

This investment, which is in the form of Series A Convertible Preferred Stock, significantly enhances our financial flexibility and strengthens our ability to capitalize on recent large contract awards and growing customer demand by making crucial investments in our satellite technologies and next-generation 911 public safety solutions.

As of October 31, 2021, our cash and cash equivalents were $30.9 million, our total debt outstanding was $108.0 million and our Secured Leverage Ratio (as calculated under our existing Credit Facility) was 1.57x, and reflects a substantial reduction from 2.53x as of July 31, 2021 due to our receipt of a $100.0 million strategic growth investment.

New bookings for the first quarter of fiscal 2022 were $86.4 million, enabling us to achieve a quarterly book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.74x.

Based on expected new order flow, we expect to achieve a book-to-bill ratio in excess of 1.00x for fiscal 2022.

Key contract awards and bookings received during the first quarter include:

a $125.0 million contract from the U.S.

government for our Joint Cyber Analysis Course ("JCAC") Training solutions (for which $4.9 million of orders is included in first quarter bookings);

a $5.6 million contract renewal with a U.S.

tier-one mobile network operator ("MNO");

$4.9 million of funding from the U.S.

Army to continue its sustainment of the U.S.

Army’s family of ground satellite terminals;

$3.7 million of funding to support the State of Maryland’s Department of Human Services;

a $2.2 million contract to provide next-generation 911 services to a U.S.

military customer;

and a $2.0 million order from a leading global maritime satellite communication antenna systems provider for C-Band and Ku-Band low power outdoor block up converters.

Backlog as of October 31, 2021 was $628.5 million, $23.0 million higher than the backlog that existed as of October 31, 2020.

Additionally, 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 from which we expect future orders, our revenue visibility is over $1.2 billion.

Notably, this amount excludes potential future orders for our next-generation satellite earth station technology which is under development.

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.

With COVID-19 continuing to impact global markets and supply chains, reliable forecasting remains challenging.

Against that market backdrop, we continue to target fiscal 2022 net sales to be in a range of $580.0 million to $600.0 million and Adjusted EBITDA between $70.0 million and $76.0 million.

These targets reflect the strength of our backlog and a strong sales pipeline, offset by the lingering impacts of COVID-19, timing considerations associated with global supply chain constraints and start-up costs associated with the opening of two new high-volume technology manufacturing centers.

Our incoming CEO is continuing to develop new plans and initiatives including:

(i) conducting a strategic and financial assessment of all product lines;

(ii) revisiting and reviewing all acquisition opportunities to establish strategic priorities to optimally deploy proceeds from its recent $100.0 million strategic growth investment;

(iii) increase company-wide collaboration to exploit emerging opportunities;

(iv) the creation of a focused commercial satellite networking group based in the United States that will cater to the needs of certain U.S.

government customers;

(v) expanding the employee talent pool including adding a new COO and dedicated investor relations professional;

(vi) refreshing corporate branding including launching of a new company-wide web site and establishing a prominent social media presence;

(vii) finishing an ongoing evaluation of new segment reporting and revisiting our Non-GAAP EPS calculations.

Revenue enhancements or costs synergies associated with these new plans and initiatives are not included in our fiscal 2022 targets.

On a consolidated basis, financial performance in the first half of fiscal 2022 is expected to be significantly lower than the comparative period of fiscal 2021, with our second half of fiscal 2022 expected to be significantly higher than the comparative period of fiscal 2021.

Quarterly results are expected to build sequentially throughout the year, with the fourth quarter being the peak quarter by far.

Our consolidated net sales in fiscal 2022 are anticipated to reflect a higher percentage of total Commercial Solutions segment sales due to strong demand for our public safety and location technology solutions, including work on our recent contracts to design, deploy and operate NG-911 services for the states of South Carolina and Pennsylvania, and a higher level of annual sales in our satellite earth station product line as compared to fiscal 2021, including incremental contributions from our recently acquired TDMA modem technologies.

Sales in our Government Solutions segment are expected to decline year-over-year and reflect the impact of the recently completed withdrawal of U.S.

troops from Afghanistan and other U.S.

government program changes.

During the second half of fiscal 2022, we expect our Government Solutions segment to benefit from additional orders for the newly introduced Comtech COMET™, the world’s smallest deployable troposcatter terminal, and our next generation troposcatter system used by the U.S.

Marine Corps.

Our GAAP operating income in fiscal 2022 will be impacted by both start-up manufacturing expenses and restructuring costs associated with the opening of our two new high-volume technology manufacturing centers, as well as COVID-19 related costs.

Global supply chain issues make the amount and timing of these expenses difficult to predict.

In addition, GAAP operating income in fiscal 2022 will be impacted by greater than normal proxy solicitation costs, as well as leadership transition costs associated with the appointment of a new CEO.

Because the amount and timing of these costs remains largely unpredictable, we are not providing GAAP operating income, GAAP net income or any GAAP EPS guidance or a reconciliation of our projected results to the most comparable GAAP measure, as such a reconciliation cannot be prepared without unreasonable effort.

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.

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.

On December 9, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on February 18, 2022 to stockholders of record at the close of business on January 19, 2022.

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 2022 and a definition and explanation of Adjusted EBITDA is included in the below section " Item 2.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended October 31, 2021 and 2020 ."

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

Consolidated net sales were $116.8 million and $135.2 million for the three months ended October 31, 2021 and 2020, respectively, representing a decrease of $18.4 million, or 13.6%.

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 $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.

Net sales in our Commercial Solutions segment were $78.9 million for the three months ended October 31, 2021, as compared to $81.8 million for the three months ended October 31, 2020, a decrease of $2.9 million, or 3.5%.

Our Commercial Solutions segment represented 67.6% of consolidated net sales for the three months ended October 31, 2021 as compared to 60.5% for the three months ended October 31, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) for this segment was 0.77x.

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

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.

As further discussed below, long-term demand for our Commercial Solutions segment's products and technologies appears strong and we believe fiscal 2022 net sales for this segment will be higher than the amount we achieved in fiscal 2021.

Net sales in the three months ended October 31, 2021 of our satellite ground station technologies were lower than the three months ended October 31, 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 slightly higher than the amount we achieved in fiscal 2020.

Our results for the first quarter of fiscal 2022 also reflect nominal sales of TDMA satellite networking platforms that we now offer as a result of our March 2, 2021 acquisition of UHP Networks Inc.

Although COVID-19 spikes and global supply chain issues represent a significant performance headwind, we continue to expect sales of our satellite earth station products in fiscal 2022 to grow as compared to fiscal 2021 due to increased demand.

During the three months ended October 31, 2021, we received (i) a $2.0 million order from a leading global maritime satellite communication antenna systems provider for 250 Watt C-Band and 125 Watt Ku-Band low power outdoor block up converters and (ii) $1.2 million follow-on order for Ka-band solid-state power amplifiers (“SSPAs”) that use state-of-the-art Gallium Nitride (“GaN”) technology for an in-flight connectivity (“IFC”) application.

In addition, we expect this product line to benefit from the inclusion of a full twelve months of sales of our TDMA satellite network platform that we now offer as a result of the UHP acquisition.

We continue to monitor our inventory needs and navigate supply chain constraints which are impacting the timing of new orders, deliveries and installations.

Net sales in the three months ended October 31, 2021 of our public safety and location technology solutions were higher than the three months ended October 31, 2020, reflecting increased sales of our NG-911 services and location-based technology solutions.

Notable awards during the three months ended October 31, 2021 include:

(i) a $5.6 million contract renewal with a U.S.

tier-one MNO to continue providing messaging application support;

(ii) a $2.2 million contract to provide next-generation 911 services to a U.S.

military customer;

(iii) a $1.7 million renewal agreement with a U.S.

tier-one MNO for trusted location services;

and (iv) a $1.3 million contract renewal with a U.S.

tier-one MNO for precise location services.

To-date, the business impact of COVID-19 and global supply chain issues on our public safety and location technology solutions has been relatively muted.

We have a number of large opportunities in our pipeline and long-term demand for our products and services appears strong.

We are awaiting funding on a large NG-911 contract that we have already been awarded (and which is not in our backlog) and remain in negotiations with several other potential customers.

Timing of these awards are difficult to predict.

Although public safety and location technology solutions have long sales cycles and are subject to difficult-to-predict changes in the overall procurement strategies of wireless carrier customers, we believe that sales of our NG-911 solutions will be higher than the amount we achieved in fiscal 2021.

Overall, based on expected new order flow, we remain optimistic that fiscal 2022 net sales for this segment will be higher than the amount we achieved in fiscal 2021.

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 $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.

Net sales in our Government Solutions segment were $37.8 million for the three months ended October 31, 2021 as compared to $53.4 million for the three months ended October 31, 2020, a decrease of $15.6 million or 29.2%.

Our Government Solutions segment represented 32.4% of consolidated net sales for the three months ended October 31, 2021 as compared to 39.5% for the three months ended October 31, 2020.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended October 31, 2021 was 0.68x.

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

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;

(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.

Net sales for the first quarter of fiscal 2022 primarily reflect lower sales of global field support services, advanced VSAT products and other programs to the U.S.

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

Sales during the three months ended October 31, 2020 included 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.

There were no corresponding sales in the first quarter of fiscal 2022, as we continue to expect the next round of funding on this IDIQ contract to occur during the second half of fiscal 2022.

Notable orders awarded to us during the three months ended October 31, 2021 include:

(i) $4.9 million of orders related to a multi-year contract valued at up to $235.7 million to provide system refurbishment, sustainment services and baseband equipment to the U.S Army (such orders support the sustainment of the U.S.

Army's AN/TSC-198 SNAP family of ground satellite terminals);

(ii) a five-year single award IDIQ contract renewal with firm fixed price and time and materials delivery orders valued at approximately $125.0 million from the U.S.

government for our JCAC training solutions (initial delivery orders on the IDIQ contract have been received and funded $4.9 million to-date);

(iii) $3.7 million of funding to support the State of Maryland's Department of Human Services with technical operations support services;

(iv) a $1.8 million contract for high power solid-state amplifiers from a major domestic prime contractor;

and (v) $1.1 million of funding to continue to provide critical IT staffing and support to multiple agencies within the City of Baltimore, including, but not limited to the Baltimore City Information & Technology and the Baltimore City Police Department.

As result of the U.S.

government’s decision to fully withdraw troops from Afghanistan and make certain program changes, we are expecting a decline in overall revenues in our Government Solutions segment in fiscal 2022, as compared to fiscal 2021.

We continue to see strong interest for our Comtech COMET™ terminals and have conducted successful in-field demonstrations for a number of customers.

Although still difficult to predict, we expect that revenues in this segment for the second and third quarters of fiscal 2022 will approximate the amount we achieved during the first quarter of fiscal 2022.

Thereafter, this segment is expected to benefit from higher margin programs, including the receipt of new orders for the Comtech COMET™ and other troposcatter solutions.

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

and international government customers.

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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 April 30, 2021 and 2020 are as follows:

Three months ended April 30,

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

Three months ended October 31,

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 11.4% 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 April 30, 2020.

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

Included in domestic sales are sales to Verizon, which accounted for 11.7% and 12.5% of consolidated net sales for the three months ended October 31, 2021 and 2020, respectively.

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

domestic companies for inclusion in products that are sold to international customers) were $25.0 million and $34.6 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 the three months ended April 30, 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 October 31, 2021 and 2020.

Gross Profit.

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 was $41.7 million and $50.2 million for the three months ended October 31, 2021 and 2020, respectively, a decrease of $8.5 million.

Gross profit, as a percentage of consolidated net sales, for the three months ended October 31, 2021 was 35.7% as compared to 37.1% for the three months ended October 31, 2020.

Our gross profit (both in dollars and as a percentage of consolidated net sales) reflects the lower net sales this quarter as compared to the comparable period of the prior year and overall product mix changes, as discussed above.

In addition, our gross profit for the most recent period reflects start-up costs associated with the opening of our new high-volume technology manufacturing centers.

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 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.

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

The decrease primarily reflects lower levels of factory utilization, higher logistics and operational costs resulting from global supply chain constraints, and changes in products and services mix, including an increase in 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 October 31, 2021 decreased in comparison to the three months ended October 31, 2020.

The decrease primarily reflects lower net sales and changes in products and services mix.

Also, during the three months ended October 31, 2021, we incurred $0.7 million of incremental operating costs related to our antenna facility located 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 COVID-19 and the shut-down in fiscal 2021.

Included in consolidated cost of sales for the three months ended October 31, 2021 and 2020 are provisions for excess and obsolete inventory of $1.2 million and $1.0 million, respectively.

As discussed in "Item 2.

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Selling, General and Administrative Expenses .

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.

Selling, general and administrative expenses were $28.2 million and $27.5 million for the three months ended October 31, 2021 and 2020, respectively, representing an increase of $0.7 million, or 2.5%.

As a percentage of consolidated net sales, selling, general and administrative expenses were 24.1% and 20.3% for the three months ended October 31, 2021 and 2020, respectively.

During the three months ended October 31, 2021, we incurred $0.7 million of restructuring costs to streamline our operations, including costs related to the ongoing relocation of certain of our satellite earth station production facilities to a new 146,000 square foot facility in Chandler, Arizona.

There were no such costs in the three months ended October 31, 2020.

Excluding restructuring costs, selling, general and administrative expenses for the three months ended October 31, 2021 would have been $27.5 million, or 23.6% of consolidated net sales.

The increase in our selling, general and administration expenses, as a percentage of consolidated net sales, is due to lower consolidated net sales, as discussed above.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $0.8 million in the three months ended October 31, 2021 as compared to $0.5 million in the three months ended October 31, 2020.

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

Research and Development Expenses.

Research and development expenses were $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.

Research and development expenses were $12.5 million and $11.6 million for the three months ended October 31, 2021 and 2020, respectively, representing an increase of $0.9 million, or 7.8%.

As a percentage of consolidated net sales, research and development expenses were 10.7% and 8.6% for the three months ended October 31, 2021 and 2020, respectively.

For the three months ended October 31, 2021 and 2020, research and development expenses of $11.3 million and $9.4 million, respectively, related to our Commercial Solutions segment, and $1.1 million and $2.1 million, respectively, related to our Government Solutions segment.

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

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

During 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.

During the three months ended October 31, 2021 and 2020, customers reimbursed us $2.6 million and $3.4 million, respectively, which is not reflected in the reported research and development expenses but is included in net sales with the related costs included in cost of sales.

Amortization of Intangibles .

Amortization relating to intangible assets with finite lives was $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.

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 October 31, 2021 and $5.6 million (of which $4.3 million was for the Commercial Solutions segment and $1.3 million was for the Government Solutions segment) for the three months ended October 31, 2020.

Proxy Solicitation Costs .

During the three months ended October 31, 2021, we incurred $2.2 million of proxy solicitation costs (including legal and advisory fees) in our unallocated segment as a result of a proxy contest initiated by a shareholder during the most recently completed fiscal quarter.

There were no similar costs in the comparable period of the prior year.

Due to the ongoing nature of the proxy contest, we anticipate incurring similar proxy solicitation and related costs in our second quarter of fiscal 2022.

Acquisition Plan Expenses.

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.

During the three months ended October 31, 2020, we incurred $91.2 million of acquisition plan expenses, of which $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.

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.

There were no similar costs incurred during the three months ended October 31, 2021.

Operating Loss.

Operating loss for the three months ended October 31, 2021 was $6.5 million as compared to an operating loss of $85.7 million for the three months ended October 31, 2020.

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

Three months ended April 30,

Three months ended October 31,

2021 2020 2021 2020 2021 2020 2021 2020

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Percentage of related

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;

net sales 2.8 % 10.8 % NA 4.9 % NA NA NA NA

Our GAAP operating loss of $6.5 million for the three months ended October 31, 2021 reflects:

(i) $2.2 million of proxy solicitation costs;

(ii) $0.7 million of restructuring costs;

(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.

and (iii) $0.7 million of incremental operating costs due to the impact of COVID-19, as discussed above.

Excluding such costs, our consolidated operating loss would have been $3.0 million.

Our GAAP operating loss of $85.7 million for the three months ended October 31, 2020 reflects $91.2 million of acquisition plan expenses, as discussed above.

Excluding such costs, our consolidated operating income for the three months ended October 31, 2020 would have been $5.5 million, or 4.0% of consolidated net sales.

The decrease in operating income from $5.5 million to an operating loss of $3.0 million in the most recent quarter was due primarily to lower consolidated net sales and a lower gross profit percentage, as discussed above.

Operating income (loss) by reportable segment is further discussed below.

The decrease in our Commercial Solutions segment operating income, both in dollars and as a percentage of the related segment net sales, for the three months ended October 31, 2021 was primarily due to lower net sales and gross profit percentage, higher research and development expenses and $0.8 million of restructuring costs, as discussed above.

The decrease in our Government Solutions segment operating income for the three months ended October 31, 2021 was driven primarily by lower net sales and gross profit percentage, as discussed above.

The decrease in unallocated expenses for the three months ended October 31, 2021 as compared to the three months ended October 31, 2020 was due primarily to no acquisition plan expenses incurred during the most recently completed fiscal quarter, as discussed above.

Amortization of stock-based compensation was $0.9 million and $0.7 million, respectively, for the three months ended October 31, 2021 and 2020.

Excluding the impact of proxy solicitation costs of $2.2 million and acquisition plan expenses of $92.2 million in their respective periods, unallocated expenses were $5.1 million and $4.9 million, respectively, for the three months ended October 31, 2021 and 2020.

It is difficult to predict GAAP operating income in fiscal 2022 as it will be impacted by both start-up expenses and restructuring costs associated with the opening of Comtech’s new high-volume technology manufacturing centers, COVID-19 related costs, proxy solicitation costs and expenses associated with the CEO transition that was announced in October 2021.

Interest Expense and Other.

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%.

Interest expense was $1.6 million and $2.3 million for the three months ended October 31, 2021 and 2020, respectively.

Interest expense for the three months ended October 31, 2020 includes $1.2 million of incremental interest expense related to a now terminated financing commitment letter.

Our effective interest rate (including amortization of deferred financing costs) in the three months ended October 31, 2021 was approximately 2.9%.

Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our existing Credit Facility approximates 2.1%.

Interest (Income) and Other.

Interest (income) and other for both the three months ended April 30, 2021 and 2020 was nominal.

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

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

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 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 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.

Change in Fair Value of Convertible Preferred Stock Purchase Option Liability.

During the three months ended October 31, 2021, we recorded a $0.3 million non-cash benefit from the remeasurement of the convertible preferred stock purchase option liability.

See "Notes to Condensed Consolidated Financial Statements - Note (17) - Convertible Preferred Stock" for more information.

Benefit from Income Taxes.

For the three months ended October 31, 2021 and 2020, we recorded a tax benefit of $2.1 million and $2.2 million, respectively.

Our effective tax rate (excluding discrete tax items) for the three months ended October 31, 2021 and 2020 was 21.00% and 13.75%, respectively.

The increase is primarily due to expected product and geographical mix changes reflected in our Business Outlook for Fiscal 2022.

During the three months ended October 31, 2021, we recorded a net discrete tax benefit of $0.4 million, primarily related to the remeasurement of certain deferred tax items as a result of restructuring activities taken during the quarter.

During the three months ended October 31, 2020, we recorded a net discrete tax expense of $0.2 million, primarily related to stock-based awards that were settled during the quarter.

federal income tax returns for fiscal 2018 through 2020 are subject to potential future IRS audit.

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

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.

Net Loss Attributable to Common Stockholders.

During the three months ended October 31, 2021 and 2020, the consolidated net loss attributable to common stockholders was $11.2 million and $85.8 million, respectively.

Adjusted EBITDA.

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,

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

Three months ended October 31,

2021 2020 2021 2020 2021 2020 2021 2020

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Interest (income) and other — 0.1 0.3 — — — 0.2 0.1

— 0.1 0.1 — (0.4) — (0.3) 0.1

Change in fair value of convertible preferred stock purchase option liability — — — — (0.3) — (0.3) —

Interest expense — — 0.1 0.1 1.5 2.2 1.6 2.3

Amortization of stock-based compensation — — — — 0.9 0.7 0.9 0.7

— — — — 1.2 1.0 1.2 1.0

Amortization of intangibles 4.3 4.3 1.1 1.3 — — 5.3 5.6

4.2 4.3 1.1 1.2 — — 5.3 5.5

Depreciation 1.8 2.0 0.4 0.4 0.1 0.2 2.2 2.6

Estimated contract settlement costs

— 0.5 — — — — — 0.5

Proxy solicitation costs — — — — 2.2 — 2.2 —

Acquisition plan expenses — (1.1) — — — 92.2 — 91.2

— 0.7 — — 5.3 5.3 5.3 6.0

Restructuring costs 0.8 — (0.1) — — — 0.7 —

COVID-19 related costs — — 0.7 — — — 0.7 —

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

Adjusted EBITDA $ 9.1 14.0 0.6 4.3 (4.2) (4.0) $ 5.5 14.3

Percentage of related net sales 11.5 % 17.1 % 1.6 % 8.1 % NA NA 4.7 % 10.6 %

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.

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the three months ended October 31, 2021 as compared to the three months ended October 31, 2020 is primarily attributable to lower consolidated net sales and gross profit percentage, and higher 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, for the three months ended October 31, 2021 as compared to the three months ended October 31, 2020 is primarily due to lower segment net sales and gross profit percentage, as well as higher research and development expenses, 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, for the three months ended October 31, 2021 as compared to the three months ended October 31, 2020 is driven primarily by lower segment net sales and gross profit percentage, as discussed above.

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

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

A reconciliation of our fiscal 2021 GAAP Net Loss to Adjusted EBITDA is shown in the table below (numbers in the table may not foot due to rounding):

($ in millions) Fiscal Year 2021

Reconciliation of GAAP Net Income to Adjusted EBITDA:

Net income $ 7.0

Provision for income taxes 2.3

Reconciliation of GAAP Net Loss to Adjusted EBITDA:

Net loss $ (73.5)

Benefit from income taxes (1.5)

Interest (income) and other (0.1)

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Depreciation 9.4

Estimated contract settlement costs 0.4

Acquisition plan expenses 100.3

Adjusted EBITDA $ 77.8

Reconciliations of our GAAP consolidated operating income (loss), net income (loss) and net income (loss) per diluted share for the three months ended 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

Diluted Share

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported

$ 2.4 $ 0.8 $ 0.03

Acquisition plan expenses

Restructuring costs 2.8

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Strategic emerging technology costs 0.3

Net discrete tax expense

Non-GAAP measures $ 8.9 $ 6.8 $ 0.26

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

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported

$ (3.1) $ (4.0) $ (0.16)

Acquisition plan expenses

Estimated contract settlement costs

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

Adjusted EBITDA $ 76.5

Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before income taxes, interest (income) and other, change in fair value of the convertible preferred stock purchase option liability, 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, proxy solicitation 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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We believe that investors and analysts may use Adjusted EBITDA, along with other information contained in our SEC filings, in assessing our performance and comparability of our results with other companies.

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

Our Non-GAAP measures for consolidated operating income (loss), net income (loss) attributable to common stockholders and net income (loss) per diluted common share reflect the GAAP measures as reported, adjusted for certain items as described above.

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

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

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

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

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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 $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 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;

(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, 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 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.

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

Government Solutions

Net sales in our Government Solutions segment were $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.

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 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.

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 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;

(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;

(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;

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.

and international government customers.

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

Geography and Customer Type

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

Nine months ended April 30,

2021 2020 2021 2020 2021 2020

Commercial Solutions Government Solutions Consolidated

government 15.8 % 15.3 % 68.7 % 69.1 % 37.1 % 38.1 %

Domestic 58.7 % 59.1 % 13.2 % 11.4 % 40.4 % 38.8 %

74.5 % 74.4 % 81.9 % 80.5 % 77.5 % 76.9 %

International 25.5 % 25.6 % 18.1 % 19.5 % 22.5 % 23.1 %

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

Sales to U.S.

government customers include sales to the U.S.

Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors.

Domestic sales include sales to commercial customers, as well as to U.S.

state and local governments.

Included in domestic sales are sales to Verizon, 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 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 the nine months ended April 30, 2021 and 2020.

Gross Profit.

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 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 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.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Provisions for Excess and Obsolete Inventory," we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends.

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

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $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 $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 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 $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 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.

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

Operating (Loss) Income.

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:

Nine months ended April 30,

2021 2020 2021 2020 2021 2020 2021 2020

($ in millions) Commercial Solutions Government Solutions Unallocated Consolidated

Operating income (loss) $ 27.4 26.5 8.8 16.3 (114.2) (30.4) $ (78.0) 12.4

Percentage of related

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

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;

(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 $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 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.

(Benefit from) Provision for Income Taxes.

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 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.

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

Net (Loss) Income.

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 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

($ in millions) Commercial Solutions Government Solutions Unallocated Consolidated

Net income (loss) $ 26.6 26.0 9.1 16.4 (116.6) (36.5) $ (80.8) 5.9

Provision for (benefit from) income taxes 0.9 0.4 (0.5) (0.1) (2.4) 1.2 (2.1) 1.5

Interest (income) and other — 0.1 0.1 — (0.3) — (0.3) —

Interest expense — — 0.1 — 5.2 4.9 5.2 4.9

Amortization of stock-based compensation — — — — 3.2 3.1 3.2 3.1

Amortization of intangibles 12.8 13.0 2.9 2.9 — — 15.7 16.0

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

Restructuring costs 1.2 — — — — — 1.2 —

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 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.

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

($ in millions) Fiscal Year 2020

Reconciliation of GAAP Net Income to Adjusted EBITDA:

Net income $ 7.0

Provision for income taxes 2.3

Interest (income) and other (0.2)

Interest expense 6.1

Amortization of stock-based compensation 9.3

Amortization of intangibles 21.6

Depreciation 10.6

Estimated contract settlement costs 0.4

Acquisition plan expenses 20.8

Adjusted EBITDA $ 77.8

Reconciliations of our GAAP consolidated operating income (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

Diluted Share

Reconciliations of our GAAP consolidated operating (loss) income, net (loss) income attributable to common stockholders and net (loss) income per diluted common share for the three months ended October 31, 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).

Non-GAAP net (loss) income attributable to common stockholders and EPS reflect non-GAAP provisions for income taxes based on year-to-date results, as adjusted for the non-GAAP reconciling items included in the tables below.

We evaluate our non-GAAP effective income tax rate on an ongoing basis, and it can change from time to time.

Our non-GAAP effective income tax rate can differ materially from our GAAP effective income tax rate.

In addition, due to the GAAP net loss for the period, non-GAAP EPS adjustments for the three months ended October 31, 2020 were computed using 25,315,000 weighted average diluted shares outstanding during the period.

Three months ended October 31, 2021

($ in millions, except for per share amount) Operating Loss Net Loss Attributable to Common Stockholders Net Loss per Diluted Common Share

Reconciliation of GAAP to Non-GAAP Earnings:

1 unchanged sentence

$ (6.5) $ (11.2) $ (0.43)

Acquisition plan expenses

99.8 96.4 3.70

Adjustments to reflect redemption value of convertible preferred stock

Proxy solicitation costs

Restructuring costs

COVID-19 related costs

Strategic emerging technology costs 0.3 0.3 0.01

Interest expense — 1.0 0.04

Change in fair value of convertible preferred stock purchase option liability — (0.3) (0.01)

Net discrete tax benefit

1 unchanged sentence

Non-GAAP measures $ (3.0) $ (4.0) $ (0.15)

Nine months ended April 30, 2020

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

Diluted Share

Three months ended October 31, 2020

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

Reconciliation of GAAP to Non-GAAP Earnings:

3 unchanged sentences

91.2 88.3 3.49

Estimated contract settlement costs

Net discrete tax benefit

— (0.8) (0.03)

Interest expense

Net discrete tax expense

Non-GAAP measures $ 5.5 $ 3.7 $ 0.15

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

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

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

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

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.

LIQUIDITY AND CAPITAL RESOURCES

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 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.

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.

Our cash and cash equivalents were $30.9 million at both October 31, 2021 and July 31, 2021 and reflect the following:

• Net cash provided by operating activities was $4.8 million for the three months ended October 31, 2021 as compared to net cash used in operating activities of $74.2 million for the three months ended October 31, 2020.

During the three months ended October 31, 2020, 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 used in operating activities would have been $4.2 million.

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

• Net cash used in investing activities for the three months ended October 31, 2021 and 2020 was $3.6 million and $0.9 million, respectively.

Net cash used in the three months ended October 31, 2021 primarily reflects capital expenditures to build-out cloud-based computer networks to support our recent NG-911 contract wins and capital investments and tenant improvements in connection with the opening of our new high-volume technology manufacturing centers.

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

• Net cash used in financing activities was $1.1 million for the three months ended October 31, 2021 as compared to net cash provided by financing activities of $59.7 million for the three months ended October 31, 2020.

During the three months ended October 31, 2021, we received an aggregate of $100.0 million in proceeds related to the issuance of a new series of Convertible Preferred Stock to certain investors.

During the three months ended October 31, 2021, we also made net payments under our Credit Facility of $93.0 million as compared to net borrowings under our Credit Facility of $67.5 million during the three months ended October 31, 2020, primarily related to the $70.0 million payment we made to Gilat.

During the three months ended October 31, 2021 and 2020, we paid $2.9 million and $5.2 million, respectively, in cash dividends to our stockholders.

We also made $4.7 million and $2.7 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during the three months ended October 31, 2021 and 2020, respectively.

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

The Convertible Preferred Stock is discussed below and in " Notes to Condensed Consolidated Financial Statements – Note (17) – Convertible Preferred Stock.

Our investment policy relating to our cash and cash equivalents is intended to minimize principal loss while at the same time maximize the income we receive without significantly increasing risk.

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

As of April 30, 2021, our material short-term cash requirements primarily consist of:

(i) interest payments under our Credit Facility;

(ii) payments related to lease commitments;

(iii) our ongoing working capital needs, including income tax payments;

and (iv) payment of accrued quarterly dividends.

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.

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

(i) capital investments and tenant improvements in connection with the opening of our two new high-volume technology manufacturing centers;

(ii) interest payments under our Credit Facility;

(iii) payments related to lease commitments;

(iv) our ongoing working capital needs, including income tax payments;

(v) payment of accrued quarterly dividends on shares of our common stock;

and (vi) a cumulative 6.5% annual dividend on our Convertible Preferred Stock, which is payable in kind or in cash at our election.

In addition to capital investments for our two new high-volume manufacturing centers, we continue to make significant capital expenditures to build-out cloud-based computer networks to support our previously announced NG-911 contract wins for the states of Pennsylvania, South Carolina and Arizona.

Aggregate capital investments for these and other initiatives in fiscal 2022 are expected to approximate $30.0 million.

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 the stock purchase agreement, during fiscal 2021, the initial up-front payment of approximately $24.0 million was paid mostly in shares of our common stock, with a nominal amount paid in cash.

In August 2021, approximately $4.0 million of the $5.0 million hold back amount previously placed in escrow at closing was paid to the seller in shares of our common stock, as the conditions pursuant to the stock purchase agreement were met.

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

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.

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

The terms of the stock purchase agreement provide an ability for us to substitute cash in lieu of the common stock that was initially placed into escrow.

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

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

There were no repurchases of our common stock during 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.

Our material long-term cash requirements primarily consist of mandatory interest payments pursuant to our Credit Facility and lease commitments.

There were no repurchases of our common stock during the three months ended October 31, 2021 and 2020.

On October 4, 2021, our Board of Directors declared a dividend of $0.10 per common share, which was paid on November 12, 2021.

On December 9, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on February 18, 2022 to stockholders of record at the close of business on January 19, 2022.

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

Our material long-term cash requirements primarily consist of mandatory interest payments pursuant to our Credit Facility, a cumulative 6.5% annual dividend related to our Convertible Preferred Stock, which is payable in kind or in cash at our election, and lease commitments.

We have historically met both our short-term and long-term cash requirements with funds provided by a combination of cash and cash equivalent balances, cash generated from operating activities and cash generated from financing transactions.

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(i) a revolving loan facility ("Revolving Loan Facility") with a borrowing limit of $300.0 million;

(ii) an accordion feature allowing us to borrow up to an additional $250.0 million;

(ii) an accordion feature allowing us to make a request to borrow up to an additional $250.0 million subject to satisfaction of specified conditions, including approval by our lenders;

(iii) a $35.0 million letter of credit sublimit;

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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 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.

As of October 31, 2021, the amount outstanding under our Credit Facility was $108.0 million, which is reflected in the non-current portion of long-term debt on our Condensed Consolidated Balance Sheet.

At October 31, 2021, we had $1.5 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 three months ended October 31, 2021, we had outstanding balances under the Credit Facility ranging from $100.0 million to $212.0 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 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").

As of October 31, 2021, our Secured Leverage Ratio was 1.57x TTM Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA.

Our Interest Expense Coverage Ratio as of October 31, 2021 was 12.78x 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 and foreign subsidiaries (the "Guarantors").

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

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

Convertible Preferred Stock

On October 18, 2021, we entered into a Subscription Agreement (the “Subscription Agreement”) with certain affiliates and related funds of White Hat Capital Partners LP and Magnetar Capital LLC (collectively, the “Investors”), relating to the issuance and sale of up to 125,000 shares of a new series of the Company's Convertible Preferred Stock, par value $0.10 per share (the "Convertible Preferred Stock"), for an aggregate purchase price of up to $125.0 million, or $1,000 per share.

On October 19, 2021 (the “Initial Closing Date”), pursuant to the terms of the Subscription Agreement, the Investors purchased an aggregate of 100,000 shares of Convertible Preferred Stock (the “Initial Issuance”) for an aggregate purchase price of $100.0 million.

The Investors have a one-time option exercisable at any time on or prior to March 31, 2023 to purchase additional shares of Convertible Preferred Stock for an aggregate purchase price of $25.0 million.

This purchase option is commonly referred to as a “Green Shoe” and together with the Initial Issuance, is collectively referred to as the “Issuance”.

The initial conversion price for the shares issued in the Initial Issuance is $24.50, subject to an increase in the conversion price to $26.00 upon the achievement of $76.0 million of Adjusted EBITDA (as defined in the Subscription Agreement) for our fiscal 2022 year, and the initial conversion price for the Green Shoe is $32.00.

The Convertible Preferred Stock ranks senior to the shares of our common stock, with respect to the payment of dividends and the distribution of assets upon a liquidation, dissolution or winding up of the Company.

The Convertible Preferred Stock initially had a liquidation preference of $1,000 per share with each share entitled to a cumulative dividend (the “Dividend”) at the rate of 6.5% per annum, compounding quarterly, paid-in-kind or paid in cash, at our election.

For any quarter in which we elect not to pay the Dividend in cash with respect to a share of Convertible Preferred Stock, such Dividend becomes part of the liquidation preference of such share.

In addition, no dividend or other distribution on our common stock in excess of $0.10 per share per quarter will be declared or paid on the common stock unless, at the time of such declaration and payment, an equivalent dividend or distribution is declared and paid on the Convertible Preferred Stock (the “Participating Dividend”), provided that in the case of any such dividend in the form of cash, in lieu of a cash payment, such Participating Dividend will become part of the liquidation preference of the shares of the Convertible Preferred Stock.

Such Participating Dividend results in the Convertible Preferred Stock meeting the definition of a "participating security" for purposes of our earnings per share calculations.

The Convertible Preferred Stock is convertible into shares of common stock at the option of the holders thereof at or following the earlier to occur of (a) the filing of our Annual Report on Form 10-K for the fiscal year ending July 31, 2022, but no later than October 19, 2022 and (b) immediately prior to (and conditioned upon) the consummation of a Change of Control.

At any time after October 19, 2024, we have the right to mandate the conversion of the Convertible Preferred Stock, subject to certain restrictions, based on the price of the common stock in the preceding thirty trading days.

Holders of the Convertible Preferred Stock are entitled to vote with the holders of the common stock on an as-converted basis, as well as are entitled to a separate class vote with respect to, among other things, amendments to our organizational documents that have an adverse effect on the Convertible Preferred Stock, authorizations or issuances of securities of the Company, the payment of dividends other than dividends on common stock in the ordinary course consistent with past practice on a quarterly basis in an amount not to exceed our current dividend rate of $0.10 per share per quarter, related party transactions, repurchases or redemptions of securities of the Company (other than the repurchase of up to $25,000,000 of shares of common stock), dispositions of businesses or assets, the incurrence of indebtedness and certain amendments or extensions of our existing Credit Facility.

Holders have the right to require the Company to repurchase such holder's Convertible Preferred Stock on a date occurring either (a) on or after October 19, 2026 (the “Optional Repurchase Trigger Date”) at a price equal to the liquidation preference or (b) in connection with a conversion of Convertible Preferred Stock, pursuant to which the number of shares of common stock issuable upon such conversion would exceed 19.99% of the issued and outstanding shares of common stock as of October 18, 2021 (such excess shares, "Excess Conversion Shares"), at any time after the date that is 91 days after the maturity date of the Company's existing Credit Facility, at a price per share equal to the number of Excess Conversion Shares multiplied by the Last Reported Sales Price (as defined) of common stock on the applicable conversion date.

In addition, each holder will have the right to cause the Company to repurchase its shares of Convertible Preferred Stock in connection with a Change of Control, at a price equal to the liquidation preference.

Off-Balance Sheet Arrangements

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.

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

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

We do not expect that these commitments, as of 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:

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

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

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

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Contractual cash obligations $ 175,877 10,726 127,998 12,224 24,929

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.

In August 2021, approximately $4.0 million of the $5.0 million hold back amount previously placed into escrow at closing was paid to the seller in shares of our common stock, as the conditions pursuant to the stock purchase agreement were met.

As discussed further in " Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility ," our Credit Facility provides a senior secured loan facility of up to $550.0 million consisting of:

(i) a revolving loan facility ("Revolving Loan Facility") with a borrowing limit of $300.0 million;

(ii) an accordion feature allowing us to borrow up to an additional $250.0 million;

(ii) an accordion feature allowing us to make a request to borrow up to an additional $250.0 million subject to satisfaction of specified conditions including approval by our lenders;

(iii) a $35.0 million letter of credit sublimit;

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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.

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.

At October 31, 2021, we have approximately $1.5 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.

As discussed in " Notes to Condensed Consolidated Financial Statements - Note (17) - Convertible Preferred Stock ," the holders of the Convertible Preferred Stock have the option to redeem such shares for cash commencing in October 2026.

As the Convertible Preferred Stock are not mandatorily redeemable for cash, the redemption value of such shares are not presented in the table above.

As discussed further in " Notes to Condensed Consolidated Financial Statements - Note (18) - Stockholders’ Equity ," on December 9, 2021, our Board of Directors declared a dividend of $0.10 per common share, payable on February 18, 2022 to stockholders of record at the close of business on January 19, 2022.

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

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

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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 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.

We have an employment agreement and change of control agreement with Fred Kornberg, our Chief Executive Officer and Chairman of the Board.

The employment agreement generally provides for an annual salary and bonus award.

We have also entered into change of control 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 a termination of the employee.

In October 2021, we announced that our Board of Directors has appointed Michael D.

Porcelain, our President and Chief Operating Officer, to be CEO by the end of calendar 2021, at which point Mr.

Porcelain will also join our Board of Directors and continue as President.

Kornberg will serve as non-executive Chairman and is expected to take on a technology advisory role.

Costs associated with this leadership transition will be announced once they are finalized.

Our Condensed Consolidated Balance Sheet at October 31, 2021 includes total liabilities of $9.4 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 the nine months ended April 30, 2021, we adopted:

• FASB ASU No.

2016-13, which requires companies to utilize an impairment model (current expected credit loss ("CECL")) for most financial assets measured at amortized cost and certain other financial instruments, which include, but are not limited to trade receivables and contract assets.

This accounting standard replaced the incurred loss model with a model that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate those losses.

On August 1, 2020, we adopted this ASU on a modified-retrospective basis and recorded a $0.2 million decrease to opening retained earnings.

• FASB ASU No.

2018-13, which modifies the disclosure requirements for fair value measurements in Topic 820.