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Item 2. Management’s Discussion and Analysis

2023-12-07 compared with 2023-06-08 · 257 added, 464 removed, 260 unchanged (73% of the section changed)

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this Quarterly Report on Form 10-Q contains forward-looking statements.

Certain information in this Quarterly Report on Form 10-Q contains, and oral statements made by our representatives from time to time may contain, forward-looking statements.

Forward-looking statements can be identified by words such as:

"anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "plan," "potential," "predict," "project," "seek," "should," "strategy," "target," "will," "would," and similar references to future periods.

Examples of forward-looking statements include, among others, statements we make regarding our future performance and financial condition, plans and objectives of our management and our assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under our control which may cause our actual results, future performance and financial condition, and achievement of our plans and objectives of our management to be materially different from the results, performance or other expectations implied by these forward-looking statements.

"anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "outlook," "intend," "likely," "may," "plan," "potential," "predict," "project," "seek," "should," "strategy," "target," "will," "would," and similar references to future periods.

Examples of forward-looking statements include, among others, statements we make regarding our future performance and financial condition, plans to address our ability to continue as a going concern, plans and objectives of our management and our assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under our control which may cause our actual results, future performance and financial condition, and achievement of our plans and objectives of our management to be materially different from the results, performance or other expectations implied by these forward-looking statements.

These factors include, among other things:

our ability to access capital and liquidity so that we are able to continue as a going concern;

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

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

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

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

the risk that we will be unsuccessful in implementing our "One Comtech" transformation and integration of individual businesses into two segments;

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changing customer demands and or procurement strategies;

changes in prevailing economic and political conditions, including as a result of Russia's military incursion into Ukraine;

changes in prevailing economic and political conditions, including as a result of Russia's military incursion into Ukraine and the Israel-Hamas war;

changes in the price of oil in global markets;

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risks associated with our legal proceedings, customer claims for indemnification, and other similar matters;

risks associated with our obligations under our credit facility;

risks associated with our obligations under our credit facility and our ability to refinance our credit facility;

risks associated with our large contracts;

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

risks associated with supply chain disruptions;

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

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This includes the critical communications infrastructure that people, businesses, and governments rely on when durable, trusted connectivity is required, no matter where they are – on land, at sea, or in the air – and no matter what the circumstances – from armed conflict to a natural disaster.

Our solutions fulfill our customers’ needs for secure wireless communications in 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 anticipate future growth in our business due to increasing demand for global voice, video and data usage in recent years.

We provide our solutions to both commercial and governmental customers.

In the fourth quarter of fiscal 2022, we revised our business segments to better align them with end-markets for our products and services.

Our businesses have been re-organized into two new reportable segments:

“Satellite and Space Communications” and “Terrestrial and Wireless Networks.” All current and prior periods reflected in this Form 10-Q have been presented according to these two segments, unless otherwise noted.

For more information and for financial information about our business segments, including net sales, operating income, Adjusted EBITDA (a non-GAAP financial measure), total assets, and our operations outside the United States, refer to " Notes to Consolidated Financial Statements - Note (13) Segment Information" included in "Part I - Item 1 - Notes to Condensed Consolidated Financial Statements (Unaudited).

Our solutions are designed to fulfill our customers’ needs for secure wireless communications in 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 anticipate future growth in our business due to a trend of increasing demand for global voice, video and data usage in recent years, upgraded ground stations and related services resulting from the large quantities of satellites anticipated to be launched for new LEO and MEO constellations, digitization and virtualization of modems, the resurgence of troposcatter as a viable form of primary or backup communications, enhanced location positioning combined with data-rich geospatial intelligence, and the growth of 988 networks.

We provide our solutions to both commercial and governmental customers within the converging satellite and space communications and terrestrial and wireless networking markets.

We manage our business through two reportable operating segments:

• Satellite and Space Communications - is organized into four technology areas:

satellite modem technologies and amplifier technologies, troposcatter and SATCOM solutions, space components and antennas, and high-power amplifiers and switches technologies.

• Satellite and Space Communications - is organized into three technology areas:

satellite modem technologies and amplifier technologies, troposcatter and SATCOM solutions and space components and antennas.

This segment offers customers:

satellite ground station technologies, services and system integration that facilitate the transmission of voice, video and data over GEO, MEO and LEO satellite constellations, including solid-state and traveling wave tube power amplifiers, modems, VSAT platforms and frequency converters;

satellite ground station technologies, services and system integration that facilitate the transmission of voice, video and data over GEO, MEO and LEO satellite constellations, including traveling wave tube power amplifiers, modems, VSAT platforms and frequency converters;

satellite communications and tracking antenna systems, including high precision full motion fixed and mobile X/Y tracking antennas, RF feeds, reflectors and radomes;

over-the-horizon microwave equipment that can transmit digitized voice, video, and data over distances up to 200 miles using the troposphere and diffraction, including the Comtech COMET™;

solid-state, RF microwave high-power amplifiers and control components designed for radar, electronic warfare, data link, medical and aviation applications;

and procurement and supply chain management of high reliability Electrical, Electronic and Electromechanical ("EEE") parts for satellite, launch vehicle and manned space applications.

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Impairment of Goodwill and Other Intangible Assets .

As of April 30, 2023, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $347.7 million (of which $173.6 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Terrestrial and Wireless Networks segment).

Additionally, as of April 30, 2023, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $231.3 million (of which $66.9 million relates to our Satellite and Space Communications segment and $164.4 million relates to our Terrestrial and Wireless Networks segment).

As of October 31, 2023, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $333.1 million (of which $159.0 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Terrestrial and Wireless Networks segment).

Additionally, as of October 31, 2023, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $220.6 million (of which $63.4 million relates to our Satellite and Space Communications segment and $157.2 million relates to our Terrestrial and Wireless Networks segment).

For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our Satellite and Space Communications and Terrestrial and Wireless Networks segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values.

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Our deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and applying enacted tax rates expected to be in effect for the year in which we expect the differences to reverse.

Our provision for income taxes is based on domestic (including federal and state) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives.

We recognize potential interest and penalties related to uncertain tax positions in income tax expense.

Our provision for income taxes is based on domestic (including federal, state and local) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives.

federal government is our most significant income tax jurisdiction.

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For tax positions that are determined as "more likely than not" to be sustained upon examination, the tax benefit recognized is the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The development of valuation allowances for deferred tax assets and reserves for income tax positions requires consideration of timing and judgments about future taxable income, tax issues and potential outcomes, and are subjective critical estimates.

Valuation allowances are established, when necessary, to reduce net deferred tax assets to the amount "more likely than not" expected to be realized.

A portion of our deferred tax assets consist of federal research and experimentation tax credit carryforwards, some of which was acquired in connection with prior acquisitions.

No valuation allowance has been established on these deferred tax assets based on our evaluation that our ability to realize such assets has met the criteria of "more likely than not." We continuously evaluate additional facts representing positive and negative evidence in determining our ability to realize these deferred tax assets.

In certain circumstances, the ultimate outcome of exposures and risks involves significant uncertainties.

If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations and financial condition.

federal income tax returns for fiscal 2020 through 2022 are subject to potential future Internal Revenue Service ("IRS") audit.

None of our state income tax returns prior to fiscal 2018 are subject to audit.

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

We recognize potential interest and penalties related to uncertain tax positions in income tax expense.

On a quarterly basis, we assess the realizability of deferred tax assets, based on all available evidence, including historical taxable income and estimates about future taxable income, and valuation allowances are established, when necessary, to reduce net deferred tax assets to the amount "more likely than not" expected to be realized.

If actual outcomes differ materially from these subjective critical estimates, we will adjust these estimates in future periods, which could have a material impact on our results of operations and financial condition.

Research and Development Costs.

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We monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified.

In light of ongoing tight credit market conditions, we continue to see requests from our customers for higher credit limits and longer payment terms.

Because of our cash position and the nominal amount of interest we are earning on our cash and cash equivalents, we have, on a limited basis, approved certain customer requests.

In light of ongoing tight credit market conditions and high interest rates, we continue to see requests from our customers for higher credit limits and longer payment terms.

We have, on a limited basis, approved certain customer requests.

We continue to monitor our accounts receivable credit portfolio.

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

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

To-date, there has been no material changes in our credit portfolio as a result of the challenging business conditions.

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

Measurement of credit losses requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health of specific customers.

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

Third Quarter Highlights and Business Outlook

Financial highlights for the third quarter of fiscal 2023 include:

• Consolidated net sales were $136.3 million, up 1.9% sequentially from the second quarter of fiscal 2023 and up 11.6% from the third quarter of fiscal 2022;

• Gross margin was 31.7%, compared to 34.3% in our second quarter of fiscal 2023 and 38.2% in our third quarter of fiscal 2022;

First Quarter Highlights and Business Outlook

Financial highlights for the first quarter of fiscal 2024 include:

• Consolidated net sales were $151.9 million, up 2.1% sequentially from the fourth quarter of fiscal 2023 and up 15.9% from the first quarter of fiscal 2023;

• Gross margin was 31.5%, compared to 32.7% in our fourth quarter of fiscal 2023 and 35.7% in our first quarter of fiscal 2023;

• GAAP operating income of $2.1 million, compared to $1.1 million in our fourth quarter of fiscal 2023 and a GAAP operating loss of $9.7 million in the first quarter of fiscal 2023;

• GAAP net loss attributable to common stockholders was $3.3 million, and included $3.7 million of restructuring costs and $1.4 million of strategic emerging technology costs for next-generation satellite technology;

• GAAP EPS loss of $0.11 and Non-GAAP EPS income of $0.24;

• Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $12.5 million, or 9.2% of consolidated net sales, a sequential increase from the $11.3 million, or 8.5% of consolidated net sales for the second quarter of fiscal 2023;

• New bookings (also referred to as orders) of $102.8 million, representing a quarterly book-to-bill ratio of 0.75x (a measure defined as bookings divided by net sales);

• Backlog of $668.4 million as of April 30, 2023, compared to $702.0 million as of January 31, 2023 and $602.3 million as of April 30, 2022;

• Revenue visibility of approximately $1.1 billion.

• Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $18.4 million, or 12.1% of consolidated net sales, comparable to the $18.9 million, or 12.7% of consolidated net sales for the fourth quarter of fiscal 2023, and an increase from the $10.7 million, or 8.2% of consolidated net sales for the first quarter of fiscal 2023;

• New bookings (also referred to as orders) of $185.6 million, representing a quarterly book-to-bill ratio of 1.22x (a measure defined as bookings divided by net sales) and the highest level of quarterly bookings looking back over the past five fiscal quarters;

• Backlog of $695.9 million as of October 31, 2023, compared to $662.2 million as of July 31, 2023 and $668.2 million as of October 31, 2022;

• Revenue visibility of approximately $1.7 billion, an increase from the $1.1 billion as of July 31, 2023.

The $1.7 billion includes the $544.0 million U.S.

Army Global Field Service Representative (“GFSR”) contract and $48.6 million U.S.

Army Enterprise Digital Intermediate Frequency Multi-Carrier (“EDIM”) modem contract awarded to us in September 2023.

We measure this revenue visibility as the sum of our $695.9 million of funded backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders;

• Cash flows provided by operating activities of $16.6 million.

• Cash flows used in operating activities of $14.5 million.

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 April 30, 2023 and 2022" and "Comparison of the Results of Operations for the Nine Months Ended April 30, 2023 and 2022 ."

In August 2022, we announced that Ken Peterman was appointed President and CEO.

Peterman’s significant experience in satellite technology and decades of experience with U.S.

government contracting is expected to enhance our efforts to continually improve commercial success and shareholder value.

To advance our CEO’s initiatives to further strengthen and grow our business, we continue to move forward on the operational and cultural transformation that we call "One Comtech."

In our third quarter of fiscal 2023, as part of our comprehensive and company-wide "people strategy," we continued to enhance our leadership team with key appointments designed to maximize our ability to compete and deliver across our global market segments.

In April 2023, Donald Walther was appointed as Comtech’s new Chief Legal Officer and Nicole Robinson was appointed as Chief Strategy Officer.

Walther has significant technology and aerospace industry experience in both public and private companies in the commercial and defense sectors with his previous experience at ITT Inc.

and the Boeing Company.

He will focus on ensuring Comtech's competitive differentiation through contracts is preserved and protected.

Prior to joining Comtech, Ms.

Robinson served as President of Ursa Space Systems, a leading satellite intelligence and data analytics provider.

Robinson also served as Senior Vice President of Global Government for SES, one of the largest commercial satellite operators in the world.

Robinson will focus on creating and implementing priority space business pursuits;

oversee the development and implementation of new technologies;

orchestrate global growth initiatives and lead other priorities related to geospatial imagery and data, as well as space communications in both U.S.

and international markets.

Notably, our people strategy extends beyond the organic development of our talent pipeline and the addition of proven leaders to our team.

Our strategy also includes regular assessments of the capabilities, experiences and skill sets of our Board members to ensure continued alignment with our short and long-term goals and objectives.

To that end, we are very excited to have both Lieutenant General (Retired) Bruce T.

Crawford and the Honorable Ellen M.

Lord join our Board of Directors, effective June 15, 2023.

As planned, during the three months ended April 30, 2023, we completed our migration to our new 146,000 square-foot facility in Chandler, Arizona.

We also continued to integrate our individual businesses into two segments and improve operational performance.

This transformation has provided insight into opportunities to manage costs, streamline operations, improve efficiency, and accelerate decision making by eliminating management layers and other redundancies – resulting in a reduction in our workforce and the implementation of other lean initiatives during our third and fourth quarters of fiscal 2023.

Severance costs relating to these actions are not anticipated to be material to our results of operations.

We believe that these actions will further streamline and optimize our organization and cost structure as we approach the start of our fiscal 2024.

Over the past several months, we established EVOKE as Comtech’s innovation foundry, which is dedicated to creating and accelerating transformational changes in global technologies.

We believe that EVOKE will enhance our existing technologies and service offerings (e.g., cloud-native satellite ecosystems, 5G advanced services and “as-a-service” business models) as well as allow us to pioneer entirely new ideas and opportunities with the benefit of multiple perspectives, industry backgrounds and areas of expertise.

During our third quarter of fiscal 2023, we were pleased to announce that we added several new partners to EVOKE’s growing roster, including Aarna Networks, Descartes Labs, Inc.

and WishKnish Corp.

By combining Aarna Networks’ technologies with Comtech’s Dynamic Cloud Platform, the companies anticipate enabling customers to easily add and manage a variety of open architecture cloud-based applications across private, hybrid and public networks, in both terrestrial and non-terrestrial environments.

Descartes Labs will work with Comtech to infuse the power of artificial intelligence, machine learning, predictive intelligence and insight monitoring across Comtech’s product offerings.

We plan to collaborate with WishKnish on integrating highly secure, flexible distributed ledger (blockchain) technologies across diverse commercial and government applications.

As we enter the fourth quarter of fiscal 2023, business conditions continue to be challenging, and the operating environment is largely unpredictable, including factors such as inflation, rising interest rates, the repercussions of the military conflict between Russia and Ukraine and a potential global recession.

Order and production delays, disruptions in component availability, increased pricing both for labor and parts, lower levels of factory utilization and higher logistics and operational costs are also continuing to impact our business.

Nevertheless, despite these business conditions and resulting challenges and although we anticipate some variability from time to time as we move through our One Comtech transformational change, for our fourth quarter of fiscal 2023, we are targeting consolidated net sales to sequentially increase approximately 2.0% to 4.0% and for our consolidated Adjusted EBITDA margin to range between 9.5% and 10.5%.

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, 2023 and 2022 .”

Fiscal 2023 marked a year of tremendous change and accomplishments for our organization.

Led by a new management team and refreshed Board of Directors, as we entered fiscal 2024, we continued to implement many important lean initiatives and process improvement activities anticipated to drive sustainable, profitable growth in our business.

Several of these actions have already contributed to our improved financial performance, affording us the opportunity to report our second fiscal quarter of positive GAAP operating income since fiscal 2021.

We are greatly encouraged by the progress we have made through our One Comtech transformation, which gives us the confidence to expect, subject to the risks highlighted in this Form 10-Q and our other filings with the SEC, that our Business Outlook for Fiscal 2024 will be even better than fiscal 2023.

We base our enthusiasm about our future, in part, on our people as well as our recent large strategic contract wins, that serve to validate and reinforce our technology leadership positions in multiple growing end markets.

Taken together, we believe these significant, strategic contracts demonstrate our ability to outperform in every facet of our business.

In September 2023, we were awarded a large, multi-year GFSR contract by the U.S.

This contract has a total potential value of $544.0 million and is expected to contribute significantly to our net sales in the second half of our fiscal 2024.

Through this program, our Satellite and Space Communications segment will provide ongoing communications and IT infrastructure support for the U.S.

Army, Air Force, Navy, Marine Corps and NATO, enabling U.S.

and coalition forces to maintain robust, resilient and secure connectivity for global all-domain operations.

Foundational to this success:

Comtech’s professional engineering services and extensive portfolio of resilient, blended, smart-enabled technologies.

Also, in September 2023, our Satellite and Space Communications segment was honored to win a highly competitive $48.6 million contract to deliver next-generation EDIM modems for the U.S.

Army's satellite communications ("SATCOM") digitization and modernization programs.

The advanced, software defined EDIM modem is intended to:

support multiple satellite providers;

become one of the primary modems used for U.S.

military SATCOM, eventually replacing the Enhanced Bandwidth Efficient Modem ("EBEM");

and provide the U.S.

Army, Navy and Air Force with a digitized, hybrid satellite network architecture.

The EDIM modem would allow SATCOM users to easily roam across orbital regimes, blend capabilities from traditionally disparate networks and maintain assured, resilient connectivity in the most demanding of environments.

In October 2023, our Satellite and Space Communications segment was also awarded an order in excess of $20.0 million from our UK-based partners, Spectra Group.

The order will allow Spectra Group, the appointed regional distributor of our Compact Over-the-Horizon Transportable Terminal ("COMET"), to service multiple orders already received, and several expected follow-on orders from undisclosed customers in the NATO and European regions.

The COMET is designed to be easily integrated with other Department of Defense ("DoD") and coalition tactical, mobile, and fixed communications systems to provide resilient, secure beyond-line-of-sight ("BLOS") capabilities in some of the world’s most challenging environments.

Each COMET is an end-to-end, rapidly deployable BLOS system that utilizes a single fully integrated Troposcatter hub, which includes the company’s CS67PLUS Troposcatter radio.

The CS67PLUS is also embedded across each of Comtech’s next generation Family of Systems ("FoS").

Finally, in October 2023, our Terrestrial and Wireless Networks segment extended enhanced 911 call routing services, valued in excess of $30.0 million, for one of the largest wireless carriers in the United States.

We believe Comtech's position as a trusted leader in 911 and public safety positions us increasingly well when it comes to delivering similarly sophisticated solutions for 988 emergencies.

In addition to optimizing our cost structure, securing key contract wins and expanding our pipeline of opportunities, we have also been busy addressing strategic questions about the composition of our business and the strength of our balance sheet.

Following a careful review of our current business and product lines, considering the kind of software and solutions-based enterprise our customers need us to be in the future, we saw an opportunity to divest our solid-state RF microwave high power amplifiers and control components ("Power Systems Technology") product line.

We completed this divestiture on November 7, 2023.

We are also simultaneously addressing the need to refinance our Credit Facility, which expires in October 2024.

In connection with these ongoing initiatives, we are in discussions with various potential sources of capital, including our existing preferred shareholders, regarding alternative investment structures.

As we enter the second quarter of fiscal 2024, business conditions continue to be challenging, and the operating environment is largely unpredictable, including factors such as inflation, rising interest rates, the repercussions of the military conflicts in Russia and Ukraine and the Middle East, and a potential global recession.

Nevertheless, despite these business conditions and resulting challenges and although we anticipate some variability from time to time as we move through our One Comtech transformational change, for our second quarter of fiscal 2024, subject to the risks highlighted in this Form 10-Q and other filings with the SEC, we are targeting consolidated net sales to increase approximately 1.0% to 3.0% and for our consolidated Adjusted EBITDA margin to range between 11.0% and 13.0%.

We do not provide forward-looking guidance on a GAAP basis because we are unable to predict certain items contained in the GAAP measure without unreasonable efforts.

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Please refer to the discussion below under "Adjusted EBITDA" for more information.

As discussed in " Notes to Condensed Consolidated Financial Statements – Note (1) – General," and below under the heading “ Liquidity and Capital Resources ,” we have evaluated whether there are any conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern over the next twelve months.

Based on our current business plans, including projected capital expenditures, we do not believe our current level of cash and cash equivalents or liquidity expected to be generated from future cash flows will be sufficient to fund our operations over the next twelve months and repay current obligations under the Credit Facility, raising substantial doubt about the Company's ability to continue as a going concern as of the date of this Quarterly Report on Form 10-Q.

We are actively pursuing strategies to mitigate these conditions and events and alleviate such substantial doubt about our ability to continue as a going concern.

For more information, please see " Notes to Condensed Consolidated Financial Statements – Note (1) – General.”

Additional information related to our Business Outlook for fiscal 2024 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, 2023 and 2022" and " Comparison of the Results of Operations for the Nine Months Ended April 30, 2023 and 2022."

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2023 AND 2022

Consolidated net sales were $136.3 million and $122.1 million for the three months ended April 30, 2023 and 2022, respectively, representing an increase of $14.2 million, or 11.6%.

The period-over-period increase in net sales primarily reflects significantly higher net sales in our Satellite and Space Communications segment, as further discussed below.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended October 31, 2023 and 2022."

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2023 AND 2022

Consolidated net sales were $151.9 million and $131.1 million for the three months ended October 31, 2023 and 2022, respectively, representing an increase of $20.8 million, or 15.9%.

The period-over-period increase in consolidated net sales primarily reflects significantly higher net sales in our Satellite and Space Communications segment, as further discussed below.

Satellite and Space Communications

Net sales in our Satellite and Space Communications segment were $82.2 million for the three months ended April 30, 2023 as compared to $69.2 million for the three months ended April 30, 2022, an increase of $13.0 million or 18.9%.

Net sales for the three months ended April 30, 2023 primarily reflect significantly higher net sales of our troposcatter and SATCOM solutions to U.S.

government customers (including VSAT equipment for the U.S.

Army, progress toward delivering next-generation troposcatter terminals to the U.S.

Marine Corps and delivery of our COMET TM troposcatter terminals to an international customer), offset in part by lower sales of our satellite ground station technologies, solid-state, RF microwave high-power amplifiers and control components and high reliability EEE satellite-based space components.

Our Satellite and Space Communications segment represented 60.3% of consolidated net sales for the three months ended April 30, 2023 as compared to 56.6% for the three months ended April 30, 2022.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended April 30, 2023 was 0.94x.

Net sales in our Satellite and Space Communications segment were $102.4 million for the three months ended October 31, 2023 as compared to $80.9 million for the three months ended October 31, 2022, an increase of $21.5 million or 26.6%.

Related segment net sales for the three months ended October 31, 2023 primarily reflect significantly higher net sales of our troposcatter and SATCOM solutions to U.S.

government customers (including progress toward delivering next-generation troposcatter terminals to the U.S.

Marine Corps and VSAT equipment for the U.S.

Army), and sales of high power amplifiers and switches, X/Y antennas and satellite ground station technologies.

Net sales in the comparable period of the prior year included sales related to an FMS contract awarded to us for beyond line-of-sight communications terminals and upgrades to the Ukrainian government’s existing systems.

Our Satellite and Space Communications segment represented 67.4% of consolidated net sales for the three months ended October 31, 2023 as compared to 61.7% for the three months ended October 31, 2022.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended October 31, 2023 was 1.34x.

Bookings, sales and profitability in our Satellite and Space Communications segment can fluctuate substantially from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by our U.S.

and international government customers.

Also, net sales in future periods will no longer include our Power Systems Technology product line due to the divestiture of this product line on November 7, 2023.

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

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Terrestrial and Wireless Networks

Net sales in our Terrestrial and Wireless Networks segment were $54.1 million for the three months ended April 30, 2023, as compared to $53.0 million for the three months ended April 30, 2022, an increase of $1.1 million, or 2.1%.

Net sales in the three months ended April 30, 2023 reflect higher sales of our NG-911 solutions and services, offset in part by lower sales of our trusted location and messaging solutions.

Our Terrestrial and Wireless Networks segment represented 39.7% of consolidated net sales for the three months ended April 30, 2023 as compared to 43.4% for the three months ended April 30, 2022.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended April 30, 2023 was 0.47x.

Net sales in our Terrestrial and Wireless Networks segment were $49.5 million for the three months ended October 31, 2023, as compared to $50.3 million for the three months ended October 31, 2022, a decrease of $0.8 million, or 1.6%.

Related segment net sales for the three months ended October 31, 2023 primarily reflect lower net sales in our location platforms and call routing product lines partially offset by higher net sales in our NG-911 solutions and services business.

The lower net sales in the more recent period reflects the timing of rollout of 5G technologies and services by our major wireless carrier customers as well as longer testing and acceptance cycles resulting from the introduction of new technologies into carrier environments.

In addition, net sales in the more recent period also reflect a transition in some of our call handling solutions customers to our hosted models.

Our Terrestrial and Wireless Networks segment represented 32.6% of consolidated net sales for the three months ended October 31, 2023 as compared to 38.3% for the three months ended October 31, 2022.

Our book-to-bill ratio in this segment for the three months ended October 31, 2023 was 0.98x.

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

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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, 2023 and 2022 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, 2023 and 2022 are as follows:

Three months ended October 31,

2023 2022 2023 2022 2023 2022

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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.

government customers include sales to the 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.

No commercial customer accounted for greater than 10% of consolidated net sales for the three months ended April 30, 2023.

Included in domestic sales are sales to Verizon, which accounted for 10.6% of consolidated net sales for the three months ended April 30, 2022.

International sales for the three months ended April 30, 2023 and 2022 (which include sales to U.S.

For the three months ended October 31, 2023, except for the U.S.

government, there were no customers that represented more than 10% of consolidated net sales.

For the three months ended October 31, 2022, included in domestic sales are sales to Verizon Communications Inc.

("Verizon"), which accounted for 12.5% of consolidated net sales.

International sales for the three months ended October 31, 2023 and 2022 (which include sales to U.S.

domestic companies for inclusion in products that are sold to international customers) were $37.2 million and $27.8 million, respectively.

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

domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for the three months ended April 30, 2023 and 2022.

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, 2023 and 2022.

Gross Profit.

Gross profit was $43.1 million and $46.7 million for the three months ended April 30, 2023 and 2022, respectively.

Gross profit, as a percentage of consolidated net sales, for the three months ended April 30, 2023 was 31.7% as compared to 38.2% for the three months ended April 30, 2022.

Gross profit was $47.9 million and $46.8 million for the three months ended October 31, 2023 and 2022, respectively, an increase of $1.1 million.

Gross profit, as a percentage of consolidated net sales, for the three months ended October 31, 2023 was 31.5% as compared to 35.7% for the three months ended October 31, 2022.

Our gross profit (both in dollars and as a percentage of consolidated net sales) reflects an increase in net sales and overall product mix changes, including significantly higher net sales of our troposcatter and SATCOM solutions to U.S.

government customers, as discussed above.

Our gross profit in both periods reflects start-up costs associated with the opening of our new high-volume technology manufacturing centers, as well as increased costs resulting from the ongoing impacts of the COVID-19 pandemic and inflationary pressures.

In addition, gross profit during the three months ended April 30, 2022 reflects a lower provision for warranty obligations in light of the reduced level of sales activity during that period.

Gross profit in the comparable period of the prior year also reflects the benefit of higher net sales of our beyond line-of-sight communications terminals and upgrades to the Ukrainian government’s existing systems as part of an FMS contract awarded to us during that quarter.

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

Our Satellite and Space Communications segment's gross profit, as a percentage of related segment net sales, for the three months ended April 30, 2023 decreased in comparison to the three months ended April 30, 2022 and reflects changes in product and services mix, as discussed above.

Also, during the three months ended April 30, 2022, we incurred $0.1 million of incremental operating costs related to our antenna facility located in the United Kingdom due to the impact of the COVID-19 pandemic.

Similar operating costs were not incurred in the three months ended April 30, 2023.

Our Terrestrial and Wireless Networks segment's gross profit, as a percentage of related segment net sales, for the three months ended April 30, 2023 decreased in comparison to the three months ended April 30, 2022.

The gross profit percentage in the most recent quarter primarily reflects changes in products and services mix, as discussed above.

Included in consolidated cost of sales for the three months ended April 30, 2023 and 2022 are provisions for excess and obsolete inventory of $1.5 million and $1.1 million, respectively.

Our Satellite and Space Communications segment's gross profit, as a percentage of related segment net sales, for the three months ended October 31, 2023 decreased in comparison to the three months ended October 31, 2022.

The gross profit percentage in the most recent three-month period reflects changes in products and services mix, as discussed above.

Our Terrestrial and Wireless Networks segment's gross profit, as a percentage of related segment net sales, for the three months ended October 31, 2023 decreased in comparison to the three months ended October 31, 2022.

The gross profit percentage in the most recent three-month period reflects changes in products and services mix, as discussed above.

Included in consolidated cost of sales for the three months ended October 31, 2023 and 2022 are provisions for excess and obsolete inventory of $0.1 million and $0.8 million, respectively.

As discussed in "Item 2.

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Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $31.4 million and $27.6 million for the three months ended April 30, 2023 and 2022, respectively.

As a percentage of consolidated net sales, selling, general and administrative expenses were 23.0% and 22.6% for the three months ended April 30, 2023 and 2022, respectively.

During the three months ended April 30, 2023 and 2022, we incurred $4.1 million and $1.6 million, respectively, of restructuring costs primarily to streamline our operations and improve efficiency, including severance and costs related to the relocation of certain of our satellite ground station production facilities to our new 146,000 square foot facility in Chandler, Arizona.

Excluding restructuring costs, selling, general and administrative expenses for the three months ended April 30, 2023 and 2022 would have been $27.3 million, or 20.0%, and $26.0 million, or 21.3%, respectively, of consolidated net sales.

Selling, general and administrative expenses were $32.7 million and $29.3 million for the three months ended October 31, 2023 and 2022, respectively.

As a percentage of consolidated net sales, selling, general and administrative expenses were 21.5% and 22.3% for the three months ended October 31, 2023 and 2022, respectively.

During the three months ended October 31, 2023 and 2022, we incurred $3.7 million and $1.3 million of restructuring costs, respectively, primarily to streamline our operations and improve efficiency, including severance and costs related to the relocation of certain of our satellite ground station production facilities to our new 146,000 square foot facility in Chandler, Arizona, as well as legal and other expenses related to the divestiture of our Power Systems Technology product line, which closed on November 7, 2023.

Excluding restructuring costs, selling, general and administrative expenses for the three months ended October 31, 2023 and 2022 would have been $29.0 million or 19.1% and $28.0 million or 21.4%, respectively, of consolidated net sales.

The decrease in our selling, general and administrative expenses, as a percentage of consolidated net sales, is primarily due to higher consolidated net sales, as discussed above.

Our selling, general and administrative expenses in the most recent period also reflect higher labor costs associated with a tight global labor market, increased investments in marketing, including new social media activities, and other investments we are making to achieve our long-term business goals.

Such spending is expected to continue throughout the remainder of fiscal 2023.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $3.9 million in the three months ended April 30, 2023 as compared to $0.9 million in the three months ended April 30, 2022.

Such increase reflects our assumption that fully vested, unrestricted share units will be granted to certain employees in lieu of fiscal 2023 non-equity incentive compensation.

In fiscal 2022 and prior years, fully vested share units granted to certain employees in lieu of non-equity incentive compensation would not be settled until the one-year anniversary of the grant date.

Our selling, general and administrative expenses in the most recent period also reflect lower labor costs associated with our One Comtech initiative offset by higher legal and other professional fees as compared to the three months ended October 31, 2022.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $2.2 million in the three months ended October 31, 2023 as compared to $0.6 million in the three months ended October 31, 2022.

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

Research and Development Expenses.

Research and development expenses were $11.7 million and $14.3 million for the three months ended April 30, 2023 and 2022, respectively.

As a percentage of consolidated net sales, research and development expenses were 8.6% and 11.7% for the three months ended April 30, 2023 and 2022, respectively.

For the three months ended April 30, 2023 and 2022, research and development expenses of $5.3 million and $7.4 million, respectively, related to our Satellite and Space Communications segment, and $6.3 million and $6.8 million, respectively, related to our Terrestrial and Wireless Networks segment.

The remaining research and development expenses of $0.1 million in both the three months ended April 30, 2023 and 2022 related to the amortization of stock-based compensation expense.

During the three months ended April 30, 2023 and 2022, we incurred $1.0 million and $0.9 million, respectively, of strategic emerging technology costs in our Satellite and Space Communications segment for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations.

Research and development expenses were $7.8 million and $12.8 million for the three months ended October 31, 2023 and 2022, respectively, representing a decrease of $5.0 million or 38.7%.

As a percentage of consolidated net sales, research and development expenses were 5.1% and 9.8% for the three months ended October 31, 2023 and 2022, respectively.

For the three months ended October 31, 2023 and 2022, research and development expenses of $4.7 million and $6.4 million, respectively, related to our Satellite and Space Communications segment and $2.9 million and $6.3 million, respectively, related to our Terrestrial and Wireless Networks segment.

The remaining research and development expenses of $0.2 million and $0.1 million in the three months ended October 31, 2023 and 2022, respectively, related to the amortization of stock-based compensation expense.

Lower research and development expenses were driven by our One Comtech initiative and prioritization of resources across various programs.

During the three months ended October 31, 2023 and 2022, we incurred $1.4 million and $0.7 million, respectively, of strategic emerging technology costs in our Satellite and Space Communications segment 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 in the future.

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, 2023 and 2022, customers reimbursed us $4.5 million and $2.7 million, respectively, which is not reflected in the reported research and development expenses but is included in net sales with the related costs included in cost of sales.

During the three months ended October 31, 2023 and 2022, customers reimbursed us $4.0 million and $2.2 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 for both the three months ended April 30, 2023 and 2022 was $5.3 million (of which $1.8 million was for the Satellite and Space Communications segment and $3.5 million was for the Terrestrial and Wireless Networks segment).

Amortization relating to intangible assets with finite lives for both the three months ended October 31, 2023 and 2022 was $5.3 million (of which $1.7 million was for the Satellite and Space Communications segment and $3.6 million was for the Terrestrial and Wireless Networks segment).

CEO Transition Costs .

On August 9, 2022, our Board of Directors appointed our Chairman of the Board, Mr.

Peterman, as President and CEO.

Transition costs related to our former President and CEO, Mr.

Porcelain, pursuant to his separation agreement with the Company, were $7.4 million, of which $3.8 million related to the acceleration of unamortized stock-based compensation, with the remaining $3.6 million related to his severance payments and benefits upon termination of employment.

The cash portion of the transition costs of $3.6 million was paid to Mr.

Porcelain in October 2022.

Also, in connection with Mr.

Peterman entering into an employment agreement with the Company, effective as of August 9, 2022, we incurred a $1.0 million expense related to a cash sign-on bonus, which was paid in January 2023.

CEO transition costs related to Mr.

Porcelain and Mr.

Peterman were expensed in our Unallocated segment during the first quarter of fiscal 2023.

Operating Income (Loss).

Operating loss for the three months ended April 30, 2023 and 2022 was $5.3 and $0.6 million, respectively.

Operating income (loss) for the three months ended October 31, 2023 and 2022 was $2.1 million and $(9.7) million, respectively.

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

Three months ended April 30,

Three months ended October 31,

2023 2022 2023 2022 2023 2022 2023 2022

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Operating income (loss) $ 10.1 5.0 4.0 0.7 (12.1) (15.5) $ 2.1 (9.7)

Percentage of related net sales 0.1 % NA 5.8 % 8.7 % NA NA NA NA

Our GAAP operating loss of $5.3 million for the three months ended April 30, 2023 reflects:

Percentage of related net sales 9.9 % 6.2 % 8.2 % 1.5 % NA NA 1.4 % NA

Our GAAP operating income of $2.1 million for the three months ended October 31, 2023 reflects:

(i) $5.3 million of amortization of intangibles;

(ii) $4.1 million of restructuring costs (of which $2.2 million, $0.5 million and $1.4 million related to our Satellite and Space Communications, Terrestrial and Wireless Networks and Unallocated segments, respectively);

(ii) $3.7 million of restructuring costs (of which $0.8 million and $2.9 million related to our Satellite and Space Communications and Unallocated segments, respectively);

(iii) $2.6 million of amortization of stock-based compensation;

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and (v) $0.2 million of amortization of cost to fulfill assets, as discussed above.

Excluding such items, our consolidated operating income for the three months ended April 30, 2023 would have been $9.6 million.

Our GAAP operating loss of $0.6 million for the three months ended April 30, 2022 reflects:

(i) $5.3 million of amortization of intangibles;

(ii) $1.6 million of restructuring costs (all of which related to our Satellite and Space Communications segment);

(iii) $1.1 million of amortization of stock-based compensation;

(iv) $0.9 million of strategic emerging technology costs;

(v) $0.2 million of amortization of cost to fulfill assets;

and (vi) $0.1 million of incremental operating costs due to the impact of COVID-19, as discussed above.

Excluding such items, our consolidated operating income for the three months ended April 30, 2022 would have been $8.7 million.

The increase in operating income, excluding the above items, from $8.7 million to $9.6 million for the most recent period reflects the benefit of our One Comtech lean initiatives implemented through April 30, 2023, offset in part by a lower gross profit percentage on higher net sales, as discussed above.

Excluding such items, our consolidated operating income for the three months ended October 31, 2023 would have been $15.3 million, or 10.1% of consolidated net sales.

Our GAAP operating loss of $9.7 million for the three months ended October 31, 2022 reflects:

(i) $9.1 million of CEO transition costs;

(ii) $5.3 million of amortization of intangibles;

(iii) $1.3 million of restructuring costs (of which $1.1 million and $0.2 million related to our Satellite and Space Communications and Unallocated segments, respectively);

(iv) $0.9 million of amortization of stock-based compensation;

(v) $0.7 million of strategic emerging technology costs;

and (vi) $0.2 million of amortization of cost to fulfill assets, as discussed above.

Excluding such items, our consolidated operating income for the three months ended October 31, 2022 would have been $7.9 million, or 6.0% of consolidated net sales.

The increase in operating income, excluding the above items, from $7.9 million to $15.3 million for the most recent period reflects the benefit of our One Comtech lean initiatives implemented through October 31, 2023 and, to a lesser extent, higher consolidated net sales, as discussed above.

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

The slight increase in our Satellite and Space Communications segment operating income, both in dollars and as a percentage of related segment net sales, for the three months ended April 30, 2023 was driven primarily by lower research and development expenses, offset in part by a lower gross profit percentage on significantly higher related segment net sales and higher restructuring costs, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of related segment net sales, for the three months ended April 30, 2023 was driven primarily by a lower gross profit percentage on higher related segment net sales, offset in part by lower research and development expenses, as discussed above.

Excluding the impact of its respective portion of restructuring charges, Unallocated expenses for the three months ended April 30, 2023 would have been $7.1 million, as compared to $5.1 million for the three months ended April 30, 2022.

The increase in Unallocated expenses, excluding such items, was primarily due to our increased investments in marketing, including new social media activities, and other investments we are making to achieve our long-term business goals.

The increase in our Satellite and Space Communications segment operating income, both in dollars and as a percentage of the related segment net sales, for the three months ended October 31, 2023 was driven primarily by an increase in related segment net sales and our One Comtech lean initiatives, as discussed above.

The increase in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for the three months ended October 31, 2023 was driven primarily by our One Comtech lean initiatives, offset in part by changes in products and services mix, as discussed above.

Excluding the impact of CEO transition costs and its respective portion of restructuring charges, Unallocated expenses for the three months ended October 31, 2023 would have been $9.2 million, as compared to $6.1 million for the three months ended October 31, 2022.

The increase in Unallocated expenses excluding such items was primarily due to higher labor costs associated with our One Comtech transformation, as well as other investments we are making to achieve our long-term business goals.

Interest Expense and Other.

Interest expense was $4.4 million and $1.0 million for the three months ended April 30, 2023 and 2022, respectively.

The increase is due to a higher average debt balance outstanding during the most recent quarter, as well as higher interest rates under our Credit Facility that we entered into in November 2022.

Our effective interest rate (including amortization of deferred financing costs) in the three months ended April 30, 2023 was approximately 10.1%, as compared to 3.3% in the prior year period.

Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our Credit Facility approximates 8.9%, as compared to 2.5% in the prior year period.

Interest expense was $4.9 million and $2.2 million for the three months ended October 31, 2023 and 2022, respectively.

The increase is due to a higher average debt balance outstanding during the most recent period, a general rise in interest rates as compared to the prior year period, as well as higher interest rates under our Credit Facility that we entered into in November 2022.

Our effective interest rate (including amortization of deferred financing costs) in the three months ended October 31, 2023 was approximately 10.5%, as compared to 5.9% in the prior year period.

Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our existing Credit Facility approximates 9.2%, as compared to 7.9% in the prior year period.

Interest (Income) and Other.

Interest (income) and other for both the three months ended April 30, 2023 and 2022 was nominal.

Interest (income) and other for both the three months ended October 31, 2023 and 2022 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.

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

During the three months ended April 30, 2022, we recorded a $0.3 million non-cash benefit from the remeasurement of the convertible preferred stock purchase option liability.

There was no similar adjustment during the three months ended April 30, 2023.

See "Notes to Condensed Consolidated Financial Statements - Note (16) - Convertible Preferred Stock" for more information.

Benefit from Income Taxes.

For the three months ended April 30, 2023 and 2022, we recorded a tax benefit of $2.9 million and $0.8 million, respectively.

Our effective tax rate (excluding discrete tax items) for the three months ended April 30, 2023 and 2022 was 14.25% and 28.25%, respectively.

The decrease in the rate is primarily due to the recognition of a valuation allowance in a foreign jurisdiction.

For purposes of determining our 14.25% estimated annual effective tax rate for fiscal 2023, CEO transition costs are considered significant, unusual or infrequently occurring discrete tax items and are excluded from the computation of our effective tax rate.

During the three months ended April 30, 2023, we recorded a net discrete tax benefit of $1.2 million primarily related to the reversal of tax contingencies no longer required due to the expiration of applicable statute of limitations, offset in part by the finalization of certain tax accounts in connection with our fiscal 2022 federal income tax return.

During the three months ended April 30, 2022, we recorded a net discrete tax expense of $0.2 million, primarily related to the expiration of equity based awards, offset in part by the finalization of certain tax accounts in connection with our fiscal 2021 federal income tax return.

federal income tax returns for fiscal 2020 through 2022 are subject to potential future IRS audit.

For the three months ended October 31, 2023 and 2022, we recorded a tax benefit of $1.3 million and $0.6 million, respectively.

Our effective tax rate (excluding discrete tax items) for the three months ended October 31, 2023 and 2022 was 122.0% and 19.0%, respectively.

The increase in the rate is primarily due to changes in expected product and geographic mix.

During the three months ended October 31, 2023, we recorded a net discrete tax expense of $2.0 million primarily related to our decision to sell our Power Systems Technology product line in a taxable transaction and settlement of stock-based awards.

Due to the timing of the closing of the divestiture on November 7, 2023 and the expected timing of the settlement of contingent consideration being subsequent to October 31, 2023, we expect there will be offsetting net discrete tax benefits recorded in subsequent periods.

During the three months ended October 31, 2022, we recorded a net discrete tax benefit of $0.1 million primarily related to the deductible portion of CEO transition costs, partially offset by the settlement of stock-based awards.

federal income tax returns for fiscal 2020 through 2022 are subject to potential future Internal Revenue Service ("IRS") audit.

None of our state income tax returns prior to fiscal 2019 are subject to audit.

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Net Loss Attributable to Common Stockholders.

During the three months ended April 30, 2023 and 2022, consolidated net loss attributable to common stockholders was $9.2 million and $1.7 million, respectively.

During the three months ended October 31, 2023 and 2022, consolidated net loss attributable to common stockholders was $3.3 million and $12.8 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, 2023 and 2022 are shown in the table below with a reconciliation to net income (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, 2023 and 2022 are shown in the table below (numbers in the table may not foot due to rounding):

Three months ended October 31,

2023 2022 2023 2022 2023 2022 2023 2022

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Net income (loss) $ 9.3 5.8 4.1 0.6 (14.9) (17.5) $ (1.4) (11.1)

(Benefit from) provision for income taxes (1.2) 0.1 0.1 0.1 (1.8) (0.9) (2.9) (0.8)

Interest expense — — — — 4.4 1.0 4.4 1.0

Provision for (benefit from) income taxes 0.2 (0.2) (0.3) (0.2) (1.3) (0.2) (1.3) (0.6)

Interest (income) and other (0.3) (0.6) 0.2 0.3 — — (0.1) (0.3)

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

Interest expense 0.9 — — — 4.1 2.2 4.9 2.2

Amortization of stock-based compensation — — — — 2.6 0.9 2.6 0.9

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Amortization of cost to fulfill assets 0.2 0.2 — — — — 0.2 0.2

CEO transition costs — — — — — 9.1 — 9.1

Restructuring costs 0.8 1.1 — — 2.9 0.3 3.7 1.3

COVID-19 related costs — 0.1 — — — — — 0.1

Strategic emerging technology costs 1.4 0.7 — — — — 1.4 0.7

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Percentage of related net sales 14.8 % 12.2 % 19.5 % 11.9 % NA NA 12.1 % 8.2 %

The increase in consolidated Adjusted EBITDA, in dollars, for the three months ended April 30, 2023 as compared to the three months ended April 30, 2022 reflects the benefit of our One Comtech lean initiatives implemented through April 30, 2023, offset in part by a lower gross profit percentage, as discussed above.

The increase in our Satellite and Space Communications segment's Adjusted EBITDA, in dollars, is primarily due to lower research and development expenses, offset in part by a lower gross profit percentage on significantly higher related segment net sales, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to a lower gross profit percentage on higher related segment net sales, offset in part by lower selling, general and administrative and research and development expenses, as discussed above.

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

The increase in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the three months ended October 31, 2023 as compared to the three months ended October 31, 2022 reflects higher gross profit from higher net sales in our Satellite and Space Communications segment and the benefit of our One Comtech lean initiatives implemented through October 31, 2023, as discussed above.

The increase in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to an increase in related segment net sales and One Comtech lean initiatives, as discussed above.

The increase in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to One Comtech lean initiatives, offset in part by changes in products and services mix, as discussed above.

A reconciliation of our fiscal 2023 GAAP Net Loss to Adjusted EBITDA is shown in the table below (numbers in the table may not foot due to rounding):

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Benefit from income taxes (3.9)

Interest (income) and other (0.7)

Change in fair value of convertible preferred stock purchase

option liability (1.0)

Interest expense 15.0

Interest (income) and other 1.2

Amortization of stock-based compensation 10.1

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Amortization of cost to fulfill assets 1.0

CEO transition costs 13.6

Proxy solicitation costs 11.2

Restructuring costs 10.9

COVID-19 related costs 1.1

Strategic emerging technology costs 3.8

CEO transition costs 9.1

Adjusted EBITDA $ 53.5

Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before income taxes, interest, change in fair value of the convertible preferred stock purchase option liability, write-off of deferred financing costs, amortization of stock-based compensation, amortization of intangibles, depreciation expense, amortization of cost to fulfill assets, acquisition plan expenses, restructuring costs, COVID-19 related costs, strategic emerging technology costs (for next-generation satellite technology), facility exit costs, CEO transition 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.

Although closely aligned, our definition of Adjusted EBITDA is different than the Consolidated EBITDA (as such term is defined in our Credit Facility) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and therefore may not be comparable to similarly titled measures used by other companies.

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

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Our Non-GAAP measures reflect the GAAP measures as reported, adjusted for certain items as described herein and also excludes the effects of our outstanding convertible preferred stock.

During the first quarter of fiscal 2023, we changed the computation of our Non-GAAP measures of operating (loss) income, net (loss) income attributable to common stockholders and net (loss) income per diluted common share to adjust for amortization of intangibles (including cost to fulfill assets) and stock-based compensation.

This change was made to improve the comparability of our results with our peers.

Prior period Non-GAAP results have been restated in the tables below to reflect this change.

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.

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

We have not quantitatively reconciled our fourth quarter fiscal 2023 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.

We have not quantitatively reconciled our second quarter fiscal 2024 Adjusted EBITDA target to the most directly comparable GAAP measure because items such as stock-based compensation, adjustments to the provision for income taxes, amortization of intangibles and interest expense, which are specific items that impact these measures, have not yet occurred, are out of our control, or cannot be predicted.

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

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

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 April 30, 2023 and 2022 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).

Reconciliations of our GAAP consolidated operating income (loss), net (loss) income attributable to common stockholders and net (loss) income per diluted common share for the three months ended October 31, 2023 and 2022 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 non-GAAP net (loss) income per diluted common share 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.

1 unchanged sentence

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 net (loss) income per diluted common share for the three months ended April 30, 2023 and 2022 was computed using weighted average diluted shares outstanding of 28,498,000 and 27,225,000, respectively, during the period.

Three months ended April 30, 2023

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

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported

$ (5.3) $ (9.2) $ (0.33)

Adjustments to reflect redemption value of convertible preferred stock

Amortization of intangibles

Amortization of stock-based compensation

Restructuring costs

Strategic emerging technology costs 1.0 0.9 0.03

Amortization of costs to fulfill assets 0.2 0.2 0.01

Net discrete tax benefit

— (1.2) (0.04)

Non-GAAP measures $ 9.6 $ 3.0 $ 0.11

Three months ended April 30, 2022

In addition, due to the GAAP net loss for the period, Non-GAAP net (loss) income per diluted common share for the three months ended October 31, 2023 and 2022 was computed using weighted average diluted shares outstanding of 28,982,000 and 28,271,000, respectively, during the period.

Three months ended October 31, 2023

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

4 unchanged sentences

Amortization of intangibles

Amortization of stock-based compensation

Restructuring costs

Strategic emerging technology costs 0.9 0.7 0.03

Amortization of costs to fulfill assets 0.2 0.2 0.01

COVID-19 related costs

Change in fair value of convertible preferred stock purchase option

liability — (0.3) (0.01)

Net discrete tax expense

Non-GAAP measures $ 8.7 $ 6.9 $ 0.25

COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 2023 AND 2022

Consolidated net sales were $401.2 million and $359.3 million for the nine months ended April 30, 2023 and 2022, respectively, representing an increase of $41.9 million, or 11.7%.

The period-over-period increase in consolidated net sales primarily reflects significantly higher net sales in our Satellite and Space Communications segment, as further discussed below.

Satellite and Space Communications

Net sales in our Satellite and Space Communications segment were $243.5 million for the nine months ended April 30, 2023 as compared to $202.9 million for the nine months ended April 30, 2022, an increase of $40.6 million or 20.0%.

Related segment net sales for the nine months ended April 30, 2023 primarily reflect significantly higher net sales of our troposcatter and SATCOM solutions to U.S.

government customers (including delivery of our COMET TM troposcatter terminals to international customers, VSAT equipment for the U.S.

Army and progress toward delivering next-generation troposcatter terminals to the U.S.

Marine Corps) and satellite ground station technologies, offset in part by lower sales of our solid-state, RF microwave high-power amplifiers and control components and high reliability EEE satellite-based space components.

Our Satellite and Space Communications segment represented 60.7% of consolidated net sales for the nine months ended April 30, 2023 as compared to 56.5% for the nine months ended April 30, 2022.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the nine months ended April 30, 2023 was 1.44x.

and international government customers.

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

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

Terrestrial and Wireless Networks

Net sales in our Terrestrial and Wireless Networks segment were $157.7 million for the nine months ended April 30, 2023, as compared to $156.4 million for the nine months ended April 30, 2022, an increase of $1.3 million, or 0.8%.

Related segment net sales for the nine months ended April 30, 2023 primarily reflect higher sales of our NG-911 solutions and services, offset in part by lower sales of our trusted location and messaging solutions and cyber security training services.

Our Terrestrial and Wireless Networks segment represented 39.3% of consolidated net sales for the nine months ended April 30, 2023 as compared to 43.5% for the nine months ended April 30, 2022.

Our book-to-bill ratio in this segment for the nine months ended April 30, 2023 was 0.64x.

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

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

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, 2023 and 2022 are as follows:

Nine months ended April 30,

2023 2022 2023 2022 2023 2022

Satellite and Space Communications Terrestrial and Wireless Networks Consolidated

government 48.7 % 45.6 % 1.8 % 2.3 % 30.3 % 26.8 %

Domestic 17.2 % 17.4 % 89.8 % 88.2 % 45.7 % 48.2 %

65.9 % 63.0 % 91.6 % 90.5 % 76.0 % 75.0 %

International 34.1 % 37.0 % 8.4 % 9.5 % 24.0 % 25.0 %

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

Sales to U.S.

government customers include sales to the 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% and 11.1% of consolidated net sales for the nine months ended April 30, 2023 and 2022, respectively.

International sales for the nine months ended April 30, 2023 and 2022 (which include sales to U.S.

domestic companies for inclusion in products that are sold to international customers) were $96.2 million and $89.9 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, 2023 and 2022.

Gross Profit.

Gross profit was $135.9 million and $134.3 million for the nine months ended April 30, 2023 and 2022, respectively, an increase of $1.6 million.

Gross profit, as a percentage of consolidated net sales, for the nine months ended April 30, 2023 was 33.9% as compared to 37.4% for the nine months ended April 30, 2022.

government customers, as discussed above.

In addition, during the nine months ended April 30, 2023 and 2022, respectively, we recorded a $1.5 million and $2.5 million benefit to cost of sales as we reduced a warranty accrual due to lower than expected warranty claims in our NG-911 product line.

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

Our Satellite and Space Communications segment's gross profit, as a percentage of related segment net sales, for the nine months ended April 30, 2023 is comparable to the nine months ended April 30, 2022 and reflects changes in products and services mix, as discussed above.

Also, during the nine months ended April 30, 2022, we incurred $1.1 million of incremental operating costs related to our antenna facility located in the United Kingdom due to the impact of the COVID-19 pandemic.

Similar operating costs were not incurred in the nine months ended April 30, 2023.

Our Terrestrial and Wireless Networks segment's gross profit, as a percentage of related segment net sales, for the nine months ended April 30, 2023 decreased in comparison to the nine months ended April 30, 2022.

The gross profit percentage in the most recent nine-month period primarily reflects changes in products and services mix, as discussed above.

Included in consolidated cost of sales for the nine months ended April 30, 2023 and 2022 are provisions for excess and obsolete inventory of $2.8 million and $3.3 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 $89.6 million and $85.7 million for the nine months ended April 30, 2023 and 2022, respectively.

As a percentage of consolidated net sales, selling, general and administrative expenses were 22.3% and 23.9% for the nine months ended April 30, 2023 and 2022, respectively.

During the nine months ended April 30, 2023 and 2022, we incurred $7.0 million and $4.0 million, respectively, of restructuring costs primarily to streamline our operations and improve efficiency, including severance and costs related to the relocation of certain of our satellite ground station production facilities to our new 146,000 square foot facility in Chandler, Arizona.

Excluding restructuring costs, selling, general and administrative expenses for the nine months ended April 30, 2023 and 2022 would have been $82.6 million or 20.6% and $81.7 million or 22.7%, respectively, of consolidated net sales.

The decrease in our selling, general and administrative expenses, as a percentage of consolidated net sales, is primarily due to higher consolidated net sales, as discussed above.

Our selling, general and administrative expenses in the most recent period also reflect higher labor costs associated with a tight global labor market, increased investments in marketing, including new social media activities and other investments we are making to achieve our long-term business goals.

Such spending is expected to continue throughout the remainder of fiscal 2023.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $5.6 million in the nine months ended April 30, 2023 as compared to $3.5 million in the nine months ended April 30, 2022.

The most recent period reflects our assumption that fully vested, unrestricted share units will be granted to certain employees in lieu of fi scal 2023 non-equity incentive compensation .

Amortization of stock-based compensation expense for the prior year period includes $0.8 million related to the retirement, in December 2021, of three long-standing members of the Board of Directors.

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

Research and Development Expenses.

Research and development expenses were $36.9 million and $39.4 million for the nine months ended April 30, 2023 and 2022, respectively, representing a decrease of $2.5 million or 6.4%.

As a percentage of consolidated net sales, research and development expenses were 9.2% and 11.0% for the nine months ended April 30, 2023 and 2022, respectively.

For the nine months ended April 30, 2023 and 2022, research and development expenses of $17.3 million and $20.6 million, respectively, related to our Satellite and Space Communications segment and $19.3 million and $18.5 million, respectively, related to our Terrestrial and Wireless Networks segment.

The remaining research and development expenses of $0.3 million in both the nine months ended April 30, 2023 and 2022, respectively, related to the amortization of stock-based compensation expense.

During the nine months ended April 30, 2023 and 2022, we incurred $2.5 million and $0.9 million, respectively, of strategic emerging technology costs in our Satellite and Space Communications segment 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 in the future.

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, 2023 and 2022, customers reimbursed us $10.1 million and $8.0 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 for both the nine months ended April 30, 2023 and 2022 was $16.0 million (of which $5.5 million was for the Satellite and Space Communications segment and $10.5 million was for the Terrestrial and Wireless Networks segment).

Proxy Solicitation Costs .

During the nine months ended April 30, 2022, we incurred $11.2 million of proxy solicitation costs (including legal and advisory fees and costs associated with a related lawsuit) in our Unallocated segment as a result of a now settled proxy contest initiated by a shareholder.

During our first quarter of fiscal 2022, we also entered into a Cooperation Agreement with such shareholder.

There were no similar costs during the nine months ended April 30, 2023.

CEO Transition Costs .

CEO transition costs were $9.1 million for the nine months ended April 30, 2023.

On August 9, 2022, our Board of Directors appointed our Chairman of the Board, Mr.

Peterman, as President and CEO.

Transition costs related to our former President and CEO, Mr.

The cash portion of the transition costs of $3.6 million was paid to Mr.

Porcelain in October 2022.

Also, in connection with Mr.

Peterman entering into an employment agreement with the Company, effective as of August 9, 2022, we incurred a $1.0 million expense related to a cash sign-on bonus, which was paid in January 2023.

CEO transition costs related to Mr.

Porcelain and Mr.

Peterman were expensed in our Unallocated segment.

CEO transition costs were $13.6 million for the nine months ended April 30, 2022 and related to our former CEO, Fred Kornberg.

Of such amount, $10.3 million related to Mr.

Kornberg's severance payments and benefits upon termination of his employment;

the remainder related to him agreeing to serve as a Senior Technology Advisor for a minimum of two years.

CEO transition costs related to Mr.

Kornberg were expensed in our Unallocated segment.

Operating Income (Loss).

Operating loss for the nine months ended April 30, 2023 and 2022 was $15.8 million and $31.7 million, respectively.

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

Nine months ended April 30,

2023 2022 2023 2022 2023 2022 2023 2022

($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated

Operating income (loss) $ 8.4 (7.9) 7.2 17.6 (31.4) (41.4) $ (15.8) (31.7)

Percentage of related net sales 3.4 % NA 4.6 % 11.2 % NA NA NA NA

Our GAAP operating loss of $15.8 million for the nine months ended April 30, 2023 reflects:

(i) $16.0 million of amortization of intangibles;

(ii) $9.1 million of CEO transition costs;

(iii) $7.0 million of restructuring costs (of which $4.4 million, $0.5 million and $2.1 million related to our Satellite and Space Communications, Terrestrial and Wireless Networks and Unallocated segments, respectively);

(iv) $6.3 million of amortization of stock-based compensation;

(v) $2.5 million of strategic emerging technology costs;

and (vi) $0.7 million of amortization of cost to fulfill assets, as discussed above.

Excluding such items, our consolidated operating income for the nine months ended April 30, 2023 would have been $25.9 million, or 6.4% of consolidated net sales.

Our GAAP operating loss of $31.7 million for the nine months ended April 30, 2022 reflects:

(i) $16.0 million of amortization of intangibles;

(ii) $13.6 million of CEO transition costs;

(iii) $11.2 million of proxy solicitation costs;

(iv) $4.0 million of restructuring costs (all of which related to our Satellite and Space Communications segment);

(v) $4.0 million of amortization of stock-based compensation;

(vi) $1.1 million of incremental operating costs due to the impact of COVID-19;

(vii) $0.9 million of strategic emerging technology costs;

and (viii) $0.2 million of amortization of cost to fulfill assets, as discussed above.

Excluding such items, our consolidated operating income for the nine months ended April 30, 2022 would have been $19.5 million, or 5.4% of consolidated net sales.

The increase in operating income, excluding the above items, from $19.5 million to $25.9 million for the most recent period reflects the benefit of our One Comtech lean initiatives implemented through April 30, 2023 and, to a lesser extent, higher consolidated net sales, as discussed above.

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

The increase in our Satellite and Space Communications segment operating income, both in dollars and as a percentage of the related segment net sales, for the nine months ended April 30, 2023 was driven primarily by an increase in related segment net sales and lower research and development expenses, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for the nine months ended April 30, 2023 was driven primarily by changes in products and services mix and higher research and development expenses, as discussed above.

Excluding the impact of CEO transition costs, proxy solicitation costs and its respective portion of restructuring charges, Unallocated expenses for the nine months ended April 30, 2023 would have been $20.2 million, as compared to $16.5 million for the nine months ended April 30, 2022.

The increase in Unallocated expenses excluding such items was primarily due to our increased investments in marketing, including new social media activities, and other investments we are making to achieve our long-term business goals.

Interest Expense and Other.

Interest expense was $10.4 million and $3.6 million for the nine months ended April 30, 2023 and 2022, respectively.

The increase is due to a higher average debt balance outstanding during the most recent period, as well as higher interest rates under our Credit Facility that we entered into in November 2022.

Our effective interest rate (including amortization of deferred financing costs) in the nine months ended April 30, 2023 was approximately 8.3%, as compared to 3.2% in the prior year period.

Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our existing Credit Facility approximates 8.9%, as compared to 2.5% in the prior year period.

Interest (Income) and Other.

Interest (income) and other for both the nine months ended April 30, 2023 and 2022 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.

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

During the nine months ended April 30, 2022, we recorded a $1.0 million non-cash benefit from the remeasurement of the convertible preferred stock purchase option liability.

There was no similar adjustment during the nine months ended April 30, 2023.

See "Notes to Condensed Consolidated Financial Statements - Note (16) - Convertible Preferred Stock" for more information.

Benefit from Income Taxes.

For the nine months ended April 30, 2023 and 2022, we recorded a tax benefit of $3.8 million and $6.1 million, respectively.

Our effective tax rate (excluding discrete tax items) for the nine months ended April 30, 2023 and 2022 was 14.25% and 28.25%, respectively.

The decrease in the rate is primarily due to the recognition of a valuation allowance in a foreign jurisdiction.

During the nine months ended April 30, 2023, we recorded a net discrete tax benefit of $1.2 million primarily related to the reversal of tax contingencies no longer required due to the expiration of applicable statute of limitations and the deductible portion of CEO transition costs, offset in part by the settlement of stock-based awards and the finalization of certain tax accounts in connection with our fiscal 2022 federal income tax return.

During the nine months ended April 30, 2022, we recorded a net discrete tax benefit of $3.5 million primarily related to proxy solicitation costs, the deductible portion of CEO transition costs and the finalization of certain tax accounts in connection with our fiscal 2021 federal income tax return.

federal income tax returns for fiscal 2020 through 2022 are subject to potential future IRS audit.

None of our state income tax returns prior to fiscal 2018 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 Attributable to Common Stockholders.

During the nine months ended April 30, 2023 and 2022, consolidated net loss attributable to common stockholders was $28.6 million and $36.4 million, respectively.

Adjusted EBITDA.

Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the nine months ended April 30, 2023 and 2022 are shown in the table below (numbers in the table may not foot due to rounding):

Nine months ended April 30,

2023 2022 2023 2022 2023 2022 2023 2022

($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated

Net income (loss) $ 9.6 (7.3) 7.1 17.4 (40.0) (38.0) $ (23.4) (27.9)

Benefit from income taxes (1.8) (0.5) (0.2) — (1.7) (5.7) (3.8) (6.1)

Interest expense — 0.1 — — 10.4 3.5 10.4 3.6

Interest (income) and other 0.6 (0.3) 0.3 0.1 — (0.1) 0.9 (0.3)

Change in fair value of convertible preferred stock purchase option liability — — — — — (1.0) — (1.0)

Amortization of stock-based compensation

Amortization of intangibles 5.5 5.5 10.6 10.6 — — 16.0 16.0

Depreciation 3.1 2.4 5.6 4.5 0.1 0.2 8.7 7.1

Amortization of cost to fulfill assets 0.7 0.2 — — — — 0.7 0.2

Restructuring costs 4.4 4.0 0.5 — 2.1 — 7.0 4.0

COVID-19 related costs — 1.1 — — — — — 1.1

Strategic emerging technology costs

CEO transition costs — — — — 9.1 13.6 9.1 13.6

Proxy solicitation costs — — — — — 11.2 — 11.2

Adjusted EBITDA $ 24.5 6.3 23.9 32.6 (13.8) (12.4) $ 34.6 26.5

Percentage of related net sales 10.1 % 3.1 % 15.2 % 20.8 % NA NA 8.6 % 7.4 %

The increase in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the nine months ended April 30, 2023 as compared to the nine months ended April 30, 2022 reflects the benefit of our One Comtech lean initiatives implemented through April 30, 2023, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to changes in products and services mix and higher research and development expenses, as discussed above.

A reconciliation of our fiscal 2022 GAAP net loss to Adjusted EBITDA, and our definition of Adjusted EBITDA, is presented above in "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, 2023 and 2022."

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 nine months ended April 30, 2023 and 2022 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).

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 net (loss) income per diluted common share for the nine months ended April 30, 2023 and 2022 was computed using weighted average diluted shares outstanding of 28,353,000 and 27,160,000 respectively, during the period.

Nine months ended April 30, 2023

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

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported

$ (15.8) $ (28.6) $ (1.02)

Adjustments to reflect redemption value of convertible preferred stock

CEO transition costs

Amortization of intangibles

16.0 12.4 0.44

Amortization of stock-based compensation

Restructuring costs

Strategic emerging technology costs

Amortization of cost to fulfill assets

2 unchanged sentences

Non-GAAP measures $ 15.3 $ 6.8 $ 0.24

Nine months ended April 30, 2022

Three months ended October 31, 2022

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

4 unchanged sentences

CEO transition costs

13.6 13.0 0.49

Proxy solicitation costs

11.2 8.7 0.33

Amortization of intangibles

16.0 12.3 0.45

Amortization of stock-based compensation

Restructuring costs

Amortization of stock-based compensation

Strategic emerging technology costs

Amortization of cost to fulfill assets

COVID-19 related costs

Change in fair value of convertible preferred stock purchase option liability

— (1.0) (0.04)

Net discrete tax benefit

— (0.3) (0.01)

Net discrete tax expense

Non-GAAP measures $ 7.9 $ 4.6 $ 0.16

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents were $21.4 million and $21.7 million at April 30, 2023 and July 31, 2022, respectively.

For the nine months ended April 30, 2023, our cash flows reflect the following:

• Net cash used in operating activities was $0.2 million for the nine months ended April 30, 2023 as compared to net cash provided by operating activities of $8.4 million for the nine months ended April 30, 2022.

The period-over-period decrease in cash flow from operating activities reflects 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, 2023 and 2022 was $14.9 million and $14.4 million, respectively.

Net cash used in investing activities for the nine months ended April 30, 2023 primarily reflects capital expenditures to build-out cloud-based computer networks to support our previously announced NG-911 contract wins and capital investments and building improvements in connection with the opening of our new high-volume technology manufacturing centers.

Our cash and cash equivalents were $18.1 million and $19.0 million at October 31, 2023 and July 31, 2023, respectively.

For the three months ended October 31, 2023, our cash flows reflect the following:

• Net cash used in operating activities was $14.5 million for the three months ended October 31, 2023 as compared to net cash used in operating activities of $6.2 million for the three months ended October 31, 2022.

The period-over-period decrease in cash flow from operating activities reflects overall changes in net working capital requirements, principally the timing of shipments and progress toward completion on contracts accounted for over time, and related billings and payments.

• Net cash used in investing activities for the three months ended October 31, 2023 and 2022 was $3.2 million and $7.2 million, respectively.

Net cash used in investing activities for the three months ended October 31, 2023 primarily reflects capital expenditures to build-out cloud-based computer networks to support our previously announced NG-911 contract wins and capital investments and building 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 provided by financing activities was $14.8 million and $8.0 million for the nine months ended April 30, 2023 and 2022, respectively.

During the nine months ended April 30, 2023, we had net borrowings under our Credit Facility of $29.8 million, as compared to net payments under our Credit Facility of $74.0 million during the nine months ended April 30, 2022.

During the nine months ended April 30, 2022, 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 nine months ended April 30, 2023, we paid deferred financing costs of $3.8 million in connection with the amendment of our Credit Facility.

During the nine months ended April 30, 2023 and 2022, we paid $8.7 million and $8.4 million, respectively, in cash dividends to our common stockholders.

We also made $2.8 million and $6.1 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, 2023 and 2022, respectively.

• Net cash provided by financing activities was $17.0 million and $13.3 million for the three months ended October 31, 2023 and 2022, respectively.

During the three months ended October 31, 2023 and 2022, we had net borrowings under our Credit Facility of $19.6 million and $18.7 million, respectively.

During the three months ended October 31, 2022, we paid $3.1 million in cash dividends to our common stockholders.

We also made $1.7 million and $2.3 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, 2023 and 2022, 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 material cash requirements are for working capital, debt service (including interest), capital expenditures, income tax payments, facilities lease payments and dividends related to our Convertible Preferred Stock, which are payable in kind or in cash at our election.

Our material cash requirements could increase beyond our current expectations due to factors such as general economic conditions, a change in government spending priorities, larger than usual customer orders or a future redemption by the holders of our Series A Convertible Preferred Stock.

Also, in light of our CEO's initiatives to grow the Company, we continue to review and evaluate our capital allocation plans.

Furthermore, we may choose to raise additional funds through equity and debt financing transactions to provide additional flexibility or to pursue acquisitions.

Although it is difficult in the current economic and credit environment to predict the terms and conditions of financing that may be available in the future, we believe that we would have sufficient access to credit from financial institutions and/or financing from public and private debt and equity markets.

We have historically met our cash requirements with funds provided by a combination of cash and cash equivalent balances, cash generated from operating activities and cash generated from equity and debt financing transactions.

As discussed in " Notes to Condensed Consolidated Financial Statements – Note (1) – General," as of the date these financial statements were issued (the "issuance date"), we evaluated whether the following adverse conditions or events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern over the next twelve months beyond the issuance date.

Over the past three fiscal years, we incurred operating losses of $14.7 million, $33.8 million, and $68.3 million in fiscal 2023, 2022 and 2021, respectively.

More recently, we recognized operating income of $2.1 million in the three months ended October 31, 2023.

In addition, over the past three fiscal years, net cash used in operating activities was $4.4 million and $40.6 million in fiscal 2023 and 2021, respectively, and net cash provided by operating activities was $2.0 million in fiscal 2022.

More recently, net cash used in operating activities was $14.5 million in the three months ended October 31, 2023.

As of the issuance date, our available sources of liquidity included cash and cash equivalents of approximately $18.0 million.

In addition, as of the issuance date, borrowings under our Credit Facility, which has a maturity date of October 31, 2024, aggregated $180.5 million, of which $149.3 million and $31.2 million related to the Revolving Loan Facility and Term Loan, respectively.

Accordingly, as of the issuance date, there was no additional borrowing capacity under the Revolving Loan Facility.

Our ability to meet our current obligations as they come due may be impacted by our ability to remain compliant with the financial covenants under the Credit Facility or to obtain waivers or amendments that impact the related financial covenants.

If we are unable to satisfy certain covenants and not able to obtain waivers or amendments, such event would constitute an Event of Default and could cause an immediate acceleration and repayment of all outstanding principal, interest and fees due under the Credit Facility.

If there is an Event of Default, there can be no assurances that we will be able to continue as a going concern, which could force us to delay, reduce or discontinue certain aspects of our business strategy.

Additionally, our ability to meet future anticipated liquidity needs will largely depend on our ability to generate positive cash inflows from operations, as well as refinance our Credit Facility, and/or secure other sources of outside capital.

Based on our current business plans, including projected capital expenditures, we do not believe our current level of cash and cash equivalents, or liquidity expected to be generated from future cash flows will be sufficient to fund our operations over the next twelve months beyond the issuance date and repay the outstanding borrowings scheduled to mature under the Credit Facility on or before October 31, 2024.

In anticipation of this maturity, we engaged with third party financial advisors to assist us in our discussions and negotiations with our existing lenders and holders of Convertible Preferred Stock to extend or refinance the Credit Facility and/or amend or restructure our Convertible Preferred Stock, seeking other sources of credit or outside capital and evaluating other capital structure-related alternatives.

If we are unable to obtain sufficient, timely financial resources or outside capital, our business, financial condition and results of operations could be materially and adversely affected.

Our ability to generate cash in the future or have sufficient access to credit from financial institutions and/or financing from public and/or private debt and equity markets on acceptable terms, or at all, (i) is subject to (a) general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control and (b) a majority vote consent right of the holders of the Convertible Preferred Stock (as discussed further in " Notes to Condensed Consolidated Financial Statements – Note (17) – "Convertible Preferred Stock "), and (ii) could (x) dilute the ownership interest of our stockholders, (y) include terms that adversely affect the rights of our common stockholders, or (z) restrict our ability to take specific actions such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

Also, our transition to sustained profitability is dependent upon the successful completion of our ongoing One Comtech transformation and integration of individual businesses into two segments and related restructuring activities to optimize our cost structure.

In addition to our plan to refinance the Credit Facility and/or secure new sources of credit or outside capital, our plans also include, among other things:

• implementing certain cost savings and restructuring activities to reduce cash used in operations, as discussed further in " Notes to Condensed Consolidated Financial Statements – Note (20) – “Cost Reduction ;”

• pursuing initiatives to reduce investments in working capital, namely accounts receivable and inventory;

• improving process disciplines to attain and maintain profitable operations by entering into more favorable sales or service contracts;

• reevaluating our business plans to identify opportunities to further reduce capital expenditures;

• seeking opportunities to improve liquidity through any combination of debt and or equity financing (including possibly restructuring our existing Convertible Preferred Stock);

• seeking other strategic transactions and or measures including, but not limited to, the potential sale or divestiture of assets.

While we believe the implementation of some or all of the elements of our plans over the next twelve months beyond the issuance date will be successful, these plans are not all solely within management’s control and, as such, we can provide no assurance our plans are probable of being effectively implemented as of the issuance date.

Therefore, these adverse conditions and events described above raise substantial doubt about our ability to continue as a going concern as of the issuance date.

We prepared our unaudited condensed consolidated financial statements as of October 31, 2023 on a going concern basis, assuming our financial resources will be sufficient to meet our capital needs over the next twelve months and did not include any adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation for the next twelve months.

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

We expect capital investments for these and other initiatives to continue in fiscal 2024.

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.

We expect capital investments for these and other initiatives to continue for the remainder of fiscal 2023 as we look to complete such projects.

On July 13, 2022, we filed a $200.0 million shelf registration statement with the SEC for the sale of various types of securities, including debt securities.

This new shelf registration statement was declared effective by the SEC as of July 25, 2022 and expires on July 25, 2025.

On September 29, 2020, our Board of Directors authorized a new $100.0 million stock repurchase program, which replaced our prior program.

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, 2023 and 2022.

On September 29, 2022 and December 8, 2022, our Board of Directors declared a dividend of $0.10 per common share, which was paid on November 18, 2022 and February 17, 2023, respectively.

Encouraged by the progress that we have made related to our One Comtech transformation, our launch of EVOKE and our emerging growth opportunities, as previously disclosed, during the third quarter of fiscal 2023, the Board, together with management, adjusted the Company’s capital allocation plans and determined to forgo a common stock dividend, thereby increasing our financial flexibility.

This shelf registration statement was declared effective by the SEC as of July 25, 2022 and expires on July 25, 2025.

On September 29, 2020, our Board of Directors authorized a $100.0 million stock repurchase program, which replaced our prior program.

The $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 three months ended October 31, 2023 and 2022.

During the third quarter of fiscal 2023, the Board, together with management, adjusted the Company’s capital allocation plans and determined to forgo a common stock dividend, thereby increasing our financial flexibility.

Future common stock dividends, if any, remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval and certain voting rights of holders of our Series A Convertible Preferred Stock.

Our material cash requirements are for working capital, capital expenditures, income tax payments, debt service (including interest), facilities lease payments and dividends related to our Convertible Preferred Stock, which are payable in kind or in cash at our election.

In our first quarter of fiscal 2022, we secured a $100.0 million strategic growth investment to enhance our financial flexibility and strengthen our ability to capitalize on recent large contract awards and growing customer demand by making crucial investments in our satellite and space communications and terrestrial and wireless networks solutions.

Based on our current revenue visibility and anticipated benefits of our One Comtech profit improvement initiatives, we believe that our existing cash and cash equivalent balances, our cash generated from operating activities and amounts potentially available under our Credit Facility will be sufficient to meet our currently anticipated cash requirements in the next twelve months and beyond.

Also, in light of our CEO's initiatives to grow the Company, we continue to review and evaluate our capital allocation plans.

Furthermore, we may choose to raise additional funds through equity and debt financing transactions to provide additional flexibility or to pursue acquisitions.

Credit Facility

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On November 30, 2022, we refinanced the amount outstanding under the Credit Facility by entering into a Second Amended and Restated Credit Agreement (also referred to herein as the "Credit Facility") with the existing lenders.

On November 7, 2023, we entered into a Third Amended and Restated Credit Agreement (also referred to herein as the "Amended Credit Facility") with our existing lenders in connection with the sale of our Power Systems Technology product line to Stellant Systems, Inc.

See " Notes to Condensed Consolidated Financial Statements – Note (10) – Credit Facility " for further information.

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

As of April 30, 2023, the amount outstanding under our Credit Facility was $159.8 million, comprised of $111.0 million under the Revolving Loan Facility and $48.8 million under the Term Loan.

At April 30, 2023, we had $1.0 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, 2023, we had outstanding balances under the Credit Facility ranging from $130.0 million to $182.4 million.

As of April 30, 2023, our Secured Leverage Ratio was 3.73x trailing twelve months ("TTM") Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") compared to the maximum allowable Secured Leverage Ratio of 4.00x TTM Adjusted EBITDA.

Our Interest Expense Coverage Ratio as of April 30, 2023 was 4.11x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA.

As of October 31, 2023, the amount outstanding under our Credit Facility was $184.0 million, comprised of $136.5 million under the Revolving Loan Facility and $47.5 million under the Term Loan.

At October 31, 2023, we had $0.6 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, 2023, we had outstanding balances under the Credit Facility ranging from $165.0 million to $184.6 million.

As of October 31, 2023, our Secured Leverage Ratio was 3.53x trailing twelve months ("TTM") Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("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, 2023 was 3.37x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA.

Our Minimum Liquidity was $29.2 million compared to the Minimum Liquidity requirement of $25.0 million.

Given our expected future business performance, we anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future, however there can be no assurance that we will be able to satisfy these covenants.

Although we are actively pursuing strategies to mitigate these conditions and events and alleviate such substantial doubt about our ability to continue as a going concern, there can be no assurance that our plans will be successful.

Convertible Preferred Stock

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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, 2023, will materially adversely affect our liquidity.

At April 30, 2023, cash payments due under contractual 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, 2023, will materially adversely affect our liquidity.

At October 31, 2023, cash payments due under contractual 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:

Total Due Within 1 Year

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All of these agreements may require payments by us, in certain circumstances, including, but not limited to, a change in control of the Company or termination of the employee.

Our Condensed Consolidated Balance Sheet at April 30, 2023 includes total liabilities of $8.9 million for uncertain tax positions, including interest, any or all of which may result in a cash payment.

Our Condensed Consolidated Balance Sheet at October 31, 2023 includes total liabilities of $9.3 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 (2) - Adoption of Accounting Standards and Updates, " ASUs issued, but not effective until after April 30, 2023, are not expected to have a material impact on our condensed consolidated financial statements or disclosures.

As further discussed in " Notes to Condensed Consolidated Financial Statements – Note (3) - Adoption of Accounting Standards and Updates, " ASUs issued, but not effective until after October 31, 2023, are not expected to have a material impact on our condensed consolidated financial statements or disclosures.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis