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What changed in COMTECH TELECOMMUNICATIONS CORP /DE/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of COMTECH TELECOMMUNICATIONS CORP /DE/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+736 added−587 removedSource: 10-K (2024-10-30) vs 10-K (2023-10-12)

Top changes in COMTECH TELECOMMUNICATIONS CORP /DE/'s 2024 10-K

736 paragraphs added · 587 removed · 414 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

99 edited+86 added−81 removed80 unchanged
Biggest changeArmed Forces, NATO and foreign governments (i.e., ministries of defense) Domestic and international defense customers, as well as prime contractors and system suppliers such as General Dynamics Corporation, Lockheed Martin Corporation, L3Harris Technologies, Inc., Northrop Grumman Corporation, Raytheon Technologies Corporation, Telephonics Corporation, The Boeing Company and ViaSat Inc.
Biggest changeArmed Forces, NATO and foreign governments (i.e., ministries of defense) • Domestic and international defense customers, as well as prime contractors and system suppliers such as General Dynamics Corporation, Lockheed Martin Corporation, L3Harris Technologies, Inc., Northrop Grumman Corporation, Raytheon Technologies Corporation, The Boeing Company and ViaSat Inc. • Commercial end-customers also include Claro Argentina, Intelsat S.A., JAXA, NASA, SED Systems (a division of Calian Ltd.), SES S.A. and Speedcast International Limited • Satellite systems integrators, wireless and other communication service providers, and broadcasters, such as DIRECTTV Group • Aviation industry system integrators such as Collins Aerospace, an RTX Business • Oil companies such as Shell Oil Company and PETRONAS Terrestrial and Wireless Networks Segment Overview Our Terrestrial and Wireless Networks segment is a leading provider of next generation 911 (“NG-911”) infrastructure and solutions for state and local governments and carriers.
Next Generation 911 & Call Delivery In addition to 911 call routing, we provide systems integration, geospatial location information, satellite and location infrastructure terminals, and linkage to NG-911 Emergency Services IP Networks ("ESInet"). We also offer what we believe are best-in-class 911 call handling solutions under the Solacom brand name.
Next Generation 911 and Call Delivery In addition to 911 call routing, we provide systems integration, geospatial location information, satellite and location infrastructure terminals, and linkage to NG-911 Emergency Services IP Networks ("ESInet"). We also offer what we believe are best-in-class 911 call handling solutions under the Solacom brand name.
We devote resources to evaluating and responding to requests for proposals by governmental agencies around the world and, as needed, we employ the use of specialized consultants to develop our proposals and bids. We intend to continue to expand international marketing efforts by engaging additional independent sales representatives, distributors and value-added resellers and by establishing foreign sales offices.
We devote resources to evaluating and responding to requests for proposals by governmental agencies around the world and, as needed, we employ the use of specialized consultants to develop our proposals and bids. We intend to continue to expand international marketing efforts, as needed, by engaging additional independent sales representatives, distributors and value-added resellers and by establishing foreign sales offices.
Backlog in both our Satellite and Space Communications segment and Terrestrial and Wireless Networks segment and has been, and could be, highly influenced by the nature and timing of orders received from federal, state and local governments and defense-related agencies, causing such orders to be subject to unpredictable funding, deployment and technology decisions by such customers.
Backlog in both our Satellite and Space Communications segment and Terrestrial and Wireless Networks segment has been, and could be, highly influenced by the nature and timing of orders received from federal, state and local governments and defense-related agencies, causing such orders to be subject to unpredictable funding, deployment and technology decisions by such customers.
As a U.S. government contractor and subcontractor, we are subject to a variety of rules and regulations, such as the Federal Acquisition Regulations ("FAR"). Individual agencies can also have acquisition regulations. For example, the DoD implements the FAR through the Defense Federal Acquisition Regulation supplement (commonly known as "DFARs").
As a U.S. government contractor and subcontractor, we are subject to a variety of rules and regulations, such as the Federal Acquisition Regulations ("FAR"). Individual agencies can also have acquisition regulations. For example, the DoD implements the FAR through the U.S. Defense Federal Acquisition Regulation Supplement (commonly known as "DFARS").
Additionally, changes in regulatory requirements could further restrict our ability to deliver services to our international customers, including the addition of a country to the list of sanctioned countries under the IEEPA or similar legislation could negatively impact our business. In the past, we have self-reported violations of export control laws or regulations to the U.S.
Additionally, changes in regulatory requirements could further restrict our ability to deliver services to our international customers or negatively impact our business, including the addition of a country to the list of sanctioned countries under the IEEPA or similar legislation. In the past, we have self-reported violations of export control laws or regulations to the U.S.
Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers, which could place us at a competitive disadvantage and could harm our reputation. Laws and regulations have been enacted that affect companies conducting business on the Internet, including the European General Data Protection Regulation ("GDPR").
Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers, which could place us at a competitive disadvantage and could harm our reputation. 19 Laws and regulations have been enacted that affect companies conducting business on the Internet, including the European General Data Protection Regulation ("GDPR").
Suppliers are also required to comply with the National Industrial Security Program Operating Manual which relates to the handling of classified materials and programs and is administered by the Defense Counterintelligence and Security Agency (“DCSA”). Suppliers who do not comply with these various regulations may lose and/or become ineligible for facility security clearances and/or participation in classified programs.
Suppliers are also required to comply with the National Industrial Security Program Operating Manual which relates to the handling of classified materials and programs and is administered by the Defense Counterintelligence and Security Agency (“DCSA”). Suppliers who do not comply with these various regulations may lose and/or become ineligible for facility security clearances and/or participation in classified and non-classified programs.
The Location Studio TM platform is a complete end-to-end location application consisting of maps, map data, including our Trusted OpenStreetMap ("TOSM") geo-services, application program interfaces ("APIs") and software development kits ("SDKs") enabling public safety ecosystems and enterprises to customize unique mapping applications.
The Location Studio ® platform is a complete end-to-end location application consisting of maps, map data, including our Trusted OpenStreetMap ("TOSM") geo-services, application program interfaces ("APIs") and software development kits ("SDKs") enabling public safety ecosystems and enterprises to customize unique mapping applications.
Efforts to comply with this SEC rule have resulted in additional costs to us and, we believe, to our suppliers. As such, the availability of raw materials used 18 in our operations could be negatively impacted and/or raw material prices could increase.
Efforts to comply with this SEC rule have resulted in additional costs to us and, we believe, to our suppliers. As such, the availability of raw materials used in our operations could be negatively impacted and/or raw material prices could increase.
Our Location Studio TM platform enables customers, particularly public safety agencies, to build their own applications with end-user functionality, such as maps, search, geocoding, routing, and navigation, using their own brand.
Our Location Studio ® platform enables customers, particularly public safety agencies, to build their own applications with end-user functionality, such as maps, search, geocoding, routing, and navigation, using their own brand.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Comparison of Fiscal 2023 and 2022 – Adjusted EBITDA .” More Information and Where to Find It Our Internet website is www.comtech.com , at which you can find our filings with the Securities and Exchange Commission ("SEC"), including investor letters, press releases, annual reports, quarterly reports, current reports, and any amendments to those filings.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Comparison of Fiscal 2024 and 2023 – Adjusted EBITDA .” More Information and Where to Find It Our Internet website is www.comtech.com , at which you can find our filings with the Securities and Exchange Commission ("SEC"), including investor letters, press releases, annual reports, quarterly reports, current reports, and any amendments to those filings.
SmartResponse™ is available for use in both emergency centers and response vehicles. 8 • Wireless Emergency Alerts (“WEA”): WEA, also known as Commercial Mobile Alerts System (“CMAS”) in the U.S., enable authorized officials to inform the public about life-threatening events by automatically delivering emergency alerts to mobile devices (including roaming users) via the government alert gateway.
SmartResponse ® is available for use in both emergency centers and response vehicles. 9 • Wireless Emergency Alerts (“WEA”): WEA, also known as Commercial Mobile Alerts System (“CMAS”) in the U.S., enable authorized officials to inform the public about life-threatening events by automatically delivering emergency alerts to mobile devices (including roaming users) via the government alert gateway.
Our quality engineering team assures that the product received from our suppliers and test facilities are compliant to their respective specifications prior to shipment to our end customers. Most recently, our service offerings have been expanded to include kitting to customer Bill of Materials with direct shipments to customer designated contract manufacturers.
Our quality engineering team assures that the product received from our suppliers and test facilities are compliant to their respective specifications prior to shipment to our end customers. Our service offerings have been expanded to include kitting to customer bill of materials with direct shipments to customer designated contract manufacturers.
In addition, we expect to leverage our relationships with larger companies (such as prime contractors to the U.S. government and large mobile wireless operators) to market our technology solutions. In fiscal 2024, we expect to continue expanding our social media and Internet presence and further developing an updated marketing and branding strategy.
In addition, we expect to leverage our relationships with larger companies (such as prime contractors to the U.S. government and large mobile wireless operators) to market our technology solutions. In fiscal 2025, we expect to continue expanding our social media and Internet presence and further developing an updated marketing and branding strategy.
Department of the Treasury’s Office of Foreign Assets Control ("OFAC"), the Department of Commerce ("DoC") as well as other applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect our operations. We must comply with all applicable export control laws and regulations of the U.S. and other countries.
Department of the Treasury’s Office of Foreign Assets Control ("OFAC"), the Department of Commerce ("DoC") and their foreign counterparts as well as other applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect our operations. We must comply with all applicable export control laws and regulations of the U.S. and other countries.
Our location technology solutions enable the determination of a mobile phone's geospatial position in a variety of environments, leveraging a wide range of signals including Global Positioning System ("GPS"), Global Navigation Satellite Systems ("GNSS") and multiple cellular positioning technologies ranging from 2G through 5G mobile networks.
Our location technology solutions enable the determination of a mobile device’s geospatial position in a variety of environments, leveraging a wide range of signals including Global Positioning System ("GPS"), Global Navigation Satellite Systems ("GNSS") and multiple cellular positioning technologies ranging from 2G through 5G mobile networks.
In addition to our growth in core 911 services, the expected expansion of 988 networks in fiscal 2024 and beyond across the United States is expected to have a positive impact on our business. 988 services provide free and confidential support for people in distress, suicide prevention and crisis resources.
In addition to our growth in core 911 services, the expected expansion of 988 networks in fiscal 2025 and beyond across the United States is expected to have a positive impact on our business. 988 services provide free and confidential support for people in distress, suicide prevention and crisis resources.
Our next generation solutions enable rich, multimedia information to be delivered alongside 911 calls. Also, our E911 and NG-911 call routing solutions allow cellular carriers and voice over the Internet ("VoIP") carriers, as well as legacy telecommunications carriers, to deliver emergency calls to public safety emergency call centers nationwide.
Our next generation solutions enable rich, multimedia information to be delivered alongside 911 calls. Also, our E-911 and NG-911 call routing solutions allow cellular carriers and voice over the Internet ("VoIP") carriers, as well as legacy telecommunications carriers, to deliver emergency calls to public safety emergency call centers nationwide.
We believe state and local governments need to upgrade existing legacy networks, location technologies, and call handling systems to modern NG-911 systems infrastructure, including 911 text messaging services, advanced data, real-time photos, and other types of information sharing over IP networks. 6 As the U.S. and Canada broadly adopt upgraded NG-911 and call handling solutions, we believe that other countries will follow similar technology and telecommunications advancements.
We believe state and local governments need to upgrade existing legacy networks, location technologies, and call handling systems to modern NG-911 systems infrastructure, including 911 text messaging services, advanced data, real-time photos, and other types of information sharing over IP networks. 7 As the U.S., Canada and Australia broadly adopt upgraded NG-911 and call handling solutions, we believe that other countries will follow similar technology and telecommunications advancements.
Our backlog does not include the value of options that may be exercised in the future on multi-year contracts, nor does it include the value of additional purchase orders that we may receive under indefinite delivery/indefinite quantity ("IDIQ") contracts or basic ordering agreements.
Such backlog does not include the value of options that may be exercised in the future on multi-year contracts, nor does it include the value of additional purchase orders that we may receive under indefinite delivery/indefinite quantity ("IDIQ") contracts or basic ordering agreements.
Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for fiscal 2023, 2022 and 2021.
Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for fiscal 2024, 2023 and 2022.
As service providers work to offer connectivity to these high-speed, high-bandwidth satellites and expand their networks to handle the demand for new LEO, MEO and HTS applications, we believe our ELEVATE TM , Heights TM and UHP networking platforms, our solid-state amplifiers and our X/Y antennas will ultimately be incorporated into many new installations and equipment upgrades.
As service providers work to offer connectivity to these high-speed, high-bandwidth satellites and expand their networks to handle the demand for new LEO, MEO and HTS applications, we believe our ELEVATE TM , Heights TM and UHP networking platforms, and our solid-state amplifiers will ultimately be incorporated into many new installations and equipment upgrades.
The Guardian platform also offers a cloud-based reporting and analytics solution (“Guardian Insights”), designed to assist emergency call center directors to know their operations, so they can better plan and manage resources and workloads. We are investing in product enhancements for our Guardian platform including additional cloud-based capabilities, analytics, and cyber security solutions.
The Guardian platform also offers a cloud-based reporting and analytics solution (“Guardian Insights”), designed to assist emergency call center directors to know their operations, so they can better plan and manage resources and workloads. We are investing in product enhancements for our Guardian platform, which include additional cloud-based capabilities, analytics, and cyber security solutions.
Offering a bird's-eye view of integrated data, the SmartResponse TM solution empowers first responders to ensure appropriate resources are on the scene and to better serve the public in emergency situations. 7 Terrestrial and Wireless Networks: Key Markets and Growth Drivers We are a leading provider of modern public safety and location technologies.
Offering a bird's-eye view of integrated data, the SmartResponse ® solution empowers first responders to ensure appropriate resources are on the scene and to better serve the public in emergency situations. 8 Terrestrial and Wireless Networks: Key Markets and Growth Drivers We are a leading provider of modern public safety and location technologies.
In addition, in certain cases, U.S. export controls also severely limit unlicensed technical discussions, such as discussions with any persons who are not U.S. citizens or permanent residents.
In addition, in certain cases, U.S. and foreign export controls also severely limit unlicensed technical discussions, such as discussions with any persons who are not U.S. citizens or permanent residents.
Certain of our products and systems may require licenses from U.S. government agencies for export from the U.S., and some of our products are not permitted to be exported. We cannot be certain that we will be able to obtain necessary export licenses, and such failure would materially adversely affect our operations.
Certain of our products and systems may require licenses from U.S. government agencies for export from the U.S. or other countries, and some of our products are not permitted to be exported. We cannot be certain that we will be able to obtain necessary export licenses, and such failure would materially adversely affect our operations.
A large majority of the solutions in our satellite ground station technologies product line within our Satellite and Space Communications segment operate under short lead times.
A large majority of the solutions in our satellite ground infrastructure technologies product line within our Satellite and Space Communications segment operate under short lead times.
(formerly CenturyLink, Inc.), Mobilaris AB, Mobile Arts AB, Motorola Solutions, Inc., NGA911, Nokia Networks (a subsidiary of Nokia Corporation), Polaris Wireless, RapidDeploy, Inc., Rave Mobile Safety, Sinch AB (Inteliquent), Synergem Technologies, SS8, ThriveDX, TomTom N.V., Versaterm Public Safety Inc., WestTel, and Zetron.
(formerly CenturyLink, Inc.), Mobilaris AB, Mobile Arts AB, Motorola Solutions, Inc., NGA911, NextNav, Inc., Nokia Networks (a subsidiary of Nokia Corporation), Polaris Wireless, RapidDeploy, Inc., RapidSOS, Rave Mobile Safety, Sinch AB (Inteliquent), Synergem Technologies, SS8, TomTom N.V., Versaterm Public Safety Inc., WestTel, and Zetron.
In some cases, these same companies may be among our competitors. Listed below, in alphabetical order, are some of our competitors in each of our two business segments: Satellite and Space Communications – ACTIA Group, Advantech Co., Ltd., Aethercomm Inc.
In some cases, these same companies may be among our competitors. 14 Listed below, in alphabetical order, are some of our competitors in each of our two business segments: Satellite and Space Communications – Advantech Co., Ltd., Aethercomm Inc.
None of the information on our website, blog or any other website identified herein is incorporated by reference in this annual report and such information should not be considered a part of this annual report. 10 Acquisitions In order to position ourselves to take advantage of additional growth opportunities and meet our strategic objectives, we have followed, and will continue to follow, a disciplined approach in identifying, executing and capitalizing on acquisitions of businesses and enabling technologies.
None of the information on our website, blog or any other website identified herein is incorporated by reference in this Form 10-K and such information should not be considered a part of this Form 10-K. 10 Strategic Transformation In order to position ourselves to take advantage of additional growth opportunities and meet our strategic objectives, we have followed, and will continue to follow, a disciplined approach in identifying, executing and capitalizing on acquisitions and divestitures of businesses and enabling technologies.
Internal research and development expenses are reported as research and development expenses for financial reporting purposes and were $48.6 million, $52.5 million and $49.1 million in fiscal 2023, 2022 and 2021, respectively, representing 8.8%, 10.8% and 8.4% of total consolidated net sales, respectively, for these periods.
Internal research and development expenses are reported as research and development expenses for financial reporting purposes and were $24.1 million, $48.6 million and $52.5 million in fiscal 2024, 2023 and 2022, respectively, representing 4.5%, 8.8% and 10.8% of total consolidated net sales, respectively, for these periods.
In fiscal 2022, we began marketing SmartResponse TM , a newly developed cloud-based solution that offers a common operational picture to PSAPs and first responders, enabling an effective data-driven response for security agencies and first responders by providing a holistic information environment for them.
We recently began marketing SmartResponse ® , a newly developed cloud-based solution that offers a common operational picture to PSAPs and first responders, enabling an effective data-driven response for security agencies and first responders by providing a holistic information environment for them.
We believe Comtech is uniquely positioned to expand our 911 services into 988 services and help mitigate some of the core challenges the network is currently experiencing with area code specific call routing. By connecting the 988 services with Comtech’s existing 911 infrastructure, the location services critical to dispatch personnel can be improved for 988 exponentially.
We believe we are uniquely positioned to expand our 911 services into 988 services and help mitigate some of the core challenges the network is currently experiencing with area code specific call routing. By connecting the 988 services with our proven 911 infrastructure, we believe that location services critical to dispatch personnel can be improved for 988 exponentially.
Please see Item 1A – “ Risk Factors ” under Part I of this Form 10-K for more information about risks pertaining to recognition of our backlog. A significant portion of the backlog from our U.S. commercial customers relates to large, multi-year contracts to provide state and local governments (and their agencies) with 911 public safety and location technology solutions.
Please see " Strategic Transformation " section discussed above, as well as Item 1A – “ Risk Factors ” under Part I of this Form 10-K for more information about risks pertaining to recognition of our backlog. 12 A significant portion of the backlog from our U.S. commercial customers relates to large, multi-year contracts to provide state and local governments (and their agencies) with 911 public safety and location technology solutions.
For technological capabilities that are not protected by patents or licenses, we generally rely on the expertise of our employees and our learned experiences in both the design and manufacture of our products and the delivery of our services.
The products we sell require significant engineering design and manufacturing expertise. For technological capabilities that are not protected by patents or licenses, we generally rely on the expertise of our employees and our learned experiences in both the design and manufacture of our products and the delivery of our services.
Our Business Outlook for Fiscal 2024 is discussed further in Part II – “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Outlook for Fiscal 2024 .” For a definition and explanation of Adjusted EBITDA, see Part II – “Item 7.
Our fiscal 2024 performance and outlook for fiscal 2025 are discussed further in Part II – “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Fiscal 2024 Highlights and Business Outlook for Fiscal 2025 .” For a definition and explanation of Adjusted EBITDA, see Part II – “Item 7.
Many of our satellite communications products have been tested and certified for use by U.S. and coalition military satellite communications ("MILSATCOM") assets, such as the Wideband Global SATCOM constellation. We believe this provides us the opportunity to capture the increased demand for MILSATCOM programs.
Department of Defense ("DoD") and several coalition partners, is maturing satellite communications. Many of our satellite communications products have been tested and certified for use by U.S. and coalition military satellite communications ("MILSATCOM") assets, such as the Wideband Global SATCOM constellation. We believe this provides us the opportunity to capture the increased demand for MILSATCOM programs.
Some large defense-based companies, such as Northrop Grumman Corporation, have subsidiaries or divisions that compete against us in one or more business segments. In addition, new and potential competitors are always emerging.
Some large defense-based companies have subsidiaries or divisions that compete against us in one or more business segments. In addition, new and potential competitors are always emerging.
(a subsidiary of HEICO Corp.), ENENSYS Technologies, ETM Electromatic Inc., Gilat Satellite Networks Ltd., Empower RF Systems, Inc., General Dynamics Corporation, Hughes Network Systems, LLC (a subsidiary of EchoStar), KVH Industries, Inc., Kratos Defense and Security Solutions (Including Kratos RT Logic and Avtec Systems, Inc.), L3Harris Technologies, Inc., Mission Microwave Technologies, LLC, ND Satcom GmbH, Novelsat LTD, Panasonic Corporation, Paradise Datacom Ltd.
(acquired by Teledyne Technologies Inc.), Gilat Satellite Networks Ltd., Empower RF Systems, Inc., General Dynamics Corporation, Hughes Network Systems, LLC (a subsidiary of EchoStar), KVH Industries, Inc., Kratos Defense and Security Solutions (Including Kratos RT Logic and Avtec Systems, Inc.), L3Harris Technologies, Inc., Mission Microwave Technologies, LLC, ND Satcom GmbH, Novelsat LTD, Panasonic Corporation, Paradise Datacom Ltd.
Department of State, Directorate of Defense Trade Controls ("DDTC"), DoC and OFAC. In addition, we have made various commitments to U.S. government agencies that oversee trade and export matters that we will maintain certain policies and procedures including maintaining a company-wide Office of Trade Compliance and conducting ongoing internal assessments and reporting any future violations to those agencies.
In addition, we have made various commitments to U.S. government agencies that oversee trade and export matters that we will maintain certain policies and procedures including maintaining a company-wide Office of Trade Compliance and conducting ongoing internal assessments and reporting any future violations to those agencies.
During fiscal 2023, 2022 and 2021, we were reimbursed by customers for such activities in the amounts of $14.0 million, $9.8 million and $13.6 million, respectively.
During fiscal 2024, 2023 and 2022, we were reimbursed by customers for such activities in the amounts of $18.9 million, $14.0 million and $9.8 million, respectively.
Space Components and Antennas For over 45 years, we have been recognized as an industry leader and global supplier of high-reliability products and supply chain management and engineering services, supporting selection of space-qualified parts for satellite and launch vehicle tracking solutions geared for critical U.S.
Army to support Very Small Aperture Terminal (“VSAT”) satellite systems and related services. Space Components and Antennas For over 45 years, we have been recognized as an industry leader and global supplier of high-reliability products and supply chain management and engineering services, supporting selection of space-qualified parts for satellite and launch vehicle tracking solutions geared for critical U.S.
We believe that Comtech is well-positioned to capitalize on this demand through sales of our market-leading satellite ground station technologies, including new next-generation satellite earth station technologies that can be used with the thousands of new LEO, MEO and large HTS satellite constellations that are expected to be deployed over the next several years.
We believe that we are well-positioned to capitalize on this demand through sales of our market-leading, including new next-generation satellite ground infrastructure technologies that can be used with the thousands of new LEO, MEO and large HTS satellites that are expected to be deployed over the next several years, and our advanced troposcatter systems.
International sales for fiscal 2023, 2022 and 2021 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $132.1 million, $121.4 million and $138.9 million, respectively. When we sell internationally, we denominate most of our contracts in U.S. dollars.
("Verizon"), which were 10.6% and 11.1% of consolidated net sales, respectively. International sales for fiscal 2024, 2023 and 2022 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $115.9 million, $132.1 million and $121.4 million, respectively. When we sell internationally, we denominate most of our contracts in U.S. dollars.
In addition to adjustments from these types of contingencies, variations in backlog from time to time are attributable, in part, to changes in sales mix, the timing of contract proposals, the timing of contract awards, delivery schedules on specific contracts and new bookings obtained through acquisitions.
In addition to adjustments from these types of contingencies, variations in backlog from time to time are attributable, in part, to changes in sales mix, the timing of contract proposals, the timing of contract awards, delivery schedules on specific contracts, new bookings obtained through acquisitions or reductions due to divestitures or other restructuring type activities.
At July 31, 2023, we had 1,718 employees (including temporary employees and contractors), 1,132 of whom were engaged in production and production support, 305 in research and development and other engineering support, and 281 in marketing and administrative functions. None of our U.S. based employees are represented by a labor union.
At July 31, 2024, we had 1,676 employees (including temporary employees and contractors), 1,048 of whom were engaged in production and production support, 337 in research and development and other engineering support and 291 in marketing and administrative functions. None of our U.S. based employees are represented by a labor union.
The FAR also subjects suppliers to audits and other government reviews. These reviews cover issues such as cost, performance and accounting practices relating to our contracts. The government may challenge a supplier's costs and fees.
The FAR also subjects suppliers to audits and other government reviews. These reviews cover issues such as cost, performance and accounting practices relating to our contracts. The government may challenge a supplier's costs and fees or require corrective actions which can delay programs and increase our costs.
At July 31, 2023, 57.2% of our backlog consisted of orders for use by U.S. commercial customers, 27.0% consisted of U.S. government contracts, subcontracts and government funded programs and 15.8% consisted of orders for use by international customers (including sales to U.S. domestic companies for inclusion in products that will be sold to international customers).
" At July 31, 2024, 66.6% of our backlog consisted of orders for use by U.S. commercial customers, 18.8% consisted of U.S. government contracts, subcontracts and government funded programs and 14.6% consisted of orders for use by international customers (including sales to U.S. domestic companies for inclusion in products that will be sold to international customers).
Our People Strategy is also focused on developing and promoting talent; supporting a competitive benefits program; and emphasizing the importance of our employees’ health, safety and wellness.
Our People Strategy is also focused on meeting and executing our strategic recruitment initiatives, developing and promoting talent; supporting competitive benefits and wellness programs; and emphasizing the importance of our employees’ health, safety and wellness.
Cost-plus-incentive-fee orders typically provide for sharing with the U.S. government savings accrued from orders performed for less than the target costs and costs incurred in excess of targets up to a negotiated ceiling price (which is higher than the target cost), and for the supplier to carry the entire burden of costs exceeding the negotiated ceiling price. 17 In fiscal 2023, $172.0 million or 31.3% of our consolidated net sales were to the U.S. government (including sales to prime contractors to the U.S. government).
Cost-plus-incentive-fee orders typically provide for sharing with the U.S. government savings accrued from orders performed for less than the target costs and costs incurred in excess of targets up to a negotiated ceiling price (which is higher than the target cost), and for the supplier to carry the entire burden of costs exceeding the negotiated ceiling price.
Within the satellite communications market, we are a leading provider of X/Y terminal solutions that fully support the mission requirements of LEO, MEO and GEO satellite communication and tracking requirements, offering a host of high-performance single-band and multi-band feed solutions. We also supply maritime antenna solutions that are fielded by foreign governments.
Within the satellite communications market, we are a leading provider of components that support the mission requirements of LEO, MEO and GEO satellite communication and tracking requirements, offering a host of high-performance single-band and multi-band feed solutions.
Of our 1,718 employees, 384 employees are based outside of the United States, including 123 employees in Canada, 120 employees in the United Kingdom, and 91 employees in India. We believe that our employee relations are good.
Of our 1,676 employees, 345 employees are based outside of the United States, including 142 employees in Canada, 88 employees in the United Kingdom, and 87 employees in India. We believe that our employee relations are good.
During fiscal 2023, 2022 and 2021, we incurred $3.8 million, $1.2 million and $0.3 million, respectively, of strategic emerging technology costs for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations. We are evaluating this new market in relation to our long-term business strategies, and expect to incur additional costs in fiscal 2024.
During fiscal 2024, 2023 and 2022, we incurred $4.1 million, $3.8 million and $1.2 million, respectively, of strategic emerging technology costs for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations.
Although funding for these multi-year contracts is dependent on future budgets being approved, we include the full estimated value of these large, multi-year contracts in our backlog given the critical nature of the services being provided and the positive historical experience of our state and local government customers passing their respective budgets. 12 There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, or that any contract included in backlog will be profitable.
Although funding for these multi-year contracts is dependent on future budgets being approved, we include the full estimated value of these large, multi-year contracts in our backlog given the critical nature of the services being provided and the positive historical experience of our state and local government customers passing their respective budgets.
Sales by geography and customer type, as a percentage of related net sales, are as follows: Fiscal Years Ended July 31, 2023 2022 2021 2023 2022 2021 2023 2022 2021 Satellite and Space Communications Terrestrial and Wireless Networks Consolidated U.S. government 49.9 % 45.6 % 52.8 % 1.7 % 2.4 % 1.4 % 31.3 % 27.2 % 34.6 % Domestic 16.7 % 18.0 % 15.3 % 89.2 % 88.1 % 89.2 % 44.7 % 47.8 % 41.5 % Total U.S. 66.6 % 63.6 % 68.1 % 90.9 % 90.5 % 90.6 % 76.0 % 75.0 % 76.1 % International 33.4 % 36.4 % 31.9 % 9.1 % 9.5 % 9.4 % 24.0 % 25.0 % 23.9 % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Sales to U.S. government customers include sales to the DoD, intelligence and civilian agencies, as well as sales directly to or through prime contractors. 11 Domestic sales include sales to commercial customers, as well as to U.S. state and local governments.
In addition, in recent years, we have found that overall sales cycles for each of our product lines have significantly increased, as we continue to support our customer's overall migration and upgrade to newer designs and technologies. 11 Sales by geography and customer type, as a percentage of related net sales, are as follows: Fiscal Years Ended July 31, 2024 2023 2022 2024 2023 2022 2024 2023 2022 Satellite and Space Communications Terrestrial and Wireless Networks Consolidated U.S. government 55.4 % 49.9 % 45.6 % 1.1 % 1.7 % 2.4 % 33.7 % 31.3 % 27.2 % Domestic 15.1 % 16.7 % 18.0 % 89.4 % 89.2 % 88.1 % 44.8 % 44.7 % 47.8 % Total U.S. 70.5 % 66.6 % 63.6 % 90.5 % 90.9 % 90.5 % 78.5 % 76.0 % 75.0 % International 29.5 % 33.4 % 36.4 % 9.5 % 9.1 % 9.5 % 21.5 % 24.0 % 25.0 % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Sales to U.S. government customers include sales to the DoD, intelligence and civilian agencies, as well as sales directly to or through prime contractors.
(recently acquired by Frontgrade Technologies, a portfolio company of Veritas Capital), Agilis Satcom, AMERGINT Technologies, Inc., Amkom Design Group Inc., AnaCom, Inc., Codan Limited, CPI International, Inc., Datum Systems, Inc., dB Control Corp.
(acquired by Frontgrade Technologies, a portfolio company of Veritas Capital), Agilis Satcom, AMERGINT Technologies, Inc., Amkom Design Group Inc., AnaCom, Inc., Codan Limited, Communications and Power Industries (also referred to as "CPI"), Datum Systems, Inc., dB Control Corp. (a subsidiary of HEICO Corp.), ETM Electromatic Inc.
We estimate that a substantial portion of the backlog as of July 31, 2023 will be recognized as sales during the next twenty-four month period, with the rest thereafter.
We estimate that a substantial portion of the backlog as of July 31, 2024 will be recognized as sales during the next twenty-four month period, with the rest thereafter. Such estimate could be impacted by our transformation strategy discussed above, under the section " Strategic Transformation.
Included in domestic sales are sales to Verizon Communications Inc. ("Verizon"), which represented 10.6%, 11.1% and 10.7% of consolidated net sales for fiscal 2023, 2022 and 2021, respectively. Except for the U.S. government and Verizon, there were no other customers that represented more than 10.0% of consolidated net sales during fiscal 2023, 2022 and 2021.
Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. For fiscal 2024, except for the U.S. government, there were no customers that represented more than 10% of consolidated net sales. For fiscal 2023 and 2022, included in domestic sales are sales to Verizon Communications Inc.
To-date, our strategy has been to avoid offensive and defensive patent litigation and focus on building meaningful partnerships with other companies through direct licensing, cross licensing, and other forms of agreements.
To-date, our strategy has been to avoid offensive and defensive patent litigation and focus on building meaningful partnerships with other companies through direct licensing, cross licensing, and other forms of agreements. We do not believe that any single patent or group of patents, patent application or patent license agreement is material to our operations.
Financial Statements and Supplementary Data ." 2 The markets and key technologies for each segment are further described below. Satellite and Space Communications Segment Overview Our Satellite and Space Communications segment designs, builds and supports a variety of sophisticated communications equipment that is designed to meet or exceed the highest standards for performance and quality by businesses and governments worldwide.
Financial Statements and Supplementary Data ." The markets and key technologies for each segment are further described below. Satellite and Space Communications Segment Overview Our Satellite and Space Communications segment designs, builds and supports a variety of sophisticated communications equipment critical to modern communications infrastructures.
Once a product is designed into a system, customers may be reluctant to change the incumbent supplier due to the extensive qualification process and potential redesign required in using alternative sources. In addition, in recent years, we have found that overall sales cycles for each of our product lines have significantly increased.
Once a product is designed into a system, customers may be reluctant to change the incumbent supplier due to the extensive qualification process and potential redesign required in using alternative sources.
There is a higher degree of risk in this regard with respect to unfunded backlog. The actual amount and timing of any revenue is subject to various contingencies, many of which are beyond our control.
The actual amount and timing of any revenue is subject to various contingencies, many of which are beyond our control.
(formerly CenturyLink, Inc.), Comcast Corporation, Nokia Corporation, T-Mobile USA, Inc. and Verizon Communications Inc. Different solutions deployed with telephone companies and federal, provincial, and local governments in Australia, Canada, Cayman Islands and New Zealand Business Results and Challenges: Overview In fiscal 2023, we achieved consolidated net sales of $550.0 million and Adjusted EBITDA of $53.5 million.
Louis County, MO and the North Central Texas Emergency Communications District • End-customers also include AT&T Inc., Comcast Corporation, Nokia Corporation, T-Mobile USA, Inc. and Verizon Communications Inc. • Different solutions deployed with telephone companies and federal, provincial, and local governments in Australia, Canada, Cayman Islands and New Zealand Business Results and Challenges: Overview In fiscal 2024, we achieved consolidated net sales of $540.4 million and Adjusted EBITDA of $45.7 million.
In past instances where we have provided government-purpose rights, to our knowledge, the U.S. government has not exercised any of these rights.
Almost all the products and services we sell to the U.S. government include technology and other technical know-how that we have internally developed. In past instances where we have provided government-purpose rights, to our knowledge, the U.S. government has not exercised any of these rights.
Congress ("Congress") the proposed budget for the upcoming fiscal year and from February through September of each year, the appropriations and authorization committees of Congress review the President’s budget proposals and establish the funding levels for the upcoming fiscal year. Once these levels are enacted into law, the Executive Office of the President administers the funds to the agencies.
Generally, in February of each year, the President of the United States presents to the U.S. Congress ("Congress") the proposed budget for the upcoming fiscal year and from February through September of each year, the appropriations and authorization committees of Congress review the President’s budget proposals and establish the funding levels for the upcoming fiscal year.
Local safety committees identify safety programs and ensure completion of all training and target learning objectives. Employee wellness is important to Comtech. All employees and their households have access to an employee assistance program, as well as a health advocate program to help with all aspects of benefits, family life, financial concerns, legal issues and transition to retirement.
All employees and their households have access to an employee assistance program, as well as a health advocate program to help with all aspects of benefits, family life, financial concerns, legal issues and transition to retirement. Assistance is available 365 days per year, 24 hours per day.
We hold leadership positions in the market for high-throughput modems used in cellular backhaul, a market that has been rapidly growing due to increased mobile phone usage and increasing data throughput demands from LTE and 5G deployments worldwide. An estimated 3 billion people globally remain unconnected to any wireless services, representing a significant opportunity.
We hold strong positions in the market for high-throughput modems used in cellular backhaul, a market that has been rapidly growing due to increased mobile device usage and increasing data throughput demands from LTE and 5G deployments worldwide. An increasing area of focus for many governments, including the U.S.
Our text messaging platforms are used by wireless carriers to provide short messaging services (“SMS”) to their end-customers as well as being used to communicate with 911 public safety answering points (“PSAPs”).
Our text messaging platforms are used by wireless carriers to provide short messaging services (“SMS”) to their end-customers as well as being used to communicate with 911 public safety answering points (“PSAPs”). Solacom Call Handling Solutions Solacom Guardian is our state-of-the-art call handling solution, which provides an integrated call and text-to-and-from 911 solution on a unified platform.
We do not believe that any single patent or group of patents, patent application or patent license agreement is material to our operations. 13 We have filed additional patent applications for certain apparatus and processes we believe we have invented covering key features of location services, wireless text alerts, SMS Center, mobile-originated data and E911 network software.
We have filed additional patent applications for certain apparatus and processes we believe we have invented covering key features of location services, wireless text alerts, SMS Center, mobile-originated data and E911 network software. There is no assurance that any patent application will result in a patent being issued by the U.S.
We have significantly increased our “911-as-a-Service" (“911aaS”) offering, deploying hosted 911 call centers solutions across numerous states and regions in the U.S. and provinces in Canada. Trusted Location and Messaging Solutions We believe that as the industry moves toward digital transformation, customers will be looking for situational awareness solutions that are built on top of mapping and geo-services.
Trusted Location and Messaging Solutions We believe that as the industry moves toward digital transformation, customers will be looking for situational awareness solutions that are built on top of mapping and geo-services.
According to Frost & Sullivan, a leading third-party research firm, we were the second leading NG-911 primary contract holder at year-end 2022 with an estimated market share of 22.3%. Our direct NG-911 contracts covered a population of over 56 million at the end of 2022.
According to Frost & Sullivan, a leading third-party research firm, we were the second leading NG-911 primary contract holder at year-end 2023, with an estimated market share of 22.1% and a population coverage of nearly 60 million. We have primary statewide contracts in Arizona, Illinois, Iowa, Massachusetts, Ohio, Pennsylvania, South Carolina and Washington.
We rigorously review our benefit and compensation plans to maintain competitive packages that reflect the wellness needs of our workforce and the marketplace. These programs include 401(k) plans, comprehensive health packages, and welfare benefits, among many others. We support pay equity for all employees within the same geographic area, experience level, and performance standards.
This year employees had an opportunity to participate in wellness events as a company-wide challenge. We rigorously review our benefit and compensation plans to maintain competitive packages that reflect the wellness needs of our workforce and the marketplace. These programs include 401(k) plans, comprehensive health packages, and welfare benefits, among many others.
We believe we are a world leader in the design and supply of troposcatter equipment. We have designed, manufactured, and delivered troposcatter systems (sometimes referred to as over-the-horizon ("OTH") microwave products and systems) for well over fifty years.
These products include configurations that are formally qualified for use on aircraft and being installed as both retrofit and linefit initiatives. Troposcatter Technologies We believe we are a world leader in the design and supply of troposcatter equipment. We have designed, manufactured, and delivered troposcatter systems for well over fifty years.
We believe that competition in all our markets is based primarily on technology innovation, product performance, reputation, delivery times, customer support and price.
We believe that competition in all our markets is based primarily on technology innovation, product performance, reputation, delivery times, customer support and price. Due to our proprietary know-how, we believe we can develop, produce and deliver products and services on a cost-effective basis faster than many of our competitors.
We also provide rugged, highly efficient, and reliable amplifiers for commercial and military applications around the world.
We believe the technologies incorporated into our DCG product line create a meaningful competitive advantage for us. 4 We also provide rugged, highly efficient, and reliable amplifiers for commercial and military applications around the world.
Thereafter, we can receive orders pursuant to sole-source or competitively awarded contracts, which we describe below.
Once these levels are enacted into law, the Executive Office of the President administers the funds to the agencies. Thereafter, we can receive orders pursuant to sole-source or competitively awarded contracts, which we describe below.
Examples of end-market applications that are driving long-term demand for our satellite-based communication technologies include: • New LEO, MEO and HTS Satellites: Thousands of new satellites are reportedly being launched over the next several years, according to announcements by companies including Telesat Lightspeed, OneWeb, SpaceX Starlink, Amazon Kuiper and Viasat, which we believe will lead to increasingly complex satellite networks.
Our communications solutions provide command and control and satellite networking capabilities that support U.S. and allied government initiatives for assured and resilient communications capabilities, as well as supporting interoperability objectives, including the Joint All Domain Command and Control (“JADC2”) efforts. • New LEO, MEO and HTS Satellites: Thousands of new satellites are reportedly in orbit or being launched over the next several years, according to announcements by companies including Telesat Lightspeed, Eutelsat, OneWeb, SpaceX Starlink, Amazon Kuiper and Viasat, which we believe will lead to increasingly complex satellite networks.
Human Capital Our employees are one of our most valuable assets and we believe our success depends on the talent we attract and retain, which is why we make our People Strategy one of our top priorities.
Human Capital Our employees are one of our most valuable assets and we believe our success depends on the talent we attract and retain. Our comprehensive people strategy continues to focus on developing a meaningful plan to enhance our employees’ engagement and interests, which will complement and build on our strong foundation.
Business Segments We offer advanced secure wireless communications technologies founded on decades of expertise in the satellite communications and cellular markets. We believe these markets are undergoing a period of long-term growth, reinvestment, and rapid technological change. We manage our business through two reportable operating segments: Satellite and Space Communications and Terrestrial and Wireless Networks.
Business Segments We operate two core businesses: Satellite and Space Communications, and Terrestrial and Wireless Networks, each of which we believe are serving end markets themselves undergoing a period of long-term growth, reinvestment and rapid technological change.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBusiness Risks • Our backlog is subject to customer cancellation or modification. • Contract cost growth on our firm fixed-price contracts exposes us to reduced profitability and the potential loss of future business and other risks. • Our business is highly dependent on the budgetary decisions of our government customers. • Our contracts with the U.S. government are subject to unique business, commercial and government audit risks. • Our dependence on sales to international customers exposes us to unique business, commercial and export compliance audit risks. 19 • A change in our relationship with our large wireless carrier customers could have a material adverse effect. • A change by wireless carrier partners in the pricing and other terms by which they offer our products to their end-customers could have a material adverse affect. • Disputes with our subcontractors or key suppliers or their inability to deliver on a timely basis, could cause unanticipated delays in our shipments.
Biggest changeBusiness Risks • Our current cash and liquidity projections raise substantial doubt about our ability to continue as a going concern. • Our business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile. • Our backlog is subject to customer cancellation or modification and such cancellations or modifications could result in a decline in sales and increased provisions for excess and obsolete inventory. • Our efforts to invoice and collect unbilled receivables may be unsuccessful. 20 • Contract cost growth on our firm fixed-price contracts exposes us to reduced profitability and the potential loss of future business and other risks. • Our business is highly dependent on the budgetary decisions of our government customers. • Our contracts with the U.S. government are subject to unique business, commercial and government audit risks. • Our dependence on sales to international customers exposes us to unique business, commercial and export compliance audit risks. • A change in our relationship with our large wireless carrier customers could have a material adverse effect. • A change by wireless carrier partners in the pricing and other terms by which they offer our products to their end-customers could have a material adverse affect. • Disputes with our subcontractors or key suppliers or their inability to deliver on a timely basis, could cause delays in our shipments. • Our estimates regarding future warranty obligations may change based on a variety of factors, impacting future cost of revenue.
Leadership transitions can be inherently difficult to manage, and an inadequate transition may cause disruption to our business an growth plans, including to our relationships with our customers and employees.
Leadership transitions can be inherently difficult to manage, and an inadequate transition may cause disruption to our business and growth plans, including to our relationships with our customers and employees.
If, at the time of any refinancing, prevailing interest rates or other factors result in higher interest rates on such refinancing, increases in interest expense could have a material adverse effect on our business, results of operations and financial condition.
If, at the time of any such refinancing, prevailing interest rates or other factors result in higher interest rates on such refinancing, increases in interest expense could have a material adverse effect on our business, results of operations and financial condition.
We anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future, however, there can be no assurance that we will be able to meet these covenants. Further, our ability to comply with covenants, terms of and conditions on our facility may be affected by events beyond our control.
We anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future, however, there can be no assurance that we will be able to meet these covenants. Further, our ability to comply with covenants, terms of and conditions on our Credit Facility may be affected by events beyond our control.
Legal, Regulatory and Litigation Risks • Changes in U.S. federal, state and local and foreign tax law could adversely affect our business and financial condition. • Our U.S. federal, state and local and foreign tax returns are subject to audit and a resulting tax assessment or settlement could have a material adverse effect on our business, results of operations and financial condition. • We may be subject to environmental liabilities. • The success of our business is dependent on compliance with FCC rules and regulations and similar foreign laws and regulations. • Regulation of the mobile communications industry and VoIP is evolving, and unfavorable changes or our failure to comply with existing and potential new legislation or regulations could harm our business and operating results. • Ongoing compliance with the provisions of securities laws, related regulations and financial reporting standards could unexpectedly materially increase our costs and compliance related expenses. • Indemnification provisions in our contracts could have a material adverse effect on our consolidated results of operations, financial position, or cash flows. • We are, from time to time, and could become a party to additional litigation or subject to claims.
Legal, Regulatory and Litigation Risks • Changes in U.S. federal, state and local and foreign tax law could adversely affect our business and financial condition. • Our U.S. federal, state and local and foreign tax returns are subject to audit and a resulting tax assessment or settlement could have a material adverse effect on our business, results of operations and financial condition. • We may be subject to environmental liabilities. • The success of our business is dependent on compliance with FCC rules and regulations and similar foreign, state and local laws and regulations. • Regulation of the mobile communications industry and VoIP is evolving, and unfavorable changes or our failure to comply with existing and potential new legislation or regulations could harm our business and operating results. 21 • Ongoing compliance with the provisions of securities laws, related regulations and financial reporting standards could unexpectedly materially increase our costs and compliance related expenses. • Indemnification provisions in our contracts could have a material adverse effect on our consolidated results of operations, financial position, or cash flows. • We are, from time to time, and could become a party to additional litigation or subject to claims.
Violations of any of these laws, rules or regulations, and other business practices that are regarded as unethical, could interrupt the sales of our products and services, result in the cancellation of orders or the termination of customer relationships, and could damage our reputation, any of which developments could have a material adverse effect on our business, results of operations and financial condition. • We must comply with all applicable export control laws and regulations of the U.S. and other countries - Certain of our products and systems may require licenses from U.S. government agencies for export from the U.S., and some of our products are not permitted to be exported.
Violations of any of these laws, rules or regulations, and other business practices that are regarded as unethical, could interrupt the sales of our products and services, result in the cancellation of orders or the termination of customer relationships, and could damage our reputation, any of which developments could have a material adverse effect on our business, results of operations and financial condition. • We must comply with all applicable export control laws and regulations of the U.S., the U.K. and other countries - Certain of our products and systems may require licenses from U.S. government agencies for export from the U.S., and some of our products are not permitted to be exported.
If we were unable to comply with such requirements with respect to a significant quantity of our products, our sales in those countries could be restricted, which could have a material adverse effect on our business, results of operations and financial condition. 28 • We may be affected by the future imposition of tariffs and trade restrictions - The current U.S. administration has generally not amended the trade policies and tariffs on imported products from the prior administration, and has increased sanctions against Russia.
If we were unable to comply with such requirements with respect to a significant quantity of our products, our sales in those countries could be restricted, which could have a material adverse effect on our business, results of operations and financial condition. • We may be affected by the future imposition of tariffs and trade restrictions - The current U.S. administration has generally not amended the trade policies and tariffs on imported products from the prior administration, and has increased sanctions against Russia.
If we are unable to develop unique and proprietary solutions that are superior to and/or more cost effective than other market offers, our 911 business could get replaced by new market entrants, resulting in a material adverse effect on our business, results of operations and financial condition. 37 • Under the FCC’s mandate, our 911 and emerging 988 businesses are dependent on state and local governments - Under the FCC’s mandate, wireless carriers are required to provide 911 services only if state and local governments request the service.
If we are unable to develop unique and proprietary solutions that are superior to and/or more cost effective than other market offers, our 911 business could get replaced by new market entrants, resulting in a material adverse effect on our business, results of operations and financial condition. • Under the FCC’s mandate, our 911 and emerging 988 businesses are dependent on state and local governments - Under the FCC’s mandate, wireless carriers are required to provide 911 services only if state and local governments request the service.
Changes in, or our failure to comply with, applicable laws and regulations could materially adversely harm our business, results of operations, and financial condition. • Our future growth is dependent, in part, on developing NG-911 compliant products - The FCC requires that certain location information be provided to network operators for public safety answering points when a subscriber makes a 911 call.
Changes in, or our failure to comply with, applicable laws and regulations could materially adversely harm our business, results of operations, and financial condition. 42 • Our future growth is dependent, in part, on developing NG-911 compliant products - The FCC requires that certain location information be provided to network operators for public safety answering points when a subscriber makes a 911 call.
Concerns over these safety risks and the effect of any legislation that may be adopted in response to these risks could limit our ability to market and sell our products and services, which could negatively impact our business, consolidated results of operations and financial condition. 38 • The regulatory environment for VoIP services is developing - The FCC has determined that VoIP services are not subject to the same regulatory scheme as traditional wireline and wireless telephone services.
Concerns over these safety risks and the effect of any legislation that may be adopted in response to these risks could limit our ability to market and sell our products and services, which could negatively impact our business, consolidated results of operations and financial condition. • The regulatory environment for VoIP services is developing - The FCC has determined that VoIP services are not subject to the same regulatory scheme as traditional wireline and wireless telephone services.
Similar to all companies in our industry, we are under constant cyber-attack and are subject to an ongoing risk of security breaches and disruptions of our IT networks and related systems, including third-party data center facilities, whether through actual breaches, cyber-attacks (including ransomware) or cyber intrusions via the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization.
Nevertheless, similar to all companies in our industry, we are under constant cyber-attack and are subject to an ongoing risk of security breaches and disruptions of our IT networks and related systems, including third-party data center facilities, whether through actual breaches, cyber-attacks (including ransomware) or cyber intrusions via the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization.
Our gross margins may also be materially adversely affected if the cost of third-party data and content increases substantially. 43 • Third-party data centers or third-party networks may fail - Many products and services of our advanced communication solutions, in particular our public safety and location technology solutions, are provided through a combination of our servers, which are hosted at third-party data centers, and on the networks, as well as within the data centers of our wireless carrier partners.
Our gross margins may also be materially adversely affected if the cost of third-party data and content increases substantially. • Third-party data centers or third-party networks may fail - Many products and services of our advanced communication solutions, in particular our public safety and location technology solutions, are provided through a combination of our servers, which are hosted at third-party data centers, and on the networks, as well as within the data centers of our wireless carrier partners.
A security breach or other significant disruption (including as a result of a lack of redundancy and/or failure of such redundancy) involving these types of information, IT networks and related systems could: • Disrupt the proper functionality of these networks, data center facilities and systems and therefore our operations and/or those of certain of our customers; • Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or our customers, including trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; • Compromise national security and other sensitive government functions; • Require significant management attention and resources to remedy the damage that results and delay progress on other business objectives; • Require us to make payments to our customers to reimburse them for damages, pay them penalties or provide refunds; and • Damage our reputation with our customers (particularly agencies of the U.S. government) and the public generally.
A security breach or other significant disruption (including as a result of a lack of redundancy and/or failure of such redundancy) involving these types of information, IT networks and related systems could: • Disrupt the proper functionality of these networks, data center facilities and systems and therefore our operations and/or those of certain of our customers; • Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or our customers, including employee information, trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; • Compromise national security and other sensitive government functions; • Require significant management attention and resources to remedy the damage that results and delay progress on other business objectives; 40 • Require us to make payments to our customers to reimburse them for damages, pay them penalties or provide refunds; and • Damage our reputation with our customers (particularly agencies of the U.S. government) and the public generally.
All of the aforementioned conditions and factors could, in the aggregate, have a material adverse effect on our business, results of operations and financial condition. Additionally, cost cutting, efficiency initiatives, reprioritization, other affordability analyses, and changes in budgetary priorities by our governmental customers, including the U.S. government, could adversely impact both of our operating segments.
All of the aforementioned conditions and factors could have a material adverse effect on our business, results of operations and financial condition. Additionally, cost cutting, efficiency initiatives, reprioritization, other affordability analyses, and changes in budgetary priorities by our governmental customers, including the U.S. government, could adversely impact both of our operating segments.
Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of payments, fines and suspension or debarment from U.S. government contracting or subcontracting for a period of time. Our dependence on sales to international customers exposes us to unique business, commercial and export compliance audit risks.
Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of payments, fines and suspension or debarment from U.S. government contracting or subcontracting for a period of time. 31 Our dependence on sales to international customers exposes us to unique business, commercial and export compliance risks.
No such requirements exist for VoIP service providers, so carriers could prevent us from continuing to provide VoIP 911 service by denying us access to the required databases. Ongoing compliance with the provisions of securities laws, related regulations and financial reporting standards could unexpectedly materially increase our costs and compliance related expenses.
No such requirements exist for VoIP service providers, so carriers could prevent us from continuing to provide VoIP 911 service by denying us access to the required databases. 44 Ongoing compliance with the provisions of securities laws, related regulations and financial reporting standards could unexpectedly materially increase our costs and compliance related expenses.
Our subcontractors and suppliers may also, in turn, be unable to maintain the quality of the materials they receive from their respective suppliers. 29 Our reliance on a single partner to source critical parts (i.e., where we are unable to develop a critical redundant source of supply) may impair our ability to produce and deliver our products.
Our subcontractors and suppliers may also, in turn, be unable to maintain the quality of the materials they receive from their respective suppliers. Our reliance on a single partner to source critical parts (i.e., where we are unable to develop a critical redundant source of supply) may impair our ability to produce and deliver our products.
Government contracts are conditioned upon the continuing availability of congressional appropriations and Congress’s failure to appropriate funds, or Congress’s actions to reduce or delay spending on, or reprioritize its spending away from, U.S. government programs which we participate in, could negatively affect our results of operations.
Government contracts are conditioned upon the continuing availability of congressional appropriations and Congress’ failure to appropriate funds, or Congress’s actions to reduce or delay spending on, or reprioritize its spending away from, U.S. government programs which we participate in, could negatively affect our results of operations.
In addition, foreign defense contracts generally contain provisions relating to termination at the convenience of the government. 27 • We rely on a limited number of international sales agents - In some countries, we rely upon one or a small number of sales agents, exposing us to risks relating to our contracts with, and related performance of, those agents.
In addition, foreign defense contracts generally contain provisions relating to termination at the convenience of the government. • We rely on a limited number of international sales agents - In some countries, we rely upon one or a small number of sales agents, exposing us to risks relating to our contracts with, and related performance of, those agents.
Termination for convenience provisions provide us with little to no recourse related to: our potential recovery of costs incurred or costs committed, potential settlement expenses and hypothetical profit on work completed prior to termination. 26 • Our U.S. government contracts are subject to funding by the U.S.
Termination for convenience provisions provide us with little to no recourse related to: our potential recovery of costs incurred or costs committed, potential settlement expenses and hypothetical profit on work completed prior to termination. • Our U.S. government contracts are subject to funding by the U.S.
Any of these events may dilute a stockholder's ownership interest in Comtech and have an adverse impact on the price of our common stock. Actions of activist stockholders could impact the pursuit of our business strategies and adversely affect our results of operations, financial condition and/or share price.
Any of these events may dilute a stockholder's ownership interest in Comtech and have an adverse impact on the price of our common stock. 51 Actions of activist stockholders could impact the pursuit of our business strategies and adversely affect our results of operations, financial condition and/or share price.
If our sole-source proposals are rejected in favor of a competitor’s proposal, it could result in the termination of existing contracts, which could have a material adverse effect on our business, results of operations and financial condition. 30 • We may not be able to obtain sufficient components to meet expected demand - Our dependence on component availability, government furnished equipment, subcontractors and key suppliers, including the core manufacturing expertise of our high-volume technology manufacturing center located in Arizona exposes us to risk.
If our sole-source proposals are rejected in favor of a competitor’s proposal, it could result in the termination of existing contracts, which could have a material adverse effect on our business, results of operations and financial condition. 35 • We may not be able to obtain sufficient components to meet expected demand - Our dependence on component availability, government furnished equipment, subcontractors and key suppliers, including the core manufacturing expertise of our high-volume technology manufacturing center located in Arizona exposes us to risk.
We may also be the subject of increased cyber-attacks as a result of the conflict. The military conflict between Russia and Ukraine has impacted our sales pipeline and continues to have significant repercussions for our business.
We may also be the subject of increased cyber-attacks as a result of the conflict. The military conflict between Russia and Ukraine has impacted our sales pipeline and continues to have repercussions for our business.
Any impairment charges that we may record in the future could be material to our results of operations and financial condition. 34 Cybersecurity Risks We could be negatively impacted by a system failure, lack of or failure of redundant system components, security breach through cyber-attack, cyber intrusion or otherwise, by other significant disruption of our IT networks or those we operate for certain customers, or third-party data center facilities, servers and related systems.
Any impairment charges that we may record in the future could be material to our results of operations and financial condition. 39 Cybersecurity Risks We could be negatively impacted by a system failure, lack of or failure of redundant system components, security breach through cyber-attack, cyber intrusion or otherwise, by other significant disruption of our IT networks or those we operate for certain customers, or third-party data center facilities, servers and related systems.
Additionally, funding for opportunities with other customers that we expected to book and ship has also been shifted to other programs and/or temporarily delayed as a result of changes in defense spending priorities. Prior to this conflict, we maintained a small group of employees in Moscow, Russia who supported certain UHP-branded satellite communications products.
Additionally, funding for opportunities with other customers that we expected to book and ship has also been shifted to other programs and/or temporarily delayed as a result of changes in defense spending priorities. Prior to this conflict, we maintained a small group of employees who supported certain UHP-branded satellite communications products.
Although adjustments relating to past audits of our federal income tax returns were immaterial, a tax assessment or settlement for other periods or other jurisdictions that may be selected for future audit could have a material adverse effect on our business, consolidated results of operations and financial condition. 36 We may be subject to environmental liabilities.
Although adjustments relating to past audits of our federal and state income tax returns were immaterial, a tax assessment or settlement for other periods or other jurisdictions that may be selected for future audit could have a material adverse effect on our business, consolidated results of operations and financial condition. We may be subject to environmental liabilities.
In addition, we have made various commitments to U.S. government agencies that oversee trade and export matters and have committed that we will maintain certain policies and procedures including maintaining a company-wide Chief Trade Compliance Officer and Office of Trade Compliance and conducting ongoing internal assessment and reporting any future violations to those agencies.
In addition, we have made various commitments to U.S. government agencies that oversee trade and export matters and have committed that we will maintain certain policies and procedures including maintaining a company-wide Chief Trade Compliance Officer and Office of Trade Compliance and conducting ongoing internal assessments and reporting of any future violations to those agencies.
We are, from time to time, and could become a party to additional litigation or subject to claims, including product liability claims, employee claims, government investigations and other proceedings that could cause us to incur unanticipated expenses and otherwise have a material adverse effect on our business, results of operations and financial condition .
We are, from time to time, and could become a party to additional litigation or subject to claims, including product liability claims, current and former employee claims, government investigations and other proceedings that could cause us to incur unanticipated expenses and otherwise have a material adverse effect on our business, results of operations and financial condition .
This provision could have the effect of delaying or preventing a change in control of Comtech. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 46
This provision could have the effect of delaying or preventing a change in control of Comtech. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
A significant decline in our customers' spending that is greater than we anticipate or a shift in funding priorities may also have a negative effect on future orders, sales, income and cash flows and we might be required to perform a quantitative assessment during fiscal 2024 or beyond.
A significant decline in our customers' spending that is greater than we anticipate or a shift in funding priorities may also have a negative effect on future orders, sales, income and cash flows and we might be required to perform a quantitative assessment during fiscal 2025 or beyond.
We have significant operations in Arizona, Florida, California, Washington State, Maryland, New York and other locations which could be materially and adversely impacted in the event of a terrorist attack and government responses thereto or significant disruptions (including natural disasters) to our business.
We have significant operations in Arizona, Florida, California, Washington State, Maryland and other locations which could be materially and adversely impacted in the event of a terrorist attack and government responses thereto or significant disruptions (including natural disasters) to our business.
The success of our business is dependent on compliance with FCC rules and regulations and similar foreign laws and regulations. Many of our products are incorporated into wireless communications systems that must comply with various U.S. government regulations, including those of the FCC, as well as similar international laws and regulations.
The success of our business is dependent on compliance with FCC rules and regulations and similar foreign, state and local laws and regulations. Many of our products are incorporated into wireless communications systems that must comply with various U.S. government regulations, including those of the FCC, as well as similar state, local and international laws and regulations.
During fiscal 2023, we experienced disruptions in our supply chain relating to later-than-expected delivery of certain key components from several suppliers that adversely impacted our revenue in fiscal 2023. In addition, the ongoing supply chain issues have affected the quality of the components we receive.
During fiscal 2024, we experienced disruptions in our supply chain relating to later-than-expected delivery of certain key components from several suppliers that adversely impacted our revenue in fiscal 2024. In addition, the ongoing supply chain issues have affected the quality of the components we receive.
We cannot predict, and no guarantees can be given, as to the outcome or timing of any matters relating to the foregoing actions by stockholders and our responses thereto or the ultimate impact on our business, liquidity, financial condition or results of operations.
We cannot predict, and no guarantees can be given, as to the outcome or timing of any matters relating to the foregoing actions by activist stockholders and our responses thereto or the ultimate impact on our business, results of operations or financial condition.
For the fiscal years ended July 31, 2023, 2022 and 2021, we conducted no business with states designated as sponsors of terrorism. • We must maintain a company-wide Office of Trade Compliance - In the past, we have self-reported violations of export control laws or regulations to the U.S.
For the fiscal years ended July 31, 2024, 2023 and 2022, we conducted no business with states designated as sponsors of terrorism. 32 • We must maintain a company-wide Office of Trade Compliance - In the past, we have self-reported violations of export control laws or regulations to the U.S.
A decrease in DoD or Department of Homeland Security expenditures, the elimination or curtailment of a material program in which we are involved, or changes in payment patterns of our customers as a result of changes in U.S. government spending could have an adverse effect on our business, results of operations and financial condition.
A decrease in DoD or Department of Homeland Security expenditures, the elimination or curtailment of a material program in which we are involved, or changes in payment patterns of our customers as a result of changes in U.S. government spending could have an adverse effect on our business, results of operations and financial condition. On September 25, 2024, the U.S.
If such unauthorized disclosure or access does occur, we may be required to notify persons whose information was disclosed or accessed under existing and proposed laws.
If such unauthorized disclosure or access does occur, we may be required to notify regulators, customers and persons whose information was disclosed or accessed under existing and proposed laws.
Business Risks Our backlog is subject to customer cancellation or modification and such cancellations could result in a decline in sales and increased provisions for excess and obsolete inventory. We currently have a backlog of orders, mostly under contracts that our customers may modify or terminate.
Our backlog is subject to customer cancellation or modification and such cancellations or modifications could result in a decline in sales and increased provisions for excess and obsolete inventory. We currently have a backlog of orders, mostly under contracts that our customers may modify or terminate.
It is possible that a shutdown of the U.S. government may occur, or interim budgets may be adopted. As such, we may experience delayed orders, delayed payments and adverse impacts on our results of operations. We may experience related supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and subcontractors.
Accordingly, it is still possible that a partial shutdown of the U.S. government may occur, or additional interim budgets may be adopted. As such, we may experience delayed orders, delayed payments and adverse impacts on our results of operations. We may experience related supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and subcontractors.
Our business is highly competitive. We will continue to invest in research and development for the introduction of new and enhanced products and services designed to improve capacity, data processing rates and features. We must also continue to develop new features and to improve functionality of our software. Research and development in our industry is complex, expensive and uncertain.
We will continue to invest in research and development for the introduction of new and enhanced products and services designed to improve capacity, data processing rates and features. We must also continue to develop new features and to improve functionality of our software. Research and development in our industry is complex, expensive and uncertain.
Similarly, there are a number of legislative proposals in the United States, at both the federal and state level, that could impose new obligations in areas affecting our business, such as liability for personal data protection.
Similarly, there are a number of state privacy laws, as well as legislative proposals in the United States, at both the federal and state level, that could impose new obligations in areas affecting our business, such as liability for personal data protection.
Volatility of financing conditions may cause our customers to be reluctant to spend funds required to purchase our equipment and could cause their projects to be postponed or canceled.
Volatility of financing conditions may cause our customers to be reluctant to spend funds required to purchase our solutions and could cause their projects to be postponed or canceled.
Managing the merger of multiple production facilities and their attending employee populations is difficult and may negatively impact business prospects in the short and long term.
Managing the disposition of multiple production facilities and their attending employee populations is difficult and may negatively impact business prospects in the short and long term.
Accordingly, there is no assurance that the actions taken by the Board of Directors and management in seeking to maintain constructive engagement with certain stockholders will be successful in preventing the occurrence of stockholder activist campaigns.
However, there is no assurance that the actions taken by the Board of Directors and management team in seeking to maintain constructive engagement with certain stockholders will be successful in preventing the occurrence of stockholder activist campaigns.
Certain parts received in fiscal 2023 did not meet our quality specifications and we were unable to use them. We obtain certain components and subsystems from a single source or a limited number of sources.
Certain parts received in fiscal 2024 did not meet our quality specifications and we were unable to use them. 22 We obtain certain components and subsystems from a single source or a limited number of sources.
In light of current challenges in the supply chain, we may not be able to qualify alternate suppliers for our components. 21 Heading into our fiscal 2024, we have a significant portion of our targeted revenues in our backlog.
In light of current challenges in the supply chain, we may not be able to qualify alternate suppliers for our components. Heading into our fiscal 2025, we have a significant portion of our targeted revenues in our backlog.
A substantial increase in our indebtedness could also have a negative impact on our credit ratings. In this regard, failure to maintain our credit ratings could adversely affect the interest rate available to us in future financings, as well as our liquidity, competitive position and access to capital markets.
A substantial increase in our indebtedness could also have a negative impact on our credit ratings. In this regard, failure to maintain our credit ratings could adversely affect the interest rate available to us in future financings, as well as our liquidity, competitive position and access to capital markets, including for bonding requirements.
In addition, all of our U.S. government contracts can be audited by the Defense Contract Audit Agency ("DCAA") and other U.S. government agencies and we can be subject to penalties arising from post-award contract audits (sometimes referred to as a Truth in Negotiations Act or "TINA" audit) or cost audits in which the value of our contracts may be reduced.
In addition, all of our U.S. government contracts can be audited by the Defense Contract Audit Agency ("DCAA") and other U.S. government agencies and we can be subject to penalties arising from post-award contract audits (sometimes referred to as a Truth in Negotiations Act or "TINA" audit), cost audits in which the value of our contracts may be reduced or increased costs to implement corrective actions.
Taken together, each of the risks set forth herein may have a material adverse effect on our results of operations and financial condition. External events outside our control may disrupt our supply chain. With recent history in mind, natural disasters, pandemics, extreme weather conditions, legislative or regulatory changes may all impact the performance of our supplier base.
Taken together, each of the risks set forth herein may have a material adverse effect on our results of operations and financial condition. External events outside our control may disrupt our supply chain. Natural disasters, pandemics, extreme weather conditions, legislative or regulatory changes may all impact the performance of our supplier base.
We have incurred indebtedness under a Credit Facility, and may incur substantial additional indebtedness in the future, and may not be able to service that debt in the future and we must maintain compliance with various covenants that impose restrictions on our business.
We have incurred indebtedness under a credit facility and an unsecured subordinated loan, and may incur substantial additional indebtedness in the future, and may not be able to service that debt in the future and we must maintain compliance with various covenants that impose restrictions on our business.
The final determination of tax examinations and any related litigation could be materially different than what is reflected in historical income tax provisions and accruals. Our U.S. federal income tax returns for fiscal 2020 through 2022 are subject to potential future Internal Revenue Service ("IRS") audit.
The final determination of tax examinations and any related litigation could be materially different than what is reflected in historical income tax provisions and accruals. 41 Our U.S. federal income tax returns for fiscal 2021 through 2023 are subject to potential future Internal Revenue Service ("IRS") audit.
Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Arizona and our antenna production facility in the United Kingdom), could be subject to natural disasters or other significant disruptions, including hurricanes, tornadoes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts, telecommunications failures, and other natural and man-made disasters or disruptions.
Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Arizona), could be subject to natural disasters or other significant disruptions, including hurricanes, tornadoes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts, telecommunications failures, and other natural and man-made disasters or disruptions.
If it is determined that we have violated U.S. export control laws or regulations or trade regulations, civil and criminal penalties could apply, and we may suffer reputational harm. • We are subject to future export compliance audits - We continue to implement policies and procedures to ensure that we comply with all applicable export control laws and regulations.
If it is determined that we have violated export control laws or regulations or trade regulations in any jurisdictions, civil and criminal penalties could apply, and we may suffer reputational harm. • We are subject to future export compliance audits - We continue to implement policies and procedures to ensure that we comply with all applicable export control laws and regulations.
Sales for use by international customers (including sales to U.S. companies for inclusion in products that will be sold to international customers) represented approximately 24.0%, 25.0% and 23.9% of our consolidated net sales for the fiscal years ended July 31, 2023, 2022 and 2021, respectively, and we expect that international sales will continue to be a significant portion of our consolidated net sales for the foreseeable future.
Sales for use by international customers (including sales to U.S. companies for inclusion in products that will be sold to international customers) represented approximately 21.5%, 24.0% and 25.0% of our consolidated net sales for the fiscal years ended July 31, 2024, 2023 and 2022, respectively, and we expect that international sales will continue to be a significant portion of our consolidated net sales for the foreseeable future.
Even though we take precautions to avoid engaging in transactions that may violate U.S. export control laws or regulations, including trade sanctions, those measures may not be effective in every instance.
Even though we take precautions to avoid engaging in transactions that may violate U.S. export control laws or regulations and their foreign counterparts, including trade sanctions, those measures may not be effective in every instance.
U.S. laws and regulations applicable to us include the Arms Export Control Act, the IEEPA, the ITAR, the EAR and the trade sanctions laws and regulations administered by the U.S.
U.S. laws and regulations applicable to us include the Arms Export Control Act, the IEEPA, the ITAR, the EAR and the trade sanctions laws and regulations administered by the U.S. Treasury Department's OFAC.
Additionally, as of July 31, 2023, net intangibles recorded on our Consolidated Balance Sheet aggregated $225.9 million. 33 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.
Additionally, as of July 31, 2024, net intangibles recorded on our Consolidated Balance Sheet aggregated $194.8 million. Goodwill 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.
In recent years, global oil and natural gas prices have been volatile and have significantly impaired the ability of certain of our government customers in the oil and gas producing regions of the world to invest in telecommunications products and infrastructure.
From time to time, global oil and natural gas prices have been volatile and have significantly impaired the ability of certain of our government customers in the oil and gas producing regions of the world to invest in telecommunications products and infrastructure.
The ability of our subscribers to receive critical location and business information requires timely and uninterrupted connections with our wireless network carriers.
The ability of our subscribers (or those of our customers) to receive critical location and business information requires timely and uninterrupted connections with our wireless network carriers.
None of our state income tax returns prior to fiscal 2019 are subject to audit.
None of our state income tax returns prior to fiscal 2020 are subject to audit.
Many of our competitors have financial, technical, marketing, sales and distribution resources greater than ours. Recently, we have seen increased requests for proposals from large wireless carriers for sole-source solutions and have responded to several such requests.
Many of our competitors have financial, technical, marketing, sales and distribution resources greater than ours. We continue to see requests for proposals from large wireless carriers for sole-source solutions and have responded to several such requests.
For example, many companies are developing new technologies and the shift towards open standards such as IP-based satellite networks will likely result in increased competition and some of our products may become commoditized as a result. Our Terrestrial and Wireless Networks segment provides various technologies that are utilized on mobile phones.
For example, many companies are developing new technologies and the shift towards open standards will likely result in increased competition and some of our products may become commoditized as a result. 48 Our Terrestrial and Wireless Networks segment provides various technologies that are utilized on mobile devices.
In fiscal 2023, we continued to expand our Canadian operations and shifted certain commercial software development and support activities outside of Russia. However, as we are currently in an environment where software engineering talent is already in high demand and commands a premium, we expect to incur additional annual expenses in connection with this personnel shift for our UHP products.
In fiscal 2024, we continued to expand our operations and shift certain commercial software development and support activities to Canada. However, as we are currently in an environment where software engineering talent is already in high demand and commands a premium, we expect to incur additional annual expenses in connection with this personnel shift for our UHP products.
Nevertheless, loss of that facility would have a negative impact on our production capability and we would incur unexpected costs and lost revenue associated with our inability to meet our contractual commitments.
The loss of our facility in Arizona would have a negative impact on our production capability and we would incur unexpected costs and lost revenue associated with our inability to meet our contractual commitments.
Factors that could have a significant impact on the market price of our stock include, among others: • strategic transactions, such as acquisitions and divestures by us and our competitors; • our ability to successfully integrate and manage recent acquisitions; • our issuance of potentially dilutive equity or equity-type securities; • our issuance of debt; • our ability to successfully access equity and debt capital markets; • future announcements concerning us or our competitors; • shareholder activism involving our common stock, board of directors or corporate governance; 44 • receipt or non-receipt of substantial orders for products and services; • quality deficiencies in services or products; • results of technological innovations and new commercial products; • changes in recommendations of securities analysts; • government regulations; • changes in the status or outcome of government audits; • proprietary rights or product or patent litigation; • changes in U.S. government policies; • changes in economic conditions generally, particularly in the terrestrial and wireless networks and satellite and space communications markets; • changes in securities market conditions, generally; • changes in prevailing interest rates; • changes in the status of litigation and legal matters (including changes in the status of export matters); • cyber attacks; • energy blackouts; • acts of terrorism or war; • inflation or deflation; • rumors or allegations regarding our financial disclosures or practices; and • potential resurgences of the COVID-19 or similar pandemics.
Factors that could have a significant impact on the market price of our stock include, among others: • strategic transactions, such as acquisitions and divestitures by us and our competitors; • our ability to successfully integrate and manage acquisitions or unwind and manage divestitures; • our issuance of potentially dilutive equity or equity-type securities; • our issuance of debt or refinancing our debt; • our ability to successfully access equity and debt capital markets; • future announcements concerning us or our competitors; • shareholder activism involving our common stock, board of directors or corporate governance; • receipt or non-receipt of substantial orders for products and services; • quality deficiencies in services or products; • results of technological innovations and new commercial products; • changes in our own outlook or recommendations of securities analysts; • government regulations; • changes in the status or outcome of government audits; • proprietary rights or product or patent litigation; • changes in U.S. government policies; • changes in economic conditions generally, particularly in the terrestrial and wireless networks and satellite and space communications markets; • changes in securities market conditions, generally; • changes in prevailing interest rates; • changes in the status of litigation and legal matters (including changes in the status of export matters); • cyber attacks; • energy blackouts; • acts of terrorism or war; • inflation or deflation; • rumors or allegations regarding our financial disclosures or practices; • our ability to timely file documents required by the SEC within prescribed time periods; and • global pandemics.
If state and local governments do not widely request that 911 services be provided or we become subject to significant pressures from wireless carriers with respect to pricing of 911 services, our 911 business would be harmed and future growth of our business would be reduced. On May 17, 2023, the U.S.
If state and local governments do not widely request that 911 services be provided or we become subject to significant pressures from wireless carriers with respect to pricing of 911 services, our 911 business would be harmed and future growth of our business would be reduced.
In the future, if we determine that our inventory is overvalued, we will be required to recognize such costs in our financial statements at the time of such determination. Any such charges could be materially adverse to our results of operations and financial condition.
In the future, if we determine that our inventory is overvalued, we will be required to recognize such costs in our financial statements at the time of such determination. Any such charges could be materially adverse to our results of operations and financial condition. Our efforts to invoice and collect unbilled receivables may be unsuccessful.
Any such claim, including any out of pocket payments we are required to make and the costs of the defense against such claim, could result in material costs and have an adverse effect on our business, results of operations and financial condition.
In many cases, we are unable to obtain insurance and are self-insured. Any such claim, including any out of pocket payments we are required to make and the costs of the defense against such claim, could result in material costs and have an adverse effect on our business, results of operations and financial condition.
Strategic Growth Risks • We face a number of risks relating to the expected long-term growth of our business. • Loss of our executive officers or other key personnel or other changes to our management team could disrupt our operations and growth plans or harm our business. • We must service the debt and maintain compliance with various covenants under a Credit Facility that imposes restrictions on our business. • Acquisitions of companies and investments could prove difficult to integrate, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock. • Our investments in recorded goodwill and other intangible assets could be impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure.
Strategic Growth Risks • We face a number of risks relating to the expected long-term growth of our business. • Loss of our executive officers or other key personnel or other changes to our management team could disrupt our operations and growth plans or harm our business. • We must service the debt and maintain compliance with various covenants under a credit facility that imposes restrictions on our business. • Divestitures of portions of our business in the course of pursuing strategic alternatives and revisiting our portfolio could prove difficult to carve out, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock. • Our investments in recorded goodwill and other intangible assets have been impaired and may be further impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure as we pursue strategic alternatives.
Although sales into Russia represented approximately 1% of our consolidated net sales in fiscal 2023 and 2022, consolidated net sales into Russia in fiscal 2024 and beyond were expected to significantly grow. As a result of the economic sanctions against Russia, however, we have stopped accepting new orders in Russia and plan to wind down operations in fiscal 2024.
Although sales into Russia represented approximately 1% of our consolidated net sales in fiscal 2024 and 2023, consolidated net sales into Russia in fiscal 2025 and beyond had been expected to grow. As a result of the economic sanctions against Russia, however, we have stopped accepting new orders in Russia and initiated a wind down of operations in fiscal 2024.
Failure to comply with these regulations and practices could result in fines being imposed against us or our suspension for a period of time from eligibility for bidding on, or for award of, new government contracts.
Failure to comply with these regulations and practices could result in fines being imposed against us, civil or criminal penalties, termination of contracts, our suspension for a period of time from eligibility for bidding on, or for award of, new government contracts, or other adverse consequences.
During our fiscal years ended July 31, 2023, 2022 and 2021, sales to the U.S. government (including sales to prime contractors to the U.S. government) were $172.0 million, $132.6 million and $201.1 million or 31.3%, 27.2% and 34.6% of our consolidated net sales, respectively.
During our fiscal years ended July 31, 2024, 2023 and 2022, sales to the U.S. government (including sales to prime contractors to the U.S. government) were $182.3 million, $172.0 million and $132.6 million, or 33.7%, 31.3% and 27.2% of our consolidated net sales, respectively.
There can be no assurance that we will win additional contracts or that actual contracts that are awarded will ultimately be profitable. • We can be disqualified as a supplier to the U.S. government - As a supplier to the U.S. government, we must comply with numerous regulations, including those governing security, contracting practices and classified information.
There can be no assurance that we will win additional contracts or that actual contracts that are awarded will ultimately be profitable. • Failure to comply with government contractor obligations can result in adverse consequences for the company - As a supplier to the U.S. government, we must comply with numerous regulations, including those governing security, contracting practices and classified information.
Historically, our business outlook is difficult to forecast and backlog (sometimes referred to herein as orders or bookings), net sales and operating results may vary significantly from period to period due to a number of factors including: sales mix; fluctuating market demand; start-up costs associated with the opening of our two new high-volume technology manufacturing centers; price competition; new product introductions by us or our competitors; customer bankruptcies; changing customer partnering procurement strategies; fluctuations in foreign currency exchange rates; unexpected changes in the timing of delivery of components or subsystems; the financial performance and impact of acquisitions; new accounting standards; political instability; regulatory developments; changes in income tax rates or tax credits; the price and expected volatility of our stock (which will impact, among other items, the amount of stock-based compensation expense we may record); general global economic conditions, and the impact of natural disasters or global pandemics, such as the COVID-19 pandemic.
Historically, our business outlook is difficult to forecast and backlog (sometimes referred to herein as orders or bookings), net sales and operating results may vary significantly from period to period due to a number of factors including: the impact of strategic alternatives and portfolio reshaping; sales mix; fluctuating market demand; price competition; delayed collections from customers; new product introductions by us or our competitors; customer bankruptcies; changing customer partnering procurement strategies; fluctuations in foreign currency exchange rates; unexpected changes in the timing of delivery of components or subsystems; the financial performance and impact of acquisitions or divestitures; new accounting standards; political instability; regulatory developments; changes in income tax rates or tax credits; the price and expected volatility of our stock (which will impact, among other items, the amount of stock-based compensation expense we may record); perceptions of our financial condition and ability to continue as a going concern; general global economic conditions, and the impact of natural disasters or global pandemics, such as the COVID-19 pandemic.
Our investments in recorded goodwill and other intangible assets could be impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure. As of July 31, 2023, goodwill recorded on our Consolidated Balance Sheet aggregated $347.7 million.
Our investments in recorded goodwill and other intangible assets could be further impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure as we pursue strategic alternatives. As of July 31, 2024, goodwill recorded on our Consolidated Balance Sheet aggregated $284.2 million.
Even if we are successful in any proxy contest or in defending against any unsolicited takeover attempt, our business could be adversely affected by any such proxy contest or unsolicited takeover attempt due to: • perceived uncertainties as to future direction may result in the loss of potential acquisitions, collaborations or other strategic opportunities, and may make it more difficult to attract and retain qualified personnel, customers, suppliers, and other business partners; and • if individuals are elected or appointed to our Board of Directors with a specific agenda or who do not agree with our strategic plan, the ability of our Board of Directors to function effectively could be adversely affected, which could in turn adversely affect our ability to effectively and timely implement our strategic plan and create additional value for our stockholders, and/or adversely affect our business, operating results and financial condition.
Even if we are successful in any proxy contest or other activism campaign, any such proxy contest or activist stockholder campaign could adversely affect our business due to: • perceived uncertainties as to future direction, strategy or leadership that may result in the loss of potential business opportunities, acquisitions, collaborations or other strategic opportunities, and that may make it more difficult to attract and retain qualified personnel, investors, customers, suppliers, and other business partners; and • the risk that individuals may be elected to our Board of Directors with a specific agenda or who do not agree with our strategic plan, adversely affecting the ability of our Board of Directors to function effectively, which could in turn adversely affect our ability to effectively and timely implement our strategic plan and create additional value for our stockholders, and/or adversely affect our business, results of operations and financial condition.
Our products including software may not be error or defect free after delivery to customers, which could damage our reputation, cause revenue losses, result in the rejection of our products or services, divert development resources and increase service and warranty costs, each of which could have a material adverse effect on our business, results of operations and financial condition.
Our hardware products are also subject to warranty obligations and integrate a wide variety of components from different vendors. 50 Our products including software may not be error or defect free after delivery to customers, which could damage our reputation, cause revenue losses, result in the rejection of our products or services, divert development resources and increase service and warranty costs, each of which could have a material adverse effect on our business, results of operations and financial condition.
We may, in the future, change our management approach which in turn may change the way we define our reporting units, as such term is defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350 " Intangibles - Goodwill and Other.
Reporting units are defined by how our CEO manages the business, which includes resource allocation decisions. We may, in the future, change our management approach which in turn may change the way we define our reporting units, as such term is defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350 " Intangibles - Goodwill and Other.
Our business is highly dependent on the budgetary decisions of our government customers, including the U.S. government (including prime contractors to the U.S. government), and changes in the U.S. government’s fiscal policies or budgetary priorities may have a material adverse effect on our business, operating results and financial condition.
A significant change in an estimate on one or more programs could have a material adverse effect on our business, results of operations and financial condition. 29 Our business is highly dependent on the budgetary decisions of our government customers, including the U.S. government (including prime contractors to the U.S. government), and changes in the U.S. government’s fiscal policies or budgetary priorities may have a material adverse effect on our business, operating results and financial condition.
For additional information related to these lawsuits, see "Notes to Consolidated Financial Statements - Note (12)(a) - Commitments and Contingencies - Legal Proceedings and Other Matters" included in "Part II - Item 8.
For additional information related to these lawsuits, see "Notes to Consolidated Financial Statements - Note (13)(a) - Commitments and Contingencies - Legal Proceedings and Other Matters" included in "Part II - Item 8. Financial Statements and Supplementary Data," included in this Form 10-K.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table lists our primary leased facilities at July 31, 2023: Location Property Type Square Footage Lease Expiration Satellite and Space Communications Chandler, Arizona A Manufacturing and Engineering 146,000 July 2036 Orlando, Florida B Manufacturing and Engineering 99,000 April 2026 Hampshire, UK C Manufacturing and Engineering 77,000 November 2030 Santa Clara, California D Manufacturing and Engineering 47,000 April 2026 Melville, New York E Manufacturing and Engineering 45,000 December 2031 Various facilities F Support, Engineering and Sales 22,000 Various Cypress, California G Support, Engineering and Sales 28,000 July 2025 Tempe, Arizona A Manufacturing and Engineering 20,000 January 2027 Plano, Texas G R&D and Engineering 12,000 August 2025 Saint-Laurent, Canada H Manufacturing, Engineering, Sales and General Office 12,000 June 2029 508,000 Terrestrial and Wireless Networks Seattle, Washington I Network Operations, R&D, Engineering and Sales 30,000 October 2033 Stoughton, Massachusetts J Network Operations 26,000 March 2025 Annapolis, Maryland K Support, Engineering and Sales 17,000 July 2026 Gatineau, Canada L Network Operations, R&D, Engineering, Sales and General Office 16,000 April 2028 Chicago, Illinois L General Office 4,000 September 2024 93,000 Corporate Annapolis, Maryland K General Office and Common Areas 2,000 July 2026 Melville, New York M Corporate Headquarters and General Office 9,600 August 2027 11,600 Total Square Footage 612,600 A.
Biggest changeThe following table lists our primary leased facilities at July 31, 2024: Location Property Type Square Footage Lease Expiration Satellite and Space Communications Chandler, Arizona A Manufacturing and Engineering and Corporate Headquarters 146,000 July 2036 Orlando, Florida B Manufacturing and Engineering 99,000 April 2026 Hampshire, UK C Manufacturing and Engineering 77,000 November 2030 Santa Clara, California D Manufacturing and Engineering 47,000 April 2026 Cypress, California E Support, Engineering and Sales 28,000 July 2025 Tempe, Arizona A Manufacturing and Engineering 20,000 January 2027 Various facilities F Support, Engineering and Sales 19,000 Various Plano, Texas E R&D and Engineering 12,000 August 2025 Saint-Laurent, Canada G Manufacturing, Engineering, Sales and General Office 12,000 June 2029 460,000 Terrestrial and Wireless Networks Seattle, Washington H Network Operations, R&D, Engineering and Sales 30,000 October 2033 Stoughton, Massachusetts I Network Operations 26,000 March 2025 Annapolis, Maryland J Support, Engineering and Sales 17,000 July 2026 Gatineau, Canada K Network Operations, R&D, Engineering, Sales and General Office 16,000 April 2028 Chicago, Illinois K General Office 4,000 September 2024 93,000 Corporate Melville, New York L General Office 9,600 August 2027 Annapolis, Maryland J General Office and Common Areas 2,000 July 2026 11,600 Total Square Footage 564,600 A.
Our Terrestrial and Wireless Networks segment maintains office space in Annapolis, Maryland used primarily for the design and development of our software-based systems and applications and network operations for our Terrestrial and Wireless Networks segment. L.
Our Terrestrial and Wireless Networks segment maintains office space in Annapolis, Maryland used primarily for the design and development of our software-based systems and applications and network operations for our Terrestrial and Wireless Networks segment. K.
The new Chandler, Arizona facility utilizes state-of-the-art design and production techniques, including analog, digital and RF microwave production, hardware assembly and full-service engineering. B. Our Satellite and Space Communications segment engineers and manufactures our over-the-horizon microwave troposcatter systems and mission-critical satellite equipment in a leased facility in Orlando, Florida. 47 C.
The Chandler, Arizona facility utilizes state-of-the-art design and production techniques, including analog, digital and RF microwave production, hardware assembly and full-service engineering. In fiscal 2024, this location became our new corporate headquarters. B. Our Satellite and Space Communications segment engineers and manufactures our over-the-horizon microwave troposcatter systems and mission-critical satellite equipment in a leased facility in Orlando, Florida. C.
Our Satellite and Space Communications segment currently leases two manufacturing facilities in Hampshire, United Kingdom, where we manufacture our high precision full motion fixed and mobile X/Y satellite tracking antennas, RF feeds, reflectors and radomes.
Our Satellite and Space Communications segment currently leases two manufacturing facilities in Hampshire (Basingstoke), United Kingdom, where we previously manufactured high precision full motion fixed and mobile X/Y satellite tracking antennas.
Our Terrestrial and Wireless Networks segment maintains office space in Gatineau, Canada and Chicago, Illinois that are utilized for network operations, R&D, engineering, sales of our public safety and location technology solutions and general office use. M. Our corporate headquarters are located in an office building complex in Melville, New York.
Our Terrestrial and Wireless Networks segment maintains office space in Gatineau, Canada and Chicago, Illinois that are utilized for network operations, R&D, engineering, sales of our public safety and location technology solutions and general office use. We exited our Chicago, Illinois office in September 2024.
Our Terrestrial and Wireless Networks segment maintains office space in Stoughton, Massachusetts used primarily for servicing certain of our state and local municipality NG-911 customers. K.
Our Terrestrial and Wireless Networks segment maintains office space in Seattle, Washington used primarily for servicing and hosting our VoIP and VoWiFi E911 and NG-911 services, and related emerging technologies. I. Our Terrestrial and Wireless Networks segment maintains office space in Stoughton, Massachusetts used primarily for servicing certain of our state and local municipality NG-911 customers. J.
Our Satellite and Space Communications segment maintains office space in Cypress, California and Plano, Texas used primarily for R&D, engineering, sales and customer support. H. Our Satellite and Space Communications segment maintains office space in Saint-Laurent, Canada, used primarily for sales, engineering, manufacturing and general office use. I.
All are primarily utilized for engineering, sales, software development, customer support, and general office use. G. Our Satellite and Space Communications segment maintains office space in Saint-Laurent, Canada, used primarily for sales, engineering, manufacturing and general office use. H.
Our Satellite and Space Communications segment leases an additional seven facilities, four of which aggregate 16,000 square feet and are located in the U.S. with the remaining three facilities aggregating 6,000 square feet located in Singapore, China and India. All are primarily utilized for engineering, sales, software development, customer support, and general office use. G.
Our Satellite and Space Communications segment maintains office space in Cypress, California and Plano, Texas used primarily for R&D, engineering, sales and customer support. F. Our Satellite and Space Communications segment leases an additional five facilities, four of which aggregate 16,000 square feet and are located in the U.S. with the remaining facility aggregating 3,000 square feet located in India.
Also, in fiscal 2023 and 2022, as part of our environmental related initiatives, we were able to reduce our total company-wide square footage of our various facilities by 162,000 sq. ft. or 20.9% and 78,000 sq ft. or 9.1%, respectively, for a total two-year reduction of 240,000 sq. ft. or 28.1%. 48
As part of our environmental related initiatives, we were able to reduce our total company-wide square footage of our various facilities for a total three-year reduction of 288,000 sq. ft. or 33.8%. 56
In fiscal 2023, we completed the relocation of certain of our satellite ground station production facility operations from our existing manufacturing locations, such as Tempe, Arizona, to this new facility, which reduced our Tempe, Arizona footprint by 116,000 square feet to 20,000 square feet through January 2027.
To support our long-term business goals, we entered a 15-year lease for a new 146,000 square foot high-volume technology manufacturing facility in Chandler, Arizona. In fiscal 2023, we completed the relocation of certain of our satellite ground infrastructure production facility operations to this new facility, which reduced our Tempe, Arizona footprint to 20,000 square feet through January 2027.
Our Satellite and Space Communications segment manufactures certain of our solid-state, high-power amplifiers in a 45,000 square foot engineering and manufacturing facility on more than two acres of land in Melville, New York and an 8,000 square foot facility in Topsfield, Massachusetts.
In fiscal 2024, as part of the divestiture of our solid-state RF microwave high power amplifiers and control components product line, we no longer lease the 45,000 square foot engineering and manufacturing facility in Melville, New York or the 8,000 square foot facility in Topsfield, Massachusetts.
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To support our long-term business goals, we recently commenced a 15-year lease for a new 146,000 square foot high-volume technology manufacturing facility in Chandler, Arizona.
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As a result of our fourth quarter fiscal 2024 decision to exit this product line, we are currently in discussions with each landlord regarding our exit and termination of such facility leases. 55 D. Our Satellite and Space Communications segment manufactures certain amplifiers in a leased manufacturing facility located in Santa Clara, California. E.
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These facilities are expected to support the production of X/Y satellite tracking antennas that can be used in connection with the thousands of new LEO, MEO and large HTS satellite constellations reportedly being launched over the next several years. D. Our Satellite and Space Communications segment manufactures certain amplifiers in a leased manufacturing facility located in Santa Clara, California. E.
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Our facility in Gatineau, Canada is subject to expropriation by the City of Gatineau and we expect to exit this facility and enter into a new lease agreement for an alternate facility in calendar 2025. L. Our Unallocated segment maintains general office space in a building complex located in Melville, New York for certain company-wide functions.
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Our Massachusetts lease is currently on a month-to-month basis and therefore excluded from the table above; however, we are currently in negotiations with the landlord to extend such lease for up to ten years. F.
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Our Terrestrial and Wireless Networks segment maintains office space in Seattle, Washington used primarily for servicing and hosting our VoIP and VoWiFi E911 and NG-911 services, and related emerging technologies. In fiscal 2023, as part of our cost reduction initiatives, we reduced our footprint at this location from 58,000 square feet to 30,000 square feet. J.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Information regarding legal proceedings is incorporated herein by reference to the " Notes to Consolidated Financial Statements – Note (12)(a) - Commitments and Contingencies – Legal Proceedings and Other Matters " included in " Part II - Item 8. Financial Statements and Supplementary Data, " of this Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.
Biggest changeITEM 3. LEGAL PROCEEDINGS Information regarding legal proceedings is incorporated herein by reference to the " Notes to Consolidated Financial Statements – Note (13)(a) - Commitments and Contingencies – Legal Proceedings and Other Matters " included in " Part II - Item 8. Financial Statements and Supplementary Data, " of this Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES 49 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 49 Stock Performance Graph and Cumulative Total Return 49 Dividends 50 Recent Sales of Unregistered Securities 50 Purchases of Equity Securities by the Issuer and Affiliated Purchasers 50 Approximate Number of Equity Security Holders 50
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 57 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 57 Stock Performance Graph and Cumulative Total Return 57 Recent Sales of Unregistered Securities 58 Purchases of Equity Securities by the Issuer and Affiliated Purchasers 58 Approximate Number of Equity Security Holders 58

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2023 and 2022 - Adjusted EBITDA." 54 Fiscal 2023 Highlights and Business Outlook for Fiscal 2024 Our financial highlights for the fiscal year ended July 31, 2023 include: • Consolidated net sales were $550.0 million, an increase of 13.1% from fiscal 2022; • Gross margin was 33.5%, compared to 37.0% in fiscal 2022; • GAAP net loss attributable to common stockholders was $33.9 million, and included $10.9 million of restructuring costs, $9.1 million of CEO transition costs and $3.8 million of strategic emerging technology costs for next-generation satellite technology, as discussed below; • GAAP EPS loss of $1.21 and Non-GAAP EPS of $0.65; • Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $53.5 million, an increase of 36.1% from fiscal 2022; • New bookings (also referred to as orders) of $594.1 million, resulting in an annual book-to-bill ratio of 1.08x (a measure defined as bookings divided by net sales); • Backlog of $662.2 million as of July 31, 2023, compared to $618.1 million as of July 31, 2022 and $668.4 million as of April 30, 2023; • Revenue visibility of approximately $1.1 billion as of July 31, 2023 (such amount does not yet include the $544.0 million U.S.
Biggest changeAdjusted 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; $12.5 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; • GAAP EPS loss of $4.70 and Non-GAAP EPS of $0.10; • 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; • New bookings (also referred to as orders) of $700.6 million, resulting in an annual book-to-bill ratio of 1.30x (a measure defined as bookings divided by net sales); • Backlog of $798.9 million as of July 31, 2024, compared to $662.2 million as of July 31, 2023 and $653.4 million as of April 30, 2024.
In accordance with FASB ASC 606 - Revenue from Contracts with Customers ("ASC 606"), we record revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers.
Revenue Recognition. In accordance with FASB ASC 606 - Revenue from Contracts with Customers ("ASC 606"), we record revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any of our equity securities during the fiscal year ended July 31, 2023. On September 29, 2020, our Board of Directors authorized a $100.0 million stock repurchase program, which replaced our prior program.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any of our equity securities during the fiscal year ended July 31, 2024. On September 29, 2020, our Board of Directors authorized a $100.0 million stock repurchase program, which replaced our prior program.
ITEM 6. [RESERVED] 50 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview of Business We are a leading global provider of next-generation 911 emergency systems ("NG-911") and secure wireless and satellite communications technologies.
ITEM 6. [RESERVED] 58 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview of Business We are a leading global provider of next-generation 911 emergency systems ("NG-911") and secure wireless and satellite communications technologies.
Other factors may also influence our provision, including decisions to exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand.
Other factors may also influence our provision, including decisions to restructure or exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand.
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. We had approximately 28.1 million shares of Common Stock outstanding as of July 31, 2023.
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. We had approximately 28.7 million shares of Common Stock outstanding as of July 31, 2024.
None of our state income tax returns prior to fiscal 2019 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. 52 Research and Development Costs. We generally expense all research and development costs.
None of our state income tax returns prior to fiscal 2020 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. Capitalized Engineering Costs. We generally expense all research and development costs.
In certain circumstances, the ultimate outcome of exposures and risks involves significant uncertainties. If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations and financial condition. Our U.S. federal income tax returns for fiscal 2020 through 2022 are subject to potential future Internal Revenue Service ("IRS") audit.
The ultimate outcome of tax exposures and risks involves significant uncertainties. If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations and financial condition. Our U.S. federal income tax returns for fiscal 2021 through 2023 are subject to potential future Internal Revenue Service ("IRS") audit.
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 988 networks. We provide our solutions to both commercial and governmental customers.
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. We provide our solutions to both commercial and governmental customers.
Approximate Number of Equity Security Holders As of October 6, 2023, there were approximately 770 holders of our common stock. Such number of record owners was determined from our stockholder records and does not include beneficial owners whose shares of our common stock are held in the name of various security holders, dealers and clearing agencies.
Approximate Number of Equity Security Holders As of October 23, 2024, there were approximately 764 holders of our common stock. Such number of record owners was determined from our stockholder records and does not include beneficial owners whose shares of our common stock are held in the name of various security holders, dealers and clearing agencies.
See " Notes to Consolidated Financial Statements - Note (1)(c) - Revenue Recognition " 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. Impairment of Goodwill and Other Intangible Assets .
See " Notes to Consolidated Financial Statements - Note (1)(d) - Revenue Recognition " included in " Part II - Item 8. 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.
Generally, we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international customer that we do not do business with regularly. In addition, we seek to obtain insurance for certain domestic and international customers.
Generally, we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international customer that we do not do business with regularly.
We manage our business through two reportable operating segments: • Satellite and Space Communications - is organized into four technology areas: satellite modem and amplifier technologies; troposcatter and SATCOM solutions; space components and antennas; and high-power amplifiers and switch technologies.
We manage our business through two reportable operating segments: • Satellite and Space Communications - is organized into four technology areas: satellite modem and amplifier technologies, troposcatter technologies, government services and space components.
Additionally, as of July 31, 2023, net intangibles recorded on our Consolidated Balance Sheet aggregated $225.9 million (of which $65.1 million relates to our Satellite and Space Communications segment and $160.8 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).
Future changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition. 53 Results of Operations The following table sets forth, for the periods indicated, certain income and expense items expressed as a percentage of our consolidated net sales: Fiscal Years Ended July 31, 2023 2022 2021 Gross margin 33.5 % 37.0 % 36.8 % Selling, general and administrative expenses 21.8 % 23.6 % 19.2 % Research and development expenses 8.8 % 10.8 % 8.4 % Amortization of intangibles 3.9 % 4.4 % 3.6 % CEO transition costs 1.7 % 2.8 % — % Proxy solicitation costs — % 2.3 % — % Acquisition plan expenses — % — % 17.2 % Operating loss (2.7) % (6.9) % (11.7) % Interest expense (income) and other 2.9 % 0.7 % 1.2 % Loss before benefit from income taxes (5.6) % (7.6) % (12.9) % Net loss (4.9) % (6.8) % (12.6) % Net loss attributable to common stockholders (6.2) % (8.9) % (12.6) % Adjusted EBITDA (a Non-GAAP measure) 9.7 % 8.1 % 13.2 % For a definition and explanation of Adjusted EBITDA, see " Item 7.
Results of Operations The following table sets forth, for the periods indicated, certain income and expense items expressed as a percentage of our consolidated net sales: Fiscal Years Ended July 31, 2024 2023 2022 Gross margin 29.1 % 33.5 % 37.0 % Selling, general and administrative expenses 22.8 % 21.8 % 23.6 % Research and development expenses 4.5 % 8.8 % 10.8 % Amortization of intangibles 3.9 % 3.9 % 4.4 % Impairment of long-lived assets, including goodwill 11.9 % — % — % CEO transition costs 0.5 % 1.7 % 2.8 % Loss on business divestiture 0.2 % — % — % Proxy solicitation costs — % — % 2.3 % Operating loss (14.8) % (2.7) % (6.9) % Interest expense and other items 3.8 % 2.9 % 0.7 % Loss before benefit from income taxes (18.6) % (5.6) % (7.6) % Net loss (18.5) % (4.9) % (6.8) % Net loss attributable to common stockholders (25.1) % (6.2) % (8.9) % Adjusted EBITDA (a Non-GAAP measure) 8.5 % 9.7 % 8.1 % For a definition and explanation of Adjusted EBITDA, see " Item 7.
Costs associated with some of our warranties that are provided under long-term contracts are incorporated into our estimates of total contract costs. There exist inherent risks and uncertainties in estimating warranty expenses, particularly on larger or longer-term contracts.
We record a liability for estimated warranty expense based on historical claims, product failure rates and other factors. Costs associated with some of our warranties that are provided under long-term contracts are incorporated into our estimates of total contract costs. There exist inherent risks and uncertainties in estimating warranty expenses, particularly on larger or longer-term contracts.
Our provision for income taxes is based on domestic (including federal, state and local) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives. We recognize potential interest and penalties related to uncertain tax positions in income tax expense.
Our provision for income taxes is based on domestic (including federal, state and local) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives. The U.S. federal government is our most significant income tax jurisdiction.
As of July 31, 2023, total goodwill recorded on our Consolidated Balance Sheet aggregated $347.7 million (of which $173.6 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Terrestrial and Wireless Networks segment).
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).
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.
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.
This segment offers customers: satellite ground station technologies, services and system integration that facilitate the transmission of voice, video and data over GEO, MEO and LEO satellite constellations, including solid-state and traveling wave tube power amplifiers, modems, VSAT platforms and frequency converters; satellite communications and tracking antenna systems, including high precision full motion fixed and mobile X/Y tracking antennas, RF feeds, reflectors and radomes; over-the-horizon microwave troposcatter equipment that can transmit digitized voice, video, and data over distances up to 200 miles using the troposphere and diffraction, including the Comtech COMET™; solid-state, RF microwave high-power amplifiers and control components designed for radar, electronic warfare, data link, medical and aviation applications; and procurement and supply chain management of high reliability Electrical, Electronic and Electromechanical ("EEE") parts for satellite, launch vehicle and manned space applications. • 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.
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; 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.
Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. To date, capitalized internally developed software costs were not material, but could increase in the future. Provisions for Excess and Obsolete Inventory. We record a provision for excess and obsolete inventory based on historical and projected usage trends.
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.
The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.
The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. Our common stock trades on the Nasdaq Stock Market LLC ("Nasdaq") under the symbol "CMTL." 57 Recent Sales of Unregistered Securities None.
Any such charge could be material to our results of operations and financial condition. Allowance for Doubtful Accounts. We perform credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information.
Controls and Procedures, " included in this Form 10-K, for further information. Allowance for Doubtful Accounts. We perform credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information.
Excluding $14.0 million in aggregate payments for restructuring costs, including severance, proxy solicitation and CEO transition costs, cash flows provided by operations would have been $9.6 million. Non-GAAP financial measures discussed above are reconciled to the most directly comparable GAAP financial measures in the table included in the below section "
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. Non-GAAP financial measures discussed above are reconciled to the most directly comparable GAAP financial measures in the table included in the below section "
We monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. In light of ongoing tight credit market conditions and high interest rates, we continue to see requests from our customers for higher credit limits and longer payment terms.
In light of ongoing tight credit market conditions and high interest rates, we continue to see requests from our customers for higher credit limits and longer payment terms. We have, on a limited basis, approved certain customer requests.
As such, comparisons between periods and our current results may not be indicative of a trend or future performance. 51 Critical Accounting Policies We consider certain accounting policies to be critical due to the estimation process involved in each. Revenue Recognition.
As such, comparisons between periods and our current results may not be indicative of a trend or future performance.
No valuation allowance has been established on these deferred tax assets based on our evaluation that our ability to realize such assets has met the criteria of "more likely than not." We continuously evaluate additional facts representing positive and negative evidence in determining our ability to realize these deferred tax assets.
Valuation allowances are established, when necessary, to reduce net deferred tax assets to the amount "more-likely-than-not" expected to be realized. We continuously evaluate additional facts representing positive and negative evidence in determining our ability to realize these deferred tax assets. Significant judgment is required in determining income tax provisions and tax positions.
See " Notes to Consolidated Financial Statements - Note (13) - Goodwill and Note (14) - 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. Provision for Warranty Obligations.
Any such charge could be material to our results of operations and financial condition. See " Notes to Consolidated Financial Statements - Note (1)(f) - Inventories " included in " Part II - Item 8. Financial Statements and Supplementary Data, " (which discussion is incorporated herein by reference), and " Part II - Item 9A.
We measure this revenue visibility as the sum of our $662.2 million backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders; and • Cash flows used in operating activities of $4.4 million.
We measure this revenue visibility as the sum of our $798.9 million of funded backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders; and • 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.
We provide warranty coverage for most of our products, including products under long-term contracts, for a period of at least one year from the date of shipment. We record a liability for estimated warranty expense based on historical claims, product failure rates and other factors.
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. Provision for Warranty Obligations. We provide warranty coverage for most of our products, including products under long-term contracts, for a period of at least one year from the date of shipment.
The U.S. federal government is our most significant income tax jurisdiction. Significant judgment is required in determining income tax provisions and tax positions. We may be challenged upon review by the applicable taxing authority and positions taken by us may not be sustained.
For tax positions taken or expected to be taken in a tax return, we account for unrecognized tax benefits using a “more-likely-than-not” threshold for financial statement recognition and measurement. We may be challenged upon review by the applicable taxing authority and positions taken by us may not be sustained.
Removed
Our common stock trades on the Nasdaq Stock Market LLC ("Nasdaq") under the symbol "CMTL." 49 Dividends On September 29, 2022 and December 8, 2022, our Board of Directors declared a dividend of $0.10 per common share, which was paid on November 18, 2022 and February 17, 2023, respectively.
Added
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. 59 Critical Accounting Policies We consider certain accounting policies to be critical due to the estimation process involved in each.
Removed
During the third quarter of fiscal 2023, encouraged by the progress that we have made related to our One Comtech transformation, our launch of EVOKE and our emerging growth opportunities, as previously disclosed, the Board, together with management, adjusted the Company’s capital allocation plans and determined to forgo a common stock dividend, thereby increasing our financial flexibility for future investments.
Added
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.
Removed
Future common stock dividends, if any, remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval and certain voting rights of holders of our Series A Convertible Preferred Stock. Recent Sales of Unregistered Securities None.
Added
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.
Removed
The development of valuation allowances for deferred tax assets and reserves for income tax positions requires consideration of timing and judgments about future taxable income, tax issues and potential outcomes, and are subjective critical estimates. Valuation allowances are established, when necessary, to reduce net deferred tax assets to the amount "more likely than not" expected to be realized.
Added
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.
Removed
A portion of our deferred tax assets consist of federal research and experimentation tax credit carryforwards, some of which was acquired in connection with prior acquisitions.
Added
We recognize potential interest and penalties related to uncertain tax positions in income tax expense. 60 In assessing the need for a valuation allowance for deferred tax assets, we consider all positive and negative evidence, including past financial performance, timing and judgments about future taxable income and tax planning strategies.
Removed
We have, on a limited basis, approved certain customer requests. We continue to monitor our accounts receivable credit portfolio. To-date, there has been no material changes in our credit portfolio as a result of the challenging business conditions.
Added
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.
Removed
Army Global Field Service Representative (“GFSR”) contract or $48.6 million U.S. Army Enterprise Digital Intermediate Frequency Multi-Carrier (“EDIM”) modem contract awarded to us in September 2023).
Added
Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred).
Added
Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces.
Added
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.
Added
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.
Added
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. Provisions for Excess and Obsolete Inventory. We record a provision for excess and obsolete inventory based on historical and projected usage trends.
Added
In addition, we seek to obtain insurance for certain domestic and international customers. 61 We monitor billing events, collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified.
Added
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.
Added
Future changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2024 and 2023 - Adjusted EBITDA." 62 Fiscal 2024 Highlights and Business Outlook for Fiscal 2025 Our financial performance for the fiscal year ended July 31, 2024 includes: • Consolidated net sales of $540.4 million, compared to $550.0 million in fiscal 2023.
Added
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").
Added
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.
Added
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.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

2 edited+0 added−0 removed0 unchanged
Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 51 Overview 51 Critical Accounting Policies 52 Results of Operations 54 Fiscal 2023 Highlights and Business Outlook for Fiscal 2024 55 Comparison of Fiscal 2023 and 2022 57 Comparison of Fiscal 2022 and 2021 63 Liquidity and Capital Resources 63 Recent Accounting Pronouncements 67 ITEM 7A.
Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 59 Overview 59 Critical Accounting Policies 60 Results of Operations 62 Fiscal 2024 Highlights and Business Outlook for Fiscal 2025 63 Comparison of Fiscal 2024 and 2023 66 Comparison of Fiscal 2023 and 2022 73 Liquidity and Capital Resources 74 Recent Accounting Pronouncements 79 ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 67 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 67
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 79 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 79

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

102 edited+109 added−51 removed10 unchanged
Biggest changeFiscal 2023 ($ in millions, except for per share amounts) Operating (Loss) Income Net (Loss) Income Attributable to Common Stockholders Net (Loss) Income per Diluted Common Share Reconciliation of GAAP to Non-GAAP Earnings: GAAP measures, as reported $ (14.7) $ (33.9) $ (1.21) Adjustments to reflect redemption value of convertible preferred stock — 7.0 0.25 Amortization of intangibles 21.4 16.6 0.59 Restructuring costs 10.9 8.3 0.30 Amortization of stock-based compensation 10.1 7.9 0.28 CEO transition costs 9.1 8.6 0.31 Strategic emerging technology costs 3.8 3.4 0.12 Amortization of cost to fulfill assets 1.0 1.0 0.03 Net discrete tax benefit — (0.3) (0.01) Non-GAAP measures $ 41.6 $ 18.5 $ 0.65 Fiscal 2022 ($ in millions, except for per share amounts) Operating (Loss) Income Net (Loss) Income Attributable to Common Stockholders Net (Loss) Income per Diluted Common Share Reconciliation of GAAP to Non-GAAP Earnings: GAAP measures, as reported $ (33.8) $ (43.3) $ (1.63) Adjustments to reflect redemption value of convertible preferred stock — 10.2 0.39 Amortization of intangibles 21.4 16.3 0.62 CEO transition costs 13.6 13.0 0.49 Proxy solicitation costs 11.2 8.7 0.33 Amortization of stock-based compensation 7.8 6.1 0.23 Restructuring costs 6.0 4.6 0.17 Strategic emerging technology costs 1.2 0.9 0.03 COVID-19 related costs 1.1 0.8 0.03 Amortization of cost to fulfill assets 0.5 0.4 0.01 Change in fair value of convertible preferred stock purchase option liability — (1.0) (0.04) Net discrete tax expense — 2.6 0.10 Non-GAAP measures $ 28.9 $ 19.3 $ 0.71 62 Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before income taxes, interest (income) and other, change in fair value of the convertible preferred stock purchase option liability, write-off of deferred financing costs, interest expense, amortization of stock-based compensation, amortization of intangibles, depreciation expense, amortization of cost to fulfill assets, estimated contract settlement costs, settlement of intellectual property litigation, acquisition plan expenses, restructuring costs, COVID-19 related costs, strategic emerging technology costs (for next-generation satellite technology), facility exit costs, CEO transition costs, proxy solicitation costs, strategic alternatives analysis expenses and other.
Biggest changeFiscal 2024 ($ in millions, except for per share amounts) Operating (Loss) Income Net (Loss) Income Attributable to Common Stockholders Net (Loss) Income per Diluted Common Share Reconciliation of GAAP to Non-GAAP Earnings: GAAP measures, as reported $ (79.9) $ (135.4) $ (4.70) Loss on extinguishment of convertible preferred stock — 19.6 0.68 Adjustments to reflect redemption value of convertible preferred stock — 15.9 0.55 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 21.2 16.4 0.57 Restructuring costs 12.5 9.7 0.34 Amortization of stock-based compensation 6.1 4.8 0.17 Strategic emerging technology costs 4.1 3.8 0.13 CEO transition costs 2.9 2.2 0.08 Loss on business divestiture 1.2 1.2 0.04 Amortization of cost to fulfill assets 1.0 1.0 0.03 Net discrete tax expense — 4.1 0.14 Non-GAAP measures $ 33.5 $ 2.8 $ 0.10 72 Fiscal 2023 ($ in millions, except for per share amounts) Operating (Loss) Income Net (Loss) Income Attributable to Common Stockholders Net (Loss) Income per Diluted Common Share Reconciliation of GAAP to Non-GAAP Earnings: GAAP measures, as reported $ (14.7) $ (33.9) $ (1.21) Adjustments to reflect redemption value of convertible preferred stock — 7.0 0.25 Amortization of intangibles 21.4 16.6 0.59 Restructuring costs 10.9 8.3 0.30 Amortization of stock-based compensation 10.1 7.9 0.28 CEO transition costs 9.1 8.6 0.31 Strategic emerging technology costs 3.8 3.4 0.12 Amortization of cost to fulfill assets 1.0 1.0 0.03 Net discrete tax benefit — (0.3) (0.01) Non-GAAP measures $ 41.6 $ 18.5 $ 0.65 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.
These measures are adjusted as described in the reconciliation of GAAP to Non-GAAP in the tables presented herein, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring.
These measures are adjusted as described in the reconciliation of GAAP to Non-GAAP measures in the tables presented herein, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring.
Non-GAAP net (loss) income attributable to common stockholders and net (loss) 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. We evaluate our Non-GAAP effective income tax rate on an ongoing basis, and it can change from time to time.
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. We evaluate our Non-GAAP effective income tax rate on an ongoing basis, and it can change from time to time.
Many of our money market mutual funds invest in direct obligations of the U.S. government, bank securities guaranteed by the Federal Deposit Insurance Corporation, certificates of deposit and commercial paper and other securities issued by other companies. While we cannot predict future market conditions or market liquidity, we believe our investment policies are appropriate in the current environment.
Money market mutual funds we invest in are direct obligations of the U.S. government, bank securities guaranteed by the Federal Deposit Insurance Corporation, certificates of deposit and commercial paper and other securities issued by other companies. While we cannot predict future market conditions or market liquidity, we believe our investment policies are appropriate in the current environment.
As discussed further in " Notes to Consolidated Financial Statements - Note (12) - Commitments and Contingencies, " included in " Part II - Item 8.- Financial Statements and Supplementary Data ," included in this Form 10-K (which discussion is incorporated herein by reference), we are subject to a number of indemnification demands and we are incurring ongoing legal expenses in connection with these matters.
As discussed further in " Notes to Consolidated Financial Statements - Note (13) - Commitments and Contingencies, " included in " Part II - Item 8.- Financial Statements and Supplementary Data ," included in this Form 10-K (which discussion is incorporated herein by reference), we are subject to a number of indemnification demands and we are incurring ongoing legal expenses in connection with these matters.
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 2023 and 2022.
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 2024 and 2023.
Additional information related to our Business Outlook for Fiscal 2024 and a definition and explanation of Adjusted EBITDA is included in the below section "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2023 and 2022." Comparison of Fiscal 2023 and 2022 Net Sales.
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. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2024 and 2023." Comparison of Fiscal 2024 and 2023 Net Sales.
Credit Facility As discussed further in " Notes to Consolidated Financial Statements - Note (7) - Credit Facility " included in " Part II - Item 8.
As discussed further in " Notes to Consolidated Financial Statements - Note (8) - Credit Facility " included in " Part II - Item 8.
Comparison of Fiscal 2022 and 2021 A detailed discussion of fiscal 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in "Part II - Item 7.
Comparison of Fiscal 2023 and 2022 A detailed discussion of fiscal 2023 items and year-over-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in "Part II - Item 7.
As further discussed in " Notes to Consolidated Financial Statements – Note (1)(m) - Adoption of Accounting Standards and Updates " included in " Part II - Item 8.
As further discussed in " Notes to Consolidated Financial Statements – Note (1)(n) - Adoption of Accounting Standards and Updates " included in " Part II - Item 8.
Our U.S federal income tax returns for fiscal 2020 through 2022 are subject to potential future IRS audit. None of our state income tax returns prior to fiscal 2019 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. Net Loss Attributable to Common Stockholders.
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. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. Net Loss Attributable to Common Stockholders.
During fiscal 2023 and 2022, we incurred $3.8 million and $1.2 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.
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.
Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference), our Consolidated Balance Sheet at July 31, 2023 includes total liabilities of $9.2 million for uncertain tax positions, including interest, any or all of which may result in a cash payment.
Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference), our Consolidated Balance Sheet at July 31, 2024 includes total liabilities of $8.6 million for uncertain tax positions, including interest, any or all of which may result in a cash payment.
Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for fiscal 2023 and 2022. Gross Profit. Gross profit was $184.5 million and $179.8 million for fiscal 2023 and 2022, respectively.
Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for fiscal 2024 and 2023. Gross Profit. Gross profit was $157.2 million and $184.5 million for fiscal 2024 and 2023, respectively.
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 2023 and 2022 was computed using weighted average diluted shares outstanding of 28,376,000 and 27,188,000, respectively.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2022 and 2021" in our Annual Report on Form 10-K for the year ended July 31, 2022. Liquidity and Capital Resources Our cash and cash equivalents were $19.0 million and $21.7 million at July 31, 2023 and 2022, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2023 and 2022" in our Annual Report on Form 10-K for the year ended July 31, 2023. 73 Liquidity and Capital Resources Our cash and cash equivalents were $32.4 million and $19.0 million at July 31, 2024 and 2023, respectively.
Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2023 was 1.29x.
Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2024 was 1.03x.
The remaining research and development expenses of $1.0 million and $0.8 million in fiscal 2023 and 2022, respectively, related to the amortization of stock-based compensation expense.
The remaining research and development expenses of $0.5 million and $1.0 million in fiscal 2024 and 2023, respectively, related to the amortization of stock-based compensation expense.
Also, in light of our CEO's initiatives to grow the Company, we continue to review and evaluate our capital allocation plans. Furthermore, we may choose to raise additional funds through equity and debt financing transactions to provide additional flexibility or to pursue acquisitions.
Also, in light of our recently announced strategic transformation 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.
As a percentage of consolidated net sales, selling, general and administrative expenses were 21.8% and 23.6% for fiscal 2023 and 2022, respectively.
As a percentage of consolidated net sales, selling, general and administrative expenses were 22.8% and 21.8% for fiscal 2024 and 2023, respectively.
Amortization relating to intangible assets with finite lives was $21.4 million (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) for both fiscal 2023 and 2022. Proxy Solicitation Costs .
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 $14.1 million was for the Terrestrial and Wireless Networks segment).
Operating income (loss) by reportable segment is shown in the table below: Fiscal Years Ended July 31, 2023 2022 2023 2022 2023 2022 2023 2022 ($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated Operating income (loss) $ 15.0 $ (5.7) $ 12.3 $ 18.9 $ (42.0) $ (47.0) $ (14.7) $ (33.8) Percentage of related net sales 4.5 % NA 5.8 % 9.2 % NA NA NA NA 59 Our GAAP operating loss of $14.7 million for fiscal 2023 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; (v) $3.8 million of strategic emerging technology costs; and (vi) $1.0 million of amortization of cost to fulfill assets, as discussed above.
Operating (loss) income by reportable segment is shown in the table below: Fiscal Years Ended July 31, 2024 2023 2024 2023 2024 2023 2024 2023 ($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated Operating (loss) income $ (54.2) $ 15.0 $ 21.7 $ 12.3 $ (47.4) $ (42.0) $ (79.9) $ (14.7) Percentage of related net sales NA 4.5 % 10.0 % 5.8 % NA NA NA NA Our GAAP operating loss of $79.9 million for fiscal 2024 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; (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, Terrestrial and Wireless Networks and Unallocated segments, respectively); (iv) $6.1 million of amortization of stock-based compensation; (v) $4.1 million of strategic emerging technology costs; (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.
See " Notes to Consolidated Financial Statements - Note (8) -"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.
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. 77 As discussed further in " Notes to Consolidated Financial Statements - Note (16) - Convertible Preferred Stock " included in " Part II - Item 8.
For purposes of determining our 14.5% annual effective tax rate for fiscal 2023, CEO transition costs are considered significant, unusual or infrequently occurring discrete tax items and are excluded from the computation of our effective tax rate. 60 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.
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.
As discussed further in "Notes to Consolidated Financial Statements - Note (18) – Subsequent Events" included in "Part II - Item 8.
As further discussed in " Notes to Consolidated Financial Statements – Note (10) - "Income Taxes " included in " Part II - Item 8.
During fiscal 2023 and 2022, we incurred $10.9 million and $6.0 million, respectively, of restructuring costs primarily to streamline our operations and improve efficiency, including severance and costs related to the relocation of certain of our satellite ground station production facilities to our new 146,000 square foot facility in Chandler, Arizona.
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.
Our effective interest rate (including amortization of deferred financing costs) in fiscal 2023 was approximately 8.9% as compared to 3.4% in fiscal 2022. Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our existing Credit Facility is approximately 9.2%. Interest (Income) and Other. Interest (income) and other for both fiscal 2023 and 2022 was nominal.
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%. Interest (Income) and Other.
Future common stock dividends, if any, remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval and certain voting rights of holders of our Series A Convertible Preferred Stock.
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.
Geography and Customer Type Sales by geography and customer type, as a percentage of related sales, for the fiscal years ended July 31, 2023 and 2022 are as follows: Fiscal Years Ended July 31, 2023 2022 2023 2022 2023 2022 Satellite and Space Communications Terrestrial and Wireless Networks Consolidated U.S. government 49.9 % 45.6 % 1.7 % 2.4 % 31.3 % 27.2 % Domestic 16.7 % 18.0 % 89.2 % 88.1 % 44.7 % 47.8 % Total U.S. 66.6 % 63.6 % 90.9 % 90.5 % 76.0 % 75.0 % International 33.4 % 36.4 % 9.1 % 9.5 % 24.0 % 25.0 % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 57 Sales to U.S. government customers include sales to the DoD, intelligence and civilian agencies, as well as sales directly to or through prime contractors.
Geography and Customer Type Sales by geography and customer type, as a percentage of related sales, for the fiscal years ended July 31, 2024 and 2023 are as follows: Fiscal Years Ended July 31, 2024 2023 2024 2023 2024 2023 Satellite and Space Communications Terrestrial and Wireless Networks Consolidated U.S. government 55.4 % 49.9 % 1.1 % 1.7 % 33.7 % 31.3 % Domestic 15.1 % 16.7 % 89.4 % 89.2 % 44.8 % 44.7 % Total U.S. 70.5 % 66.6 % 90.5 % 90.9 % 78.5 % 76.0 % International 29.5 % 33.4 % 9.5 % 9.1 % 21.5 % 24.0 % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Sales to U.S. government customers include sales to the U.S.
During fiscal 2023 and 2022, consolidated net loss attributable to common stockholders was $33.9 million and $43.3 million, respectively. Adjusted EBITDA.
During fiscal 2024 and 2023, consolidated net loss attributable to common stockholders was $135.4 million and $33.9 million, respectively.
Fiscal 2023 net sales in this segment primarily reflect significantly higher net sales of our troposcatter and SATCOM solutions to both U.S. and international government customers (including delivery of our COMET™ troposcatter terminals to international customers, progress toward delivering next-generation troposcatter terminals to the U.S. Marine Corps and VSAT equipment for the U.S.
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.
Satellite and Space Communications Net sales in our Satellite and Space Communications segment were $337.8 million for fiscal 2023 as compared to $279.7 million for fiscal 2022, an increase of $58.1 million, or 20.8%.
Satellite and Space Communications Net sales in our Satellite and Space Communications segment were $324.1 million for fiscal 2024 as compared to $337.8 million for fiscal 2023, a decrease of $13.7 million, or 4.1%.
Our Satellite and Space Communications segment's gross profit, as a percentage of related segment net sales, for fiscal 2023 decreased in comparison to fiscal 2022. The decrease in gross profit percentage primarily reflects changes in products and services mix, as discussed above.
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 increase in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to an increase in related segment net sales and lower research and development expenses, 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.
In addition, during fiscal 2023 and 2022, we recorded benefits of $2.3 million and $2.5 million, respectively, to cost of sales as we reduced a warranty accrual due to lower than expected warranty claims in our NG-911 product line.
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. Gross profit, as a percentage of related segment net sales, is further discussed below.
Excluding the impact of CEO transition costs, proxy solicitation costs and its respective portion of restructuring charges, Unallocated expenses for fiscal 2023 would have been $29.0 million, as compared to $21.9 million for fiscal 2022.
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.
Terrestrial and Wireless Networks Net sales in our Terrestrial and Wireless Networks segment were $212.2 million for fiscal 2023, as compared to $206.5 million for fiscal 2022, an increase of $5.7 million, or 2.8%, reflecting higher sales of our NG-911 solutions and services, offset in part by lower sales of our trusted location and messaging solutions and cyber security training services.
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.
However, our consolidated gross profit, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each segment, and therefore is inherently difficult to forecast. Selling, General and Administrative Expenses . Selling, general and administrative expenses were $120.0 million and $114.9 million for fiscal 2023 and 2022, respectively.
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.
International sales for fiscal 2023 and 2022 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $132.1 million and $121.4 million, respectively.
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 2024 and 2023 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $115.9 million and $132.1 million, respectively.
The increase in our Satellite and Space Communications segment operating income, both in dollars and as a percentage of the related segment net sales, for fiscal 2023 was driven primarily by an increase in related segment net sales and 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.
Recent Accounting Pronouncements We are required to prepare our consolidated financial statements in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") which is the source for all authoritative U.S. generally accepted accounting principles, which is commonly referred to as "GAAP." The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates ("ASUs").
The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of any potential cash settlement with the taxing authorities. 78 Recent Accounting Pronouncements We are required to prepare our consolidated financial statements in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") which is the source for all authoritative U.S. generally accepted accounting principles, which is commonly referred to as "GAAP." The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates ("ASUs").
Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference), on October 31, 2018, we entered into a First Amended and Restated Credit Agreement (the "Credit Facility") with a syndicate of lenders.
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 $222.0 million credit facility with a new syndicate of lenders, which replaced our prior credit facility. As further discussed below, we subsequently amended the credit facility on October 17, 2024 (the "Credit Facility").
Financial Statements and Supplementary Data, " (which discussion is incorporated herein by reference), included in this Form 10-K, the holders of the Convertible Preferred Stock have the option to redeem such shares for cash commencing in October 2026.
Financial Statements and Supplementary Data, " (which discussion is incorporated herein by reference), included in this Form 10-K, the holders of the Convertible Preferred Stock have the option to redeem such shares for cash: (i) in the event of the occurrence of an asset sale trigger; (ii) in the event of a satisfaction of the existing Credit Facility; and (iii) in all other cases, October 31, 2028.
Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both fiscal 2023 and 2022 are shown in the table below (numbers in the table may not foot due to rounding): Fiscal Years Ended July 31, 2023 2022 2023 2022 2023 2022 2023 2022 ($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated Net income (loss) $ 15.5 (3.9) 12.3 18.8 (54.7) (48.0) $ (26.9) (33.1) Benefit from income taxes (1.7) (1.1) (0.2) — (2.0) (2.9) (3.9) (4.0) Interest (income) and other 1.2 (0.8) 0.2 0.1 (0.2) — 1.2 (0.7) Change in fair value of convertible preferred stock option liability — — — — — (1.0) — (1.0) Interest expense — 0.1 — — 15.0 4.9 15.0 5.0 Amortization of stock-based compensation — — — — 10.1 7.8 10.1 7.8 Amortization of intangibles 7.3 7.3 14.1 14.1 — — 21.4 21.4 Depreciation 4.1 4.0 7.6 6.1 0.2 0.2 11.9 10.3 Amortization of cost to fulfill assets 1.0 0.5 — — — — 1.0 0.5 CEO transition costs — — — — 9.1 13.6 9.1 13.6 Proxy solicitation costs — — — — — 11.2 — 11.2 Restructuring costs 5.7 5.7 1.3 — 3.9 0.3 10.9 6.0 Strategic emerging technology costs 3.8 1.2 — — — — 3.8 1.2 COVID-19 related costs — 1.1 — — — — — 1.1 Adjusted EBITDA $ 37.0 14.1 35.3 39.1 (18.8) (13.9) $ 53.5 39.3 Percentage of related net sales 11.0 % 5.0 % 16.6 % 18.9 % NA NA 9.7 % 8.1 % The increase in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for fiscal 2023 as compared to fiscal 2022 reflects the benefit of our One Comtech lean initiatives implemented through fiscal 2023, as discussed above.
Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both fiscal 2024 and 2023 are shown in the table below (numbers in the table may not foot due to rounding): Fiscal Years Ended July 31, 2024 2023 2024 2023 2024 2023 2024 2023 ($ 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) — Amortization of stock-based compensation — — — — 6.1 10.1 6.1 10.1 Amortization of intangibles 6.7 7.3 14.5 14.1 — — 21.2 21.4 Depreciation 3.9 4.1 7.9 7.6 0.4 0.2 12.2 11.9 Impairment of long-lived assets, including goodwill 64.5 — — — — — 64.5 — Amortization of cost to fulfill assets 1.0 1.0 — — — — 1.0 1.0 CEO transition costs — — — — 2.9 9.1 2.9 9.1 Restructuring costs 3.8 5.7 0.6 1.3 8.1 3.9 12.5 10.9 Strategic emerging technology costs 4.1 3.8 — — — — 4.1 3.8 Loss on business divestiture — — — — 1.2 — 1.2 — Adjusted EBITDA $ 29.8 37.0 44.7 35.3 (28.7) (18.8) $ 45.7 53.5 Percentage of related net sales 9.2 % 11.0 % 20.6 % 16.6 % NA NA 8.5 % 9.7 % 71 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.
At July 31, 2023, cash payments due under contractual obligations (including estimated interest expense on our Credit Facility), excluding purchase orders that we entered into in our normal course of business, are as follows: ($ in thousands) Total Due Within 1 Year Credit Facility - principal payments $ 165,025 4,375 Credit Facility - interest payments 21,532 15,087 Operating and financing lease obligations 57,340 9,478 Contractual cash obligations $ 243,897 28,940 The commitments under our Credit Facility are described in detail above.
At July 31, 2024, cash payments due under contractual obligations (including estimated interest expense on our Credit Facility), excluding purchase orders that we entered into in our normal course of business, are as follows: ($ in thousands) Total Due Within 1 Year Credit Facility - principal payments $ 194,163 4,050 Credit Facility - interest payments 92,800 28,985 Operating lease obligations 43,690 8,263 Contractual cash obligations $ 330,653 41,298 The commitments under our Credit Facility are described in detail above.
As a result, pending or future claims asserted against us by a party that we have agreed to indemnify could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition. 66 We entered into legacy change of control agreements prior to 2022 with certain of our executive officers and certain key employees.
Our insurance policies may not cover the cost of defending indemnification claims or providing indemnification. As a result, pending or future claims asserted against us by a party that we have agreed to indemnify could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition.
For fiscal 2023 and 2022, research and development expenses of $22.4 million and $26.5 million, respectively, related to our Satellite and Space Communications segment, and $25.2 million in both periods, related to our Terrestrial and Wireless Networks segment.
As a percentage of consolidated net sales, research and development expenses were 4.5% and 8.8% for fiscal 2024 and 2023, 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.
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.
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. 76 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.
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.
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.
Order and production delays, disruptions in component availability, increased pricing for labor and parts, lower levels of factory utilization and higher logistics and operational costs also continue to impact our business.
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.
Our investment policy relating to our cash and cash equivalents is intended to minimize principal loss while at the same time maximize the income we receive without significantly increasing risk. To minimize risk, we generally invest our cash and cash equivalents in money market mutual funds (both government and commercial), certificates of deposit, bank deposits, and U.S. Treasury securities.
To minimize risk, we generally invest excess cash and cash equivalents in money market mutual funds (both government and commercial), certificates of deposit, bank deposits, and U.S. Treasury securities.
Included in consolidated cost of sales are provisions for excess and obsolete inventory of $4.9 million and $4.4 million, for fiscal 2023 and 2022, respectively. As discussed in "Item 7.
The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above. 67 Included in consolidated cost of sales are provisions for excess and obsolete inventory of $2.8 million and $4.9 million, for fiscal 2024 and 2023, respectively. As discussed in "Item 7.
Our material cash requirements are for working capital, capital expenditures, income tax payments, debt service (including interest), facilities lease payments, and dividends related to our Convertible Preferred Stock, which are payable in kind or in cash at our election.
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.
We believe that investors and analysts may use Adjusted EBITDA, along with other information contained in our SEC filings, in assessing our performance and comparability of our results with other companies. Our Non-GAAP measures reflect the GAAP measures as reported, adjusted for certain items as described herein and also excludes the effects of our outstanding convertible preferred stock.
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.
For fiscal 2023, our cash flows reflect the following: • Net cash used in operating activities was $4.4 million for fiscal 2023 as compared to net cash provided by operating activities of $2.0 million for fiscal 2022.
For fiscal 2024, our cash flows reflect the following: • Net cash used in operating activities was $54.5 million and $4.4 million for fiscal 2024 and 2023, respectively.
As discussed further in " Notes to Consolidated Financial Statements - Note (15) - Convertible Preferred Stock " included in " Part II - Item 8.
Credit Facility See " Notes to Consolidated Financial Statements - Note (8) - Credit Facility " included in " Part II - Item 8.
Bookings, sales and profitability in our Terrestrial and Wireless Networks segment can fluctuate from period-to-period due to many factors, including changes in the general business environment. Period-to-period fluctuations in bookings are normal for this segment. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance.
Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2024 was 1.70x. 66 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.
We have not quantitatively reconciled our Q1 fiscal 2024 Adjusted EBITDA target to the most directly comparable GAAP measure because items such as adjustments to the provision for income taxes, and interest expense, which are specific items that impact these measures, have not yet occurred, are out of our control, or cannot be predicted.
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.
Excluding $14.0 million and $15.9 million in aggregate payments for restructuring costs, including severance, proxy solicitation costs and CEO transition costs in fiscal 2023 and 2022, respectively, cash flows provided by operations would have been $9.6 million and $17.9 million, 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.
Our Terrestrial and Wireless Networks segment represented 38.6% of consolidated net sales for fiscal 2023 as compared to 42.5% for fiscal 2022. Our book-to-bill ratio (a measure defined as bookings divided by net sales) for this segment was 0.74x.
Our Terrestrial and Wireless Networks segment represented 40.0% of consolidated net sales for fiscal 2024 as compared to 38.6% for fiscal 2023.
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. 61 Reconciliations of our GAAP consolidated operating (loss) income, net (loss) income attributable to common stockholders and net (loss) income per diluted common share for fiscal 2022 and 2021 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).
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).
Following a careful review of our current business and product lines, considering the kind of software and solutions-based enterprise our customers need us to be in the future, we saw an opportunity to divest our solid state power amplifier product line.
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.
Consolidated net sales were $550.0 million and $486.2 million for fiscal 2023 and 2022, respectively, representing an increase of $63.8 million, or 13.1%. The period-over-period increase in net sales primarily reflects significantly higher net sales in our Satellite and Space Communications segment, as further discussed below.
Consolidated net sales were $540.4 million and $550.0 million for fiscal 2024 and 2023, respectively, representing a decrease of $9.6 million, or 1.7%. 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.
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.
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.
We expect capital investments for these and other initiatives to continue in fiscal 2024. 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.
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.
All of our available cash and cash equivalents are currently invested in bank deposits and money market deposit accounts which, at this time, are currently yielding an immaterial interest rate. Change in Fair Value of Convertible Preferred Stock Purchase Option Liability.
Interest (income) and other for both fiscal 2024 and 2023 was nominal. All of our available cash and cash equivalents are currently invested in bank deposits and money market deposit accounts which, at this time, are currently yielding an immaterial interest rate. Write-off of Deferred Financing Costs.
We also made $2.9 million and $6.1 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during fiscal 2023 and 2022, respectively. 63 The Credit Facility is discussed below and in "Notes to Consolidated Financial Statements - Note (7) - Credit Facility" included in "Part II - Item 8.
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.
Our definition of Adjusted EBITDA may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is also a measure frequently requested by our investors and analysts.
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.
During fiscal 2023 and 2022, customers reimbursed us $14.0 million and $9.8 million, respectively, which is not reflected in the reported research and development expenses but is included in net sales with the related costs included in cost of sales. Amortization of Intangibles.
During fiscal 2024 and 2023, customers reimbursed us $18.9 million and $14.0 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. 68 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.
Excluding restructuring costs, selling, general and administrative expenses for fiscal 2023 and 2022 would have been $109.2 million or 19.9% and $108.9 million or 22.4%, respectively, of consolidated net sales. The decrease in our selling, general and administrative expenses, as a percentage of consolidated net sales, is primarily due to higher consolidated net sales, as discussed above.
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. Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $4.8 million in fiscal 2024 as compared to $8.0 million in fiscal 2023.
Our GAAP operating loss of $33.8 million for fiscal 2022 reflects: (i) $21.4 million of amortization of intangibles; (ii) $13.6 million of CEO transition costs; (iii) $11.2 million of proxy solicitation costs; (iv) $7.8 million of amortization of stock-based compensation; (v) $6.0 million of restructuring costs; (vi) $1.2 million of strategic emerging technology costs; (vii) $1.1 million of incremental operating costs due to the lingering impact of COVID-19; and (viii) $0.5 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. 69 Our GAAP operating loss of $14.7 million for fiscal 2023 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; (v) $3.8 million of strategic emerging technology costs; and (vi) $1.0 million of amortization of cost to fulfill assets, as discussed above.
Foundational to this success: Comtech’s professional engineering services and extensive portfolio of resilient, blended, smart-enabled technologies. • Also, in September 2023, we were honored to win a highly competitive $48.6 million contract to deliver next-generation EDIM modems for the U.S. Army's satellite communications ("SATCOM") digitization and modernization programs.
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. Army's satellite communications ("SATCOM") digitization and modernization programs.
Our Terrestrial and Wireless Networks segment's gross profit, as a percentage of related segment net sales, for fiscal 2023 decreased in comparison to fiscal 2022. The gross profit percentage in fiscal 2023 primarily reflects changes in products and services mix, as discussed above.
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.
No assurances can be given that a transaction will be consummated and the Investors reserve the right to withdraw the proposal at any time. Commitments 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.
Commitments In the normal course of business, other than as discussed below, we routinely enter into binding and non-binding purchase obligations primarily covering anticipated purchases of inventory and equipment. We do not expect that these commitments, as of July 31, 2024, will materially adversely affect our liquidity.
All of these agreements may require payments by us, in certain circumstances, including, but not limited to, a change in control of the Company or termination of the employee. As further discussed in " Notes to Consolidated Financial Statements – Note (9) - "Income Taxes " included in " Part II - Item 8.
We entered into employment and/or change of control agreements with certain of our executive officers and certain key employees. All of these agreements may require payments by us, in certain circumstances, including, but not limited to, a change in control of the Company or termination of the employee.
Net cash used during fiscal 2023 and 2022 primarily reflects capital expenditures to build-out cloud-based computer networks to support our previously announced NG-911 contract wins and capital investments and building improvements in connection with the opening of our new high-volume technology manufacturing centers.
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.
Financial Statements and Supplementary Data" included in this Form 10-K. The Convertible Preferred Stock is discussed below and in "Notes to Consolidated Financial Statements - Note (15) - Convertible Preferred Stock" included in "Part II - Item 8. Financial Statements and Supplementary Data" included in this Form 10-K.
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.
The period-over-period decrease in cash flow from operating activities reflects overall changes in net working capital requirements, principally the timing of shipments, billings and payments. • Net cash used in investing activities for fiscal 2023 and 2022 was $18.3 million and $19.6 million, respectively.
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.
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. • Finally, increasing our potential revenue visibility, we were recently selected as one of multiple awardees under the Defense Logistics Agency's Gateway to Sustainment indefinite delivery, indefinite quantity contract, with a ceiling value of $3.2 billion.
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.
Based on our current revenue visibility, we believe that our existing cash and cash equivalent balances, our cash generated from operating activities and amounts potentially available under our Credit Facility will be sufficient to meet our currently anticipated cash requirements in the next twelve months and beyond. 64 Our material cash requirements could increase beyond our current expectations due to factors such as general economic conditions, a change in government spending priorities, larger than usual customer orders, or a future redemption by the holders of our Series A Convertible Preferred Stock.
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; (ii) general economic conditions; (iii) a change in 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of July 31, 2023, we had cash and cash equivalents of $19.0 million, which consisted of cash and highly-liquid money market deposit accounts. Many of these investments are subject to fluctuations in interest rates, which could impact our results.
Biggest changeAs of July 31, 2024, we had cash and cash equivalents of $32.4 million, which consisted of cash and highly-liquid money market deposit accounts. Many of these investments are subject to fluctuations in interest rates, which could impact our results.
Based on our investment portfolio balance as of July 31, 2023, a hypothetical change in interest rates of 10% would have a nominal impact on interest income over a one-year period. Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.
Based on our investment portfolio balance as of July 31, 2024, a hypothetical change in interest rates of 10% would have a nominal impact on interest income over a one-year period. Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.
Based on the amount of outstanding debt under our Credit Facility, a hypothetical change in interest rates by 10% would change interest expense by approximately $1.5 million over a one-year period.
Based on the amount of outstanding debt under our Credit Facility, a hypothetical change in interest rates by 10% would change interest expense by approximately $2.7 million over a one-year period.

Other CMTL 10-K year-over-year comparisons