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Item 7. Management’s Discussion and Analysis

2025-11-10 compared with 2024-10-30 · 449 added, 408 removed, 315 unchanged (73% of the section changed)

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Overview of Business

We are a leading global provider of next-generation 911 emergency systems ("NG-911") and secure wireless and satellite communications technologies.

We are a leading provider of satellite and space communications technologies, terrestrial and wireless network solutions, Next Generation 911 ("NG-911") and emergency services and cloud native capabilities.

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 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, in addition to the growth of emergency communication networks and related applications.

Over the long-term, we anticipate future growth in our end markets due to a trend of increasing demand for global voice, video and data usage in recent years, in addition to the growth of emergency communication networks and related applications.

We provide our solutions to both commercial and governmental customers.

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

satellite modem and amplifier technologies, troposcatter technologies, government services and space components.

satellite modem and amplifier technologies, troposcatter technologies, cybersecurity training (formerly, known as government services) and space components.

This segment offers customers:

satellite ground infrastructure 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;

over-the-horizon microwave solutions that can transmit digitized voice, video, and data over distances up to 200 miles using the troposphere and diffraction;

professional engineering, training and field support services, including cybersecurity, for multiple U.S.

government agencies;

advanced cybersecurity training in support of U.S.

government and certain commercial and university customers;

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

• Terrestrial and Wireless Networks - is organized into three service areas:

next generation 911 and call delivery, Solacom call handling solutions, and trusted location and messaging solutions.

• Allerium (formerly, Terrestrial and Wireless Networks) - is organized into three service areas:

next generation 911 and call delivery, call handling solutions, and trusted location and messaging solutions.

This segment offers customers:

SMS text to 911 services, providing alternate paths for individuals who need to request assistance (via text messaging) a method to reach Public Safety Answering Points ("PSAPs");

SMS text to 911 services;

next generation 911 solutions, providing emergency call routing, location validation, policy-based routing rules, logging and security functionality;

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Our Quarterly Financial Information

Quarterly and period-to-period sales and operating results may be significantly affected by either short-term or long-term contracts with our customers.

In addition, our gross profit is affected by a variety of factors, including the mix of products, systems and services sold, production efficiencies, estimates of warranty expense, price competition and general economic conditions.

Quarterly and period-to-period sales and operating results may be significantly affected by, among other things, short-term or long-term contracts with our customers, allowances for bad debt, impairments of long-lived assets (including goodwill) and changes in the estimated fair value of derivative instruments and warrants.

In addition, our gross profit is affected by a variety of factors, including, among other things, the mix of products, systems and services sold, production efficiencies, provisions for excess and obsolete inventories, estimates of warranty expense, price competition and general economic conditions.

Our gross profit may also be affected by the impact of any cumulative adjustments to contracts that are accounted for over time.

In particular our contracts with the U.S.

government can be terminated for convenience by it at any time and orders are subject to unpredictable funding, deployment and technology decisions by the U.S.

Our contracts with the U.S.

government (or prime contractors to the U.S.

government) can be terminated for convenience at any time and orders are subject to unpredictable funding, deployment and technology decisions by our customers.

Some of these contracts are indefinite delivery/indefinite quantity ("IDIQ") contracts and, as such, the U.S.

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As such, comparisons between periods and our current results may not be indicative of a trend or future performance.

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 business and factors that can influence our future results.

Please see the " Transformation Plan " section discussed above, as well as disclosures in Item 1A – Risk Factors under Part I of this Form 10-K for more information about risks pertaining to our business and those factors that can influence our future results.

Critical Accounting Policies

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Controls and Procedures, included in this Form 10-K, for further information.

Impairment of Goodwill and Other Intangible Assets .

As of July 31, 2024, total goodwill recorded on our Consolidated Balance Sheet aggregated $284.2 million (of which $110.1 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Terrestrial and Wireless Networks segment).

Additionally, as of July 31, 2024, net intangibles recorded on our Consolidated Balance Sheet aggregated $194.8 million (of which $48.4 million relates to our Satellite and Space Communications segment and $146.4 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.

During our fourth quarter of fiscal 2024, we recorded a $64.5 million non-cash impairment charge in our Satellite and Space Communications segment related to long-lived assets, including goodwill.

See " Notes to Consolidated Financial Statements - Note (14) - Goodwill" and "Note (15) - Intangible Assets " included in " Part II - Item 8.

A cost-to-cost measure of progress is principally used to account for contracts in our Satellite and Space Communications segment and, to a lesser extent, certain location-based and messaging infrastructure contracts in our public safety and location technologies product line within our Allerium segment.

For over time contracts using a cost-to-cost measure of progress, we have an estimate at completion ("EAC") process in which management reviews the progress and execution of our performance obligations and calculates an estimated contract profit based on total estimated contract revenue and cost.

Since certain contracts extend over a long period of time, the impact of revisions in revenue and/or cost estimates during the progress of work may impact current period earnings through a cumulative adjustment.

Additionally, if the EAC process indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident.

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

We perform on a broad range of contracts whose revenue is recognized over time, including the development of complex and advanced customized solutions which often require the application of new technologies.

Cost estimates on fixed-price development contracts and early stage/low-rate production contracts are inherently more uncertain as to future events than on mature, full-rate production contracts.

As a result, for fixed-price development contracts and early stage/low-rate production contracts, there is typically more variability in those estimates and greater financial risk associated with unanticipated cost growth.

Risks include, but are not limited to:

technical engineering risks related to the underlying technologies being developed;

schedule risks related to completing performance obligations timely;

and customer risks related to changing specifications.

The estimation of contract revenue, cost and progress toward completion requires the use of judgment, which can be affected by any number of factors over time and which may cause our actual results to differ materially from those estimates, as facts and circumstances change or become known to us.

Changes in estimates can occur for a variety of reasons including, but not limited to:

changes in the availability, productivity and cost of labor;

the effect of change orders on contract scope;

the resolution of engineering risks at lower or higher costs than anticipated;

the availability and cost of material components and subcontracts, as well as the performance of our subcontractors or suppliers;

the impact of unanticipated changes in our customers' schedules;

and changes in indirect cost allocations, such as overhead.

The impact of gross favorable and unfavorable changes in contract estimates on reported gross margin is presented in the table below:

Fiscal Years Ended July 31,

2025 2024 2023

Gross favorable changes $ 11,439,000 11,802,000 7,421,000

Gross unfavorable changes (19,671,000) (20,744,000) (11,451,000)

Net changes $ (8,232,000) (8,942,000) (4,030,000)

Impairment of Long-Lived Assets, Including Goodwill .

As of July 31, 2025, total goodwill recorded on our Consolidated Balance Sheet aggregated $204.6 million (of which $30.5 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Allerium segment).

Additionally, as of July 31, 2025, net intangibles recorded on our Consolidated Balance Sheet aggregated $173.1 million (of which $41.2 million relates to our Satellite and Space Communications segment and $131.9 million relates to our Allerium segment).

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

See Notes to Consolidated Financial Statements - Note (15) - Long-lived Assets, including Goodwill and Note (16) - Intangible Assets included in Part II - Item 8.

Financial Statements and Supplementary Data (which discussion is incorporated herein by reference), included in this Form 10-K, for further information.

Also, as announced on October 17, 2024, 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.

Such activities could result in a material impairment of our goodwill and/or intangible assets.

See " Part I - Item 1.

Business - Strategic Transformation " for more information.

Ongoing and future actions supporting our transformation strategy could result in a material impairment of our goodwill and/or intangible assets.

Provision for Warranty Obligations.

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We may be challenged upon review by the applicable taxing authority and positions taken by us may not be sustained.

We recognize all or a portion of the benefit of income tax positions only when we have made a determination that it is "more-likely-than-not" that the tax position will be sustained upon examination, based upon the technical merits of the position and other factors.

We recognize all or a portion of the benefit of income tax positions in our GAAP results only when we have made a determination that it is "more-likely-than-not" that the tax position will be sustained upon examination, based upon the technical merits of the position and other factors.

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.

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federal income tax returns for fiscal 2022 through 2025 are subject to potential future Internal Revenue Service ("IRS") audit.

None of our state income tax returns prior to fiscal 2020 are subject to audit.

None of our state and foreign income tax returns prior to fiscal 2021 are subject to audit.

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

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Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers.

To date, costs capitalized related to internally developed software to be sold were not material, but could increase in the future.

We capitalize certain costs related to internal-use software (e.g., hosted "SaaS" applications within our Terrestrial and Wireless Networks segment), primarily consisting of direct labor and third-party vendor costs associated with creating the software.

To date, costs capitalized related to software developed for the purpose of selling to third parties was not material, but could increase in the future.

As it relates to software developed for the purpose of internal-use (e.g., hosted "SaaS" applications within our Allerium segment), costs capitalized primarily consist of direct labor and third-party vendor costs associated with creating the software.

Software development projects generally include three stages:

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Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which we expect to benefit from the use of that software.

Once the software is placed in service, these costs are amortized on the straight-line method over the estimated useful life of the software.

During fiscal 2024, internal-use software costs capitalized were $3.8 million.

During fiscal 2025 and 2024, internal-use software costs capitalized were $3.9 million and $3.8 million, respectively.

Capitalized internal use software costs are amortized once the software is placed in service on the straight-line method over the estimated useful life of the software, which is generally three years.

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Financial Statements and Supplementary Data (which discussion is incorporated herein by reference) and Part II - Item 9A.

Controls and Procedures, " included in this Form 10-K, for further information.

Controls and Procedures, included in this Form 10-K, for further information (including a discussion of provisions recorded in our first quarter of fiscal 2025 associated with certain discontinued products and operations within our Satellite and Space Communications segment).

Allowance for Doubtful Accounts.

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

Also, more recently, in fiscal 2024, we experienced a significant increase in the overall level of contract assets (i.e., unbilled receivables) related to large, long-term contracts with certain U.S.

government and international customers.

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 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.

Also, we can from time to time experience significant increases in the overall level of contract assets (i.e., unbilled receivables) related to large, long-term contracts with certain U.S.

government, domestic and international customers.

We continuously monitor our accounts receivable credit portfolio.

Except as discussed in Notes to Consolidated Financial Statements - Note (4) - Accounts Receivable included in Part II - Item 8.

Financial Statements and Supplementary Data (which discussion is incorporated herein by reference), included in this Form 10-K, our overall credit losses have historically been within the allowances we established.

However, we may not be able to accurately predict our future credit loss experience.

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.

Derivative Instruments and Warrant Liabilities.

We evaluate our financial instruments, including our Credit Facility, Subordinated Credit Facility, Convertible Preferred Stock and warrants to issue our common stock pursuant to the terms of such instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

Such evaluation considers a qualitative and quantitative assessment of whether the host instrument is more debt or equity-like, and if embedded derivatives should be bifurcated from the host instrument and/or combined for accounting purposes.

For derivatives that are accounted for as liabilities, the derivative is initially recorded at its estimated fair value and is then re-valued at each reporting date, with changes in its estimated fair value reported in our Consolidated Financial Statements .

To estimate such fair values, with the assistance of a third party valuation expert, we primarily use Monte Carlo simulation models, on a with and without basis, or Black-Scholes option pricing models, each adjusted for instrument-specific terms.

Due to the nature of our derivative instruments and warrant liabilities, we must use Level 3 inputs for estimating fair value, which are unobservable inputs developed using the best available information under the circumstances.

Level 3 inputs are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect our assumptions related to how market participants would use similar inputs to price the asset or liability.

Accordingly, our estimates and assumptions could prove to be inaccurate.

Also, changes in such estimates and assumptions from period to period could be material to our results of operations and financial condition.

See Notes to Consolidated Financial Statements - Note (1)(j) - Fair Value Measurements and Financial Instruments included in Part II - Item 8.

Financial Statements and Supplementary Data (which discussion is incorporated herein by reference), for further information.

Results of Operations

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2025 and 2024 - Adjusted EBITDA.

Fiscal 2024 Highlights and Business Outlook for Fiscal 2025

Fiscal 2025 Results and Business Outlook

Our financial performance for the fiscal year ended July 31, 2025 includes:

• Consolidated net sales of $540.4 million, compared to $550.0 million in fiscal 2023.

The prior year included a full year of operations related to our solid state, high power amplifier product line divested in November 2023 (the "PST Divestiture").

Adjusted for the PST Divestiture and despite very challenging business conditions in fiscal 2024, our consolidated net sales grew slightly from fiscal 2023;

• Gross margin was 29.1%, compared to 33.5% in fiscal 2023;

• GAAP net loss attributable to common stockholders was $135.4 million and included:

a $64.5 million impairment charge in our Satellite and Space Communications segment related to long-lived assets, including goodwill;

• Consolidated net sales of $499.5 million, compared to $540.4 million in fiscal 2024, reflecting:

(a) the completion of certain legacy contracts to deliver next-generation troposcatter terminals to the U.S.

Marine Corps and Army;

(b) the divestiture of our high power solid state amplifiers product line in November 2023;

and (d) the discontinuation of certain low-margin orders in our Satellite and Space Communications segment in order to focus on opportunities through which we can provide a more differentiated solution at higher margins;

offset, in part, by growth in our:

(x) Allerium segment, driven by our next-generation 911 emergency communications solutions;

and (y) Satellite and Space Communications satellite ground infrastructure solutions, reflecting the ongoing shift back to higher volume production contracts as certain legacy non-recurring engineering contracts draw nearer to completion;

• Gross margin was 25.6%, compared to 29.1% in fiscal 2024, reflecting, in addition to product mix changes, an $11.4 million non-cash charge in our first quarter of fiscal 2025 related to the write down of certain inventories as a result of restructuring activities within our Satellite and Space Communications segment;

our quarterly gross profit, both in dollars and as a percentage of consolidated net sales, improved sequentially throughout fiscal 2025, ultimately achieving a 31.2% gross profit percentage in our fourth quarter;

• GAAP net loss attributable to common stockholders was $204.3 million and included, among other things:

a $79.6 million non-cash impairment charge related to long-lived assets, including goodwill;

$48.9 million of net non-cash adjustments and paid-in-kind dividends related to our Convertible Preferred Stock;

$27.9 million in amortization and write-offs of deferred financing costs, debt discount, accreted interest and interest paid-in-kind related to our senior and subordinated credit facilities;

$21.7 million of intangible asset amortization;

a $16.1 million non-cash charge to fully reserve for an unbilled receivable contract asset;

$15.6 million of restructuring costs;

$4.1 million of strategic emerging technology costs for next-generation satellite technology;

$2.9 million of CEO transition costs;

and a $1.2 million loss associated with the PST Divestiture due to the acquirer not achieving certain post-divestiture earn-out criteria;

the $11.4 million non-cash inventory charge discussed above;

$2.7 million of proxy solicitation costs;

and $2.1 million of CEO transition costs;

offset, in part, by a $38.5 million non-cash benefit resulting from the remeasurement of warrants and derivatives;

our quarterly GAAP net loss attributable to common stockholders improved sequentially throughout fiscal 2025, due primarily to improved operational and financial performance, which ultimately positioned us to achieve positive GAAP operating income in our fourth quarter;

• GAAP EPS loss of $6.95 and Non-GAAP EPS of $2.41;

• Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $45.7 million, a decrease of 14.6% from fiscal 2023, due in part to the PST Divestiture;

• Adjusted EBITDA (a Non-GAAP financial measure discussed below) was negative $2.0 million, compared to Adjusted EBITDA of positive $45.7 million in fiscal 2024;

we experienced sequential quarterly improvements in Adjusted EBITDA throughout fiscal 2025, with improvements from negative $30.8 million in our first quarter to positive $13.3 million in our fourth quarter;

• New bookings (also referred to as orders) of $372.7 million, resulting in an annual book-to-bill ratio of 0.75x (a measure defined as bookings divided by net sales);

bookings in the third quarter included a $36.4 million debooking related to the low margin U.S.

Army GFSR contract that was protested by and ultimately awarded to the incumbent in May 2025;

as part of our transformation plan, we have refocused and prioritized our sales efforts to target higher margin opportunities in which we have greater differentiation;

• Backlog of $672.1 million as of July 31, 2025, compared to $798.9 million as of July 31, 2024 and $708.1 million as of April 30, 2025;

Backlog as of July 31, 2024 represents a new record for Comtech;

• Revenue visibility of approximately $1.8 billion as of July 31, 2024, an increase from the $1.1 billion as of July 31, 2023.

new bookings and backlog do not yet include the $130.0 million plus, multi-year contract extension awarded to us by a U.S.

domestic top tier mobile network operator in November 2025;

• Revenue visibility of approximately $1.1 billion as of July 31, 2025.

We measure this revenue visibility as the sum of our $672.1 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 used in operating activities of $54.5 million, due primarily to a significant increase in the overall level of contract assets (i.e., unbilled receivables) in fiscal 2024 related to our progress on large, long-term "over-time" contracts awarded to us by certain U.S.

government and international end customers, as well as the timing of payments to our suppliers as we execute on our backlog.

As experienced in the latter part of fiscal 2024, we expect the level of our unbilled receivables to continue to decline throughout fiscal 2025, as we invoice our customers upon physical delivery of products or the achievement of specified contractual milestones.

Additionally, cash flows used in operating activities includes $16.0 million in aggregate payments for restructuring costs, including severance, CEO transition costs and strategic emerging technology costs for next-generation satellite technology.

• Cash flows used in operating activities of $8.3 million, reflecting sequential quarterly improvements throughout fiscal 2025 from negative $21.8 million in our first quarter to positive $11.4 million in our fourth quarter;

excluding $23.0 million in aggregate payments for restructuring costs, including severance, proxy solicitation costs and CEO transition costs, fiscal 2025 cash flows provided by operating activities would have been $14.7 million;

also, fiscal 2025 operating cash flows include $29.6 million of total cash paid for interest related to debt obligations and income taxes.

As of the issuance date, we determined that we have alleviated the substantial doubt regarding our ability to continue as a going concern, which was first disclosed in December 2023.

As discussed throughout this Form 10-K for the fiscal year ended July 31, 2025, such determination considered:

our significantly improved operational and financial performance over recent fiscal quarters;

the cumulative amendments to our senior and subordinated credit facilities (which among other things, provide for a long-term financial covenant holiday through January 31, 2027);

our enhanced liquidity position;

and considering our projections of future operating cash flows.

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 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2025 and 2024.

We operated most of fiscal 2024 under extremely difficult business conditions stemming from:

a marked increase in working capital requirements related to certain troposcatter related contracts;

an unexpected change in our CEO more than halfway through the fiscal year;

the year-long protest by the incumbent of the large, multi-year Global Field Service Representative ("GFSR") contract awarded to us by the U.S.

supply chain and operational challenges that strained our liquidity at various points in the fiscal year;

a prolonged refinancing of our debt capital;

and a shift during our fourth quarter in the timing of our receipt and performance on a large COMET order anticipated for a certain international end country.

However, despite these challenges, the existing management team was successful in achieving many positive accomplishments along the way, such as:

attracting strong talent throughout our organization;

winning new strategic business opportunities, as well as competitive renewals;

relocating our headquarters to be within close proximity to several key customers and suppliers;

restructuring operations that had been underperforming under legacy management;

reducing the level of unbilled receivables;

and, importantly, emerging from fiscal 2024 with a clear vision for our company that we believe will contribute greatly toward unlocking meaningful shareholder value.

Key Business Developments

Other Key Business Developments and Updates

Satellite and Space Communications

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

Army with a total potential value of $544.0 million.

Through this program, we would 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.

The incumbent protested (and lost) the award of the contract to Comtech several times.

Currently, the contract remains under protest and a stop work order.

If we are successful in ultimately winning the protest, we would expect the GFSR contract to contribute significantly to our net sales in future periods.

In September 2023, we won a highly competitive $48.6 million contract to deliver next-generation Enterprise Digital Intermediate Frequency Multi-Carrier (“EDIM”) modems for the U.S.

Our Satellite and Space Communications segment continues to focus on addressing performance, thoughtfully evaluating the product portfolio and implementing initiatives to improve margins and cash flow generation.

During fiscal 2025, we have revamped this segment with new leadership and streamlining;

refocused our product portfolio around differentiated technology and solutions;

improved accountability and process disciplines, including implementation of robust approval processes;

renegotiated customer contract terms and pricing;

aligned product management and program management;

eliminated legacy products and services that were not contributing meaningfully to related segment net sales and or gross profits and launched new products as this segment transitions from low or no margin non-recurring engineering contracts to higher volume manufacturing orders.

As an update to our recent performance, during the fourth quarter of fiscal 2025, we were awarded a mix of orders which span across multiple product lines and included, among others:

• additional funding of approximately $10.3 million from a major U.S.

prime contractor in support of NASA's Orion Production and Operations Contract ("OPOC"), commonly known as the Artemis project;

• incremental funding of approximately $7.4 million for continued, ongoing training and support of complex cybersecurity operations for U.S.

government customers;

• $2.8 million in funded orders calling for the supply of Very Small Aperture Terminal (“VSAT”) equipment and related services for the U.S.

Army (given the award of the follow on "VSAT IV" contract to a competitor, we do not expect material contributions from our legacy contract going forward);

• over $2.0 million in funded orders for high power Ka band traveling wave tube amplifiers for use in a satellite constellation designed to provide high speed internet access to rural areas of the U.S.;

• approximately $2.0 million in funded orders from a long-term, existing international customer for the procurement of EEE space parts and services;

• approximately $2.0 million in funded orders from the U.S.

Navy for satellite ground infrastructure solutions;

• over $1.0 million in funded orders related to an international customer's replacement of an existing air traffic control network;

• over $1.0 million in funded orders for satellite ground infrastructure solutions intended for use in the SES mPower satellite constellation.

In fiscal 2024, we won a highly competitive $48.6 million contract to deliver next-generation Enterprise Digital Intermediate Frequency Multi-Carrier (“EDIM”) modems for the U.S.

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

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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.

We are progressing with our efforts on this contract and pleased to have recently secured incremental funding from the customer for additional work.

In November 2023, following a careful review of our business and product lines at that time, we saw an opportunity to divest our solid state, high power amplifier product line.

The PST Divestiture generated $33.3 million of net cash proceeds prior to the repayment of debt and provided timely liquidity as we progressed with our efforts to refinance our debt capital structure.

In July 2024, we made the decision to exit our subsidiary operations in Basingstoke, United Kingdom.

operations were established in connection with the legacy management team’s 2020 acquisition of CGC Technology Limited, which primarily served customers in Europe.

Following the acquisition, we 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 the U.K.

business would not generate an attractive return on invested capital and made the decision to exit these operations in order to curtail our future expenses and cash outlays, after anticipated restructuring charges associated with such exit.

Shifting to our troposcatter product line, throughout most of fiscal 2024, we experienced elevated levels of unbilled receivables due to the timing of our performance and billings related to certain large U.S.

We are progressing with our efforts on this contract and pleased to have recently secured incremental funding from the customer for additional work, as well as funding for initial production quantities to be delivered following the completion of final acceptance testing, currently anticipated in fiscal 2026.

During fiscal 2025, we began deliveries of initial production units to our prime contractor in support of a next-generation satellite modem contract and will be moving into full production during fiscal 2026, as the program transitions from a multi-year development period into a production-oriented stage.

A second next-generation product with the same prime contractor has also significantly progressed in development and is also expected to begin production deliveries in fiscal 2026.

These are important milestones for the S&S segment, as they address the long-awaited migration from low-margin nonrecurring engineering efforts to higher volume production with improved operating margins and faster cash conversion cycles.

In our troposcatter product line, throughout most of fiscal 2024, we experienced elevated levels of receivables due to the timing of our performance on and billings and collections related to certain large U.S.

government and international customer contracts.

As we progressed through the fourth quarter of fiscal 2024, we were successful in ramping up deliveries of next-generation troposcatter terminals related to our U.S.

Marine Corps and Army contracts, contributing to a meaningful reduction of our consolidated unbilled receivables from $141.3 million at April 30, 2024 to $123.7 million as of July 31, 2024.

Based on our anticipated performance over the next several months, we expect further material reductions in our unbilled receivables related to these contracts, contributing significantly to our cash flows and liquidity in fiscal 2025.

Terrestrial and Wireless Networks

In October 2023, we extended enhanced 911 call routing services, valued in excess of $30.0 million, for one of the largest wireless carriers in the U.S.

Subsequent to year end, our new management team in this segment, led by Jeff Robertson, former CEO for Intrado's Life and Safety business, secured another renewal of these critical services in October 2024.

During our second fiscal quarter of 2024, we amended and extended critical Next Generation 911 (“NG-911”) services for the State of Washington.

This extension is valued at $48.0 million over the next five years, with the option to extend further through 2034.

Also, we extended critical call handling services provided to PSAPs across Australia through our partnership with Telstra.

These services, valued at approximately $6.0 million over the next several years, support Australia's "000" (911 equivalent) emergency communications.

Additionally, we were awarded several multi-year NG-911 call handling services contracts, aggregating $6.5 million, for PSAPs located in Canada and the U.S.

We believe Comtech's position as a trusted leader in 911, NG-911 and public safety applications positions us increasingly well when it comes to delivering similarly sophisticated solutions for other types of emergencies.

In May 2024, we were awarded a large multi-year NG-911 contract by the Commonwealth of Massachusetts, valued at over $250.0 million.

The new contract has an initial five-year term from August 1, 2024 through July 31, 2029, and includes one option to renew for a five-year period through July 31, 2034.

While a continuation of existing services within the state, the procurement itself was competitive and Comtech was successful in securing the win, demonstrating the trust of our public safety partners as well as our leadership in NG-911 systems and services.

In June 2024, we announced the North Central Texas Emergency Communications District (“NCT911”) awarded us a contract to deliver NG-911 services that will further modernize NCT911’s infrastructure.

The NCT911 contract includes a five-year base award, as well as three additional two-year option periods, with a not to exceed value of approximately $30.0 million.

At the start of fiscal 2024, we helped Strathcona County in Alberta become Canada’s first PSAP to transition to NG-911 services.

In July 2024, we announced completing the full migration and deployment of an NG-911 system in Saskatchewan, Canada.

With the Saskatchewan NG-911 deployment, we are now the first company, in partnership with leading ESInet provider SaskTel, to deploy a province-wide NG-911 system in Canada.

Subsequent to year end, in September 2024, we were also pleased to have been awarded a large, multi-year location-based services maintenance and support contract from one of the largest wireless carriers in the U.S.

Strategic Transformation

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;

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.

In addition to assessing our Basingstoke, UK operations, as discussed above, over the past several months, we have also 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.

Amended Credit Agreement and New Subordinated Term Loan Facility

In June 2024, we entered into a $222.0 million credit facility with a new syndicate of lenders (the “Credit Facility”), which replaced our prior credit facility.

On October 17, 2024, we amended the Credit Facility, which waived certain defaults or events of default, including in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of July 31, 2024.

The amendment also provides for, among other things:

(i) an increase to the interest rate margins applicable to the loans;

(ii) a modification of certain financial and collateral reporting requirements;

(iii) a lender and agent consent right with respect to $27.5 million of Revolver borrowings above $32.5 million;

(iv) our ability to incur $25.0 million of senior unsecured subordinated debt;

(v) a maturity date based on the earlier of (x) July 31, 2028 or (y) 90 days prior to the earliest date that the debt under the Subordinated Credit Agreement (as defined below) becomes due and payable;

and (vi) a suspension of financial covenant testing through the end of our fiscal quarter ending January 31, 2025.

On October 17, 2024, we also entered into a Subordinated Credit Agreement with the existing holders of our Convertible Preferred Stock (the “Subordinated Credit Agreement”), which provides a subordinated unsecured term loan facility in the aggregate principal amount of $25.0 million (the “Subordinated Credit Facility”).

The proceeds of the Subordinated Credit Facility:

(i) cured our default on certain financial covenants under the Credit Facility, as discussed above;

(ii) provides additional liquidity to us;

and (iii) funds our general working capital needs, including support of our transformation initiatives.

See "Notes to Consolidated Financial Statements" included in "Part II - Item 8.

Financial Statements and Supplementary Data" included in this Form 10-K, for further information.

Effective October 28, 2024, the Board of Directors appointed John Ratigan as our President and CEO and a member of the Board.

Ratigan had been serving as our interim CEO since March 2024.

During principally the first half of fiscal 2025, we maintained deliveries of next-generation troposcatter terminals related to our U.S.

Marine Corps and Army end user contracts, contributing to a 26% year-over-year reduction in our consolidated receivables, net as of July 31, 2025.

In December 2024, however, we received notice from our prime contractor to stop work associated with the U.S.

Marine Corps contract.

Such contract was subsequently terminated.

We have initiated litigation against the prime contractor in order to enforce our rights and recover $15.7 million of total receivables related to this contract as of July 31, 2025.

While we believe that we have meritorious claims, some or all of such receivables could be at risk of not being collected.

Future results of operations related to our troposcatter solutions product line depend, in part, on the nature, timing and amount associated with resolving this matter.

In September 2025, as part of our cost savings plans, we made the decision to migrate certain production capabilities and operational functions to our manufacturing operations in Chandler, Arizona.

Such initiative is expected to be completed in fiscal 2026, result in increased manufacturing efficiencies, allow us to further optimize our facilities footprint and result in recurring annualized cost savings of approximately $3.0 million.

With strategic wins in the U.S., Canada and Australia, we believe Comtech's position as a trusted leader in 911, NG-911 and public safety applications positions us increasingly well when it comes to delivering similarly sophisticated solutions for other types of emergencies.

New emergency requesting devices, such as "wearables," vehicles, smart speakers and AI capable cameras, and new delivery methods, such as through satellite networks, are expected to drive innovation and growth within the public safety market over time.

As an update to our recent performance, during the fourth quarter of fiscal 2025, we were awarded a mix of orders which span across multiple product lines and included, among others:

• over $20.0 million of incremental, multi-year funding related to the continued deployment of NG-911 solutions for the State of Ohio;

• more than $4.5 million of initial funding related to the deployment of our NG-911 call handling solutions for a new customer in South Australia;

• over $3.5 million of incremental funding to migrate additional counties onto our NG-911 solutions deployed in the State of South Carolina;

• in excess of $2.0 million of funding to provide emergency location-based solutions to a mobile network operator located in Canada;

• approximately $2.0 million of incremental funding in support of an NG-911 emergency communications platform in the Northeastern region of the U.S.;

• various funded orders, aggregating approximately $2.0 million, to provide new features and security enhancements for wireless emergency alert and other location-based solutions provided to a top tier mobile network operator;

• over $1.5 million of incremental funding from a NG-911 customer in the Southeastern region of the U.S.

Subsequent to year end, in November 2025, Allerium secured a multi-year contract extension from its largest customer – a leading telecommunications company in the U.S.

known for its network reliability and security.

This contract award is valued in excess of $130.0 million and is for a scalable service.

The agreement reinforces Allerium's commitment to helping carriers and public safety organizations modernize critical infrastructure and optimize service reliability with confidence.

During fiscal 2025, we launched the rebranding of our Terrestrial and Wireless Networks segment to "Allerium," a fusion of “all” and “continuum.” Allerium is a name we believe symbolizes the seamless connection, collaboration, reliability and empowerment that we are focused on delivering to public safety professionals and essential service providers.

Allerium reflects a brand rooted in experience, driven by innovation and built for those who protect our communities.

This rebrand serves to clarify our go-to-market strategy under a single identity, which we believe reaffirms our commitment to delivering successful outcomes when it matters most.

The rebrand strengthens market recognition, enhances customer trust and positions the business for sustained growth.

Allerium underscores our focus on long-term value creation by improving brand equity, expanding customer reach and enabling more efficient go-to-market execution.

It also increases visibility within key public safety and network markets, sectors defined by trust, reliability and innovation.

While the rebrand has changed, our mission has not:

to serve those who protect our communities, with technology that performs when every connection counts.

Unallocated and Other Matters, Including an Update on Comtech's Improved Capital Structure

On July 21, 2025, we entered into the third amendment to the Credit Facility which, among other things:

(i) suspends, until the four-quarter period ending January 31, 2027, testing of the Net Leverage Ratio, the Fixed Charge Coverage Ratio and the Minimum EBITDA covenants;

(ii) altered the interest rate margins applicable to Term Loans;

(iii) delayed the scheduled repayment of a portion of the principal of the Term Loans;

(iv) delayed the scheduled repayment of fees due pursuant to the second amendment to the Credit Facility;

(v) reduced the Minimum EBITDA requirements;

(vi) reduced the minimum quarterly Average Liquidity requirement (from $17.5 million to $15.0 million);

(vii) permits us to engage in the sale or disposition of certain properties and assets (the “Specified Permitted Individual Disposition”) approved by the administrative agent, subject to the conditions to use net cash proceeds from such sale to repay outstanding principal amounts of the obligations under our credit facilities;

(viii) permitted partial repayments, without premium, of approximately $28.5 million of the outstanding Term Loans and $5.8 million of the outstanding Revolver Loans;

(ix) permanently reduced commitments under the Revolver Loan Facility by $2.1 million;

and (x) required us to adopt management incentive and retention arrangements for key personnel in connection with the contemplation of our strategic alternatives.

We also amended the Subordinated Credit Agreement on July 21, 2025, which, among other things:

(i) provided for the incurrence of a $35.0 million incremental facility, the net proceeds of which were used to pay certain transaction costs, fees and expenses incurred in connection with amendments to our credit facilities and to prepay, without premium, portions of the outstanding Term Loans and Revolver Loan under the Credit Facility, as discussed above;

(ii) suspends, until the four-quarter period ending January 31, 2027, testing of the Net Leverage ratio, the Fixed Charge Coverage ratio and the Minimum EBITDA covenants;

(iii) modified the interest rate applicable to the subordinated term loans;

(iv) reduced the Minimum EBITDA requirements, (v) reduced the minimum quarterly Average Liquidity requirement (from $17.5 million to $15.0 million);

(vi) permits us to engage in the Specified Permitted Individual Disposition approved by the subordinated agent (subject to the same requirement with respect to the application of net cash proceeds from such Specified Permitted Individual Disposition as discussed above under the third amendment to the Credit Facility);

and (vi) required us to adopt management incentive and retention arrangements for key personnel in connection with the contemplation of our strategic alternatives (also as discussed above under the third amendment to the Credit Facility).

Interest on the $35.0 million shall be paid-in-kind quarterly, in arrears, by capitalizing and adding the unpaid and accrued amount of such interest to the aggregate outstanding principal amount of the incremental priority subordinated credit facility on the last business day of each quarter.

Unlike the existing subordinated term loans, the incremental priority subordinated credit facility is not subject to any make-whole premium.

Collectively, we believe these actions provide us with enhanced financial flexibility, as we continue to transform our Company and pursue strategic alternatives.

Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note (8) - Credit Facility, Note (9) - Subordinated Credit Facility and Note (17) - Convertible Preferred Stock for further information.

In August 2025, as part of our ongoing board refreshment initiatives, our Board of Directors (the “Board”) appointed Mr.

Sprung as an independent director.

Sprung’s extensive corporate finance, capital markets and restructuring experience qualifies him to serve on the Board.

Sprung’s appointment also satisfies our obligation to appoint an independent director mutually agreed to by us and our lenders under the Credit Facility.

Business Outlook

As we enter fiscal 2025, business conditions continue to be challenging, and the operating environment is largely unpredictable, due to many factors including, but not limited to:

uncertainties related to our recently announced transformation strategy and associated actions we may take;

uncertainties related to our ability to operate as going concern, fluctuations in interest rates;

continuing resolutions associated with the U.S.

Federal budget;

repercussions of military conflicts in Russia, Ukraine and the Middle East;

and a potential global recession.

Order and production delays, contract protests, delayed cash collections from customers, disruptions in component availability, increased pricing both for labor and parts, lower levels of factory utilization and higher logistics and operational costs resulting from such conditions have or could impact our business as well.

In light of these business conditions and resulting challenges, we anticipate variability from time to time as we move through our transformation strategy.

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.

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.

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

Additional information related to our Business Outlook for Fiscal 2025 and a definition and explanation of Adjusted EBITDA is included in the below section "Item 7.

While business conditions and our operational and financial performance have improved over the past several quarters, the operating environment remains largely unpredictable due to many factors, including but not limited to our ongoing transformation plan and the actions we may take, as well as those other matters as discussed throughout this Form 10-K, in our Note About Forward-Looking Statements in this Form 10-K and in Part 1, Item 1A.

Risk Factors.

Such conditions and factors have caused and could cause variability in our financial results from period to period.

Additional information related to our Fiscal 2025 Results and Business Outlook and a definition and explanation of Adjusted EBITDA is included in the below section Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2025 and 2024.

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Consolidated net sales were $499.5 million and $540.4 million for fiscal 2025 and 2024, respectively, representing a decrease of $40.9 million, or 7.6%.

The decrease reflects lower net sales in our Satellite and Space Communications segment offset, in part, by an increase in net sales in our Terrestrial and Wireless Networks segment, as further discussed below.

The prior year included a full year of operations related to our solid state, high power amplifier product line divested in November 2023 (the "PST Divestiture").

Adjusted for the PST Divestiture and despite very challenging business conditions in fiscal 2024, our consolidated net sales grew slightly from fiscal 2023.

The decrease reflects significantly lower net sales in our Satellite and Space Communications segment offset, in part, by higher net sales in our Allerium segment, as further discussed below.

Satellite and Space Communications

Net sales in our Satellite and Space Communications segment were $269.3 million for fiscal 2025, as compared to $324.1 million for fiscal 2024, a decrease of $54.8 million, or 16.9%.

Fiscal 2024 primarily reflects 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 U.S.

Army), offset by lower net sales of satellite ground infrastructure solutions (including X/Y steerable antennas), high power solid state amplifiers related to the PST Divestiture in November 2023 and COMET troposcatter terminals to international customers.

Related segment net sales in fiscal 2025 primarily reflect the anticipated lower net sales of our troposcatter solutions (in particular, next-generation troposcatter terminals to the U.S.

Marine Corps and Army and COMET terminals to an international customer), EEE space components and antennas (including those related to the CGC Divestiture initiated in our fourth quarter of fiscal 2024) and high-power solid state amplifiers related to the PST Divestiture (which was completed in November 2023), offset, in part, by higher net sales of our SATCOM solutions (primarily satellite ground infrastructure solutions and VSAT and similar equipment sales to the U.S.

More broadly, net sales in this segment reflect a favorable change in the mix of products and services sold relative to the prior year period.

Net sales in fiscal 2025 reflect the discontinuation of certain low-margin business in order to focus on opportunities in which we can provide a more differentiated solution at higher margins, as well as an ongoing shift back to higher volume production orders in our satellite ground infrastructure solutions product line, as certain legacy low or no margin non-recurring engineering contracts draw nearer to completion.

Our Satellite and Space Communications segment represented 53.9% of consolidated net sales for fiscal 2025, as compared to 60.0% for fiscal 2024.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2024 was 1.03x.

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

and international government customers, and changes in the general business environment.

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

Also, during the fourth quarter of fiscal 2024, as part of our recently announced transformation strategy, we made the decision to cease operations located in the United Kingdom related to our X/Y steerable antenna product line.

As a result, we do not anticipate generating any meaningful sales from this product line in fiscal 2025 and beyond.

Terrestrial and Wireless Networks

Net sales in our Terrestrial and Wireless Networks segment were $216.3 million for fiscal 2024, as compared to $212.2 million for fiscal 2023, an increase of $4.1 million, or 1.9%, reflecting higher net sales of our NG-911 and call handling services, offset in part by lower net sales of our location based solutions.

Our Terrestrial and Wireless Networks segment represented 40.0% of consolidated net sales for fiscal 2024 as compared to 38.6% for fiscal 2023.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2024 was 1.70x.

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.

Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2025 was 0.62x, which includes a $36.4 million debooking associated with the U.S.

Army GFSR contract that was protested and ultimately awarded to the incumbent (see Fiscal 2025 Highlights and Business Outlook above for further information).

Net sales in our Allerium segment were $230.3 million for fiscal 2025, as compared to $216.3 million for fiscal 2024, an increase of $14.0 million, or 6.5%.

Related segment net sales for fiscal 2025 reflect higher sales of our NG-911 emergency communication, call handling and location-based solutions.

Our Allerium segment represented 46.1% of consolidated net sales for fiscal 2025, as compared to 40.0% for fiscal 2024.

Our book-to-bill ratio in this segment for fiscal 2025 was 0.89x.

Subsequent to year end, in November 2025, we were awarded a large, multi-year contract extension from a U.S.

domestic mobile network operator, valued in excess of $130.0 million.

Bookings, sales and profitability in both segments can fluctuate from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by our customers and changes in the general business environment.

Period-to-period fluctuations in bookings are normal for our segments.

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

Also, on October 17, 2024, we announced that we are exploring strategic alternatives for our Terrestrial and Wireless Networks segment, which is in advanced stages.

Also, we announced that we are exploring strategic alternatives for our businesses.

Accordingly, future results of operations can be impacted by the timing and outcome of such initiatives.

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2025 2024 2025 2024 2025 2024

Satellite and Space Communications Terrestrial and Wireless Networks Consolidated

Satellite and Space Communications Allerium Consolidated

government 55.1 % 55.4 % 1.2 % 1.1 % 30.3 % 33.7 %

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state and local governments.

For fiscal 2024, except for the U.S.

For fiscal 2025 and 2024, except for the U.S.

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

For fiscal 2023, included in domestic sales are sales to Verizon Communications Inc.

("Verizon"), which were 10.6% of consolidated net sales.

International sales for fiscal 2025 and 2024 (which include sales to U.S.

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Gross Profit.

Gross profit was $157.2 million and $184.5 million for fiscal 2024 and 2023, respectively.

Gross profit was $127.9 million and $157.2 million for fiscal 2025 and 2024, respectively, a decrease of $29.3 million.

Gross profit, as a percentage of consolidated net sales, for fiscal 2025 was 25.6%, as compared to 29.1% for fiscal 2024.

Our gross profit (both in dollars and as a percentage of consolidated net sales) reflects overall product mix changes (including the impact of the PST Divestiture, as discussed above.

In addition, during fiscal 2023, we recorded a benefit of $2.3 million to cost of sales as we reduced a warranty accrual due to lower than expected warranty claims in our NG-911 product line.

Our gross profit (both in dollars and as a percentage of consolidated net sales) reflects:

(i) overall product mix changes, as discussed above;

(ii) a non-cash charge of $11.4 million related to the write down of certain inventories as a result of restructuring activities within our Satellite and Space Communications segment;

(iii) higher expected costs at completion, as we advanced a non-recurring engineering related project in our Satellite and Space Communications segment (and with an international customer) through development and toward production;

and (iv) the expensing of work in process inventory related to certain loss contracts in our satellite ground infrastructure product line.

Excluding the non-cash inventory-related charge, our gross profit, as a percentage of consolidated net sales, for fiscal 2025 would have been 27.9%, a decrease from the 29.1% reported in fiscal 2024.

In the second half of fiscal 2025, we experienced sequential improvements in our margins (both in dollars and as a percentage of consolidated net sales), with gross profit for each of the third and fourth quarters exceeding 30.0% of net sales.

Also, gross profit (both in dollars and as a percentage of consolidated net sales) in fiscal 2024 was influenced by a large, high margin sale of COMET terminals to an international customer, which did not repeat in fiscal 2025.

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 fiscal 2024 decreased in comparison to fiscal 2023.

The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above, and higher expected costs at completion as we advanced certain nonrecurring engineering related projects in our satellite ground infrastructure product line through development and toward production.

Also, fiscal 2024 gross profit in this segment reflects challenging business conditions related to our steerable antenna operations located in the United Kingdom that we recently announced exiting.

Our Terrestrial and Wireless Networks segment's gross profit, as a percentage of related segment net sales, for fiscal 2024 decreased in comparison to fiscal 2023.

Our Satellite and Space Communications segment's gross profit, both in dollars and as a percentage of related segment net sales, for fiscal 2025 decreased significantly in comparison to fiscal 2024.

The gross profit percentage in the more recent period reflects changes in products and services mix, as well as other segment related items, as discussed above.

During fiscal 2025, we have revamped this segment with new leadership and streamlining;

refocused our product portfolio around differentiated technology and solutions;

improved accountability and process disciplines, including implementation of robust approval processes;

renegotiated customer contracts terms and pricing;

aligned product management and program management;

As evidenced by the improvement in our gross profit percentage for this segment in the second half of fiscal 2025, we believe our margins in this segment will continue to benefit from these initiatives, and other actions we may take, over time.

Our Allerium segment's gross profit, both in dollars and as a percentage of related segment net sales, for fiscal 2025 increased in comparison to fiscal 2024.

The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above.

Such gross margins also reflect the continued adoption of our solutions by new customers, as well as the migration of more PSAPs onto our NG-911 core services and platforms, as we progress through initial deployments of our solutions to monthly recurring revenue streams.

Included in consolidated cost of sales are provisions for excess and obsolete inventory of $16.2 million and $2.8 million, for fiscal 2025 and 2024, respectively.

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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.

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 the transformation strategy include the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus and the implementation of additional organizational, operational and cost-savings 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.

While anticipated to improve our profitability in future periods, such actions may result in near term restructuring charges, including an increase in our provision for excess and obsolete inventory.

As discussed above and in Notes to Consolidated Financial Statements - Note (5) - Inventories included in Part II - Item 8.

Financial Statements and Supplementary Data, in connection with our initiatives to transform our Company, during the first quarter of fiscal 2025, we recorded a non-cash charge of $11.4 million within Cost of Sales on our Consolidated Statement of Operations related to the write down of inventory associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued.

Such non-cash charge also included the write down of inventory associated with the CGC Divestiture that was no longer considered salable during the period.

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.

Our consolidated gross profit, as a percentage of consolidated net sales may also be impacted by the timing and outcome of actions we may take related to our transformation strategy initiatives.

Our consolidated gross profit, as a percentage of consolidated net sales, may also be impacted by the timing and outcome of actions we may take related to our transformation strategy.

Selling, General and Administrative Expenses .

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As a percentage of consolidated net sales, selling, general and administrative expenses were 28.7% and 22.8% for fiscal 2025 and 2024, respectively.

During fiscal 2024 and 2023, we incurred $12.5 million and $10.9 million, respectively, of restructuring costs primarily related to streamlining our operations and improving efficiency, including severance and costs associated with the relocation of certain of our satellite ground infrastructure production facilities to our 146,000 square foot facility in Chandler, Arizona.

Fiscal 2024 costs also include those activities supporting the PST Divestiture in November 2023 and, more recently, our announced pursuit of strategic alternatives related to our Terrestrial and Wireless Networks segment.

Excluding restructuring costs, selling, general and administrative expenses for fiscal 2024 and 2023 would have been $110.9 million or 20.5% and $109.2 million or 19.9%, respectively, of consolidated net sales.

Although higher on a year-over-year basis, in fiscal 2025, we implemented actions to reduce overall spending on general and administrative activities, primarily in our Satellite and Space Communications and Unallocated segments.

As a result, throughout fiscal 2025, we achieved sequential reductions in our consolidated selling, general and administrative expenses each quarter.

During fiscal 2025, we determined that an unbilled receivable contract asset related to an international customer and reseller of our troposcatter technologies was at risk of not being invoiced or collected, principally due to the customer's near-term ability to secure certain opportunities in its pipeline.

As a result and considering that we offered a price concession (i.e., variable consideration) to our customer in the first quarter of fiscal 2025, we reversed $1.6 million of cumulative revenue and associated unbilled receivable contract assets related to this transaction, and recorded a non-cash charge to fully reserve for the remaining $16.1 million unbilled receivable contract asset within our allowance for doubtful accounts.

Also, during fiscal 2025 and 2024, we incurred $15.6 million and $12.5 million, respectively, of restructuring costs within selling, general and administrative expenses, primarily to streamline our operations and improving efficiency (including costs related to legal and professional fees associated with our pursuit of strategic alternatives, the wind down of our steerable antenna product line in the U.K.

initiated in our fourth quarter of fiscal 2024 and severance costs).

Excluding such provision for doubtful accounts and restructuring costs, selling, general and administrative expenses for fiscal 2025 and 2024 would have been $111.8 million or 22.3% and $110.7 million or 20.5%, respectively, of consolidated net sales.

The increase in our selling, general and administrative expenses, in dollars and as a percentage of consolidated net sales, excluding such items is primarily due to significantly lower consolidated net sales and higher legal and professional fees and cash-based incentive compensation, offset in part by recent divestitures (i.e., PST and CGC) and lower stock-based compensation, as discussed below.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $2.5 million in fiscal 2025, as compared to $4.8 million in fiscal 2024.

Although higher in the prior fiscal 2023 period, both fiscal 2024 and 2023 include fully vested stock-based awards granted to certain employees in lieu of annual non-equity incentive compensation.

Also, the more recent period reflects a benefit associated with the forfeitures of stock-based awards related to our former CEO.

During fiscal 2025, we reversed a portion of our stock-based compensation expense related to performance shares due to lower-than-estimated achievement of fiscal 2022 and 2023 performance share goals.

Stock-based compensation expense for the more recent period also reflects the forfeiture of awards related to our former Chief Operating Officer and former Chief Executive Officer, whose employment were both terminated during the more recent period.

Additionally, with respect to stock-based compensation expense reported in the prior year period, we had determined to settle fiscal 2024 non-equity annual incentive awards accrued during such period with stock-based awards in lieu of cash.

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

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As a percentage of consolidated net sales, research and development expenses were 3.5% and 4.5% for fiscal 2025 and 2024, respectively.

For fiscal 2024 and 2023, research and development expenses of $12.9 million and $22.4 million, respectively, related to our Satellite and Space Communications segment, and $10.6 million and $25.2 million, respectively, related to our Terrestrial and Wireless Networks segment.

For fiscal 2025 and 2024, research and development expenses of $5.6 million and $12.9 million, respectively, related to our Satellite and Space Communications segment, and $11.6 million and $10.6 million, respectively, related to our Allerium segment.

The remaining research and development expenses of $0.2 million and $0.6 million in fiscal 2025 and 2024, respectively, related to the amortization of stock-based compensation expense.

During fiscal 2024 and 2023, we incurred $4.1 million and $3.8 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 expect strategic emerging technology costs to decrease in fiscal 2025 as a result of our fourth quarter fiscal 2024 decision to cease operations related to our steerable antenna product line in the United Kingdom.

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

During fiscal 2025 and 2024, customers reimbursed us $22.8 million and $23.0 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.

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, a more focused prioritization of resources across various programs 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.

In addition to increases in customer-funded research and development activities in recent years, in fiscal 2025 and 2024, we also experienced an increase in engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $6.8 million and $6.7 million, respectively.

As a result of these trends, a more focused prioritization of resources across various programs and the impact of prior reductions in force announced in fiscal 2023, our internal research and development expenses for financial reporting purposes has significantly decreased more recently as compared to historical periods.

During fiscal 2025 and 2024, we incurred $0.3 million and $4.1 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 newer broadband satellite constellations.

As a result of our decision to cease operations related to our steerable antenna product line in the U.K., we do not expect to incur similar strategic emerging technology costs in the future.

Amortization of Intangibles.

Amortization relating to intangible assets with finite lives was $21.2 million for fiscal 2024 (of which $6.7 million was for the Satellite and Space Communications segment and $14.5 million was for the Terrestrial and Wireless Networks segment) and $21.4 million for fiscal 2023 (of which $7.3 million was for the Satellite and Space Communications segment and $14.1 million was for the Terrestrial and Wireless Networks segment).

Amortization relating to intangible assets with finite lives was $21.7 million for fiscal 2025 (of which $7.2 million was for the Satellite and Space Communications segment and $14.5 million was for the Allerium segment) and $21.2 million for fiscal 2024 (of which $6.7 million was for the Satellite and Space Communications segment and $14.5 million was for the Allerium segment).

The increase in our Satellite and Space Communications segment's amortization during the more recent period reflects the impact of our decision to wind down our steerable antenna product line in the U.K.

Impairment of Long-lived Assets, including Goodwill.

During the fourth quarter of fiscal year 2024, our lower-than-expected financial performance, cured default on certain credit facility covenants and sustained decrease in our stock price since August 1, 2023 were each considered triggering events requiring an interim quantitative goodwill impairment test as of July 31, 2024.

Based on lower-than-expected financial performance during the first quarter of fiscal 2025 within our Satellite and Space Communications segment, and other factors, we determined that we were required to perform an interim quantitative goodwill impairment test as of October 31, 2024.

Based on our quantitative evaluation, we determined that our Satellite and Space Communications reporting unit had an estimated fair value below its carrying value and concluded that our goodwill in this reporting unit was impaired.

As a result, in the fourth quarter of fiscal 2024, we recognized a non-cash $48.9 million goodwill impairment charge in our Satellite and Space Communications reporting unit.

In addition to testing goodwill associated with our Satellite and Space Communications reporting unit for impairment, we also assessed the recoverability of the carrying values of our other long-lived assets, including identifiable intangible assets with finite useful lives.

Such testing also considered our decision in the fourth quarter of fiscal 2024 to cease our steerable antenna operations located in the United Kingdom.

Based on our evaluation, we determined that the fair value of the asset group related to such operations was lower than its carrying value and recorded a non-cash $15.6 million long-lived asset impairment charge in our Satellite and Space Communications segment.

As a result, in the first quarter of fiscal 2025, we recognized a $79.6 million non-cash goodwill impairment charge in our Satellite and Space Communications reporting unit.

In addition to testing goodwill for impairment, we also assessed the recoverability of the carrying values of our other long-lived assets in this segment, including identifiable intangible assets with finite useful lives.

Based on our evaluation, we determined that the fair values of such assets were not impaired.

We performed our next quantitative goodwill impairment test as of August 1, 2025 (i.e., the start of our fiscal 2026) and determined that our Satellite and Space Communications and Allerium reporting units had estimated fair values in excess of their carrying values and concluded that our goodwill as of such date was not impaired.

See Notes to Consolidated Financial Statements included in Part II - Item 8.

Financial Statements and Supplementary Data included in this Form 10-K for further information.

Proxy Solicitation Costs.

During fiscal 2025, we incurred $2.7 million of proxy solicitation costs (including legal and advisory fees) in our Unallocated segment as a result of a now-settled proxy contest.

There were no similar costs in fiscal 2024.

CEO Transition Costs .

For the three fiscal years ended July 31, 2024, cumulative CEO transition costs aggregated $25.6 million.

CEO transition costs were $2.9 million for fiscal 2024 and principally consisted of legal expenses related to the March 2024 termination of our former CEO, Mr.

Peterman, for cause due to conduct unrelated to our business strategy, financial results or previously filed financial statements.

CEO transition costs were $9.1 million for fiscal 2023, of which $7.4 million related to our former President and CEO, Mr.

Porcelain, pursuant to his separation agreement with the Company, and $1.7 million related our other former CEO, Mr.

CEO transition costs were $13.6 million for fiscal 2022 and entirely related to our former CEO, Mr.

CEO transition costs are expensed in our Unallocated segment.

During fiscal 2025 and 2024, we recorded $2.1 million and $2.9 million, respectively, related to CEO transition costs.

Such Unallocated expenses primarily represent legal expenses related to a former CEO, severance related to another former CEO, third party CEO search firm expenses and expenses related to a sign on bonus for our current CEO.

Loss on Business Divestiture.

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Although a loss for GAAP purposes, the PST Divestiture resulted in a gain for tax purposes.

However, we completed the PST Divestiture in a tax efficient manner as we utilized a portion of the capital loss carryforward (related to the failed 2020 Gilat acquisition) which was set to expire in 2026.

However, we completed the PST Divestiture in a tax efficient manner as we utilized a portion of our capital loss carryforward which is set to expire in 2026.

Operating (Loss) Income.

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2025 2024 2025 2024 2025 2024 2025 2024

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

($ in millions) Satellite and Space Communications Allerium Unallocated Consolidated

Operating (loss) income $ (111.6) $ (54.2) $ 24.1 $ 21.7 $ (51.6) $ (47.4) $ (139.1) $ (79.9)

Percentage of related net sales NA 4.5 % 10.0 % 5.8 % NA NA NA NA

Percentage of related net sales NA NA 10.5 % 10.0 % NA NA NA NA

Our GAAP operating loss of $139.1 million for fiscal 2025 reflects:

(i) a $64.5 million non-cash charge related to the impairment of certain long-lived assets, including goodwill, in our Satellite and Space Communications segment;

(i) a non-cash goodwill impairment charge of $79.6 million;

(ii) $21.7 million of amortization of intangibles;

(iii) $12.5 million of restructuring costs (of which $3.8 million, $0.6 million and $8.1 million related to our Satellite and Space Communications, Terrestrial and Wireless Networks and Unallocated segments, respectively);

(iii) $15.6 million of restructuring costs (of which $5.5 million, $0.6 million and $9.5 million related to our Satellite and Space Communications, Allerium and Unallocated segments, respectively);

(iv) $3.1 million of amortization of stock-based compensation;

(v) $4.1 million of strategic emerging technology costs;

(v) $2.7 million of proxy solicitation costs;

(vi) $2.1 million of CEO transition costs;

(vii) a $1.2 million loss on the PST Divestiture reported in our Unallocated segment;

(vii) $0.3 million of strategic emerging technology costs;

and (viii) $0.3 million of amortization of cost to fulfill assets, as discussed above.

Excluding such items, our consolidated operating income for fiscal 2024 would have been $33.5 million.

Excluding such items, our consolidated operating loss for fiscal 2025 would have been $13.8 million.

Our GAAP operating loss of $79.9 million for fiscal 2024 reflects:

(i) $21.4 million of amortization of intangibles;

(ii) $10.9 million of restructuring costs (of which $5.7 million, $1.3 million and $3.9 million related to our Satellite and Space Communications, Terrestrial and Wireless Networks and Unallocated segments, respectively);

(iii) $10.1 million of amortization of stock-based compensation;

(iv) $9.1 million of CEO transition costs;

(i) a non-cash goodwill impairment charge of $64.5 million;

(ii) $21.2 million of amortization of intangibles;

(iii) $12.5 million of restructuring costs (of which $3.8 million, $0.6 million and $8.1 million related to our Satellite and Space Communications, Allerium and Unallocated segments, respectively);

(iv) $6.1 million of amortization of stock-based compensation;

(v) $4.1 million of strategic emerging technology costs;

and (vi) $1.0 million of amortization of cost to fulfill assets, as discussed above.

(vi) $2.9 million of CEO transition costs;

(vii) a $1.2 million loss on the PST Divestiture reported in our Unallocated segment;

and (viii) $1.0 million of amortization of cost to fulfill assets, as discussed above.

Excluding such items, our consolidated operating income for fiscal 2024 would have been $33.5 million.

The decrease in operating income, excluding the above items, from $41.6 million for fiscal 2023 to $33.5 million for fiscal 2024 primarily reflects lower consolidated net sales and gross profit (both in dollars and as a percentage of consolidated net sales) and higher selling, general and administrative expenses (due to increased headcount, legal and professional fees and cash incentive compensation), offset in part by lower research and development expenses in both of our reportable operating segments, as discussed above.

The decrease, excluding the above items, from $33.5 million of operating income to $13.8 million of operating loss for the more recent period primarily reflects lower consolidated net sales and gross profit (both in dollars and as a percentage of consolidated net sales) and higher selling, general and administrative expenses, offset in part by lower research and development expenses, as discussed above.

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

The significant decrease in our Satellite and Space Communications segment operating income for fiscal 2024 primarily reflects the non-cash impairment charge related to certain long-lived assets, including goodwill, and lower net sales and gross profit (both in dollars and as a percentage of related segment net sales), offset in part by lower research and development expenses, as discussed above.

The significant increase in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for fiscal 2024 reflects lower research and development expenses, as discussed above.

Excluding the loss on the PST Divestiture, the impact of CEO transition costs and its respective portion of restructuring charges in each period, Unallocated expenses for fiscal 2024 would have been $35.3 million, as compared to $29.0 million for fiscal 2023.

The fiscal 2025 operating loss for our Satellite and Space Communications segment was significantly impacted by the $79.6 million non-cash goodwill impairment charge in the first quarter of fiscal 2025.

The decrease in our Satellite and Space Communications segment operating income for fiscal 2025 also reflects significantly lower net sales and gross profit, both in dollars and as a percentage of related segment net sales (including an $11.4 million non-cash charge related to the write down of certain inventory and impact of the PST and CGC divestitures), an incremental year-over-year non-cash goodwill impairment charge, higher selling, general and administrative expenses (driven by a $16.1 million non-cash charge related to an allowance for doubtful accounts, offset in part by cost savings initiatives) and higher amortization of intangibles, offset in part by lower research and development expenses, as discussed above.

The increase in our Allerium segment operating income, both in dollars and as a percentage of the related segment net sales, for fiscal 2025 reflects higher net sales and gross profit, offset in part by higher selling, general and administrative expenses and research and development expenses, as discussed above.

Excluding the loss on the PST Divestiture, proxy solicitation costs, CEO transition costs and its respective portion of restructuring charges in each period, Unallocated expenses for fiscal 2025 would have been $37.3 million, as compared to $35.3 million for fiscal 2024.

The increase in Unallocated expenses, excluding such items, was primarily due to higher selling, general and administrative expenses, as discussed above.

Amortization of stock-based compensation was $6.1 million and $10.1 million, respectively, for fiscal 2024 and 2023.

Although higher in the prior fiscal 2023 period, both fiscal 2024 and 2023 include fully vested stock-based awards granted to certain employees in lieu of annual non-equity incentive compensation.

Also, stock-based compensation for the more recent period reflects a benefit associated with the forfeitures of awards related to our former CEO.

Interest Expense and Other.

Interest expense was $45.7 million and $22.2 million for fiscal 2025 and 2024, respectively.

The increase is due to a higher average debt balance outstanding during fiscal 2024, a general rise in interest rates compared to the prior year and higher interest rates under our Credit Facility entered into in June 2024 (see "Notes to Consolidated Financial Statements - Note (8) - Credit Facility" included in " Part II - Item 8.

Financial Statements and Supplementary Data " for further discussion of the Credit Facility).

Our effective interest rate (including amortization of deferred financing costs) in fiscal 2024 was approximately 12.3% as compared to 8.9% in fiscal 2023.

Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our Credit Facility is approximately 14.8%.

The increase during fiscal 2025 is primarily due to:

higher interest rates and fees and average debt balance outstanding during the more recent period related to our Credit Facility;

accreted interest related to our Subordinated Credit Facility;

the amortization of deferred financing costs and debt discounts related to both credit facilities;

and the immediate expensing of certain financing fees related to refinancing and or amending our credit facilities, as discussed further in Notes to Consolidated Financial Statements - Note (8) - Credit Facility and Note (9) - Subordinated Credit Facility included in Part II - Item 8.

Financial Statements and Supplementary Data.

Our effective interest rate in fiscal 2025 was approximately 19.6% as compared to 12.3% in fiscal 2024.

Our current cash borrowing rate under our Credit Facility is approximately 13.9%, which reflects the benefit of recent amendments to the Credit Facility and lower interest rates, as compared to 14.8% in the corresponding prior year period.

Interest (Income) and Other.

1 unchanged sentence

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.

Write-off of Deferred Financing Costs.

During the fourth quarter of fiscal 2024, in connection with the extinguishment and refinancing of our Prior Credit Facility through a new syndicate of lenders, we fully expensed all $1.8 million of the remaining deferred financing costs related to the Prior Credit Facility.

Change in Fair Value of Warrants.

During fiscal 2024, we recorded a $4.3 million net benefit from the remeasurement of warrants.

The net benefit was driven by the impact of a lower market price of our common stock after the issuance of the warrants to the holders of our Series B-1 Convertible Preferred Stock in January 2024, offset in part by a higher market price of our common stock after the issuance of warrants to certain lenders under our Credit Facility in June 2024.

See "Notes to Consolidated Financial Statements - Note (16) - Convertible Preferred Stock" and " Note (8) - Credit Facility" included in " Part II - Item 8.

Write-off of Deferred Financing Costs and Debt Discounts.

In connection with the October 17, 2024, March 3, 2025 and July 21, 2025 amendments to the Credit Facility and Subordinated Credit Facility, and in particular, the prepayments of Term Loan principal and reduced commitments under the Credit Facility, $9.0 million of deferred financing fees and debt discounts were immediately expensed during fiscal 2025.

During fiscal 2024, in connection with the June 17, 2024 refinancing and extinguishment of the prior credit facility, we fully expensed all $1.8 million of the remaining deferred financing costs related to such credit facility.

Change in Fair Value of Warrants and Derivatives.

During fiscal 2025 and 2024, we recorded a $38.5 million and $4.3 million non-cash benefit, respectively, due to the remeasurement of warrants and derivatives related to our Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock.

The remeasurement and resulting non-cash benefit for fiscal 2025 primarily reflects a decrease in the estimated probability of events that could result in additional and/or accelerated payments to holders of our Convertible Preferred Stock and lenders under our Subordinated Credit Facility.

The remeasurement and resulting non-cash benefit for fiscal 2024 was driven by the impact of a lower market price of our common stock after the issuance of the warrants to the holders of our Convertible Preferred Stock in January 2024, offset in part by a higher market price of our common stock after the issuance of warrants to certain lenders under our Credit Facility in June 2024.

See Notes to Consolidated Financial Statements - Note (8) - Credit Facility, Note (9) - Subordinated Credit Facility and Note (17) - Convertible Preferred Stock included in Part II - Item 8.

Financial Statements and Supplementary Data for more information.

Benefit from Income Taxes.

For fiscal 2024 and 2023, we recorded tax benefits of $0.3 million and $3.9 million, respectively.

For fiscal 2025 and 2024, we recorded nominal tax benefits.

Our effective tax rate (excluding discrete tax items) for fiscal 2025 was (0.47)%, as compared to 8.1% for fiscal 2024.

The decrease in the rate is primarily due to changes in expected product and geographical mix.

For purposes of determining our 8.1% effective tax rate for fiscal 2024, the impairment of long-lived assets, including goodwill, the change in fair value of warrants, CEO transition costs and the impact of the PST Divestiture are each considered significant, unusual or infrequently occurring discrete tax items and excluded from the computation of our effective tax rate.

For purposes of determining our 14.5% effective tax rate for fiscal 2023, CEO transition costs were considered significant, unusual or infrequently occurring discrete tax items and excluded from the computation of our effective tax rate.

The decrease in the rate is primarily due to changes in expected product and geographical mix and not providing for tax benefits on U.S.

related deferred tax assets in the more recent period.

For purposes of determining our (0.47)% effective tax rate for fiscal 2025, the impairment of goodwill, the change in fair value of warrants and derivatives, proxy solicitation costs and CEO transition costs are considered significant, unusual or infrequently occurring discrete tax items and excluded from the computation of our effective tax rate.

During fiscal 2025, we recorded a net discrete tax benefit of $0.6 million primarily related to the reversal of tax contingencies no longer required due to the expiration of applicable statute of limitations and proxy solicitation costs.

During fiscal 2024, we recorded a net discrete tax expense of $2.7 million, primarily related to stock-based awards and the establishment of a valuation allowance on U.S.

net deferred tax assets, partially offset by the reversal of tax contingencies no longer required due to the expiration of applicable statute of limitations.

During fiscal 2023, we recorded a net discrete tax benefit of $0.8 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 and state income tax returns.

Our U.S federal income tax returns for fiscal 2021 through 2023 are subject to potential future IRS audit.

None of our state income tax returns prior to fiscal 2020 are subject to audit.

federal income tax returns for fiscal 2022 through 2025 are subject to potential future IRS audit.

None of our state and foreign income tax returns prior to fiscal 2021 are subject to audit.

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

1 unchanged sentence

During fiscal 2025 and 2024, consolidated net loss attributable to common stockholders was $204.3 million and $135.4 million, respectively.

In addition to those items discussed above, the more recent period also includes:

(i) $19.6 million of expenses related to the exchange of our Series A-1 Convertible Preferred Stock for Series B Convertible Preferred Stock on January 22, 2024 (inclusive of the initial fair value of warrants issued to such holders) and the exchange of our Series B Convertible Preferred Stock for Series B-1 Convertible Preferred Stock on June 17, 2024;

(ii) $11.6 million of dividends related to our Convertible Preferred Stock outstanding during fiscal 2024;

and (iii) $4.3 million of Series B Convertible Preferred Stock issuance costs (consisting of third party financial advisor, legal and professional fees).

In addition to those items discussed above:

(i) fiscal 2025 includes $100.1 million of net dividends related to our Convertible Preferred Stock, offset, in part, by a $51.2 million gain related to the exchange of our Series B-1 Convertible Preferred Stock for Series B-2 Convertible Preferred Stock on October 17, 2024;

and (ii) fiscal 2024 includes:

(a) $19.6 million of losses related to the exchange of our Series A-1 Convertible Preferred Stock for Series B Convertible Preferred Stock on January 22, 2024 (inclusive of the initial fair value of warrants issued to such holders) and the exchange of our Series B Convertible Preferred Stock for Series B-1 Convertible Preferred Stock on June 17, 2024;

(b) $11.6 million of dividends related to our Convertible Preferred Stock;

and (c) $4.3 million of Series B Convertible Preferred Stock issuance costs (consisting of third party financial advisor, legal and professional fees).

For GAAP purposes, net dividends related to our Convertible Preferred Stock reflect dividends paid in kind and dividends accrued at the stated rate, as well as changes in the carrying value of such Convertible Preferred Stock due to changes in the fair value of derivatives embedded in the instrument.

Adjusted EBITDA.

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2025 2024 2025 2024 2025 2024 2025 2024

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

Net (loss) income $ (55.5) 15.5 21.0 12.3 (65.4) (54.7) $ (100.0) (26.9)

Provision for (benefit from) income taxes 0.7 (1.7) 0.7 (0.2) (1.6) (2.0) (0.3) (3.9)

Interest expense — — — — 22.1 15.0 22.2 15.0

Interest (income) and other 0.6 1.2 — 0.2 — (0.2) 0.7 1.2

Write-off of deferred financing costs — — — — 1.8 — 1.8 —

Change in fair value of warrants and derivatives — — — — (4.3) — (4.3) —

($ in millions) Satellite and Space Communications Allerium Unallocated Consolidated

Operating (loss) income $ (111.6) (54.2) 24.1 21.7 (51.6) (47.4) $ (139.1) (79.9)

Amortization of stock-based compensation — — — — 3.1 6.1 3.1 6.1

Amortization of intangibles 7.3 6.7 14.5 14.5 — — 21.7 21.2

Impairment of long-lived assets, including

goodwill 79.6 64.5 — — — — 79.6 64.5

Depreciation 3.0 3.9 8.3 7.9 0.5 0.4 11.8 12.2

Impairment of long-lived assets, including goodwill 64.5 — — — — — 64.5 —

Amortization of cost to fulfill assets 0.3 1.0 — — — — 0.3 1.0

CEO transition costs — — — — 2.9 9.1 2.9 9.1

Restructuring costs 5.5 3.8 0.6 0.6 9.5 8.1 15.6 12.5

Strategic emerging technology costs 0.3 4.1 — — — — 0.3 4.1

Proxy solicitation costs — — — — 2.7 — 2.7 —

CEO transition costs — — — — 2.1 2.9 2.1 2.9

Loss on business divestiture — — — — — 1.2 — 1.2

Adjusted EBITDA $ (15.8) 29.8 47.6 44.7 (33.7) (28.7) $ (2.0) 45.7

Percentage of related net sales 9.2 % 11.0 % 20.6 % 16.6 % NA NA 8.5 % 9.7 %

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for fiscal 2024 as compared to fiscal 2023 primarily reflects lower consolidated net sales and gross profit (both in dollars and as a percentage of consolidated net sales) and higher selling, general and administrative expenses, offset in part by lower research and development expenses in both of our reportable operating segments, as discussed above.

The decrease in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, primarily reflects lower net sales and gross profit (both in dollars and as a percentage of related segment net sales), offset in part by lower research and development expenses, 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, reflects lower research and development expenses, offset in part by a lower gross profit percentage on related segment net sales, as discussed above.

Also, our consolidated Adjusted EBITDA could be impacted by the timing and outcome of our recently announced strategy to transform Comtech into a pure-play satellite and space communications company.

Reconciliations of our GAAP consolidated operating loss, net loss attributable to common stockholders and net loss per diluted common share for fiscal 2024 and 2023 to the corresponding Non-GAAP measures are shown in the tables below (numbers and per share amounts in the table may not foot due to rounding).

Non-GAAP net income attributable to common stockholders and net income per diluted common share reflect Non-GAAP provisions for income taxes based on full year results, as adjusted for the Non-GAAP reconciling items included in the tables below.

Percentage of related net sales:

Operating income NA NA 10.5 % 10.0 % NA NA NA NA

Adjusted EBITDA NA 9.2 % 20.7 % 20.6 % NA NA NA 8.5 %

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for fiscal 2025 as compared to fiscal 2024 primarily reflects lower consolidated net sales and gross profit (both in dollars and as a percentage of consolidated net sales, and including an $11.4 million non-cash charge related to a write down of inventory) and higher selling, general and administrative expenses (driven by a $16.1 million non-cash charge related to an allowance for doubtful accounts), offset in part by lower research and development expenses, as discussed above.

The decrease in our Satellite and Space Communications segment's Adjusted EBITDA reflects significantly lower net sales and gross profit (both in dollars and as a percentage of related segment net sales, and including an $11.4 million non-cash charge related to inventory) and higher selling, general and administrative expenses (driven by a $16.1 million non-cash charge related to an allowance for doubtful accounts), offset in part by lower research and development expenses, as discussed above.

The increase in our Allerium segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, reflects higher gross profit (both in dollars and as a percentage of related segment net sales), offset by higher selling, general and administrative expenses and higher research and development expenses, as discussed above.

Reconciliations of our GAAP consolidated results 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 results reflect Non-GAAP provisions for (benefits from) income taxes based on year-to-date results, as adjusted for the Non-GAAP reconciling items included in the tables below.

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

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

In addition, due to the GAAP net loss for the period, Non-GAAP EPS for fiscal 2024 and 2023 was computed using weighted average diluted shares outstanding of 29,132,000 and 28,376,000, respectively.

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

In addition, due to the GAAP net loss for the period, Non-GAAP net income per diluted common share for fiscal 2024 was computed using weighted average diluted shares outstanding of 29,132,000, respectively.

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

Diluted Common Share

2 unchanged sentences

$ (139.1) $ (204.3) $ (6.95)

Loss on extinguishment of convertible preferred stock

Adjustments to reflect redemption value of convertible preferred stock

1 unchanged sentence

— (38.5) (1.32)

Gain on extinguishment of convertible preferred stock

— (51.2) (1.74)

Impairment of long-lived assets, including goodwill

5 unchanged sentences

Amortization of stock-based compensation

Strategic emerging technology costs 4.1 3.8 0.13

Proxy solicitation costs

CEO transition costs

Loss on business divestiture 1.2 1.2 0.04

Strategic emerging technology costs 0.3 0.3 0.01

Amortization of cost to fulfill assets 0.3 0.3 0.01

Net discrete tax expense

Net discrete tax benefit

— (0.3) (0.01)

Non-GAAP measures $ (13.8) $ (70.8) $ (2.41)

4 unchanged sentences

$ (79.9) $ (135.4) $ (4.70)

Loss on extinguishment of convertible preferred stock

Adjustments to reflect redemption value of convertible preferred stock

Change in fair value of warrants and derivatives

— (4.3) (0.15)

Impairment of long-lived assets, including goodwill

64.5 63.8 2.21

Amortization of intangibles

3 unchanged sentences

Amortization of stock-based compensation

10.1 7.9 0.28

CEO transition costs

Strategic emerging technology costs

CEO transition costs

Loss on business divestiture

Amortization of cost to fulfill assets

Net discrete tax benefit

— (0.3) (0.01)

Net discrete tax expense

Non-GAAP measures $ 33.5 $ 2.8 $ 0.10

Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before interest, income taxes, depreciation expense, amortization of intangibles, amortization of stock-based compensation, amortization of cost to fulfill assets, restructuring costs, strategic emerging technology costs (for next-generation satellite technology), change in fair value of warrants and derivatives, write-off of deferred financing costs, CEO transition costs, impairment of long-lived assets, including goodwill, loss on business divestiture and, in the past, acquisition plan expenses, change in fair value of convertible preferred stock purchase option liability, COVID-19 related costs, facility exit costs, proxy solicitation costs and strategic alternatives analysis expenses and other.

Although closely aligned, our definition of Adjusted EBITDA is different than 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.

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

Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before interest, income taxes, depreciation, amortization of intangibles, impairment of long-lived assets, including goodwill, amortization of cost to fulfill assets, amortization of stock-based compensation, CEO transition costs, change in fair value of warrants and derivatives, proxy solicitation costs, restructuring costs, strategic emerging technology costs (for next-generation satellite technology) and write-off of deferred financing costs and debt discounts, and in the recent past, acquisition plan expenses, change in fair value of the convertible preferred stock purchase option liability, COVID-19 related costs, facility exit costs, strategic alternatives expenses and other and loss on business divestiture.

These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results.

Although closely aligned, our definition of Adjusted EBITDA is different than EBITDA (as such term is defined in our Credit Facility and Subordinated 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, as well as adjusted operating income (loss), net income (loss) attributable to common shareholders and net income (loss) per diluted common share, as presented in the above tables, are non-GAAP measures.

These Non-GAAP measures are frequently requested by investors and analysts.

We believe that investors and analysts may use these Non-GAAP measures along with other information contained in our SEC filings, including GAAP measures, in assessing our performance and comparability of our results with other companies.

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.

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

As we have not provided targets for fiscal 2025, we have also not quantitatively reconciled our fiscal 2025 outlook to comparable GAAP measures.

Furthermore, even if targets had been provided, 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.

As we have not provided future Non-GAAP financial guidance or targets, there is no need to reconcile our business outlook to the most directly comparable GAAP measures.

Furthermore, even if guidance or targets had been provided, 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 at this time.

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.

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

Comparison of Fiscal 2024 and 2023

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• Net cash used in operating activities was $8.3 million and $54.5 million for fiscal 2025 and 2024, respectively.

Net cash used in operating activities for fiscal 2024 and net cash provided by operating activities for fiscal 2023 would have been $38.5 million and $9.6 million, respectively, when excluding $16.0 million and $14.0 million, respectively, in aggregate cash payments for restructuring costs (including severance), CEO transition costs and strategic emerging technology costs for next-generation satellite technology.

The period-over-period decrease in cash flows from operating activities reflects overall changes in net working capital requirements, principally the timing of:

(i) payments to vendors;

and (ii) progress toward completion on contracts accounted for over time, including related shipments, billings and collections.

More specifically, in fiscal 2024, we experienced a significant increase in the overall level of contract assets (i.e., unbilled receivables) related to large, long-term contracts with certain U.S.

government and international customers.

While such contract assets are trending lower more recently due to shipments, billings and collections from our customers, such contract activity did result in a material increase in working capital during our fiscal 2024.

• Net cash provided by investing activities in fiscal 2024 was $20.1 million compared to net cash used in investing activities in fiscal 2023 of $18.3 million.

Fiscal 2024 includes $33.2 million of net cash proceeds from the PST Divestiture, offset in part by 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 our manufacturing facilities.

• Net cash provided by financing activities was $47.8 million and $20.1 million for fiscal 2024 and 2023, respectively.

During fiscal 2024, we entered into a new Credit Facility and repaid in full the outstanding borrowings under our Prior Credit Facility.

During fiscal 2024, with respect to term loans, we received net proceeds of $157.1 million and made $48.8 million in total repayments.

During fiscal 2024, we had revolving loan net repayments of $85.3 million, as compared to revolving loan net borrowings of $36.9 million in fiscal 2023.

During fiscal 2024, we paid financing costs of $10.3 million in connection with our credit facilities.

During fiscal 2024, we received an aggregate of $43.2 million in net proceeds related to the issuance of our Series B Convertible Preferred Stock, and also paid $4.3 million in related issuance costs (consisting of third party financial advisor, legal and professional fees).

During fiscal 2024 and 2023, we paid $0.3 million and $8.7 million, respectively, in cash dividends to our common stockholders.

We also made $3.8 million and $2.9 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during fiscal 2024 and 2023, respectively.

Credit Facility

See " Notes to Consolidated Financial Statements - Note (8) - Credit Facility " included in " Part II - Item 8.

Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference), for detailed information related to our Credit Facility entered into on June 17, 2024, which replaced the Prior Credit Facility previously entered into on November 7, 2023.

As of July 31, 2024, the amount outstanding under our Credit Facility was $194.2 million, comprised of $32.5 million under the Revolving Loan and $161.7 million under the Term Loan.

During fiscal 2024, we had outstanding balances under our credit facilities ranging from $156.2 million to $202.0 million.

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.

Convertible Preferred Stock

See " Notes to Consolidated Financial Statements - Note (16) - Convertible Preferred Stock " included in " Part II - Item 8.

Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference), for additional information.

Subordinated Credit Agreement

See " Notes to Consolidated Financial Statements - Note (19) - Subsequent Event " included in " Part II - Item 8.

Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference), for additional information on our Subordinated Credit Agreement, which we entered into on October 17, 2024.

Liquidity and Going Concern

Pursuant to the requirements of ASC Topic 205-40, " Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern ," we are required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern.

This evaluation does not take into consideration the potential mitigating effect of our plans that have not been fully implemented or are not within our control as of the date the audited Consolidated Financial Statements are issued.

When substantial doubt exists, we are required to evaluate whether the mitigating effect of our plans sufficiently alleviates substantial doubt about our ability to continue as a going concern.

The mitigating effect of our plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the Consolidated Financial Statements are issued, and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.

As of the date these financial statements were issued (the "issuance date"), we evaluated whether the following adverse conditions, when 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 $79.9 million, $14.7 million and $33.8 million in fiscal 2024, 2023 and 2022, respectively.

In addition, over the past three fiscal years, net cash used in operating activities was $54.5 million and $4.4 million in fiscal 2024 and 2023, respectively, and net cash provided by operating activities was $2.0 million in fiscal 2022.

Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to generate positive cash inflows from operations, maximize our borrowing capacity under our Credit Facility, as discussed further below, and or secure other sources of outside capital.

While we believe we will be able to generate sufficient positive cash inflows, maximize our borrowing capacity and secure outside capital, there can be no assurance our plans will be successfully implemented and, as such, we may be unable to continue as a going concern over the next year beyond the issuance date.

As discussed further in " Notes to Consolidated Financial Statements - Note (8) - Credit Facility " included in " Part II - Item 8.

Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference), on June 17, 2024, we entered into a $222.0 million credit facility with a new syndicate of lenders, which replaced our prior credit facility.

As further discussed below, we subsequently amended the credit facility on October 17, 2024 (the "Credit Facility").

The Credit Facility consists of a committed $162.0 million term loan (“Term Loan”) and $60.0 million revolver loan (“Revolver Loan”).

At July 31, 2024 and October 25, 2024 (the date closest to the issuance date), total outstanding borrowings under the Credit Facility were $194.2 million and $199.1 million, respectively.

At both July 31, 2024 and October 25, 2024, $32.5 million was drawn on the Revolver Loan.

As of the issuance date, our available sources of liquidity approximate $28.7 million, consisting solely of qualified cash and cash equivalents.

That is, our available sources of liquidity do not include the remaining portion of the committed Revolver Loan due to the lenders' consent right, discussed below, to any borrowings that exceed $32.5 million.

The Credit Facility, among other things, requires compliance with new restrictive and financial covenants, including:

a maximum allowable Net Leverage Ratio of 3.25x for the fiscal quarter ending January 31, 2025;

a minimum Fixed Charge Coverage Ratio of 1.20x for the fiscal quarter ending January 31, 2025;

a minimum Average Liquidity requirement at each quarter end of $20.0 million;

and a minimum EBITDA of $35.0 million for the fiscal quarter ending October 31, 2025.

Such ratios adjust under the Credit Facility in future periods.

The Credit Facility was amended on October 17, 2024 to waive certain defaults or events of default, including in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of July 31, 2024.

The amendment also provides for, among other things:

(i) increases the interest rate margins applicable to the loans;

(ii) modifies certain financial and collateral reporting requirements;

(iii) provides a lender consent right with respect to $27.5 million of Revolver Loan borrowings above $32.5 million;

(iv) permits the incurrence of $25.0 million of senior unsecured subordinated debt (as described below);

(v) amends the maturity date to the earlier of (x) July 31, 2028 or (y) 90 days prior to the earliest date that the debt under the Subordinated Credit Agreement (as defined below) becomes due and payable;

and (vi) suspends financial covenant testing through the end of our fiscal quarter ending January 31, 2025.

In addition, we entered into a Subordinated Credit Agreement with the existing holders of our Convertible Preferred Stock (the “Subordinated Credit Agreement”) on October 17, 2024, which provides a subordinated unsecured term loan facility in the aggregate principal amount of $25.0 million (the “Subordinated Credit Facility”).

The proceeds of the Subordinated Credit Facility:

(i) cured our default on certain financial covenants under the Credit Facility, as discussed above;

(ii) provides

additional liquidity to us;

and (iii) funds our general working capital needs, including support of our strategic transformation initiatives, as discussed below.

Our ability to meet our current obligations as they become due may be impacted by our ability to remain compliant with the financial covenants required by the Credit Facility, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained.

While we believe we will be able to secure such waivers or amendments, as needed, there can be no assurance such waivers or amendments will be secured or on terms that are acceptable to us.

If we are unable to secure waivers or amendments, the lenders may declare an event of default, which would cause an immediate acceleration and repayment of all outstanding principal, interest and fees due under our Credit Facility.

Absent our ability to repay the forgoing amounts upon the declaration of an event of default, the lenders may exercise their rights and remedies under the Credit Facility, which may include, among others, a seizure of substantially all of our assets and/or the liquidation of our operations.

If an event of default occurs that allows the lenders to exercise these rights and remedies over the next year beyond the issuance date, we will be unable to continue as a going concern.

As of the issuance date, our plans to address our ability to continue as a going concern include, among other things:

• 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;

• 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 (e.g., within our Satellite and Space Communications segment) to focus future investment on our most strategic, high-margin revenue opportunities;

• 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 Credit Facility, Convertible Preferred Stock and/or Subordinated Credit Agreement);

• 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 year 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, the adverse conditions and events described above are uncertainties that raise substantial doubt about our ability to continue as a going concern.

The accompanying consolidated financial statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future.

Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

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 under certain circumstances.

The significant period-over-period improvement reflects favorable changes in net working capital requirements, due primarily to improved accountability and process disciplines, as well as the timing of and progress toward completion on contracts accounted for over time, including related shipments, billings and collections.

These activities allowed us to reduce billed receivables, contract assets (i.e., unbilled receivables) and inventory levels in fiscal 2025.

Also, as a result of our enhanced liquidity, driven by our improved operational and financial performance over the course of fiscal 2025 and recent amendments to our credit facilities, operating cash flows in the more recent period reflect our concerted efforts to reduce accounts payable in order to improve vendor relations and position ourselves to negotiate more favorable payment terms.

Operating cash flows include cash payments for interest and taxes of $27.7 million and $1.9 million, respectively, for fiscal 2025, and $18.1 million and $4.9 million, respectively, for fiscal 2024.

Operating cash flows in fiscal 2025 and 2024 also include $23.0 million and $16.0 million, respectively, in aggregate payments for restructuring costs, including severance, proxy solicitation costs, CEO transition costs and strategic emerging technology costs for next-generation satellite technology.

• Net cash used in investing activities in fiscal 2025 was $8.6 million and primarily reflects capital expenditures in our Allerium segment to build-out cloud-based computer networks and internal use software applications, as well as capital investments and building improvements in connection with our leased facilities.

Net cash provided by investing activities in fiscal 2024 was $20.1 million and includes $33.2 million of net cash proceeds from the PST Divestiture.

• Net cash provided by financing activities was $24.4 million and $47.8 million for fiscal 2025 and 2024, respectively and primarily reflects the following:

• During fiscal 2025 we:

(i) entered into a Subordinated Credit Facility agreement, as amended, with existing holders of our Convertible Preferred Stock and received proceeds of $100.0 million;

(ii) made partial term loan repayments of $56.7 million and net revolving loan repayments of $14.9 million under our Credit Facility;

and (iii) paid $4.5 million in deferred financing costs and debt discounts.

• During fiscal 2024, we:

(i) entered into the Credit Facility agreement, as amended, received term loan proceeds of $157.1 million and repaid in full the outstanding borrowings under our prior credit facility;

(ii) made $48.8 million in total term loan repayments;

(iii) made revolving loan net repayments of $85.3 million;

(iv) paid financing costs of $10.3 million in connection with our credit facilities;

(v) received an aggregate of $43.2 million in net proceeds related to the issuance of our Series B Convertible Preferred Stock;

(vi) and paid $4.3 million in related issuance costs (consisting of third party financial advisor, legal and professional fees).

• During fiscal 2025, we also received $2.8 million from the City of Gatineau, a province in Quebec, Canada, to fund the relocation of our existing leased facility to a new location.

The Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock are discussed below and in Notes to Consolidated Financial Statements - Note (8) – Credit Facility, Note (9) - Subordinated Credit Facility and Note (17) – Convertible Preferred Stock included in Part II - Item 8.

Financial Statements and Supplementary Data, included in this Form 10-K (which discussion is incorporated herein by reference).

In fiscal 2025, 2024 and 2023, we reported operating losses of $139.1 million, $79.9 million and $14.7 million, respectively, and net cash used in operating activities of $8.3 million, $54.5 million and $4.4 million, respectively.

At July 31, 2025 and November 7, 2025 (the date closest to the issuance date), total outstanding borrowings under our Credit Facility was $133.9 million and $135.0 million, respectively.

Of such amounts, $17.6 million was drawn on the Revolver Loan at both dates.

At July 31, 2025, October 31, 2025 and November 7, 2025, our available sources of liquidity totaled $47.0 million, $51.0 million and $50.3 million, respectively, which includes qualified cash and cash equivalents of $37.4 million, $41.4 million and $40.7 million, respectively, and the remaining available portion of the Revolver Loan of $9.6 million as of each such date.

As of the issuance date, we expect cash and cash equivalents and cash flows from both operating and financing activities to be our principal sources of liquidity.

We also believe these sources of liquidity will be sufficient to fund our operating and cash commitments for investing and financing activities over the next year beyond the issuance date.

During fiscal 2025 and through the issuance date, we have taken the following actions, and implemented the following plans, to improve our operational and financial performance, enhance our liquidity and financial condition and ability to meet our financial covenants contained in our credit facilities:

• Engaged in portfolio-shaping opportunities to enhance profitability, efficiency and focus, including the elimination of legacy solutions that were not contributing meaningfully to net sales and or gross profits;

• Prioritized efforts to complete low or no margin non-recurring engineering contracts in order to accelerate our migration to higher volume and higher margin manufacturing related orders with improved cash conversion cycles;

• Developed and launched new products and services around differentiated technology and solutions;

• Improved operating profitability by entering into, or renegotiating, sales or service contracts with more favorable pricing and payment terms;

• Reduced our cost structure to better align operating expenses with revenue expectations, including facility and headcount rationalization and optimization;

• Through new leadership and improved accountability and process disciplines implemented throughout the organization, reduced our investments in working capital (e.g., accounts receivable and inventory), as well as capital expenditures;

• Through a series of capital injections, aggregating $100.0 million in the form of subordinated debt, and amendments to our credit facilities:

(i) significantly reduced senior debt and related cash interest payments due under our Credit Facility;

(ii) increased the available portion of our Revolver Loan;

(iii) deferred the scheduled repayment of a portion of the Term Loan and the scheduled payment of certain fees due under the Credit Facility;

(iv) suspended testing of our Net Leverage Ratio, Fixed Charge Coverage Ratio and Minimum EBITDA covenants under our credit facilities until January 31, 2027;

and (v) reduced the minimum quarterly average liquidity requirement under our credit facilities.

Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to execute on our operational strategy, generate positive cash inflows from operations, maximize our borrowing capacity under our Credit Facility and or secure outside capital.

Our ability to do so may also be affected by general economic, financial and other factors which are beyond our control.

Based on the foregoing, over the next year beyond the issuance date, we believe that we will:

(i) be able to generate sufficient positive cash inflows and maximize our borrowing capacity under our Credit Facility to continue as a going concern, and (ii) comply with the covenants contained in our credit facilities.

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

Our material cash requirements could increase beyond our current expectations due to factors such as:

(i) an inability to meet our current obligations under our Credit Facility as they become, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained;

(i) an inability to meet our current obligations under our credit facilities as they become due, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained;

(ii) general economic conditions;

(iii) a change in government spending priorities and or contracting decisions;

(iii) a change in the timing or amounts of government spending priorities and or contracting decisions;

(iv) larger than usual customer orders;

(v) a future redemption by the holders of our Convertible Preferred Stock;

or (vi) actions we may take related to our strategic transformation.

Also, in light of our recently announced strategic transformation initiatives, we continue to review and evaluate our capital allocation plans.

or (vi) actions we may take related to our transformation plan.

Also, in light of our transformation plan initiatives, 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.

In addition to making capital investments for our 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.

In addition to making capital investments for our high-volume manufacturing center in our Satellite and Space Communications segment, we have also been making significant capital expenditures and building out cloud-based computer networks and internal use software applications to support customers in our Allerium segment.

We expect capital investments for these and other initiatives to continue in fiscal 2026.

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

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.

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 $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 fiscal 2025 and 2024.

In fiscal 2023, we adjusted the Company’s capital allocation plans and determined to forgo a common stock dividend.

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 Convertible Preferred Stock.

At July 31, 2024, we had $247,000 of cash deposited as collateral in connection with outstanding standby letters of credit to guarantee future performance on certain customer contracts and no commercial letters of credit outstanding.

In fiscal 2023, we adjusted our capital allocation plans and determined to forgo a common stock dividend.

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

At July 31, 2025, we had $0.1 million of cash deposited as collateral in connection with outstanding standby letters of credit to guarantee future performance on certain customer contracts and no commercial letters of credit outstanding.

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.

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Credit Facility - principal payments $ 133,901 4,050

Credit Facility - interest payments 92,800 28,985

Credit Facility - estimated interest payments 46,627 18,316

Operating lease obligations 42,940 7,637

Subordinated Credit Facility 100,144 —

Subordinated Credit Facility Make-Whole Amount 25,700 —

Contractual cash obligations $ 349,312 30,003

The commitments under our Credit Facility are described in detail above.

See " Notes to Consolidated Financial Statements - Note (1)(c) - Liquidity and Going Concern " included in " Part II - Item 8.

Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference) for further important information.

See " Notes to Consolidated Financial Statements - Note (9) -"Leases " included in " Part II - Item 8.

Financial Statements and Supplementary Data, " (which discussion is incorporated herein by reference), included in this Form 10-K, for additional information on our lease commitments.

As stated above, the amounts in the above table represent cash payments due under contractual obligations.

Interest payments related to our Credit Facility were calculated based the outstanding borrowings at July 31, 2025.

Interest related to the Credit Facility was calculated based on the SOFR forward curve, plus the applicable margin, and does not assume any interest paid-in-kind.

The Subordinated Credit Facility amount includes paid-in-kind interest through July 31, 2025 on the $35.0 million Subordinated Credit Facility Amendment No.

2 Priority Term Loan.

The Subordinated Credit Facility Make-Whole Amount represents $65.0 million of the outstanding Subordinated Credit Facility principal amount, multiplied by the applicable make-whole rate for each applicable tranche as of July 31, 2025.

The Subordinated Credit Facility and Make-Whole Amount are not included in the total due within one year column given the timing of such payment is subject to the timing of certain repayments, prepayments and maturity date associated with the Credit Facility.

See Part II - Item 8.

Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note (8) - Credit Facility and Note (9) - Subordinated Credit Facility for additional discussion related to the commitments under our Credit Facility and Subordinated Credit Facility, respectively (which discussion is incorporated herein by reference), and Note (10) - Leases for additional information on our lease commitments.

As discussed further in Notes to Consolidated Financial Statements - Note (17) - Convertible Preferred Stock, included in Part II - Item 8.

Financial Statements and Supplementary Data (which discussion is incorporated herein by reference), included in this Form 10-K, the holders of the Convertible Preferred Stock have the option to redeem such shares for cash:

(i) in the event of the occurrence of an asset sale trigger;

(ii) in the event of a satisfaction of the existing Credit Facility;

(i) in the event of the occurrence of an asset sale meeting certain criteria;

(ii) on or after April 30, 2027 in the event of a satisfaction of the existing Credit Facility;

and (iii) in all other cases, October 31, 2028.

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

As discussed further in " Notes to Consolidated Financial Statements - Note (19) - Subsequent Events - Subordinated Credit Agreement " included in " Part II - Item 8.

Financial Statements and Supplementary Data, " (which discussion is incorporated herein by reference), included in this Form 10-K, there are defined make-whole amounts with respect to certain repayments or prepayment of such subordinated debt equal to:

(i) from the October 17, 2024 through (but not including) July 17, 2025, $25.0 million multiplied by 33.0%;

(ii) from July 17, 2025 through (but not including) October 17, 2026, $25.0 million multiplied by 50.0%;

and (iii) from October 17, 2026 and thereafter, $25.0 million multiplied by 75.0% plus, in the case of clause (iii), interest accrued on $25.0 million at the make-whole interest rate (as defined below) starting on October 17, 2026 and calculated as of any such date of determination.

The make-whole interest rate is a rate equal to 16.0% per annum, which is increased by 2.0% per annum upon the occurrence and during the continuation of an event of default under the Subordinated Credit Agreement.

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

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As further discussed in Notes to Consolidated Financial Statements – Note (1)(n) - Adoption of Accounting Standards and Updates included in Part II - Item 8.

Financial Statements and Supplementary Data, " included in this Form 10-K, (which discussion is incorporated herein by reference), during fiscal 2024 the following FASB ASUs have been issued and incorporated into the FASB ASC and have not yet been adopted by us as of July 31, 2024:

Financial Statements and Supplementary Data, included in this Form 10-K, (which discussion is incorporated herein by reference), during fiscal 2025 we adopted:

• FASB ASU No.

2023-07, which requires the disclosure of significant segment expenses, by reportable segment, regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss.

The disclosure of other segment items by reportable segment are also required and would constitute the difference between segment revenues less these significant segment expenses and reported segment profit or loss.

On an annual basis, the update requires an entity to disclose the CODM's title and position, as well as describe how the CODM uses the reported measures.

Additionally, all existing annual disclosures about segment profit or loss must be provided on an interim basis in addition to the disclosure of significant segment expenses and other segment items.

This ASU is effective for fiscal years beginning after December 15, 2023 (our fiscal year beginning on August 1, 2024) and for interim periods within fiscal years beginning after December 15, 2024 (our interim period beginning on August 1, 2025), with early adoption permitted.

The adoption of this guidance will impact our disclosures only and we do not expect it to have a material impact on our consolidated financial statements.

Our adoption of this ASU impacted our disclosures only through the retrospective application to all prior periods presented.

See Notes to Consolidated Financial Statements - Note (13) Segment Information included in Part II - Item 8.

Financial Statements and Supplementary Data .

In addition, the following FASB ASUs have been issued and incorporated into the FASB ASC and have not yet been adopted by us as of July 31, 2025:

• FASB ASU No.

2023-09 enhances and establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements.

Most notably under the new requirements is greater disaggregation of information in the effective tax rate reconciliation, including the inclusion of both percentages and amounts, specific categories, and additional information for reconciling items meeting a quantitative threshold defined by the guidance.

2023-09, which among other things, enhances and establishes new income tax disclosure requirements, in addition to modifying and eliminating certain existing requirements.

Most notably, this ASU requires greater disaggregation of information in the effective tax rate reconciliation, including the inclusion of both percentages and amounts, specific categories and additional information for reconciling items meeting a quantitative threshold defined by the guidance.

Additionally, disclosures of income taxes paid and income tax expense must be disaggregated by federal, state and foreign taxes, with income taxes paid further disaggregated for individual jurisdictions that represent 5 percent or more of total income taxes paid.

1 unchanged sentence

We are evaluating the impact of this ASU on our consolidated financial statements and disclosures.

• FASB ASU No.

2024-03, which among other things, requires more detailed disclosures of certain categories of expenses (including purchases of inventory, employee compensation, depreciation, and amortization) that are components of existing expense captions presented on the face of the income statement.

All entities are required to apply the guidance prospectively with an option for retrospective application.

This ASU is effective for annual reporting periods beginning after December 15, 2026 (our fiscal year beginning on August 1, 2027), and interim periods within annual reporting periods beginning after December 15, 2027 (our interim period beginning on August 1, 2028), with early adoption permitted, as clarified in ASU No.

2025-01 issued January 6, 2025.

The adoption of this guidance will impact our disclosures only and we do not expect it to have a material impact on our Consolidated Financial Statements .

• FASB ASU No.

2025-05, which among other things, provides all entities with a practical expedient that allows for the assumption that current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating credit losses for such assets.

This ASU is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods (our fiscal year beginning on August 1, 2026), with early adoption permitted.

We are evaluating the impact of this ASU on our consolidated financial statements and disclosures.

• FASB ASU 2025-06, which among other things, amends the criteria for recognizing and capitalizing costs related to internal-use software by replacing the previous project stage model with a principles-based framework.

Under this ASU, costs are capitalized when management has authorized and committed to funding a software project, and it is probable that the project will be completed and the software used as intended.

This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual periods (our fiscal year beginning on August 1, 2028), on either a prospective, retrospective or modified prospective transition method.

We are evaluating the impact of this ASU on our consolidated financial statements and 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-K

Item 7. Management’s Discussion and Analysis