CMTL filing — read by section

Item 1. Business

ITEM 1. BUSINESS 
 
 Founded in 1967, we have a longstanding history of providing critical communications infrastructure technology and solutions to customers around the world. We serve two core end-markets: secure satellite and wireless communications via our Satellite and Space Communications segment, and next-generation 911 and public safety via our Terrestrial and Wireless Networks segment. In both cases, we are at the forefront of the technologies that solve extraordinarily complex communications problems – whether it’s a 911 call captured, routed, and data-enhanced to optimize the public safety result in situations where every second matters, or providing communications infrastructure that ensures people, businesses, and governments can connect anywhere on earth, under any conditions – including on the battlefield. We believe the demand for more, and better, connectivity is only growing as more devices become connected via the cloud, as growing constellations of communications satellites enable ubiquitous connectivity, and more data is created, shared and acted upon by increasingly powerful tools (including AI). This demand will come from government and commercials customers alike, as both private enterprises and government actors increasingly see the need for, and value of, next-generation communications capabilities. 
 
 Fiscal 2024 marked a year of change for our organization. 
 
 Our fiscal 2024 results were impacted by refinancing and liquidity headwinds, which in turn weighed on our supply chain, and lengthened product development and delivery cycles. Despite this commercial overhang, both of our business segments performed in terms of winning business. The Satellite and Space Communications segment secured competitive contracts on next-generation modem platforms with government customers, such as the Enterprise Digital Intermediate Frequency Multi-Carrier (“EDIM”) modem contract with the U.S. Army and a sole-source follow-on contract to support the U.S. Air Force and Army Anti-Jam Modem (“A3M”) initiative. We concluded a significant product R&D cycle, culminating with the launch in September 2024 of our new Digital Common Ground (“DCG”) portfolio of modems, which we believe will provide our Satellite and Space Communications segment with a significant technology advantage. The DCG family of products are expected to provide our customers with truly next-generation capabilities, including software defined, virtualized communications networks. 
 
 Additionally, over the course of fiscal 2024, we continued to review our operations, streamlining under-performing legacy products, lines of business and/or legacy growth initiatives that have not met our return expectations, or are no longer core to our strategic plans. For example, in November 2023, we announced the divestiture of our Power Systems Technology solid-state power amplifier product line to Stellant Systems, Inc. More recently, we re-evaluated our operations at our Basingstoke facility in the UK and determined the path to profitable operations was both unclear and expensive. As a result, we made the decision to exit this product line. 
 
 Our Terrestrial and Wireless Networks segment underwent a transformation of its own in fiscal 2024. Led by Jeff Robertson, who joined Comtech as Terrestrial and Wireless Networks’s President in March 2024, Terrestrial and Wireless Networks saw improved profitability and achieved a book-to-bill ratio of 1.70x in fiscal 2024. The segment also delivered a strong win rate for major public safety projects, as evidenced through more than doubling year-over-year bookings of orders for next-generation solutions. The Terrestrial and Wireless Networks segment recorded multiple key wins, including multi-year renewals for maintenance of NG-911 systems with longstanding customers, such as the Commonwealth of Massachusetts, the State of Washington and the North Central Texas Emergency Communications District. 
 
 Comtech exited fiscal 2024 with a record funded consolidated backlog of $798.9 million. 
 
 Amended Credit Agreement and New Subordinated Term Loan Facility 
 
 While revenue generation was healthy, and we were able to grow our backlog, our Adjusted EBITDA in the fourth quarter of fiscal 2024 was significantly below expectations primarily due to underperformance in our Satellite and Space Communications segment, causing us to enter into an amendment to our credit facility, dated June 17, 2024. Among other things, the amendment waives certain defaults or events of default in connection with certain covenants, including the Net Leverage Ratio and Fixed Charge Coverage Ratio covenants for the fourth quarter of fiscal 2024. 
 
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 Additionally, the amendment added a consent right that limits our borrowing capacity under the revolver portion of our credit facility. To eliminate the event of default, address the reduced borrowing capacity and bolster liquidity, we entered into a new $25.0 million subordinated unsecured term loan facility with the existing holders of our convertible preferred stock. Additional information related to the amended credit facility and new subordinated unsecured term loan facility can be found in a Form 8-K that was filed with the Securities and Exchange Commission ("SEC") on October 17, 2024, as well as throughout this Form 10-K. 
 
 Transformation Strategy to Become a Pure-Play Satellite and Space Communications Company 
 
 At the beginning of fiscal 2024, we made a commitment to our shareholders to be a more forward-looking organization. To that end, on October 17, 2024, we announced a transformation strategy to re-shape our Company as a pure-play satellite and space communications company, which we believe will unlock, create and deliver value to our shareholders over time. Ongoing and future actions supporting this transformation strategy include: 
 
 • An exploration of strategic alternatives for our Terrestrial and Wireless Networks segment, which is well underway; 
 • The pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus; and 
 • The implementation of additional operational initiatives to achieve profitable results from operations and to align our Company's go-forward cost structure with a pure-play focus on satellite and space communications. 
 
 In combination, we expect these three complimentary initiatives to create a pure-play leader in a large and growing market. As a U.S.-based provider of modems and high-power amplifiers, and a market leader in troposcatter technologies, we have a history of delivering mission-critical satellite and communications solutions for government and commercial customers. Our goal is to create a competitive, focused and efficient business delivering sustainable and profitable growth while providing customers with best-in-class satellite and space communications infrastructure solutions. 
 
 Business Segments 
 
 We operate two core businesses: Satellite and Space Communications, and Terrestrial and Wireless Networks, each of which we believe are serving end markets themselves undergoing a period of long-term growth, reinvestment and rapid technological change. Our Satellite and Space Communications segment is one of a limited number of U.S.-based providers of modems and high-power amplifiers, a market leader in troposcatter technologies, and serves some of the world’s largest defense contractors and allied foreign governments, as well as multiple U.S. government agencies, including branches of the U.S. Armed Forces, U.S. Department of Defense (“DoD”) and U.S. Space Force (“USSF”), among others. Our Terrestrial and Wireless Networks segment is a leading provider of next generation 911 (“NG-911”) infrastructure and solutions for state and local governments and carriers. 
 
 Satellite and Space Communications Segment Terrestrial and Wireless Networks Segment 
 
 • Contributed approximately 60% of fiscal 2024 net sales 
 
 • Satellite Modems and Amplifiers: One of the only U.S.-based providers of modems and high-power amplifiers, facilitating the transmission of voice, video and data over GEO, MEO and LEO satellite constellations 
 
 • Troposcatter Technologies: A global leader in troposcatter technologies, capable of securely transmitting digitized voice, video, and data over distances up to 200 miles, with strong market share in existing C-band and X-band troposcatter systems worldwide 
 
 • Government Services: Provides specialized onsite and remote professional engineering and training / support services for U.S. government customers 
 
 • Space Components: Specializes in delivering components for antennas and high-reliability electronic components and engineering services for space programs 
 
 • Customers include the world’s largest defense contractors, allied foreign governments, as well as multiple U.S. government agencies (including all branches of the U.S. Armed Forces) 
 
 • Contributed approximately 40% of fiscal 2024 net sales 
 
 • Next-Generation 911 Solutions: we provide emergency call routing, location validation, policy-based routing rules, logging, and security functionality 
 
 • Global Carrier Location and Messaging Services: Software and equipment for location-based and text messaging services for carriers, including for public safety, commercial and government services, and wireless emergency alerts solutions for network operators 
 
 • Call-Handling Solutions: we provide comprehensive call handling applications for Public Safety Answering Points 
 
 • Customers include state and local governments across Canada and the U.S., and several of the largest telecommunications companies in the world (including AT&T and Verizon) 
 
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 Financial information about our business segments, including net sales, operating results, Adjusted EBITDA (a Non-GAAP financial measure), total assets, and our operations outside the United States, is provided in " Notes to Consolidated Financial Statements - Note (12) Segment Information"  included in "Part II - Item 8. Financial Statements and Supplementary Data ." 
 
 The markets and key technologies for each segment are further described below. 
 
 Satellite and Space Communications Segment 
 
 Overview 
 
 Our Satellite and Space Communications segment designs, builds and supports a variety of sophisticated communications equipment critical to modern communications infrastructures. We are one of a limited number of U.S.-based providers of modems and high-power amplifiers, and a market leader in troposcatter technologies. Our Satellite and Space Communications segment has an innovative portfolio of these mission-critical technologies and serves some of the world’s largest defense contractors and allied foreign governments, as well as multiple U.S. government agencies, including the U.S. Department of Defense. 
 
 The Satellite and Space Communications segment operates in large and growing end markets that benefit from multiple tailwinds and demand-drivers, including growing global geopolitical tensions, rising global defense spending, and high barriers to entry. Further, these end markets are undergoing technology upgrade cycles and modernization initiatives that are expected to underpin demand for years to come. Fueling these cycles are the USSF’s Commercial Space Strategy and the DoD’s Joint All Domain Command and Control approach, which are expected to generate strong demand for the Satellite and Space Communications business’ next-generation digital solutions. Today, only a limited number of companies, including Comtech, can serve the complex needs of the U.S. and other governments and meet this demand. 
 
 Our Satellite and Space Communications segment is organized into four categories: satellite modem and amplifier technologies, troposcatter technologies, government services and space components. 
 
 Satellite Modem and Amplifier Technologies 
 
 We believe we are a leading provider of satellite earth station modems, solid-state amplifiers and traveling wave tube amplifiers. Many of our key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable our customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput. We hold strong positions in the market for high-throughput modems used in cellular backhaul, a market that has been rapidly growing due to increased mobile device usage and increasing data throughput demands from LTE and 5G deployments worldwide. 
 
 An increasing area of focus for many governments, including the U.S. Department of Defense ("DoD") and several coalition partners, is maturing satellite communications. Many of our satellite communications products have been tested and certified for use by U.S. and coalition military satellite communications ("MILSATCOM") assets, such as the Wideband Global SATCOM constellation. We believe this provides us the opportunity to capture the increased demand for MILSATCOM programs. 
 
 In September 2024, we announced the launch of our new Digital Common Ground (“DCG”) portfolio of modems, designed to enable the U.S. DoD and coalition partners to move to digitized, hybrid satellite network architectures. Built on the our proven satellite communications (“SATCOM”) modem portfolio, our DCG modems are designed and built at Comtech’s headquarters in Chandler, AZ and support commercial and government satellite operations on a single common platform that can be reconfigured rapidly to address changing operational needs. 
 
 We believe our DCG portfolio is one of the first product lines on the market today offering robust access to multi-orbit capabilities across commercial and purpose-built networks. The DCG product line is also one of the first to be Digital Intermediate Frequency Interoperability (“DIFI”) compliant, adhering to DoD and coalition communications standards to enable seamless information flow between services, a key tenet of Combined Joint All Domain Command and Control (“CJADC2”). The DCG product line offers industry leading performance, through multi-gigabit throughput at launch. In addition, we incorporate modern cybersecurity design principles at every level across our DCG product line, ranging from a trusted supply chain to a thoughtful software upgrade lifecycle, including in-field updates. We believe the technologies incorporated into our DCG product line create a meaningful competitive advantage for us. 
 
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 We also provide rugged, highly efficient, and reliable amplifiers for commercial and military applications around the world. These high-power amplifiers (“HPAs”) are used in critical communications links on the ground, in the air and on the sea; they support fixed traditional and direct-to-home broadcast, mobile news gathering, transportable and flyaway systems, secure high data rate communications, and broadband access over SATCOM. These products include configurations that are formally qualified for use on aircraft and being installed as both retrofit and linefit initiatives. 
 
 Troposcatter Technologies 
 
 We believe we are a world leader in the design and supply of troposcatter equipment. We have designed, manufactured, and delivered troposcatter systems for well over fifty years. We have significantly advanced the capabilities of our Troposcatter Family of Systems (“FoS”): we now deliver a next-generation, software-defined solution that represents a thousand-fold performance increase over prior generations of equipment. 
 
 Over the recent past, our next-generation Troposcatter terminals have been chosen by the U.S. Army, the Marines and defense organizations overseas to support the tactical communications requirements of our allies. While our traditional buyer is military, advances in mobility and performance expand our end markets to include new customers. Key industry verticals we are seeking to sell into include oil and gas, utility, marine and rail uses. 
 
 At the same time, the traditional defense market is changing and growing in ways that we believe make our equipment more relevant: for years, conflicts involving the U.S. and our allies mostly involved actions against unconventional adversaries with less advanced technology. That is no longer the case, as conflicts involving state actors arise around the globe. Now, U.S. and allied defense strategies are shifting focus to threats from organized, better equipped and higher technology adversaries. This places a premium on sophisticated communications technology from trusted, onshore providers, and creates a natural upgrade cycle for legacy systems deployed globally over the years. 
 
 We’re encouraged by the potential for our Troposcatter FoS, as we believe we offer one of the best products, with one of the best technologies, to a growing list of customers with expanding use cases, and a set of newly-developing end markets that should provide our business with long-term growth opportunities. 
 
 Government Services 
 
 We provide training and field support for multiple U.S. government agencies across an array of programs. These are typically long-term, multi-million dollar contracts, and examples include: Comtech as sole award winner of a 5-year, $544.0 million Global Field Service Representative (“GFSR”) contract with the U.S. Army to provide onsite professional engineering services, as well as supply and support communications technologies (we note that this contract is currently under protest by the incumbent); Comtech as sole award winner of a 5-year, $125.0 million contract to provide complex cybersecurity operations training for U.S. government customers; and Comtech as one of multiple awardees of a large multi-year Global Tactical Advanced Communication Systems II (“GTACS II”) contract with the U.S. Army to support Very Small Aperture Terminal (“VSAT”) satellite systems and related services. 
 
 Space Components and Antennas 
 
 For over 45 years, we have been recognized as an industry leader and global supplier of high-reliability products and supply chain management and engineering services, supporting selection of space-qualified parts for satellite and launch vehicle tracking solutions geared for critical U.S. National Aeronautics and Space Administration ("NASA") programs as well as several international space and defense agencies. Our engineers are not only involved in the design of products, but our technical team is heavily involved with the customer development of electronic parts and testing specifications to assure capability, reliability and radiation tolerance to specific mission/project requirements both as an individual service and for Electrical, Electronic, and Electromechanical (“EEE”) parts supplied to our customers. We also lead and conduct failure analysis investigations and assist with manufacturing and test problems at the source and support reporting and selloff with the customer and its prime (such as the Japanese Space Exploration Agency (“JAXA”) and NASA). Our quality engineering team assures that the product received from our suppliers and test facilities are compliant to their respective specifications prior to shipment to our end customers. Our service offerings have been expanded to include kitting to customer bill of materials with direct shipments to customer designated contract manufacturers. 
 
 Within the satellite communications market, we are a leading provider of components that support the mission requirements of LEO, MEO and GEO satellite communication and tracking requirements, offering a host of high-performance single-band and multi-band feed solutions. We also supply maritime antenna solutions that are fielded by foreign governments. 
 
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 Satellite and Space Communications: Key Markets and Growth Drivers 
 
 As noted previously, the Satellite and Space Communications segment operates in large and growing end markets that benefit from multiple tailwinds, including technology upgrade cycles and modernization initiatives that are expected to underpin demand for years to come. The need for more communications infrastructure from governments and enterprise alike is expected to increase as larger constellations of satellites are deployed, connected devices and end-points proliferate, and elevated geopolitical tensions persist and re-prioritize government agency and defense spending. We believe that we are well-positioned to capitalize on this demand through sales of our market-leading, including new next-generation satellite ground infrastructure technologies that can be used with the thousands of new LEO, MEO and large HTS satellites that are expected to be deployed over the next several years, and our advanced troposcatter systems. 
 
 Examples of end-market applications that are driving long-term demand for our communication technologies include: 
 
 • Government and Military Satellite Communications: Government users rely on high-speed connectivity in a variety of conditions throughout the world to provide real time information sharing, including Situational Awareness (“SA”), dissemination of Intelligence, Surveillance, and Reconnaissance (“ISR”) information, and communications. Our communications solutions provide command and control and satellite networking capabilities that support U.S. and allied government initiatives for assured and resilient communications capabilities, as well as supporting interoperability objectives, including the Joint All Domain Command and Control (“JADC2”) efforts. 
 
 • New LEO, MEO and HTS Satellites: Thousands of new satellites are reportedly in orbit or being launched over the next several years, according to announcements by companies including Telesat Lightspeed, Eutelsat, OneWeb, SpaceX Starlink, Amazon Kuiper and Viasat, which we believe will lead to increasingly complex satellite networks. As service providers work to offer connectivity to these high-speed, high-bandwidth satellites and expand their networks to handle the demand for new LEO, MEO and HTS applications, we believe our ELEVATE TM , Heights TM and UHP networking platforms, and our solid-state amplifiers will ultimately be incorporated into many new installations and equipment upgrades. We continue to provide modems and amplifiers to existing LEO and MEO communications satellite providers and expect to see growth in imaging satellites alongside commercial imaging constellations, including conventional, thermal and hyperspectral. 
 
 • Satellite-Based Cellular Backhaul: Demand for satellite-based cellular backhaul services is anticipated to grow rapidly as a result of the increased penetration of smart cellular phones and network upgrades to 4G and 5G in developing regions of the world. Ultimately, as 5G services continue to be deployed, we expect that mobile data services will become more critical. As mobile data penetration expands and mobile data consumption increases, wireless carriers must invest in their mobile network infrastructures, and we believe businesses will require back-up communications. In developing regions of the world, and in remote areas where terrestrial network infrastructure is lacking (or where challenging geography prohibits it), wireless network operators often backhaul, or transport, their wireless data traffic using satellite-based networking technologies. We are well positioned to serve the high-performance, high availability needs of satellite-based cellular backhaul through sales of our SCPC and TDMA satellite modems as well as our Heights TM , ELEVATE TM and UHP networking platforms. 
 
 • Troposcatter Family of Systems: U.S. and allied defense strategies are shifting focus to threats from organized, better equipped and higher technology adversaries, placing a premium on sophisticated communications technology from trusted, onshore providers. Comtech’s Troposcatter Family of Systems (“FoS”) delivers a next-generation, software-defined solution that represents a thousand-fold performance increase over prior generations of equipment. Further, constant innovation means Comtech’s latest generation of equipment can be packed into two small cases, offering significant mobility improvements. Our next-generation troposcatter terminals have been chosen by the U.S. Army, the U.S. Marines and defense organizations overseas to support the tactical communications requirements of our allies. Additionally, we see multiple opportunities for non-defense applications, including oil and gas, utility, marine and rail industry use. 
 
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 Satellite and Space Communications: Customer Base 
 
 Our customer base for the Satellite and Space Communications segment comprises numerous governments and companies worldwide with whom we have longstanding relationships, including leading system and network suppliers in the global satellite, mobile cellular, defense, broadcast and aerospace industries, as well as the U.S. federal government (including the U.S. Army, Air Force, Marine Corps and Navy), U.S. state and local governments and allied foreign governments. Approximately 55.4% of the segment’s sales are derived from U.S. government and related agency contracts. Representative customer categories include: 
 
 • The U.S. Army, U.S. Marine Corps, U.S. Navy, prime contractors to the U.S. Armed Forces, NATO and foreign governments (i.e., ministries of defense) 
 
 • Domestic and international defense customers, as well as prime contractors and system suppliers such as General Dynamics Corporation, Lockheed Martin Corporation, L3Harris Technologies, Inc., Northrop Grumman Corporation, Raytheon Technologies Corporation, The Boeing Company and ViaSat Inc. 
 
 • Commercial end-customers also include Claro Argentina, Intelsat S.A., JAXA, NASA, SED Systems (a division of Calian Ltd.), SES S.A. and Speedcast International Limited 
 
 • Satellite systems integrators, wireless and other communication service providers, and broadcasters, such as DIRECTTV Group 
 
 • Aviation industry system integrators such as Collins Aerospace, an RTX Business 
 
 • Oil companies such as Shell Oil Company and PETRONAS 
 
 Terrestrial and Wireless Networks Segment 
 
 Overview 
 
 Our Terrestrial and Wireless Networks segment is a leading provider of next generation 911 (“NG-911”) infrastructure and solutions for state and local governments and carriers. From the moment a 911 call is made, Comtech provides highly reliable solutions that contribute to emergency calls being processed instantly, with proper routing to first responders. Our solutions include feature-rich data sets (such as: precise location information, route optimization, text messaging, photos and real-time video), putting first responders in the best possible position to make decisions when every second counts. Our customers are the businesses, communities and governments that need to implement and improve 911 infrastructure in the U.S., as well as MNOs in the U.S. and abroad that have a need to determine subscriber location within a network or to facilitate messaging services. According to Frost & Sullivan, a leading third-party research firm, we were the second leading NG-911 primary contract holder at year-end 2023, with an estimated market share of 22.1% and a population coverage of nearly 60 million. We have primary statewide contracts in Arizona, Illinois, Iowa, Massachusetts, Ohio, Pennsylvania, South Carolina and Washington. We hold direct contracts in counties in Texas and Missouri (St. Louis County). As such, we believe that we are a leader in public safety communication and location technologies. 
 
 On October 17, 2024, we announced that we are executing a strategy to transform Comtech into a pure-play satellite and space communications company. Ongoing and future actions supporting our transformation strategy include an exploration of strategic alternatives for our Terrestrial and Wireless Networks segment, which is well underway. 
 
 The Terrestrial and Wireless Networks segment is organized into three service areas: next generation 911 and call delivery, Solacom call handling solutions and trusted location and messaging solutions. 
 
 Next Generation 911 and Call Delivery 
 
 In addition to 911 call routing, we provide systems integration, geospatial location information, satellite and location infrastructure terminals, and linkage to NG-911 Emergency Services IP Networks ("ESInet"). We also offer what we believe are best-in-class 911 call handling solutions under the Solacom brand name. We believe state and local governments need to upgrade existing legacy networks, location technologies, and call handling systems to modern NG-911 systems infrastructure, including 911 text messaging services, advanced data, real-time photos, and other types of information sharing over IP networks. 
 
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 As the U.S., Canada and Australia broadly adopt upgraded NG-911 and call handling solutions, we believe that other countries will follow similar technology and telecommunications advancements. Comtech’s public safety and location technology solutions have been deployed since 2006 and are utilized by domestic MNOs, as well as internationally, to provide reliable device location determination for public safety and commercial applications. Many of our technologies, such as positioning, mapping and text messaging are embedded in our public safety and location offerings to help address mapping, routing and geolocations. Our solutions address Federal Communications Commission ("FCC") mandates for emergency services as they relate to location delivery by supporting precise caller location. Our text messaging platforms are used by wireless carriers to provide short messaging services (“SMS”) to their end-customers as well as being used to communicate with 911 public safety answering points (“PSAPs”). 
 
 Solacom Call Handling Solutions 
 
 Solacom Guardian is our state-of-the-art call handling solution, which provides an integrated call and text-to-and-from 911 solution on a unified platform. The solution provides a flexible user interface, adapts to varying customer environments and preferences, provides powerful call conferencing capabilities, enhanced reporting capabilities and offers geospatial 911 location call display directly from a customized map. Because of its advanced features, it allows us to offer an immediate upgrade path to existing and new customers and has expanded our presence in the public safety solutions market with more than 700 PSAPs and emergency call centers installed in 5 countries. 
 
 The Guardian platform includes an integrated cloud-based texting solution (“Guardian Messenger”) which provides call takers / dispatchers with the ability to collect, process and share previously unavailable live incident information such as text, photos, and video via SMS and multimedia messaging services (“MMS”), from one integrated desktop. The Guardian platform also offers a cloud-based reporting and analytics solution (“Guardian Insights”), designed to assist emergency call center directors to know their operations, so they can better plan and manage resources and workloads. 
 
 We are investing in product enhancements for our Guardian platform, which include additional cloud-based capabilities, analytics, and cyber security solutions. We have significantly increased our “911-as-a-Service" (“911aaS”) offering, deploying hosted 911 call centers solutions across numerous states and regions in the U.S. and provinces in Canada, starting with locations where we have existing NG-911 networks. 
 
 Trusted Location and Messaging Solutions 
 
 We believe that as the industry moves toward digital transformation, customers will be looking for situational awareness solutions that are built on top of mapping and geo-services. Our location technology solutions enable the determination of a mobile device’s geospatial position in a variety of environments, leveraging a wide range of signals including Global Positioning System ("GPS"), Global Navigation Satellite Systems ("GNSS") and multiple cellular positioning technologies ranging from 2G through 5G mobile networks. For our installed base of systems, we provide ongoing operational support, including administration of system components, system optimization, configuration management and maintenance services, including tracking customer support issues, troubleshooting and developing and installing maintenance releases. 
 
 Our Location Studio ® platform enables customers, particularly public safety agencies, to build their own applications with end-user functionality, such as maps, search, geocoding, routing, and navigation, using their own brand. We believe that customers and prospects are increasingly looking for alternatives to mapping services that are subject to change by the provider, and which meet market privacy and security requirements. The Location Studio ® platform is a complete end-to-end location application consisting of maps, map data, including our Trusted OpenStreetMap ("TOSM") geo-services, application program interfaces ("APIs") and software development kits ("SDKs") enabling public safety ecosystems and enterprises to customize unique mapping applications. Map data includes positioning, search, enhanced local content, custom maps, navigation, geo-fencing, tracking integrated with third party data sources like camera feeds and IoT sensor data via cross-platform APIs and SDKs supporting all leading operating systems. 
 
 We recently began marketing SmartResponse ® , a newly developed cloud-based solution that offers a common operational picture to PSAPs and first responders, enabling an effective data-driven response for security agencies and first responders by providing a holistic information environment for them. This new solution offers streaming live feeds from traffic cameras at and near incident location, and accesses caller information like past residences, criminal history, or next-of-kin information at the tap of a button. Offering a bird's-eye view of integrated data, the SmartResponse ® solution empowers first responders to ensure appropriate resources are on the scene and to better serve the public in emergency situations. 
 
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 Terrestrial and Wireless Networks: Key Markets and Growth Drivers 
 
 We are a leading provider of modern public safety and location technologies. Our next generation solutions enable rich, multimedia information to be delivered alongside 911 calls. Also, our E-911 and NG-911 call routing solutions allow cellular carriers and voice over the Internet ("VoIP") carriers, as well as legacy telecommunications carriers, to deliver emergency calls to public safety emergency call centers nationwide. When someone places an emergency call, our technologies identify the call as an emergency call, access the user’s location information from the wireless or VoIP networks and location databases, and route the call to the assigned public safety jurisdiction. Today, we provide public safety and location technologies to many U.S. telecommunication carriers, the largest being Verizon (for which we provide 911 call routing via cellular service). We believe we service a significant portion of the carrier market for 911 cellular call routing applications, along with one other leading competitor. 
 
 In addition to our growth in core 911 services, the expected expansion of 988 networks in fiscal 2025 and beyond across the United States is expected to have a positive impact on our business. 988 services provide free and confidential support for people in distress, suicide prevention and crisis resources. We believe we are uniquely positioned to expand our 911 services into 988 services and help mitigate some of the core challenges the network is currently experiencing with area code specific call routing. By connecting the 988 services with our proven 911 infrastructure, we believe that location services critical to dispatch personnel can be improved for 988 exponentially. 
 
 In the growth area of 5G networks, new network-based positioning technologies are poised to deliver opportunities thanks to the ongoing digital transformation of multiple industry verticals, including the Public Safety, Transportation, Manufacturing, Healthcare and Retail industries. As these industries increasingly rely on data from connected devices, using location information in real-time is expected to enhance existing business processes and outcomes as well as end user experiences. We believe end-market applications such as worker’s safety in high-risk areas, smart manufacturing and autonomous driving would benefit enormously from new precision-positioning techniques. Also, MNOs can now provide even more advanced location-based services, in addition to existing connectivity solutions. 
 
 Examples of end-market applications that are driving long-term demand for our Terrestrial and Wireless Networks technologies include: 
 
 • Our XyPoint® Mobile Location Platform: Provided to MNOs globally, our virtualized location-based services (“LBS”) platform is a high availability robust solution with multiple positioning technologies, that allows authorized users to locate and track specific mobile devices and monitor specific areas of interest. MNOs can use this platform for location accuracy to support a wide variety of use cases, including public safety, location intelligence, network optimization and big data analytics. On the legacy front, our LBS platform is compatible within 2G through 4G wireless networks, as well as an enabler to the MNOs to seamlessly migrate to cloud native environments, as they progress their migrations to 5G. 
 
 • Comtech INSIGHTS LightSource: Provides first responders a reporting and analytics platform for the rich data created in Comtech’s NG-911 core systems. Authorized users at state, regional, and jurisdiction organizations can see reports and analysis of call, behavior, and location characteristics in both time and geospatial visualizations. Users are able to interact directly with the visualization in real time to focus on desired characteristics to include timeframes, call types, media types, and other information. Authorized users can also schedule reports for automatic delivery via email. 
 
 • Comtech INSIGHTS SmartResponse®: Provides first responders of all types (fire, police, medical, state, regional emergency communications centers, dispatch centers, emergency management agencies, fusion cells, intelligence centers, etc.) access to real-time 911 call information and related supplemental information for situational awareness in a geospatial, mapped context. Authorized users can view 911 calls and emergency response vehicles/assets in a 3-D map via a single pane of glass view to enhance response. SmartResponse ® is available for use in both emergency centers and response vehicles. 
 
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 • Wireless Emergency Alerts (“WEA”): WEA, also known as Commercial Mobile Alerts System (“CMAS”) in the U.S., enable authorized officials to inform the public about life-threatening events by automatically delivering emergency alerts to mobile devices (including roaming users) via the government alert gateway. Using standardized infrastructure, ensuring compliance with government regulations globally, our patented technology facilitates the origination and accurate delivery of geo-targeted emergency alerts, empowering emergency services providers to better serve the public. Using this technology, for example, MNOs can quickly broadcast emergency communications, such as severe weather alerts, to all devices in a specific geographical area. 
 
 Terrestrial and Wireless Networks: Customer Base 
 
 Our customer base for the Terrestrial and Wireless Networks segment serves numerous customers, primarily in North America and Australia, with whom we have cultivated longstanding relationships, including state and local governments, and a number of the largest telecommunication companies in the world. Representative customer categories include: 
 
 • U.S. state and local governments, such as the Commonwealth of Massachusetts, the Commonwealth of Pennsylvania and the states of Arizona, Iowa, Maine, Ohio, South Carolina, Washington, St. Louis County, MO and the North Central Texas Emergency Communications District 
 
 • End-customers also include AT&T Inc., Comcast Corporation, Nokia Corporation, T-Mobile USA, Inc. and Verizon Communications Inc. 
 
 • Different solutions deployed with telephone companies and federal, provincial, and local governments in Australia, Canada, Cayman Islands and New Zealand 
 
 Business Results and Challenges: Overview 
 
 In fiscal 2024, we achieved consolidated net sales of $540.4 million and Adjusted EBITDA of $45.7 million. Our fiscal 2024 performance and outlook for fiscal 2025 are discussed further in Part II – “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Fiscal 2024 Highlights and Business Outlook for Fiscal 2025 .” For a definition and explanation of Adjusted EBITDA, see Part II – “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Comparison of Fiscal 2024 and 2023 – Adjusted EBITDA .” 
 
 More Information and Where to Find It 
 
 Our Internet website is www.comtech.com , at which you can find our filings with the Securities and Exchange Commission ("SEC"), including investor letters, press releases, annual reports, quarterly reports, current reports, and any amendments to those filings. We also make announcements regarding company developments and financial and operating performance through our blog, Signals, at www.comtech.com/signals . We also use our website to disseminate other material information to our investors (on the Home Page and in the "Investor Relations" section). Among other things, we post on our website our press releases and information about our public conference calls (including the scheduled dates, times and the methods by which investors and others can listen to those calls), and we make available for replay webcasts of those calls and other presentations for a limited time. 
 
 We also use social media channels to communicate with customers and the public about our Company, our products, services, and other issues, and we use social media and the Internet to communicate with investors, including information about our stockholder meetings. Information and updates about our Annual Meetings will continue to be posted on our website at www.comtech.com in the "Investors" section. 
 
 None of the information on our website, blog or any other website identified herein is incorporated by reference in this Form 10-K and such information should not be considered a part of this Form 10-K. 
 
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 Strategic Transformation 
 
 In order to position ourselves to take advantage of additional growth opportunities and meet our strategic objectives, we have followed, and will continue to follow, a disciplined approach in identifying, executing and capitalizing on acquisitions and divestitures of businesses and enabling technologies. Material acquisitions and divestitures in the recent past include: 
 
 On November 7, 2023, we completed the divestiture of our solid-state RF microwave high power amplifiers and control components product line, which was included in our Satellite and Space Communications segment, pursuant to a stock sale agreement entered into on October 11, 2023 (the "PST Divestiture"). Net proceeds from the PST Divestiture in fiscal 2024 were $33.2 million and used in part to repay a portion of our outstanding debt at the time, as well as to fund working capital needs. 
 
 On October 17, 2024, we announced that we are executing a strategy to transform Comtech into a pure-play satellite and space communications company. Ongoing and future actions supporting our transformation strategy include: an exploration of strategic alternatives for our Terrestrial and Wireless Networks segment, which is well underway; the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus; and the implementation of additional operational initiatives to both achieve profitable results from operations as well as to align our go-forward cost structure with a pure-play focus on satellite and space communications. In connection with this transformation strategy, we have also undertaken a detailed evaluation of our Satellite and Space Communications segment's product portfolio to identify opportunities to divest, separate and/or rationalize businesses or facilities that are not core to our go-forward focus. Consistent with this effort, in our fourth quarter of fiscal 2024, we made the decision to exit our operations in Basingstoke, United Kingdom. Such operations were established in connection with the prior management team’s fiscal 2020 acquisition of CGC Technology Limited, which primarily served customers in Europe. Following the acquisition, Comtech continued to invest in the Basingstoke facility to advance LEO constellation-based antenna technologies in anticipation of significant production orders. Taking into consideration the significant ongoing investment as well as unfavorable contract terms on prospective antenna sales, we concluded such operations would not generate an attractive return on invested capital and made the decision to exit these operations. Furthermore, over the past several months, we have conducted an intensive review of our product portfolio to focus future investment on our most strategic, high-margin revenue opportunities within the Satellite and Space Communications segment. There can be no assurance that the exploration of strategic alternatives will result in a transaction or other strategic changes or outcomes. While anticipated to improve our profitability in future periods, such actions may result in near-term restructuring charges. 
 
 Sales, Marketing and Customer Support 
 
 Sales and marketing strategies include direct sales through sales, marketing and engineering personnel, indirect sales through independent representatives, value-added resellers, and sales through a combination of the foregoing. We devote resources to evaluating and responding to requests for proposals by governmental agencies around the world and, as needed, we employ the use of specialized consultants to develop our proposals and bids. 
 
 We intend to continue to expand international marketing efforts, as needed, by engaging additional independent sales representatives, distributors and value-added resellers and by establishing foreign sales offices. In addition, we expect to leverage our relationships with larger companies (such as prime contractors to the U.S. government and large mobile wireless operators) to market our technology solutions. In fiscal 2025, we expect to continue expanding our social media and Internet presence and further developing an updated marketing and branding strategy. 
 
 We are pre-qualified as an approved vendor for certain government contracts. We collaborate in sales efforts under various arrangements with integrators. Our marketing efforts also include advertising, public relations, speaking engagements and attending and sponsoring industry conferences. 
 
 Our management, technical and marketing personnel establish and maintain relationships with customers. Our sales strategies include a commitment to providing ongoing customer support for our systems and equipment. This support involves providing direct access to engineering staff or trained technical representatives to resolve technical or operational issues. 
 
 Our products and services in many of our product lines have long sales cycles. Once a product is designed into a system, customers may be reluctant to change the incumbent supplier due to the extensive qualification process and potential redesign required in using alternative sources. In addition, in recent years, we have found that overall sales cycles for each of our product lines have significantly increased, as we continue to support our customer's overall migration and upgrade to newer designs and technologies. 
 
 11 
 
 Sales by geography and customer type, as a percentage of related net sales, are as follows: 
 
 Fiscal Years Ended July 31, 
 2024 2023 2022 2024 2023 2022 2024 2023 2022 
 Satellite and Space Communications Terrestrial and Wireless Networks Consolidated 
 U.S. government 55.4 % 49.9 % 45.6 % 1.1 % 1.7 % 2.4 % 33.7 % 31.3 % 27.2 % 
 Domestic 15.1 % 16.7 % 18.0 % 89.4 % 89.2 % 88.1 % 44.8 % 44.7 % 47.8 % 
 Total U.S. 70.5 % 66.6 % 63.6 % 90.5 % 90.9 % 90.5 % 78.5 % 76.0 % 75.0 % 
 
 International 29.5 % 33.4 % 36.4 % 9.5 % 9.1 % 9.5 % 21.5 % 24.0 % 25.0 % 
 Total 100.0 % 100.0 % 100.0 % 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. For fiscal 2024, except for the U.S. government, there were no customers that represented more than 10% of consolidated net sales. For fiscal 2023 and 2022, included in domestic sales are sales to Verizon Communications Inc. ("Verizon"), which were 10.6% and 11.1% of consolidated net sales, respectively. 
 
 International sales for fiscal 2024, 2023 and 2022 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $115.9 million, $132.1 million and $121.4 million, respectively. When we sell internationally, we denominate most of our contracts in U.S. dollars. Some of our sales to international customers are paid for by letters of credit or on an open account. From time to time, some of our international customers may require us to provide performance guarantees. 
 
 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 fiscal 2024, 2023 and 2022. 
 
 Backlog 
 
 Our backlog as of July 31, 2024 was $798.9 million (of which $278.9 million was attributed to the Satellite and Space Communications segment and $520.0 million was attributed to the Terrestrial and Wireless Networks segment). Such amount represented a new record level of consolidated backlog for our Company. We estimate that a substantial portion of the backlog as of July 31, 2024 will be recognized as sales during the next twenty-four month period, with the rest thereafter. Such estimate could be impacted by our transformation strategy discussed above, under the section " Strategic Transformation. " 
 
 At July 31, 2024, 66.6% of our backlog consisted of orders for use by U.S. commercial customers, 18.8% consisted of U.S. government contracts, subcontracts and government funded programs and 14.6% consisted of orders for use by international customers (including sales to U.S. domestic companies for inclusion in products that will be sold to international customers). 
 
 Our backlog is defined as orders (sometimes also referred to herein as bookings) that we believe to be firm. Backlog that is derived from U.S. government orders relates to U.S. government contracts that have been awarded, signed and funded. Backlog for our U.S. government customers also includes amounts appropriated by Congress and allotted to the contract by the procuring government agency. Such backlog does not include the value of options that may be exercised in the future on multi-year contracts, nor does it include the value of additional purchase orders that we may receive under indefinite delivery/indefinite quantity ("IDIQ") contracts or basic ordering agreements. In some cases, such as contracts received from large U.S. based telecommunication companies, our backlog may include the value of customer authorizations to proceed or may be computed by multiplying the most recent month’s contract or revenue by the months remaining under the existing long-term agreements, which we consider to be the best available information for anticipating revenue under those agreements. When we acquire a company with existing contracts, we only record bookings for those contracts that meet our definition. Almost all of the contracts in our backlog (including firm orders previously received from the U.S. government) are subject to modification, cancellation at the convenience of the customer, or for default in the event that we are unable to perform under the contract. 
 
 Please see " Strategic Transformation " section discussed above, as well as Item 1A – “ Risk Factors ” under Part I of this Form 10-K for more information about risks pertaining to recognition of our backlog. 
 
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 A significant portion of the backlog from our U.S. commercial customers relates to large, multi-year contracts to provide state and local governments (and their agencies) with 911 public safety and location technology solutions. Although the contracts themselves represent legal, binding obligations of these governments, funding is often subject to the approval of budgets (for example, on an annual or bi-annual basis). Although funding for these multi-year contracts is dependent on future budgets being approved, we include the full estimated value of these large, multi-year contracts in our backlog given the critical nature of the services being provided and the positive historical experience of our state and local government customers passing their respective budgets. 
 
 There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, or that any contract included in backlog will be profitable. There is a higher degree of risk in this regard with respect to unfunded backlog. The actual amount and timing of any revenue is subject to various contingencies, many of which are beyond our control. The actual recognition of revenue on contracts included in backlog may never occur or may change because a program schedule could change, a customer may not follow up with order details (e.g., delivery instructions), fluctuations in currency exchange rates after an order is placed could cause our products to become too expensive for a foreign customer, a customer’s program could be canceled, a contract could be reduced, modified or terminated early due to changes in a customer’s priorities, funding may not be included in future budgets, actual indirect rates being reimbursed on U.S. government contracts may ultimately be less than those indirect rates included in our initial proposals, or an option that we had assumed would be exercised is not exercised. As a result of these contingencies, we may adjust our backlog if we determine that such orders are no longer firm and/or funded. In addition to adjustments from these types of contingencies, variations in backlog from time to time are attributable, in part, to changes in sales mix, the timing of contract proposals, the timing of contract awards, delivery schedules on specific contracts, new bookings obtained through acquisitions or reductions due to divestitures or other restructuring type activities. A large majority of the solutions in our satellite ground infrastructure technologies product line within our Satellite and Space Communications segment operate under short lead times. Backlog in both our Satellite and Space Communications segment and Terrestrial and Wireless Networks segment has been, and could be, highly influenced by the nature and timing of orders received from federal, state and local governments and defense-related agencies, causing such orders to be subject to unpredictable funding, deployment and technology decisions by such customers. As a result, we believe our backlog and orders, at any point in time, are not necessarily indicative of the total sales anticipated for any future period. 
 
 Research and Development 
 
 We have established leading technology positions in our fields through internal and customer-funded research and development activities. 
 
 Internal research and development expenses are reported as research and development expenses for financial reporting purposes and were $24.1 million, $48.6 million and $52.5 million in fiscal 2024, 2023 and 2022, respectively, representing 4.5%, 8.8% and 10.8% of total consolidated net sales, respectively, for these periods. Customer-funded research and development activities relate to the adaptation of our basic technology to specialized customer requirements which is recoverable under contracts and is reflected in net sales with the related costs included in cost of sales. Certain of our government customers also contract with us from time to time to conduct research on telecommunications software, equipment and systems. During fiscal 2024, 2023 and 2022, we were reimbursed by customers for such activities in the amounts of $18.9 million, $14.0 million and $9.8 million, respectively. 
 
 In addition to the recent increases in customer-funded research and development activities, in fiscal 2024, we also experienced an increase in engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $2.9 million and $3.8 million, respectively. As a result of these trends and the impact of prior reductions in force announced in fiscal 2023, our research and development expenses for financial reporting purposes significantly decreased in fiscal 2024 as compared to historical periods. 
 
 During fiscal 2024, 2023 and 2022, we incurred $4.1 million, $3.8 million and $1.2 million, respectively, of strategic emerging technology costs for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations. A significant portion of the fiscal 2024 costs related to our steerable antenna operations in Basingstoke, United Kingdom, which we decided to exit in the fourth quarter of fiscal 2024, as discussed above in the section " Strategic Transformation. " We are evaluating this new market in relation to our long-term business strategies, and expect to incur additional costs in fiscal 2025. However, such costs will be reported in the future as part of our ongoing research and development activities and not added back to our Adjusted EBITDA. 
 
 13 
 
 Intellectual Property 
 
 We rely upon trade secrets, technical know-how, continuing technological innovation and, with respect to certain key technologies, patents to develop and maintain our competitive position. The products we sell require significant engineering design and manufacturing expertise. For technological capabilities that are not protected by patents or licenses, we generally rely on the expertise of our employees and our learned experiences in both the design and manufacture of our products and the delivery of our services. 
 
 Some of our key Satellite and Space Communications segment technology is protected by patents that are significant to protecting our proprietary technology. We have been issued several U.S. patents relating to forward error correction technology that is utilized in our TPC-enabled satellite modems. Due to our market leadership position, we do not expect that upon expiration of these patents, our future results will be negatively impacted. 
 
 We have a portfolio of several hundred patents worldwide relating to wireless location services, text messaging, GPS ephemeris data, emergency public safety data routing, electronic commerce and other areas. To-date, our strategy has been to avoid offensive and defensive patent litigation and focus on building meaningful partnerships with other companies through direct licensing, cross licensing, and other forms of agreements. We do not believe that any single patent or group of patents, patent application or patent license agreement is material to our operations. 
 
 We have filed additional patent applications for certain apparatus and processes we believe we have invented covering key features of location services, wireless text alerts, SMS Center, mobile-originated data and E911 network software. There is no assurance that any patent application will result in a patent being issued by the U.S. Patent and Trademark Office or other patent offices, nor is there any guarantee that any issued patent will be valid and enforceable. Additionally, foreign patent rights may or may not be available or pursued in any technology area for which U.S. patent applications have been filed. 
 
 Almost all the products and services we sell to the U.S. government include technology and other technical know-how that we have internally developed. In past instances where we have provided government-purpose rights, to our knowledge, the U.S. government has not exercised any of these rights. To the extent that we have provided or will provide government-purpose rights in the future, we believe that given the rapidly changing nature of our technology, our future success will depend primarily on the technical competence and creative skill of our personnel, rather than any contractual protection. 
 
 Competition 
 
 Our businesses are highly competitive and are characterized by rapid technological change. Some of our competitors are substantially larger, have significantly greater financial, marketing, research and development, technological and operating resources and broader product lines than we have. Other companies are developing new technologies and the shift towards open standards such as IP-based satellite networks will likely result in increased competition. A significant technological breakthrough by others, including new companies, our existing competitors and our customers, could have a material adverse effect on our business. Our future success depends on, among other things, our ability to keep pace with such changes and developments and to respond to the increasing variety of electronic equipment users and transmission technologies. 
 
 Some large defense-based companies have subsidiaries or divisions that compete against us in one or more business segments. In addition, new and potential competitors are always emerging. Certain of our customers, such as prime contractors who currently outsource their engineering and manufacturing requirements to us, have technological capabilities in our product areas and could choose to replace our products with products they develop. In some cases, we partner or team with companies (both large and mid-tier) to compete against other teams for large defense programs. In some cases, these same companies may be among our competitors. 
 
 14 
 
 Listed below, in alphabetical order, are some of our competitors in each of our two business segments: 
 
 Satellite and Space Communications – Advantech Co., Ltd., Aethercomm Inc. (acquired by Frontgrade Technologies, a portfolio company of Veritas Capital), Agilis Satcom, AMERGINT Technologies, Inc., Amkom Design Group Inc., AnaCom, Inc., Codan Limited, Communications and Power Industries (also referred to as "CPI"), Datum Systems, Inc., dB Control Corp. (a subsidiary of HEICO Corp.), ETM Electromatic Inc. (acquired by Teledyne Technologies Inc.), Gilat Satellite Networks Ltd., Empower RF Systems, Inc., General Dynamics Corporation, Hughes Network Systems, LLC (a subsidiary of EchoStar), KVH Industries, Inc., Kratos Defense and Security Solutions (Including Kratos RT Logic and Avtec Systems, Inc.), L3Harris Technologies, Inc., Mission Microwave Technologies, LLC, ND Satcom GmbH, Novelsat LTD, Panasonic Corporation, Paradise Datacom Ltd. (a subsidiary of Teledyne Technologies Incorporated), Raytheon Technologies Corporation, SatixFy Israel Ltd., ST Engineering iDirect, Inc. (including Newtec), Starlink Services, LLC (a wholly owned subsidiary of SpaceX), Terrasat Communications Inc., Trace Systems Inc., TrellisWare Technologies, Inc., Ultra Intelligence and Communications, and ViaSat, Inc. 
 
 Terrestrial and Wireless Networks – AT&T Inc., Atos, Bandwidth.com, Carbyne, Central Square Technologies, 8x8, Inc., Everbridge, Inc., Hexagon AB, Immersive Labs, INdigital (acquired by Novacap), Intersec, Intrado Corporation (formerly West Corporation), LM Ericsson, Lumen Technologies, Inc. (formerly CenturyLink, Inc.), Mobilaris AB, Mobile Arts AB, Motorola Solutions, Inc., NGA911, NextNav, Inc., Nokia Networks (a subsidiary of Nokia Corporation), Polaris Wireless, RapidDeploy, Inc., RapidSOS, Rave Mobile Safety, Sinch AB (Inteliquent), Synergem Technologies, SS8, TomTom N.V., Versaterm Public Safety Inc., WestTel, and Zetron. 
 
 We believe that competition in all our markets is based primarily on technology innovation, product performance, reputation, delivery times, customer support and price. Due to our proprietary know-how, we believe we can develop, produce and deliver products and services on a cost-effective basis faster than many of our competitors. 
 
 Corporate Responsibility and Sustainability 
 
 We recognize the need for driving corporate responsibility within our organization, throughout our supplier network and in our communities. To drive this responsibility, we will continue to target effective corporate governance, ethical behavior in the workplace and social responsibility, while also updating and enhancing this focus with initiatives, such as: 
 
 • refreshing the roles and responsibilities of the committees of our Board of Directors, including with the establishment of an Environment, Social and Governance ("ESG") task force supervised by our Board of Directors, 
 
 • developing a company-wide People Strategy to foster and promote workplace talent and diversity, and 
 
 • organizing a company-wide strategic sourcing group that will be accountable for tracking and driving resource reduction targets, such as resource-efficient manufacturing, reduction of hazardous substances, and take-back, recycling and reuse of products. 
 
 Human Capital 
 
 Our employees are one of our most valuable assets and we believe our success depends on the talent we attract and retain. Our comprehensive people strategy continues to focus on developing a meaningful plan to enhance our employees’ engagement and interests, which will complement and build on our strong foundation. We are passionate about building meaningful employee engagement and happiness through a variety of programs, initiatives, and other opportunities that are addressed in our People Strategy. As part of this strategy, we are providing a foundation for a diverse, inclusive and equitable workplace where employees feel they belong, their views are valued, and they are empowered to pursue opportunities they are passionate about. Our People Strategy is also focused on meeting and executing our strategic recruitment initiatives, developing and promoting talent; supporting competitive benefits and wellness programs; and emphasizing the importance of our employees’ health, safety and wellness. 
 
 Fostering Proactive Belonging 
 
 We believe the principle of hospitality acts as a catalyst for fostering a sense of proactive belonging, a key component for achieving a sustainable impact. At the heart of our approach is the intentional act of bringing people together across social, cultural, and experiential gaps. By creating opportunities for provocative thinking and meaningful experiences, we are able to challenge assumptions that disrupt our innate habits of thinking and behaving. 
 
 15 
 
 We expect our employees and contractors to foster authentic connections, cultivate hospitable spaces, embrace disorienting dilemmas, and emphasize continuous learning. Our policy promotes equal employment opportunities without discrimination or harassment on the basis of race, color, national origin, religion, sex, age, disability, or any other status protected by law. Our Chief People Officer is committed to driving these policies and efforts across the enterprise to cultivate a strong culture of inclusivity. 
 
 We value a workforce that is diverse by thought. To promote this initiative, we reach out to a variety of institutions, attend recruiting events aimed at attracting talent of various backgrounds and cultures; and emphasize creating opportunities of belonging during our talent, promotion, and succession planning. 
 
 At least once per month we organize an event or engagement where employees are encouraged to participate to celebrate our workforce and our communities. Events include Asian American Pacific Islander Heritage Month, International Women’s Day, Breast Cancer Awareness Month, and Pride Month, among others. In fiscal 2024, we emphasized our commitment to celebrations like Pride Month by featuring a lunch and learn webinar led by one of our Executive Team Leaders who discussed their journey as a member of the LGBTIQA+ community. Each year we also commemorate "Honor Week” by spotlighting our veteran employees and recognizing their accomplishments. In fiscal 2024, we also launched our first Employee Resource Group focusing on Women’s Leadership to deepen and expand our efforts in this space. 
 
 Employee Workforce 
 
 Employee workforce consists of the following at July 31, 2024 and 2023: 
 
 2024 2023 
 Women 24 % 22 % 
 People of Color* 39 % 38 % 
 Veterans 12 % 10 % 
 People with Disabilities 7 % 5 % 

 * People of Color include employees who identify with any race other than white. 
 
 Developing and Retaining Talent 
 
 Our employees are one of our most valuable assets and we believe our success depends on the talent we attract and retain. Our comprehensive people strategy continues to focus on developing a meaningful plan to enhance our employees’ engagement and interests, which will complement and build on our strong foundation. 
 
 To meet and execute our strategic business goals, we are focused on sourcing, attracting, and retaining top talent, including those with engineering, science, and technical backgrounds. To boost our talent attraction efforts, we partner with local university student organizations, such as Arizona State University, to educate students about our work and to hire interns throughout our organization. This year, our total internship class was comprised of 24 students, up from 12 students in fiscal 2023. We designed our internship program to be a hands-on program that exposes students to a wide variety of activities and allows them to learn from real-world projects. All interns are paired with a mentor and are invited to attend weekly lunch and learns to receive insights about our culture and working environment. 
 
 We value employee development at all career stages and performance levels. We have made significant investments to provide ongoing training and career development opportunities by offering courses through our online learning management system. We offer job-specific skills training to promote and develop advancement within the organization and to enhance skills. In fiscal 2024 we launched Comtech University through a learning management system that is available year-round for development courses facilitated by a training coordinator. We are developing additional courses focusing on financial, leadership, and lean management skills. We also developed a “Program Management Office” academy for program management employees which includes courses and training to become a certified project manager and introduce company-wide best practices and procedures. 
 
 16 
 
 We are working to build stronger employee engagement through several new initiatives. We believe that strong communication is key to providing the foundation for an engaged workforce. Company news, employee opportunities, company initiatives, and events are communicated through our internal and external blogs and our redesigned company-wide intranet. Since launching our new MyComtech intranet site, we have identified new ways to recognize our employees. We commenced our Meet the Team series profiling one employee each month in a monthly article released on our intranet. Through the series, employees are able to learn about a fellow team member including their current position, career path, background, and interests outside of work. Mentorship and collegiality are strongly valued at Comtech. We value exceptional employees who make a difference to the communities where we operate. In addition to spotlighting employee achievements through our communication channels, we have introduced other initiatives such as awards to motivate and recognize employees who go the extra mile. 
 
 At July 31, 2024, we had 1,676 employees (including temporary employees and contractors), 1,048 of whom were engaged in production and production support, 337 in research and development and other engineering support and 291 in marketing and administrative functions. None of our U.S. based employees are represented by a labor union. Of our 1,676 employees, 345 employees are based outside of the United States, including 142 employees in Canada, 88 employees in the United Kingdom, and 87 employees in India. We believe that our employee relations are good. Subsequent to our fiscal year end, headcount based in the United Kingdom was significantly reduced as a result of our fourth quarter of fiscal 2024 decision to cease operations at such location. 
 
 Safety and Wellness 
 
 We strive to maintain a robust health, safety and wellness program to ensure a healthy work environment, promote workforce resiliency, and enhance business value. We encourage employee participation to identify opportunities for improvement and review and monitor our performance with safety committees at our local sites. Local safety committees identify safety programs and ensure completion of all training and target learning objectives. 
 
 Employee wellness is important to Comtech. All employees and their households have access to an employee assistance program, as well as a health advocate program to help with all aspects of benefits, family life, financial concerns, legal issues and transition to retirement. Assistance is available 365 days per year, 24 hours per day. This year employees had an opportunity to participate in wellness events as a company-wide challenge. 
 
 We rigorously review our benefit and compensation plans to maintain competitive packages that reflect the wellness needs of our workforce and the marketplace. These programs include 401(k) plans, comprehensive health packages, and welfare benefits, among many others. We support pay equity for all employees within the same geographic area, experience level, and performance standards. This year we added several new benefits including a legal plan and discounted pet insurance. 
 
 Environment 
 
 We are committed to reducing our environmental impact across our value chain, including in the design of our products, operation of our facilities, and procurement of materials. We are also committed to maintaining compliance with the various global environmental regulations that are applicable to our business segments, including with the respect to the waste and emissions generated at our facilities. Our Board of Directors is responsible for the oversight of our environmental efforts, and the management of climate-related issues is overseen by our Chief Legal Officer. 
 
 In September 2023, we completed our first climate change disclosure through CDP, which includes a baseline greenhouse gas inventory for company-wide Scope 1 and 2 emissions. In fiscal 2024, we completed our second Greenhouse Gas ("GHG") inventory. Having established a foundation, we are working to build on our environmental strategy and initiatives. 
 
 We seek to increase efficient usage of building space, respond to increased work-from-home and reduced requirements for office space, and encourage reduced employee commuting. We offer our employees incentives to promote greener commuting options through rideshare programs. 
 
 We are committed to providing a workplace which values the health, safety, and well-being of our employees, contractors, and visitors to our facilities, complying with Environment, Health and Safety ("EHS") legal requirements, and minimizing EHS risk. In fiscal 2024, we developed a comprehensive EHS Management System ("EHSMS"), designed to align with the core elements of international standards for environmental and occupational health and safety management systems, while placing a risk-based focus on the elements most relevant to our operations. The EHSMS has the goals of engaging employees at all levels of the organization in the prevention of work-related injuries and illnesses, reducing environmental impacts, and fostering a culture of continuous improvement. 
 
 17 
 
 U.S. Government Contracts and Security Clearances 
 
 The U.S. government operates on an October-to-September fiscal year. Generally, in February of each year, the President of the United States presents to the U.S. Congress ("Congress") the proposed budget for the upcoming fiscal year and from February through September of each year, the appropriations and authorization committees of Congress review the President’s budget proposals and establish the funding levels for the upcoming fiscal year. Once these levels are enacted into law, the Executive Office of the President administers the funds to the agencies. Thereafter, we can receive orders pursuant to sole-source or competitively awarded contracts, which we describe below. 
 
 The U.S. government may be unable to complete its budget process before the end of any given government fiscal year and when the fiscal budget is not approved in a timely manner, the U.S. government is required either to shut down or be funded pursuant to a "continuing resolution" that authorizes agencies of the U.S. government to continue operations but does not authorize new spending initiatives, either of which could result in reduced or delayed orders or payments for products and services we provide. 
 
 Sole-source contracts are generally awarded to a single contractor without a formal competition when a single contractor is deemed to have an expertise or technology superior to that of competing contractors or when there is an urgent need by the U.S. government that cannot wait for a full competitive process. Potential suppliers compete informally through research and development and marketing efforts. Competitively-bid contracts are awarded based on a formal proposal evaluation established by the procuring agency and interested contractors prepare bids. Competitively-bid contracts are awarded after a formal bid and proposal competition among suppliers. 
 
 The U.S. government has a stated policy direction to reduce the number of sole-source contract awards across all procuring agencies. In addition, the U.S. government is increasing the use of multiple-award IDIQ contracts to increase its procurement options. IDIQ contracts allow the U.S. government to select a group of eligible contractors for the same program. When the government awards IDIQ contracts to multiple bidders under the same program, a company that has already competed to be selected as a participant in the program must subsequently compete for individual delivery orders. As a result of this U.S. government shift toward multiple award IDIQ contracts, we expect to face greater competition for future U.S. government contracts and, at the same time, greater opportunities for us to participate in program areas that we do not currently participate in. 
 
 As a U.S. government contractor and subcontractor, we are subject to a variety of rules and regulations, such as the Federal Acquisition Regulations ("FAR"). Individual agencies can also have acquisition regulations. For example, the DoD implements the FAR through the U.S. Defense Federal Acquisition Regulation Supplement (commonly known as "DFARS"). For all Federal government entities, the FAR regulates the phases of any product or service acquisition, including: acquisition planning, competition requirements, contractor qualifications, protection of source selection and vendor information, and acquisition procedures. In addition, the FAR addresses the allowability of supplier costs, while Cost Accounting Standards address how those costs can be allocated to contracts. The FAR also subjects suppliers to audits and other government reviews. These reviews cover issues such as cost, performance and accounting practices relating to our contracts. The government may challenge a supplier's costs and fees or require corrective actions which can delay programs and increase our costs. Suppliers are also required to comply with the National Industrial Security Program Operating Manual which relates to the handling of classified materials and programs and is administered by the Defense Counterintelligence and Security Agency (“DCSA”). Suppliers who do not comply with these various regulations may lose and/or become ineligible for facility security clearances and/or participation in classified and non-classified programs. 
 
 Under firm fixed-price contracts, we perform for an agreed-upon price and we can derive benefits from cost savings, but bear the risk of cost overruns. Our cost-reimbursable type contracts typically provide for reimbursement of allowable costs incurred plus a negotiated fee. Cost-plus-incentive-fee orders typically provide for sharing with the U.S. government savings accrued from orders performed for less than the target costs and costs incurred in excess of targets up to a negotiated ceiling price (which is higher than the target cost), and for the supplier to carry the entire burden of costs exceeding the negotiated ceiling price. 
 
 In fiscal 2024, $182.3 million or 33.7% of our consolidated net sales were to the U.S. government (including sales to prime contractors to the U.S. government). Of this amount, firm fixed-price and cost-reimbursable type contracts (including fixed-fee, incentive-fee and time and material type contracts) accounted for $135.5 million and $46.8 million, respectively. 
 
 18 
 
 Regulatory Matters 
 
 In addition to the rules and regulations that pertain to us as a U.S. government contractor and subcontractor, we are also subject to a variety of local, state and federal governmental regulations. 
 
 Our products that are incorporated into wireless communications systems must comply with various government regulations, including those of the FCC. Our manufacturing facilities, which may store, handle, emit, generate and dispose of hazardous substances that are used in the manufacture of our products, are subject to a variety of local, state and federal regulations, including those issued by the Environmental Protection Agency. Our products are also subject to European Union directives related to the recycling of electrical and electronic equipment. 
 
 Our international sales are subject to U.S. and foreign regulations such as the Arms Export Control Act, the International Emergency Economic Powers Act ("IEEPA"), the International Traffic in Arms Regulations ("ITAR"), the Export Administration Regulations ("EAR") and the trade sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control ("OFAC"), the Department of Commerce ("DoC") and their foreign counterparts as well as other applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect our operations. We must comply with all applicable export control laws and regulations of the U.S. and other countries. Certain of our products and systems may require licenses from U.S. government agencies for export from the U.S. or other countries, and some of our products are not permitted to be exported. We cannot be certain that we will be able to obtain necessary export licenses, and such failure would materially adversely affect our operations. If we are unable to receive appropriate export authorizations in the future, we may be prohibited from selling our products and services internationally, which may limit our sales and have a material adverse effect on our business, results of operations and financial condition. In addition, in certain cases, U.S. and foreign export controls also severely limit unlicensed technical discussions, such as discussions with any persons who are not U.S. citizens or permanent residents. As a result, in cases where we may need an export license, our ability to compete against a non-U.S. domiciled foreign company that may not be subject to the same U.S. laws may be materially adversely affected. In addition, we are subject to the FCPA and other local laws that generally bar bribes or unreasonable gifts to foreign governments or officials. Violations of these laws or regulations could result in significant sanctions, including disgorgement of profits, fines, and criminal sanctions against us, our officers, our directors, or our employees, more onerous compliance requirements, more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our international business. A violation of any of the regulations enumerated above could materially adversely affect our business, financial condition and results of operations. Additionally, changes in regulatory requirements could further restrict our ability to deliver services to our international customers or negatively impact our business, including the addition of a country to the list of sanctioned countries under the IEEPA or similar legislation. 
 
 In the past, we have self-reported violations of export control laws or regulations to the U.S. Department of State, Directorate of Defense Trade Controls ("DDTC"), DoC, OFAC and their foreign counterparts. In addition, we have made various commitments to U.S. government agencies that oversee trade and export matters that we will maintain certain policies and procedures including maintaining a company-wide Office of Trade Compliance and conducting ongoing internal assessments and reporting any future violations to those agencies. 
 
 Our financial reporting, corporate governance, public disclosure and compliance practices are governed by laws such as the Sarbanes-Oxley Act of 2002, Dodd-Frank Act of 2010, and rules and regulations issued by the SEC. The SEC has adopted rules which require, among other things, public companies to conduct certain inquiries to determine whether or not Conflict Minerals (as that term is defined in the SEC rules) that are necessary to the functionality of their manufactured products or their product's production processes originated in a Covered Country (as that term is defined in the SEC rules) and ultimately file a report with the SEC. Conflict Minerals are widely used in many industries, including the telecommunications industry and almost all of our products include component parts purchased from third-party suppliers and we must rely heavily on information received from suppliers to determine the origin of those materials. We have implemented a due diligence program consistent with the Organization for Economic Co-operation and Development guidelines to collect information concerning the country of origin of Conflict Minerals and in that regard, have adopted a policy that requires our suppliers (both public and private) to commit to a code of conduct relating to the responsible sourcing of minerals and to establish a policy to reasonably assure that the products they manufacture do not contain Conflict Minerals that originated in a Covered Country. Efforts to comply with this SEC rule have resulted in additional costs to us and, we believe, to our suppliers. As such, the availability of raw materials used in our operations could be negatively impacted and/or raw material prices could increase. Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers, which could place us at a competitive disadvantage and could harm our reputation. 
 
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 Laws and regulations have been enacted that affect companies conducting business on the Internet, including the European General Data Protection Regulation ("GDPR"). The GDPR imposes certain privacy related requirements on companies that receive or process personal data of residents of the European Union that are currently different than those in the United States and include significant penalties for non-compliance. Similarly, there are several legislative proposals in the United States, at both the federal and state level, that could impose new obligations in areas affecting our business, such as liability for personal data protection. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services. Our costs to comply with the GDPR as well any other similar laws and regulations that emerge may negatively impact our business.
COMTECH TELECOMMUNICATIONS CORP /DE/ 10-K

Item 1. Business
