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What changed in COMTECH TELECOMMUNICATIONS CORP /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of COMTECH TELECOMMUNICATIONS CORP /DE/'s 2022 and 2023 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 2023 report.

+488 added−535 removedSource: 10-K (2023-10-12) vs 10-K (2022-09-29)

Top changes in COMTECH TELECOMMUNICATIONS CORP /DE/'s 2023 10-K

488 paragraphs added · 535 removed · 321 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

91 edited+50 added−23 removed119 unchanged
Biggest changeIn addition, in recent years, we have found that overall sales cycles for each of our product lines have significantly increased. 10 Sales by geography and customer type, as a percentage of related net sales, are as follows: Fiscal Years Ended July 31, 2022 2021 2020 2022 2021 2020 2022 2021 2020 Satellite and Space Communications Terrestrial and Wireless Networks Consolidated U.S. government 45.6 % 52.8 % 53.7 % 2.4 % 1.4 % 1.2 % 27.2 % 34.6 % 36.2 % Domestic 18.0 % 15.3 % 15.2 % 88.1 % 89.2 % 90.3 % 47.8 % 41.5 % 40.3 % Total U.S. 63.6 % 68.1 % 68.9 % 90.5 % 90.6 % 91.5 % 75.0 % 76.1 % 76.5 % International 36.4 % 31.9 % 31.1 % 9.5 % 9.4 % 8.5 % 25.0 % 23.9 % 23.5 % 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 U.S.
Biggest changeSales 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.
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 ™ , 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, our solid-state amplifiers and our X/Y antennas will ultimately be incorporated into many new installations and equipment upgrades.
We also make announcements regarding company developments and financial and operating performance through our blog, Signals, at www.comtech.com/comtech-signals . We also use our website to disseminate other material information to our investors (on the Home Page and in the "Investor Relations" section).
We also make announcements regarding company developments and financial and operating performance through our blog, Signals, at www.comtech.com/signals . We also use our website to disseminate other material information to our investors (on the Home Page and in the "Investor Relations" section).
Comtech is well positioned to serve the high-performance, high availability needs of satellite-based cellular backhaul through sales of our SCPC and TDMA satellite modems as well as our Heights TM , ELEVATE TM and UHP networking platforms. • Government and Military Satellite Communications: Government users rely on high-speed connectivity in a variety of conditions throughout the world to provide real time information sharing, including Situational Awareness (“SA”), dissemination of Intelligence, Surveillance, and Reconnaissance (“ISR”) information, and communications.
Comtech is well positioned to serve the high-performance, high availability needs of satellite-based cellular backhaul through sales of our SCPC and TDMA satellite modems as well as our Heights TM , ELEVATE TM and UHP networking platforms. 5 • Government and Military Satellite Communications: Government users rely on high-speed connectivity in a variety of conditions throughout the world to provide real time information sharing, including Situational Awareness (“SA”), dissemination of Intelligence, Surveillance, and Reconnaissance (“ISR”) information, and communications.
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. 11 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 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.
Due to our market leadership position, we do not expect that upon expiration of these patents, our future results will be negatively impacted. 12 We have a portfolio of several hundred patents worldwide relating to wireless location services, text messaging, GPS ephemeris data, emergency public safety data routing, electronic commerce and other areas.
Due to our market leadership position, we do not expect that upon expiration of these patents, our future results will be negatively impacted. We have a portfolio of several hundred patents worldwide relating to wireless location services, text messaging, GPS ephemeris data, emergency public safety data routing, electronic commerce and other areas.
In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services. Our costs to comply with the GDPR as well any other similar laws and regulations that emerge may negatively impact our business. 17
In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services. Our costs to comply with the GDPR as well any other similar laws and regulations that emerge may negatively impact our business.
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, health and welfare benefits, among many others. We support pay equity for all employees within the same geographic area, experience level, and performance standards.
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.
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.
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.
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. 9 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 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Comparison of Fiscal 2022 and 2021 – 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 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.
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. 13 Corporate Responsibility and Sustainability We recognize the need for driving corporate responsibility within our organization, throughout our supplier network and in our communities.
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. 14 Corporate Responsibility and Sustainability We recognize the need for driving corporate responsibility within our organization, throughout our supplier network and in our communities.
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 Department of Defense 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 Defense Federal Acquisition Regulation supplement (commonly known as "DFARs").
(a subsidiary of Teledyne Technologies Incorporated), Raytheon Technologies Corporation, SatixFy Israel Ltd., ST Engineering iDirect, Inc. (including Newtec), Terrasat Communications Inc., and ViaSat, Inc. Terrestrial and Wireless Networks – AT&T Inc., Atos, Bandwidth.com, CalAmp Corp., Carbyne, Central Square Technologies, 8x8, Inc., Everbridge, Inc., Google Inc.
(a subsidiary of Teledyne Technologies Incorporated), Raytheon Technologies Corporation, SatixFy Israel Ltd., ST Engineering iDirect, Inc. (including Newtec), Terrasat Communications Inc., and ViaSat, Inc. Terrestrial and Wireless Networks – AT&T Inc., Atos, Bandwidth.com, Carbyne, Central Square Technologies, 8x8, Inc., Everbridge, Inc., Google Inc.
We focus on expanding our diverse workforce by reaching out to institutions promoting the employment of minorities, attending recruiting events aimed at attracting talent of diverse heritage and veteran backgrounds, as well as by considering diversity of our workforce during our talent, promotion, and succession planning.
We focus on expanding our diverse workforce by reaching out to institutions promoting the employment of minorities; attending recruiting events aimed at attracting talent of diverse heritage and veteran backgrounds; and considering diversity of our workforce during our talent, promotion, and succession planning.
On the legacy front, our LBS platform is compatible within 2G through 4G wireless networks, as well as an enabler to the MNOs to seamlessly migrate to cloud native environments, as they start their migrations to 5G. 7 • Comtech INSIGHTS™ LightSource™: Provides first responders a reporting and analytics platform for the rich data created in Comtech’s NG-911 core systems.
On the legacy front, our LBS platform is compatible within 2G through 4G wireless networks, as well as an enabler to the MNOs to seamlessly migrate to cloud native environments, as they progress their migrations to 5G. • Comtech INSIGHTS™ LightSource™: Provides first responders a reporting and analytics platform for the rich data created in Comtech’s NG-911 core systems.
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 2022, 2021 and 2020.
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.
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 2023, we expect to continue expanding our social media and Internet presence and 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 2024, we expect to continue expanding our social media and Internet presence and further developing an updated marketing and branding strategy.
We estimate that a substantial portion of the backlog as of July 31, 2022 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, 2023 will be recognized as sales during the next twenty-four month period, with the rest thereafter.
During fiscal 2022 and 2021, we incurred $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 likely to incur additional costs in fiscal 2023.
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.
SmartResponse™ is available for use in both emergency centers and response vehicles. • Wireless Emergency Alerts (“WEA”): WEA, also known as Commercial Mobile Alerts System (“CMAS”) in the US, 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. 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.
Medical equipment companies, such as Varian Medical Systems, Inc., and aviation industry system integrators such as Collins Aerospace (a subsidiary of Raytheon Technologies Corporation) End-customers also include BT Group plc., China Mobile Limited, Claro Argentina, Intelsat S.A., JAXA, NASA, QUALCOMM Incorporated, SED Systems (a division of Calian Ltd.), SES S.A. and Speedcast International Limited Oil companies such as Shell Oil Company and PETRONAS U.S. state and local governments, such as the Commonwealth of Massachusetts, the Commonwealth of Pennsylvania and the states of Arizona, Iowa, Maine, New Hampshire, South Carolina, Vermont and Washington End-customers also include AT&T Inc., Lumen Technologies, Inc.
Medical equipment companies, such as Varian Medical Systems, Inc., and aviation industry system integrators such as Collins Aerospace (a subsidiary of Raytheon Technologies Corporation) End-customers also include China Mobile Limited, Claro Argentina, Intelsat S.A., JAXA, NASA, SED Systems (a division of Calian Ltd.), SES S.A. and Speedcast International Limited Oil companies such as Shell Oil Company and PETRONAS U.S. state and local governments, such as the Commonwealth of Massachusetts, the Commonwealth of Pennsylvania and the states of Arizona, Iowa, Maine, Ohio, New Hampshire, South Carolina, Vermont and Washington End-customers also include AT&T Inc., Lumen Technologies, Inc.
Broadly, the increasing digitization of people and businesses, and the ongoing migration to the cloud, means a growing reliance on communications and connectivity, and a corresponding increase in the volumes of data transmission. We believe this is a long-term secular opportunity for Comtech given our market-leading positions in, and understanding of, the fast-evolving Failsafe Communications markets.
Broadly, the increasing digitalization of people and businesses, and the ongoing migration to the cloud, means a growing reliance on communications and connectivity, and a corresponding increase in the volumes of data transmission. We believe this is a long-term secular opportunity for Comtech given our market-leading positions in, and understanding of, these fast-evolving markets.
The Comtech COMET™, introduced two years ago, is a rapidly deployable OTH microwave system that directly addresses a void in capabilities that have long been desired by tactical communications planners: low probability of intercept and low probability of detection (“LPI/LPD”), while providing high reliability, mission essential communications.
The Comtech COMET™ is a rapidly deployable OTH microwave system that directly addresses a void in capabilities that have long been desired by tactical communications planners: low probability of intercept and low probability of detection (“LPI/LPD”), while providing high reliability, mission essential communications.
A table illustrating representative customers is provided below. 8 Satellite and Space Communications Segment Representative Customers Terrestrial and Wireless Networks Segment Representative Customers Satellite systems integrators, wireless and other communication service providers, and broadcasters, such as DIRECTTV Group and EchoStar Corporation U.S. Army, the U.S. Marine Corps, the U.S. Navy, prime contractors to the U.S.
A table illustrating representative customers is provided below. 9 Satellite and Space Communications Segment Representative Customers Terrestrial and Wireless Networks Segment Representative Customers Satellite systems integrators, wireless and other communication service providers, and broadcasters, such as DIRECTTV Group U.S. Army, the U.S. Marine Corps, the U.S. Navy, prime contractors to the U.S.
In addition, we are subject to the Foreign Corrupt Practices Act ("FCPA") and other local laws that generally bar bribes or unreasonable gifts to foreign governments or officials.
In addition, we are subject to the FCPA and other local laws that generally bar bribes or unreasonable gifts to foreign governments or officials.
Information and updates about our Annual Meetings will continue to be posted on our website at www.comtech.com in the "Investor Relations" section.
Information and updates about our Annual Meetings will continue to be posted on our website at www.comtech.com in the "Investors" section.
Safety and Wellness We strive to maintain a robust health, safety and wellness program to ensure a healthy work environment, promote workforce resiliency, and enhance business value. We encourage employee participation to identify opportunities for improvement and review and monitor our performance with safety committees on the local level.
Safety and Wellness We strive to maintain a robust health, safety and wellness program to ensure a healthy work environment, promote workforce resiliency, and enhance business value. We encourage employee participation to identify opportunities for improvement and review and monitor our performance with safety committees at our local sites.
Internal research and development expenses are reported as research and development expenses for financial reporting purposes and were $52.5 million, $49.1 million and $52.2 million in fiscal 2022, 2021 and 2020, respectively, representing 10.8%, 8.4% and 8.5% 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 $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.
With the advent of 5G networks, new network-based positioning technologies are poised to deliver opportunities thanks to the ongoing digital transformation of multiple industry verticals, including the Public Safety, Transportation, Manufacturing, Healthcare and Retail industries.
In the growth area of 5G networks, new network-based positioning technologies are poised to deliver opportunities thanks to the ongoing digital transformation of multiple industry verticals, including the Public Safety, Transportation, Manufacturing, Healthcare and Retail industries.
Army’s AN/TSC-198 family of communication systems that are commonly referred to as "SNAP" (Secret Internet Protocol Router ("SIPR") and Non-secure Internet Protocol Router ("NIPR") Access Point) VSATs, support for the Army “SCOUT” (Scalable Class of Unified Terminals), and Army T2C2 (Tactical Command Communication). We also provide sustainment services for the U.S.
Army’s AN/TSC-198 family of communication systems that are commonly referred to as "SNAP" (Secret Internet Protocol Router ("SIPR") and Non-secure Internet Protocol Router ("NIPR") Access Point) VSATs, support for the Army “SCOUT” (Scalable Class of Unified Terminals), and Army T2C2 (Tactical Command Communication).
The Ka band LEO and MEO amplifiers that we design and manufacture for large commercial customers’ non-GEO constellations represent key strategic wins as we build position in higher frequency bands.
The Ka band Low Earth orbit ("LEO") and Medium Earth orbit ("MEO") amplifiers that we design and manufacture for large commercial customers’ non-GEO constellations represent key strategic wins as we build positions in higher frequency bands.
During fiscal 2022, 2021 and 2020, we were reimbursed by customers for such activities in the amounts of $9.8 million, $13.6 million and $11.9 million, respectively.
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.
The diagram below summarizes our key products, systems, and services by our two reportable operating segments: 1 Satellite and Space Communications Segment (Approximately 58% of fiscal 2022 net sales) Terrestrial and Wireless Networks Segment (Approximately 42% of fiscal 2022 net sales) • 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 equipment that can transmit digitized voice, video, and data over distances up to 200 miles using the troposphere and diffraction, including the Comtech COMET TM • Solid-state, RF microwave high-power amplifiers and control components designed for radar, electronic warfare, data link, medical and aviation applications • Procurement and supply chain management of high reliability EEE parts for satellite, launch vehicle and manned space applications • Field support sustainment services and technology insertion services primarily supporting tactical VSAT systems, Blue Force Tracking Systems and cybersecurity training services • Wireless/VolP 911 location and routing services to connect emergency calls to Public Safety Answering Points • SMS Text to 911 services, providing alternate paths for individuals who need to request assistance (via text messaging) a method to reach Public Safety Answering Points • Next Generation 911 solutions, providing emergency call routing, location validation, policy-based routing rules, logging, and security functionality • Emergency Services IP Network transport infrastructure for emergency services communications and support of Next Generation 911 services • Call handling applications for Public Safety Answering Points • Wireless emergency alerts solutions for network operators • Software and equipment for location-based and text messaging services for various applications, including for public safety, commercial and government services • Cybersecurity training, skills labs, and competency assessments for both technical and non-technical applications The markets and key technologies for each segment are further described below.
The diagram below summarizes our key products, systems, and services by our two reportable operating segments: Satellite and Space Communications Segment (Approximately 61% of fiscal 2023 net sales) Terrestrial and Wireless Networks Segment (Approximately 39% of fiscal 2023 net sales) • 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 equipment that can transmit digitized voice, video, and data over distances up to 200 miles using the troposphere and diffraction, including the Comtech COMET TM • Solid-state, RF microwave high-power amplifiers and control components designed for radar, electronic warfare, data link, medical and aviation applications • Procurement and supply chain management of high reliability EEE parts for satellite, launch vehicle and manned space applications • Field support sustainment services and technology insertion services primarily supporting tactical VSAT systems, Blue Force Tracking Systems and cybersecurity training services • Wireless/VolP 911 location and routing services to connect emergency calls to Public Safety Answering Points • SMS Text to 911 services, providing alternate paths for individuals who need to request assistance (via text messaging) a method to reach Public Safety Answering Points • Next Generation 911 solutions, providing emergency call routing, location validation, policy-based routing rules, logging, and security functionality • Emergency Services IP Network transport infrastructure for emergency services communications and support of Next Generation 911 services • Call handling applications for Public Safety Answering Points • Wireless emergency alerts solutions for network operators • Software and equipment for location-based and text messaging services for various applications, including for public safety, commercial and government services • Cybersecurity training, skills labs, and competency assessments for both technical and non-technical applications Financial information about our business segments, including net sales, operating income, Adjusted EBITDA (a Non-GAAP financial measure), total assets, and our operations outside the United States, is provided in " Notes to Consolidated Financial Statements - Note (11) Segment Information" included in "Part II - Item 8.
(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 2022, we achieved consolidated net sales of $486.2 million and Adjusted EBITDA of $39.3 million.
(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.
These High-Power Amplifiers (“HPAs”) are used in critical communications links on the ground, in the air and on the sea; they support fixed traditional and direct-to-home broadcast, mobile news gathering, transportable and flyaway systems, secure high data rate communications, and broadband access over satcom. These products include configurations that are formally qualified for use on aircraft.
These High-Power Amplifiers (“HPAs”) are used in critical communications links on the ground, in the air and on the sea; they support fixed traditional and direct-to-home broadcast, mobile news gathering, transportable and flyaway systems, secure high data rate communications, and broadband access over satcom.
Our manufacturing facilities, which may store, handle, emit, generate and dispose of hazardous substances that are used in the manufacture of our products, are subject to a variety of local, state and federal regulations, including those issued by the Environmental Protection Agency.
Our manufacturing facilities, which may store, handle, emit, generate and dispose of hazardous substances that are used in the manufacture of our products, are subject to a variety of local, state and federal regulations, including those issued by the Environmental Protection Agency. Our products are also subject to European Union directives related to the recycling of electrical and electronic equipment.
At July 31, 2022, we had 1,993 employees (including temporary employees and contractors), 1,143 of whom were engaged in production and production support, 498 in research and development and other engineering support, and 352 in marketing and administrative functions. None of our U.S. based employees are represented by a labor union.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Outlook for Fiscal 2023 .” For a definition and explanation of Adjusted EBITDA, see Part II – “Item 7.
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.
At July 31, 2022, 72.7% of our backlog consisted of orders for use by U.S. commercial customers, 11.6% consisted of U.S. government contracts, subcontracts and government funded programs and 15.7% 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, 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).
(a subsidiary of HEICO Corp.), ENENSYS Technologies, ETM Electromatic Inc., Gilat Satellite Networks Ltd., Empower RF Systems, Inc., Envistacom, LLC, General Dynamics Corporation, Hughes Network Systems, LLC (a subsidiary of EchoStar), KVH Industries, Inc., L3Harris Technologies, Inc., Mission Microwave Technologies, LLC, ND Satcom GmbH, Panasonic Corporation, Paradise Datacom Ltd.
(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.
Human Capital We realize that our employees are one of our most valuable assets and believe our success depends on the talent we attract and retain, which is why we are developing what we call our People Strategy.
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.
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 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.
We have made significant investments to provide ongoing training and career development by offering courses on our online learning management system. We offer job-specific skills training to promote and develop advancement within the organization and to enhance skills.
We recognize and reward performance while continually developing, engaging and retaining high-performing employees. We have made significant investments to provide ongoing training and career development opportunities by offering courses on our online learning management system. We offer job-specific skills training to promote and develop advancement within the organization and to enhance skills.
Our products are also subject to European Union directives related to the recycling of electrical and electronic equipment. 16 Our international sales are subject to U.S. and foreign regulations such as the Arms Export Control Act, the International Emergency Economic Powers Act ("IEEPA"), the International Traffic in Arms Regulations ("ITAR"), the Export Administration Regulations ("EAR") and the trade sanctions laws and regulations administered by the U.S.
Our international sales are subject to U.S. and foreign regulations such as the Arms Export Control Act, the International Emergency Economic Powers Act ("IEEPA"), the International Traffic in Arms Regulations ("ITAR"), the Export Administration Regulations ("EAR") and the trade sanctions laws and regulations administered by the U.S.
We see these two end-markets as part of what Comtech has identified as the “Failsafe Communications Market.” This includes the critical communications infrastructure that people, businesses, and governments rely on when durable, trusted connectivity is required, no matter where they are – on land, at sea, or in the air – and no matter what the circumstances – from armed conflict to a natural disaster.
This includes the critical communications infrastructure that people, businesses, and governments rely on when durable, trusted connectivity is required, no matter where they are – on land, at sea, or in the air – and no matter what the circumstances – from armed conflict to a natural disaster.
Our solutions are designed to fulfill our customers’ needs for secure wireless communications in the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical and other scenarios where performance is crucial. We anticipate future growth in our business due to increasing demand for global voice, video and data usage.
Our solutions are designed to fulfill our customers’ needs for secure wireless communications in the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical and other scenarios where performance is crucial.
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.
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).
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 ." 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.
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. 4 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.
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.
When we sell internationally, we denominate most of our contracts in U.S. dollars. Some of our sales to international customers are paid for by letters of credit or on an open account. From time to time, some of our international customers may require us to provide performance guarantees.
Some of our sales to international customers are paid for by letters of credit or on an open account. From time to time, some of our international customers may require us to provide performance guarantees.
Because of this, satellite communications are increasingly bridging gaps created by challenging geographies, or a lack of terrestrial infrastructure altogether. Comtech is increasingly delivering solutions to companies and countries seeking to bridge these gaps, whether across legacy 4G networks, or through the introduction of 5G networks, as operators seek ways to optimize implementation, control costs, and mitigate security risks.
Comtech is increasingly delivering solutions to companies and countries seeking to bridge these gaps, whether across legacy 4G networks, or through the introduction of 5G networks, as operators seek ways to optimize implementation, control costs, and mitigate security risks.
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., Agilis Satcom, AMERGINT Technologies, Inc., AnaCom, Inc., Codan Limited, CPI International, Inc., Datum Systems, Inc., dB Control Corp.
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.
Training in and compliance with our Standards of Business Conduct and Trade and FCPA compliance is also mandatory among our employees. 14 Through certain government contracts that we participate in, we partner with our end customer to provide enlisted, active military personnel (whose service is expected to end within 6 months) onsite training to help them with a successful transition to a civilian life.
Through certain government contracts that we participate in, we partner with our end customers to provide enlisted, active military personnel (whose service is expected to end within 6 months) onsite training to help them with a successful transition to a civilian life.
Of our 1,993 employees, 496 employees are based outside of the United States, including 148 employees in the United Kingdom, 139 employees in India and 138 employees in Canada. We believe that our employee relations are good.
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.
The U.S. government may be unable to complete its budget process before the end of any given government fiscal year and when the fiscal budget is not approved in a timely manner, the U.S. government is required either to shut down or be funded pursuant to a "continuing resolution" that authorizes agencies of the U.S. government to continue operations but does not authorize new spending initiatives, either of which could result in reduced or delayed orders or payments for products and services we provide. 15 Sole-source contracts are generally awarded to a single contractor without a formal competition when a single contractor is deemed to have an expertise or technology superior to that of competing contractors or when there is an urgent need by the U.S. government that cannot wait for a full competitive process.
The U.S. government may be unable to complete its budget process before the end of any given government fiscal year and when the fiscal budget is not approved in a timely manner, the U.S. government is required either to shut down or be funded pursuant to a "continuing resolution" that authorizes agencies of the U.S. government to continue operations but does not authorize new spending initiatives, either of which could result in reduced or delayed orders or payments for products and services we provide.
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.
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.
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.
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.
We have designed, manufactured, and delivered troposcatter systems (sometimes referred to as over-the-horizon ("OTH") microwave products and systems) for over fifty years.
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.
Finally, we believe we are well-positioned in the millimeter wave ("mmWave") market and expect that market to continue to grow as new satellite constellations move into those higher, less crowded frequencies.
These products include configurations that are formally qualified for use on aircraft and being installed as both retrofit and linefit initiatives. Finally, we believe we are well-positioned in the millimeter wave ("mmWave") market and expect that market to continue to grow as new satellite constellations move into those higher, less crowded frequencies.
Department of Defense ("DoD") personnel with curriculum development and training services to support cybersecurity workforce development. 3 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 NASA programs as well as several international space and defense agencies.
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.
Employee wellness is important to Comtech. All employees and their households have access to an employee assistance program, as well as a health advocate program to help with all aspects of benefits, family life, financial concerns, legal issues and transition to retirement. Assistance is available 365 days per year, 24 hours per day.
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.
Backlog Our backlog as of July 31, 2022 was $618.1 million (of which $192.4 million was attributed to the Satellite and Space Communications segment and $425.7 million was attributed to the Terrestrial and Wireless Networks segment).
Backlog Our backlog as of July 31, 2023 was $662.2 million (of which $293.4 million was attributed to the Satellite and Space Communications segment and $368.8 million was attributed to the Terrestrial and Wireless Networks segment).
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.
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.
Our solid-state, high-power RF microwave amplifiers and related switching control technologies are utilized in many critical applications, including electronic warfare, communications, radar, data link, IFF and medical applications (such as oncology treatment systems).
As our customers push the envelope for mobility, speed and frequency, we believe that demand for high-performance transmission products will increase over time. 4 Our solid-state, high-power RF microwave amplifiers and related switching control technologies are utilized in many critical applications, including electronic warfare, communications, radar, data link, IFF and medical applications (such as oncology treatment systems).
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.
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.
The actual amount and timing of any revenue is subject to various contingencies, many of which are beyond our control.
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.
High Power Amplifiers and Switches We offer several unique high-performance transmit and receive technologies used in sophisticated communication systems, including electronic warfare, radar, data link, medical and identification friend or foe ("IFF"). As our customers push the envelope for mobility, speed and frequency, we believe that demand for high-performance transmission products will increase over time.
High Power Amplifiers and Switches We offer several unique high-performance transmit and receive technologies used in sophisticated communication systems, including electronic warfare, radar, data link, medical and identification friend or foe ("IFF").
(a subsidiary of Alphabet Inc.), Here Technologies, Immersive Labs, INdigital, Intrado Corporation (formerly West Corporation), LM Ericsson, Lumen Technologies, Inc. (formerly CenturyLink, Inc.), Mobile Arts AB, Motorola Solutions, Inc., NGA911, Nokia Networks (a subsidiary of Nokia Corporation), RapidDeploy, Inc., Rave Mobile Safety, Sinch AB (Inteliquent), Synergem Technologies, ThriveDX, and TomTom N.V.
(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.
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.
In past instances where we have provided government-purpose rights, to our knowledge, the U.S. government has not exercised any of these rights.
Except for the U.S. government, there were no customers that represented more than 10.0% of consolidated net sales during fiscal 2020. International sales for fiscal 2022, 2021 and 2020 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $121.4 million, $138.9 million and $145.1 million, respectively.
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.
We also offer what we believe are best-in-class 911 call handling solutions under the Solacom brand name. We believe state and local governments need to upgrade existing legacy networks, location technologies, and call handling systems to modern NG-911 systems infrastructure, including 911 text messaging services, advanced data, real-time photos, and other types of information sharing over IP networks.
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.
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. Comtech’s public safety and location technology solutions have been deployed since 2006 and are utilized by domestic MNOs, as well as internationally, to provide reliable device location determination for public safety and commercial applications.
Comtech’s public safety and location technology solutions have been deployed since 2006 and are utilized by domestic MNOs, as well as internationally, to provide reliable device location determination for public safety and commercial applications.
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 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.
Environment We encourage our employees to respect our environment. To compound these efforts, we offer recycling bins at our facilities and encourage employees to use environmentally friendly commuting options such as mass transit (providing company sponsored mass transit cards) and share ride programs. Where appropriate, we also consider work from home arrangements to eliminate commuting altogether.
We offer our employees incentives to promote greener commuting options such as company-sponsored mass transit cards and rideshare programs. Where appropriate, we also consider work from home arrangements to eliminate commuting altogether.
The Terrestrial and Wireless Networks segment is organized into four product areas: Next Generation 911 & Call Delivery, Solacom Call Handling Solutions, Trusted Location and Messaging Solutions, and Cyber Security Training & Services. 5 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").
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.
Map data includes positioning, search, enhanced local content, custom maps, navigation, geo-fencing, tracking integrated with third party data sources like camera feeds and IoT sensor data via cross-platform APIs and SDKs supporting all leading operating systems. 6 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.
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.
Many of our mission-critical technologies are part of integrated communication infrastructure systems such as the U.S. military's Command, Control, Communications, Computers, Cyber Intelligence, Surveillance and Reconnaissance (also known as "C5ISR") systems and similarly complex networks for international governments. We believe we are a world leader in the design and supply of troposcatter equipment.
Troposcatter and SATCOM Solutions With persistent threats from state and non-state actors, governments around the world are increasingly seeking ways to mitigate vulnerabilities using information and more reliable communication systems to increase decision-makers’ situational awareness. 3 Many of our mission-critical technologies are part of integrated communication infrastructure systems such as the U.S. military's Command, Control, Communications, Computers, Cyber Intelligence, Surveillance and Reconnaissance (also known as "C5ISR") systems and similarly complex networks for international governments.
Sales, Marketing and Customer Support Sales and marketing strategies include direct sales through sales, marketing and engineering personnel, indirect sales through independent representatives, value-added resellers, and sales through a combination of the foregoing.
The aggregate purchase price for accounting purposes for the acquisition of UHP was $37.5 million and UHP was fully integrated into our Satellite and Space Communications segment. Sales, Marketing and Customer Support Sales and marketing strategies include direct sales through sales, marketing and engineering personnel, indirect sales through independent representatives, value-added resellers, and sales through a combination of the foregoing.
In 2022, we celebrated Earth Day in our company by encouraging our global employees to participate in environmentally-focused initiatives and then share their activities on social media. U.S. Government Contracts and Security Clearances The U.S. government operates on an October-to-September fiscal year. Generally, in February of each year, the President of the United States presents to the U.S.
In 16 fiscal 2023, we celebrated Earth Day in our company by encouraging our global employees to participate in environmentally-focused initiatives and then share their activities on social media.

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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. • 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. 18 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.
Biggest changeStrategic 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.
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; • 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 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.
Failure to comply with these policies could result in an order to divest the offending foreign ownership, fines, denial of license renewal and/or license revocation proceedings against the licensee by the FCC, or denial of certain contracts from other U.S. government agencies. 36 • We are dependent on the allocation and availability of frequency spectrum - Adverse regulatory changes related to the allocation and availability of frequency spectrum and in the military standards and specifications that define the current satellite networking environment, could materially harm our business by: (i) restricting development efforts by us and our customers, (ii) making our current products less attractive or obsolete, or (iii) increasing the opportunity for additional competition.
Failure to comply with these policies could result in an order to divest the offending foreign ownership, fines, denial of license renewal and/or license revocation proceedings against the licensee by the FCC, or denial of certain contracts from other U.S. government agencies. • We are dependent on the allocation and availability of frequency spectrum - Adverse regulatory changes related to the allocation and availability of frequency spectrum and in the military standards and specifications that define the current satellite networking environment, could materially harm our business by: (i) restricting development efforts by us and our customers, (ii) making our current products less attractive or obsolete, or (iii) increasing the opportunity for additional competition.
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 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.
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.
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.
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.
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.
There likewise can be no assurance that we will be able to retain sufficient skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies. 38 • Stock-based compensation accounting standards could negatively impact our stock - Since our inception, we have used stock-based awards as a fundamental component of our employee compensation packages.
There likewise can be no assurance that we will be able to retain sufficient skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies. • Stock-based compensation accounting standards could negatively impact our stock - Since our inception, we have used stock-based awards as a fundamental component of our employee compensation packages.
Acquisitions and investments involve risks that include failing to: • properly evaluate the technology; • accurately forecast the financial impact of the transaction, including accounting charges and transaction expenses; • integrate the technologies, products and services, research and development, sales and marketing, support and other operations; • integrate and retain key management personnel and other key employees; • retain and cross-sell to acquired customers; and 32 • combine potentially different corporate cultures.
Acquisitions and investments involve risks that include failing to: • properly evaluate the technology; • accurately forecast the financial impact of the transaction, including accounting charges and transaction expenses; • integrate the technologies, products and services, research and development, sales and marketing, support and other operations; • integrate and retain key management personnel and other key employees; • retain and cross-sell to acquired customers; and • combine potentially different corporate cultures.
The laws, rules, and regulations dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have immediate and/or retroactive application) could adversely affect us or holders of our common stock.
The laws, rules, and regulations dealing with U.S. federal, state and local and foreign income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have immediate and/or retroactive application) could adversely affect us or holders of our common stock.
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. We may be subject to environmental liabilities.
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.
We also may be subject to significant damages or injunctions that prevent the further development and sale of certain of our products or services and may result in a material loss of revenue. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products.
We also may be subject to significant damages or injunctions that prevent the further development and sale of certain of our products or services and may result in a material loss of revenue. 41 From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products.
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. 27 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. Our dependence on sales to international customers exposes us to unique business, commercial and export compliance audit risks.
Our U.S. federal, state 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. Significant judgment is required in determining the provision for income taxes.
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. Significant judgment is required in determining the provision for income taxes.
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.
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.
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. 44 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. 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.
For example: • we may be required to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows for other purposes, including but not limited to business development efforts, capital expenditures, dividends or strategic acquisitions; • if we are not able to generate sufficient cash flows to meet our substantial debt service obligations or to fund our other liquidity needs, we may have to take actions such as selling assets or raising additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures, restructuring our debt and other capital-intensive activities; • we may not be able to fund future working capital, capital investments and other business activities; • we may not be able to pay dividends or make certain other distributions; • we may become more vulnerable in the event of a downturn in our business or a worsening of general economic or industry-specific conditions; and • our flexibility in planning for, or reacting to, changes in our business and industry may be limited, thereby placing us at a competitive disadvantage compared to our competitors that have less indebtedness.
For example: • we may be required to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows for other purposes, including but not limited to business development efforts, capital expenditures, dividends (to the extent applicable) or strategic acquisitions; • if we are not able to generate sufficient cash flows to meet our substantial debt service obligations or to fund our other liquidity needs, we may have to take actions such as selling assets or raising additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures, restructuring our debt and other capital-intensive activities; • we may not be able to fund future working capital, capital investments and other business activities; • we may not be able to make certain other distributions; • we may become more vulnerable in the event of a downturn in our business or a worsening of general economic or industry-specific conditions; and • our flexibility in planning for, or reacting to, changes in our business and industry may be limited, thereby placing us at a competitive disadvantage compared to our competitors that have less indebtedness.
Despite our attempts to mitigate the impact on our business, constrained supply conditions have and are expected to continue to adversely impact our costs of goods sold and may impact the timing and amount of revenue we realize.
Despite our attempts to mitigate the impact on our business, constrained supply chain conditions have and are expected to continue to adversely impact our costs of goods sold and may impact the timing and amount of revenue we realize.
Also, we could be required to incur significant expenses related to any activist stockholder matters (included but not limited to legal fees, fees for financial advisors, fees for public relation advisors and proxy solicitation expenses).
Also, we could be required to incur significant expenses related to any activist stockholder matters (included but not limited to legal fees, fees for financial 45 advisors, fees for public relation advisors and proxy solicitation expenses).
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.
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.
During the past three years, partly driven by the COVID-19 pandemic and as a result of overall increased industry-wide demand, lead times for many components have increased as well as freight costs. In addition, threats of or actual tariffs could limit our ability to obtain certain parts on a cost-effective basis, or at all.
During the past four years, partly driven by the COVID-19 pandemic and as a result of overall increased industry-wide demand, lead times for many components have increased as well as freight costs. In addition, threats of or actual tariffs could limit our ability to obtain certain parts on a cost-effective basis, or at all.
Although we take steps to mitigate our risk with respect to contracts with the U.S. government, we may not be able to do so in every instance for any of the following reasons, among others: • Our U.S. government contracts can easily be terminated by the U.S. government - Our U.S. government contracts can be terminated by the U.S. government for its convenience or upon an event of default by us.
Although we take steps to mitigate our risk with respect to contracts with the U.S. government, we may not be able to do so in every instance for any of the following reasons, among others: • Our U.S. government contracts can easily be terminated by the U.S. government - Our U.S. government contracts and subcontracts can be terminated by the U.S. government for its convenience or upon an event of default by us.
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. 31 Further, our ability to comply with covenants, terms of and conditions 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 facility may be affected by events beyond our control.
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, 2022, goodwill recorded on our Consolidated Balance Sheet aggregated $347.7 million.
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.
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 2023 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 2024 or beyond.
Some of our single source suppliers, particularly those that provide satellite ground station and troposcatter components, have reported to us that they are having disruptions in their respective supply chains. These single source components, which includes items such as cooling fans and power supplies, are in limited supply.
Some of our single source suppliers, particularly those that provide satellite ground station and troposcatter components, have reported to us that they are having disruptions in their respective supply chains. These single source components, which include items such as cooling fans and power supplies, are in limited supply.
If we need to amend, restate or replace the Credit Agreement on materially different terms or terms adverse to the interests of the holders of our Series A Preferred Convertible Stock, and we are unable to obtain the consent of such holders, we may be unable to obtain required financing or liquidity on favorable terms, or at all.
If we need to amend, restate or replace the Credit Facility on materially different terms or terms adverse to the interests of the holders of our Series A Preferred Convertible Stock, and we are unable to obtain the consent of such holders, we may be unable to obtain required financing or liquidity on favorable terms, or at all.
During fiscal 2022, 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 2022. In addition, the ongoing supply chain issues have affected the quality of the components we receive.
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.
In some cases, we have now depleted our stock inventory and we are on waiting lists to obtain additional components. In order to ship certain items during fiscal 2023, we must obtain additional components to produce certain finished goods. We continue to seek new suppliers and inventory elsewhere.
In some cases, we have now depleted our stock inventory and we are on waiting lists to obtain additional components. In order to ship certain items during fiscal 2024, we must obtain additional components to produce certain finished goods. We continue to seek new suppliers and inventory elsewhere.
In addition to our impairment analysis of goodwill, we also review net intangibles with finite lives when an event occurs indicating the potential for impairment. We believe that the carrying values of our net intangibles were recoverable as of July 31, 2022.
In addition to our impairment analysis of goodwill, we also review net intangibles with finite lives when an event occurs indicating the potential for impairment. We believe that the carrying values of our net intangibles were recoverable as of July 31, 2023.
Any of these developments could have a material adverse effect on our business, results of operations and financial condition. 35 Legal, Regulatory and Litigation Risks Changes in U.S. federal, state and foreign tax law could adversely affect our business and financial condition.
Any of these developments could have a material adverse effect on our business, results of operations and financial condition. 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.
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 2023, 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. 21 Heading into our fiscal 2024, we have a significant portion of our targeted revenues in our backlog.
Certain parts received in fiscal 2022 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 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.
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; • 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 • the ongoing and future effects of the COVID-19 pandemic.
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.
For the fiscal years ended July 31, 2022, 2021 and 2020, we conducted no business with states designated as sponsors of terrorism. 28 • 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, 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.
Risks Related to our Common Stock • Our stock price is volatile. • Future issuances of our shares of common stock could dilute a stockholder's ownership interest in Comtech and reduce the market price of our shares of 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. • Provisions in our corporate documents and Delaware law could delay or prevent a change in control of Comtech. • A disruption in our Common Stock dividend program could negatively impact our stock price.
Risks Related to our Common Stock • Our stock price is volatile. • Future issuances of our shares of common stock could dilute a stockholder's ownership interest in Comtech and reduce the market price of our shares of 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. • Provisions in our corporate documents and Delaware law could delay or prevent a change in control of Comtech.
In addition, a large portion of our existing backlog consists of orders related to U.S. government contracts and our Business Outlook for Fiscal 2023 and beyond depends, in part, on significant new orders from the U.S. government, which undergoes extreme budgetary pressures from time to time. 25 We rely on particular levels of U.S. government spending on our communication solutions, and our receipt of future orders depends in large part on continued funding by the U.S. government for the programs in which we participate.
In addition, a large portion of our existing backlog consists of orders related to U.S. government contracts and our Business Outlook for Fiscal 2024 and beyond depends, in part, on significant new orders from the U.S. government, which undergoes extreme budgetary pressures from time to time. 25 We rely on U.S. government spending on our communication solutions, and our receipt of future orders depends in large part on continued funding by the U.S. government for the programs in which we participate.
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.
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.
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 25.0%, 23.9% and 23.5% of our consolidated net sales for the fiscal years ended July 31, 2022, 2021 and 2020, 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 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.
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 business is 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. 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.
These sales expose us to certain risks, including barriers to trade, fluctuations in foreign currency exchange rates (which may make our products less price-competitive), political and economic instability, exposure to public health epidemics, availability of suitable export financing, tariff regulations, and other U.S. and foreign regulations that may apply to the export of our products.
These sales expose us to certain risks, including barriers to trade, declining trade relations, fluctuations in foreign currency exchange rates (which may make our products less price-competitive), political, legal, social and economic instability, exposure to public health epidemics, availability of suitable export financing, tariff regulations, and other U.S. and foreign regulations that may apply to the export of our products.
In any event, we are required to perform the next annual goodwill impairment analysis on August 1, 2023 (the start of our fiscal 2024).
In any event, we are required to perform the next annual goodwill impairment analysis on August 1, 2024 (the start of our fiscal 2025).
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 2019 through 2021 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. Our U.S. federal income tax returns for fiscal 2020 through 2022 are subject to potential future Internal Revenue Service ("IRS") audit.
The COVID-19 pandemic, a terrorist attack or similar future event may disrupt our operations or those of our customers or suppliers and may affect the availability of materials needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers.
A terrorist attack or similar future event may disrupt our operations or those of our customers or suppliers and may affect the availability of materials needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers.
Even when we successfully negotiate a multi-period contract, our wireless carrier contracts, such as the ones with Verizon which collectively accounted for 11.1% of our sales in fiscal 2022, provide for terminations with notice and provide a mechanism for the wireless carrier to renegotiate lower fees and/or change services. Fee pressure from these carriers is constant and ongoing.
Even when we successfully negotiate a multi-period contract, our wireless carrier contracts, such as the ones with Verizon which collectively accounted for 10.6% of our sales in fiscal 2023, provide for terminations with notice and provide a mechanism for the wireless carrier to renegotiate lower fees and/or change services. Fee pressure from these carriers is constant and ongoing.
Additionally, as of July 31, 2022, net intangibles recorded on our Consolidated Balance Sheet aggregated $247.3 million. 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, 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.
For a more complete discussion of the material risks facing our business, please see below: Global Risks • We are unable to predict the extent to which the ongoing COVID-19 pandemic and related supply chain constraints will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives. • Our business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile. • If global economic business and political conditions deteriorate as compared to the current environment it could have a material adverse impact on our business outlook and our business, operating results and financial condition. • New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results. • We have significant operations in locations which could be materially and adversely impacted in the event of a terrorist attack or other significant disruptions (including natural disasters). • The military conflict between Russia and Ukraine, and the global response to it could adversely impact our revenues, gross margins and financial results.
For a more complete discussion of the material risks facing our business, please see below: Global Risks • New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results. • Our business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile. • If global economic business and political conditions deteriorate as compared to the current environment it could have a material adverse impact on our business outlook and our business, operating results and financial condition. • We have significant operations in locations which could be materially and adversely impacted in the event of a terrorist attack or other significant disruptions (including natural disasters). • The military conflict between Russia and Ukraine, and the global response to it could adversely impact our revenues, gross margins and financial results. • The U.S.
For example, a sudden change in global economic conditions (or a worsening of the COVID-19 pandemic as described above) could have an immediate impact on a large portion of our net sales, a large amount of which are derived from products such as satellite ground station technologies, amplifier products and mission-critical technologies that generally have short order and lead times.
For example, a sudden change in global economic or political conditions could have an immediate impact on a large portion of our net sales, a large amount of which are derived from products such as satellite ground station technologies, amplifier products and mission-critical technologies that generally have short order and lead times.
Based on our quantitative evaluations, we determined that our Satellite and Space Communications and Terrestrial and Wireless Networks reporting units had estimated fair values in excess of their carrying values of at least 18.4% and 11.6%, respectively, and concluded that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment.
Based on our quantitative evaluation, we determined that our Satellite and Space Communications and Terrestrial and Wireless Networks reporting units had estimated fair values in excess of their carrying values of at least 18.3% and 8.9%, respectively, and concluded that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment.
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.
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.
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.- Financial Statements and Supplementary Data," included in this Form 10-K.
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.
During our fiscal years ended July 31, 2022, 2021 and 2020, sales to the U.S. government (including sales to prime contractors to the U.S. government) were $132.6 million, $201.1 million and $223.4 million or 27.2%, 34.6% and 36.2% of our consolidated net sales, respectively.
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.
A decrease in Department of Defense or Department of Homeland Security expenditures, the elimination or curtailment of a material program in which we are involved (such as the withdrawal of troops from Afghanistan or other parts of the world), 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.
We are actively hiring new employees, expanding our Canadian operations and shifting 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 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.
Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk. 34 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; • 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 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.
Our hardware products are also subject to warranty obligations and integrate a wide variety of components from different vendors. 43 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 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.
Legal, Regulatory and Litigation Risks • Changes in U.S. federal, state and foreign tax law could adversely affect our business and financial condition. • Our U.S. federal, state 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. • Protection of our intellectual property is limited and pursuing infringers of our patents and other intellectual property rights can be costly. • Third parties may claim we are infringing their intellectual property rights and we could be prevented from selling our products, or suffer significant litigation expense, even if these claims have no merit.
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.
If we are not successful in doing so, we may not be able to achieve our long-term business goals. 42 We rely upon various third-party companies and their technology to provide services to our customers and if we are unable to obtain such services at reasonable prices, or at all, our gross margins and our ability to provide the services of our wireless applications business could be materially adversely affected.
We rely upon various third-party companies and their technology to provide services to our customers and if we are unable to obtain such services at reasonable prices, or at all, our gross margins and our ability to provide the services of our wireless applications business could be materially adversely affected.
In the event of any such disaster or other disruption, we could experience disruptions or interruptions to our operations or the operations of our suppliers, distributors, resellers or customers; destruction of facilities; and/or loss of life, all of which could materially increase our costs and expenses and adversely affect our business, results of operations and financial condition.
In the event of any such disaster or other disruption, we could experience disruptions or interruptions to our operations or the operations of our suppliers, distributors, resellers or customers; destruction of facilities; and/or loss of life, all of which could materially increase our costs and expenses and adversely affect our business, results of operations and financial condition. 23 The military conflict between Russia and Ukraine, and the global response to it could adversely impact our revenues, gross margins and financial results.
Protection of our intellectual property is limited and pursuing infringers of our patents and other intellectual property rights can be costly. Our businesses rely, in large part, upon our proprietary scientific and engineering know-how and production techniques.
Financial Statements and Supplementary Data," included in this Form 10-K. 40 Protection of our intellectual property is limited and pursuing infringers of our patents and other intellectual property rights can be costly. Our businesses rely, in large part, upon our proprietary scientific and engineering know-how and production techniques.
Any delays could result in increased costs of development or redirect resources from other projects. In addition, we cannot provide assurances that the markets for our products, systems, services or technologies will develop as we currently anticipate. The failure of our products, systems, services or technologies to gain market acceptance could significantly reduce our net sales and harm our business.
Any delays could result in increased costs of development or redirect resources from other projects. In addition, we cannot provide assurances that the markets for our products, systems, services or technologies will develop as we currently anticipate.
Our business is highly competitive, we are reliant upon the success of our partners, and some of our competitors have significantly greater resources than we do, which could result in a loss of customers, market share and/or market acceptance. Our business is highly competitive.
The failure of our products, systems, services or technologies to gain market acceptance could significantly reduce our net sales and harm our business. 42 Our business is highly competitive, we are reliant upon the success of our partners, and some of our competitors have significantly greater resources than we do, which could result in a loss of customers, market share and/or market acceptance.
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. 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.
Therefore, it is possible that an unfavorable resolution of one or more of these matters could have a material adverse effect on our consolidated financial statements in a future period. 39 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, 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 .
Filling new positions may be difficult in the current competitive labor market. Moreover, many of our key and technical management personnel would be difficult to replace and are not subject to employment or non-competition agreements.
The management skills that have been appropriate for us in the past may not continue to be appropriate if we grow and diversify. Filling new positions may be difficult in the current competitive labor market. Moreover, many of our key and technical management personnel would be difficult to replace and are not subject to employment or non-competition agreements.
In the future, we may adopt a stockholder rights plan which could cause substantial dilution to a stockholder, and substantially increase the cost paid by a stockholder who attempts to acquire us on terms not approved by our Board of Directors. 45 In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law.
In the future, we may adopt a stockholder rights plan which could cause substantial dilution to a stockholder, and substantially increase the cost paid by a stockholder who attempts to acquire us on terms not approved by our Board of Directors.
If subscriber turnover increases more than we anticipate, our financial results could be materially adversely affected. 29 Poor performance in or disruptions of the services included in our advanced communication solutions could harm our reputation, delay market acceptance of our services and subject us to liabilities (including breach of contract claims brought by our customers and third-party damages claims brought by end-users).
Poor performance in or disruptions of the services included in our advanced communication solutions could harm our reputation, delay market acceptance of our services and subject us to liabilities (including breach of contract claims brought by our customers and third-party damages claims brought by end-users).
Moreover, we may incur substantial additional indebtedness in the future to fund acquisitions or to fund other activities for general business purposes. If additional new debt is added to the current or planned debt levels, the related risks that we now face could intensify. A substantial increase in our indebtedness could also have a negative impact on our credit ratings.
Moreover, we may incur substantial additional indebtedness in the future to fund acquisitions or to fund other activities for general business purposes. If additional new debt is added to the current or planned debt levels, or if we are unable to obtain financing on favorable terms, the related risks that we now face could intensify.
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. 23 We cannot be sure that our systems will operate appropriately if we experience hardware or software failure, intentional disruptions of service by third parties, an act of God or an act of war.
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.
Competitive Risks • All of our business activities are subject to rapid technological change, new entrants, the introduction of other distribution models and long development and testing periods each of which may harm our competitive position. • Our business is highly competitive, we are reliant upon the success of our partners, and some of our competitors have significantly greater resources than we do, which could result in a loss of customers, market share and/or market acceptance. • We rely upon various third-party companies and their technology to provide services to our customers. 19 • Because our software may contain defects or errors, and our hardware products may incorporate defective components, our sales could decrease if these defects or errors adversely affect our reputation or delay shipments of our products.
Additionally, we may become subject to government investigations, which may have an adverse effect on our financial condition. • Protection of our intellectual property is limited and pursuing infringers of our patents and other intellectual property rights can be costly. • Third parties may claim we are infringing their intellectual property rights and we could be prevented from selling our products, or suffer significant litigation expense, even if these claims have no merit. 20 Competitive Risks • All of our business activities are subject to rapid technological change, new entrants, the introduction of other distribution models and long development and testing periods each of which may harm our competitive position. • Our business is highly competitive, we are reliant upon the success of our partners, and some of our competitors have significantly greater resources than we do, which could result in a loss of customers, market share and/or market acceptance. • We rely upon various third-party companies and their technology to provide services to our customers. • Because our software may contain defects or errors, and our hardware products may incorporate defective components, our sales could decrease if these defects or errors adversely affect our reputation or delay shipments of our products.
Future revenue will depend on the pricing and quality of those services and subscriber demand for those services, which may vary by market, and the level of subscriber turnover experienced by our wireless carrier partners.
Future revenue will depend on the pricing and quality of those services and subscriber demand for those services, which may vary by market, and the level of subscriber turnover experienced by our wireless carrier partners. If subscriber turnover increases more than we anticipate, our financial results could be materially adversely affected.
New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results. The global supply chain for certain raw materials and components, including those used in our satellite ground station and troposcatter equipment, has experienced significant strain in recent periods.
Global Risks New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results.
Although sales into Russia represented approximately 1% of our consolidated net sales in fiscal 2022 and 2021, consolidated net sales into Russia in fiscal 2023 and beyond were expected to significantly grow. As a result of the economic sanctions against Russia, we are assuming no new sales in Russia in fiscal 2023 and the foreseeable future.
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.
If any third party has a meritorious or successful claim that we are infringing its intellectual property rights, we may be forced to change our products or enter into licensing arrangements with third parties, which may be costly or impractical. This also may require us to stop selling our products as currently engineered, which could harm our competitive position.
If any third party has a meritorious or successful claim that we are infringing its intellectual property rights, we may be forced to change our products or enter into licensing arrangements with third parties that may include payment of a reasonable royalty, which may be costly or impractical.
If we are unable to develop and introduce technologically advanced products that respond to evolving industry standards and customer needs, or if we are unable to complete the development and introduction of these products on a timely and cost effective basis, it could have a material adverse effect on our business, results of operations and financial condition or could result in our technology becoming obsolete. 41 New entrants seeking to gain market share by introducing new technology and new products may make it more difficult for us to sell our products and services and could create increased pricing pressure, reduced profit margins, increased sales and marketing expenses, or the loss of market share or expected market share, any of which could have a material adverse effect on our business, results of operations and financial condition.
New entrants seeking to gain market share by introducing new technology and new products may make it more difficult for us to sell our products and services and could create increased pricing pressure, reduced profit margins, increased sales and marketing expenses, or the loss of market share or expected market share, any of which could have a material adverse effect on our business, results of operations and financial condition.
Additionally, the relative strength of the U.S. dollar against many international currencies has negatively impacted the purchasing power for many of our international end-customers because most of our sales are denominated in U.S. dollars. We generate significant sales from many emerging and developing countries and any such reduced purchasing power of our customers could adversely impact our sales and backlog.
Additionally, from time to time, the relative strength of the U.S. dollar against many international currencies has negatively impacted the purchasing power for many of our international end-customers because most of our sales are denominated in U.S. dollars.
The obligations under the Credit Facility are secured by substantially all of our tangible and intangible assets. As of July 31, 2022, the amount outstanding under our Credit Facility was $130.0 million, which is reflected in the non-current portion of long-term debt on our Consolidated Balance Sheet.
As of July 31, 2023, the amount outstanding under our Credit Facility was $164.4 million, of which $4.4 million and $160.0 million is reflected in the current and non-current portion of long-term debt, respectively, on our Consolidated Balance Sheet.
Almost all of the contracts in our backlog (including firm orders previously received from the U.S. government) are subject to cancellation at the convenience of the customer or for default in the event that we are unable to perform under the contract. 24 In some cases, such as contracts received from large U.S. based telecommunication companies, our backlog is computed by multiplying the most recent month’s contract or revenue by the months remaining under the existing long-term agreements, which we consider to be the best available information for anticipating revenue under those agreements.
For some contracts, where we are a subcontractor (and not the prime contractor), the U.S. government could terminate the prime contractor for convenience without regard for our performance as a subcontractor. 24 In some cases, such as contracts received from large U.S. based telecommunication companies, our backlog is computed by multiplying the most recent month’s contract or revenue by the months remaining under the existing long-term agreements, which we consider to be the best available information for anticipating revenue under those agreements.
Software products, such as our 911 call handling software solutions, must meet stringent customer technical requirements and we must satisfy our warranty obligations to our customers.
Software products, such as our 911 call handling software solutions, must meet stringent customer technical requirements and we must satisfy our warranty obligations to our customers. Our hardware products are also subject to warranty obligations and integrate a wide variety of components from different vendors.
Our contracts with the U.S. government are subject to unique business, commercial and government audit risks. We depend on the U.S. government for a significant portion of our revenues.
We are unable to predict the impact these or similar events could have on our business, financial position, results of operations or cash flows. Our contracts with the U.S. government are subject to unique business, commercial and government audit risks. We depend on the U.S. government for a significant portion of our revenues.
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. We are unable to predict the impact these or similar events could have on our business, financial position, results of operations or cash flows.
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.

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Item 2. Properties

Properties — owned and leased real estate

11 edited+2 added−3 removed5 unchanged
Biggest changeOur Satellite and Space Communications segment maintains office space in Saint-Laurent, Canada, used primarily for sales, engineering, manufacturing and general office use. I. 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. J.
Biggest changeOur 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.
The following table lists our primary leased facilities at July 31, 2022: Location Property Type Square Footage Lease Expiration Satellite and Space Communications Chandler, Arizona A Manufacturing and Engineering 146,000 July 2036 Tempe, Arizona A Manufacturing and Engineering 136,000 Various 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 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 624,000 Terrestrial and Wireless Networks Seattle, Washington I Network Operations, R&D, Engineering and Sales 58,000 October 2033 Stoughton, Massachusetts J Network Operations 26,000 March 2025 Lake Forest, California K R&D and Engineering 18,000 July 2023 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 October 2024 Chicago, Illinois L General Office 4,000 September 2024 139,000 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 774,600 A.
The 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.
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. We lease the New York facility from a partnership controlled by our former CEO.
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.
Also, in fiscal 2022, as part of our environmental related initiatives, we were able to reduce our total company-wide square footage of our various facilities by 78,000 sq ft. or 9.1%. 48
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
We have leases for facilities in Annapolis, Maryland and Lake Forest, California 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. L.
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. H.
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.
Our Satellite and Space Communications segment engineers and manufactures our over-the-horizon microwave 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, United Kingdom, where we manufacture our high precision full motion fixed and mobile X/Y satellite tracking antennas, RF feeds, reflectors and radomes.
This facility is 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.
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.
Our Massachusetts lease is currently on a month-to-month basis and therefore excluded from the table above. F. 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.
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.
These manufacturing facilities utilize state-of-the-art design and production techniques, including analog, digital and RF microwave production, hardware assembly and full-service engineering. 47 To support our long-term business goals, in fiscal 2021, we commenced a 15-year lease for a new 146,000 square foot facility in Chandler, Arizona.
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.
In fiscal 2022, we began shifting operations related to the production of our satellite ground station products from our existing manufacturing locations, such as Tempe, Arizona, to this new facility. We also signed a new 10-year lease in the United Kingdom to expand our Satellite and Space segment's international manufacturing capabilities.
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.
Removed
Although primarily used for our satellite ground station equipment product lines, which are part of the Terrestrial and Wireless Networks segment, both of our business segments utilize, from time to time, our high-volume technology manufacturing facilities in Arizona.
Added
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.
Removed
COVID-19 and global supply chain disruptions have delayed efforts to get our new technology manufacturing centers fully operational and have increased our start-up costs. Relocation to the Chandler, Arizona facility is expected to be completed in fiscal 2023, at which point we will reduce our Tempe, Arizona footprint to approximately 20,000 square feet through January 2027. B.
Added
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.
Removed
D. Our Satellite and Space Communications segment manufactures certain amplifiers in a leased manufacturing facility located in Santa Clara, California. E.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

32 edited+5 added−67 removed17 unchanged
Biggest changeResults 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, 2022 2021 2020 Gross margin 37.0 % 36.8 % 36.8 % Selling, general and administrative expenses 23.6 % 19.2 % 19.0 % Research and development expenses 10.8 % 8.4 % 8.5 % CEO transition costs 2.8 % — % — % Proxy solicitation costs 2.3 % — % — % Acquisition plan expenses — % 17.2 % 3.4 % Amortization of intangibles 4.4 % 3.6 % 3.5 % Operating (loss) income (6.9) % (11.7) % 2.5 % Interest expense (income) and other 0.7 % 1.2 % 1.0 % (Loss) income before (benefit from) provision for income taxes (7.6) % (12.9) % 1.5 % Net (loss) income (6.8) % (12.6) % 1.1 % Net (loss) income attributable to common stockholders (8.9) % (12.6) % 1.1 % Adjusted EBITDA (a Non-GAAP measure) 8.1 % 13.2 % 12.6 % For a definition and explanation of Adjusted EBITDA, see " Item 7.
Biggest changeFuture 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.
Our provision for income taxes is based on domestic (including federal and state) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives. We recognize potential interest and penalties related to uncertain tax positions in income tax expense.
Our provision for income taxes is based on domestic (including federal, state and local) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives. We recognize potential interest and penalties related to uncertain tax positions in income tax expense.
As such, comparisons between periods and our current results may not be indicative of a trend or future performance. 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. 51 Critical Accounting Policies We consider certain accounting policies to be critical due to the estimation process involved in each. Revenue Recognition.
If we do not accurately estimate our warranty costs, any changes to our original estimates could be material to our results of operations and financial condition. 55 Accounting for Income Taxes.
If we do not accurately estimate our warranty costs, any changes to our original estimates could be material to our results of operations and financial condition. Accounting for Income Taxes.
Future common stock dividends 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.
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.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Stock Performance Graph and Cumulative Total Return The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Index and the Nasdaq Telecommunications Index for each of the last five fiscal years ended July 31, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Stock Performance Graph and Cumulative Total Return The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Index and the Nasdaq Telecommunications Index for each of the last five fiscal years ended July 31, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends (to the extent applicable).
As of July 31, 2022, 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).
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).
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 2019 through 2021 are subject to potential future Internal Revenue Service ("IRS") audit.
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.
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, 2022. On September 29, 2020, our Board of Directors authorized a new $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, 2023. On September 29, 2020, our Board of Directors authorized a $100.0 million stock repurchase program, which replaced our prior program.
None of our state income tax returns prior to fiscal 2018 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. Research and Development Costs. We generally expense all research and development costs.
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.
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 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 EEE parts for satellite, launch vehicle and manned space applications. • Terrestrial and Wireless Networks - is organized into four product areas: Next Generation 911 & Call Delivery, Solacom Call Handling Solutions, Trusted Location and Messaging Solutions, and Cyber Security Training & Services.
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.
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. 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, 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.
The new $100.0 million stock repurchase program has no time restrictions and repurchases may be made from time to time in open-market or privately negotiated transactions, or by other means in accordance with federal securities laws. We had approximately 27.6 million shares of Common Stock outstanding as of July 31, 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. We had approximately 28.1 million shares of Common Stock outstanding as of July 31, 2023.
Approximate Number of Equity Security Holders As of September 23, 2022, there were approximately 801 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 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.
Although our overall credit losses have historically been within the allowances we established, we cannot accurately predict our future credit loss experience, given the current poor business environment.
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.
We measure this revenue visibility as the sum of our $618.1 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 provided by operating activities of $2.0 million.
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.
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.
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.
We see these two end-markets as part of what Comtech has identified as the “Failsafe Communications Market.” This includes the critical communications infrastructure that people, businesses, and governments rely on when durable, trusted connectivity is required, no matter where they are – on land, at sea, or in the air – and no matter what the circumstances – from armed conflict to a natural disaster.
This includes the critical communications infrastructure that people, businesses, and governments rely on when durable, trusted connectivity is required, no matter where they are – on land, at sea, or in the air – and no matter what the circumstances – from armed conflict to a natural disaster.
In particular our contracts with the U.S. government can be terminated for convenience by it at any time and orders are subject to unpredictable funding, deployment and technology decisions by the U.S. government.
Our gross profit may also be affected by the impact of any cumulative adjustments to contracts that are accounted for over time. In particular our contracts with the U.S. government can be terminated for convenience by it at any time and orders are subject to unpredictable funding, deployment and technology decisions by the U.S. government.
Our solutions fulfill our customers’ needs for secure wireless communications in the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical and other scenarios where performance is crucial. We anticipate future growth in our business due to increasing demand for global voice, video and data usage.
Our solutions are designed to fulfill our customers’ needs for secure wireless communications in the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical and other scenarios where performance is crucial.
We 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.
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.
Additionally, as of July 31, 2022, net intangibles recorded on our Consolidated Balance Sheet aggregated $247.3 million (of which $72.4 million relates to our Satellite and Space Communications segment and $174.9 million relates to our Terrestrial and Wireless Networks segment).
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).
Excluding $15.9 million in aggregate payments for our CEO transition and settled proxy contest, cash flows provided by operating activities would have been $17.9 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 "
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 "
This segment offers customers SMS Text to 911 services, providing alternate paths for individuals who need to request assistance (via text messaging) a method to reach Public Safety Answering Points; Next Generation 911 solutions, providing emergency call routing, location validation, policy-based routing rules, logging and security functionality; Emergency Services IP Network transport infrastructure for emergency services communications and support of Next Generation 911 services; call handling applications for Public Safety Answering Points; wireless emergency alerts solutions for network operators; software and equipment for location-based and text messaging services for various applications, including for public safety, commercial and government services, and cybersecurity training, skills labs, and competency assessments for both technical and non-technical applications. 51 Our Quarterly Financial Information Quarterly and period-to-period sales and operating results may be significantly affected by either short-term or long-term contracts with our customers.
This segment offers customers SMS text to 911 services, providing alternate paths for individuals who need to request assistance (via text messaging) a method to reach Public Safety Answering Points ("PSAPs"); next generation 911 solutions, providing emergency call routing, location validation, policy-based routing rules, logging and security functionality; Emergency Services IP Network transport infrastructure for emergency services communications and support of next generation 911 services; call handling applications for PSAPs; wireless emergency alerts solutions for network operators; and software and equipment for location-based and text messaging services for various applications, including for public safety, commercial and government services.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2022 and 2021 - Adjusted EBITDA." 57 Fiscal 2022 Highlights and Business Outlook for Fiscal 2023 Our financial highlights for the fiscal year ended July 31, 2022 include: • Consolidated net sales were $486.2 million; • Gross margins improved, year-over-year, twenty basis points to 37.0%; • GAAP net loss attributable to common stockholders was $43.3 million, and included $13.6 million of CEO transition costs, $11.2 million of proxy solicitation costs, $6.0 million of restructuring costs, $1.2 million of strategic emerging technology costs for next-generation satellite technology, and $1.1 million of COVID-19 related costs, as discussed below; • GAAP EPS loss of $1.63 and Non-GAAP EPS loss of $0.13; • Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $39.3 million; • New bookings (also referred to as orders) of $445.5 million, resulting in an annual book-to-bill ratio of 0.92x (a measure defined as bookings divided by net sales); • Backlog of $618.1 million as of July 31, 2022, compared to $658.9 million as of July 31, 2021 and $602.3 million as of April 30, 2022; • Revenue visibility of approximately $1.1 billion.
Management’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.
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 effect of the COVID-19 pandemic on worldwide business activities.
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.
In addition, our gross profit is affected by a variety of factors, including the mix of products, systems and services sold, production efficiencies, estimates of warranty expense, price competition and general economic conditions. Our gross profit may also be affected by the impact of any cumulative adjustments to contracts that are accounted for over time.
Our Quarterly Financial Information Quarterly and period-to-period sales and operating results may be significantly affected by either short-term or long-term contracts with our customers. In addition, our gross profit is affected by a variety of factors, including the mix of products, systems and services sold, production efficiencies, estimates of warranty expense, price competition and general economic conditions.
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." 49 Dividends Since September 2010, we have paid quarterly dividends on shares 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.
" A description of the segments is provided below: • Satellite and Space Communications - is organized into four product areas: Satellite Modem and Amplifier Technologies, Troposcatter and SATCOM Solutions, Space Components and Antennas, and High-Power Amplifiers and Switches.
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.
In addition, we seek to obtain insurance for certain domestic and international customers. 56 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.
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.
Any impairment charges that we may record in the future could be material to our results of operations and financial condition. 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.
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.
On October 4, 2021, December 9, 2021, March 10, 2022 and June 9, 2022, our Board of Directors declared a cash dividend of $0.10 per common share, which was paid on November 12, 2021, February 18, 2022, May 20, 2022 and August 19, 2022, respectively.
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.
Removed
On September 29, 2022, our Board of Directors declared a cash dividend of $0.10 per common share, payable on November 18, 2022 to stockholders of record at the close of business on October 19, 2022.
Added
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.
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Future common stock dividends 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. The Board of Directors is currently targeting fiscal 2023 quarterly dividend payments of $0.10 per common share.
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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.
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We provide our solutions to both commercial and governmental customers. In the fourth quarter of fiscal 2022, we revised our business segments to better align them with end-markets for our products and services.
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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 .
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Our businesses have been re-organized into two new reportable segments: “Satellite and Space Communications” and “Terrestrial and Wireless Networks.” All current and prior periods reflected in this Form 10-K have been presented according to these two segments, unless otherwise noted.
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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.
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For more information and for financial information about our business segments, including net sales, operating income, Adjusted EBITDA (a Non-GAAP financial measure), total assets, and our operations outside the United States, refer to " Notes to Consolidated Financial Statements - Note (11) Segment Information" included in "Part II - Item 8 - Financial Statements and Supplementary Data.
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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).
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Under ASC 606, we follow a five-step model to: (1) identify the contract with our customer; (2) identify our performance obligations in our contract; (3) determine the transaction price for our contract; (4) allocate the transaction price to our performance obligations; and (5) recognize revenue using one of the following two methods: • Over time - We recognize revenue using the over-time method when there is a continuous transfer of control to the customer over the contractual period of performance.
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This generally occurs when we enter into a long-term contract relating to the design, development or manufacture of complex equipment or technology platforms to a buyer’s specification (or to provide services related to the performance of such contracts).
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Continuous transfer of control is typically supported by contract clauses which allow our customers to unilaterally terminate a contract for convenience, pay for costs incurred plus a reasonable profit and take control of work-in-process. Revenue recognized over time is generally based on the extent of progress toward completion of the related performance obligations.
Removed
The selection of the method to measure progress requires judgment and is based on the nature of the products or services provided. In certain instances, typically for firm fixed-price contracts, we use the cost-to-cost measure because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts.
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Under the cost-to-cost measure, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion, including warranty costs. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred.
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Costs to fulfill generally include direct labor, materials, subcontractor costs, other direct costs and an allocation of indirect costs. When these contracts are modified, the additional goods or services are generally not distinct from those already provided.
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As a result, these modifications form part of an existing contract and we must update the transaction price and our measure of progress for the single performance obligation and recognize a cumulative catch-up to revenue and gross profits.
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For over time contracts using a cost-to-cost measure of progress, we have an estimate at completion ("EAC") process in which management reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues.
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Since certain contracts extend over a long period of time, the impact of revisions in revenue and or cost estimates during the progress of work may impact current period earnings through a cumulative adjustment. Additionally, if the EAC process indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident.
Removed
Contract revenue and cost estimates for significant contracts are generally reviewed and reassessed at least quarterly. The cost-to-cost method is principally used to account for contracts in our Satellite and Space Communications segment and, to a lesser extent, certain location-based and messaging infrastructure contracts within our Terrestrial and Wireless Networks segment.
Removed
For service-based contracts in our Terrestrial and Wireless Networks segment, we also recognize revenue over time.
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These services are typically recognized as a series of services performed over the contract term using the straight-line method, or based on our customers’ actual usage of the networks and platforms which we provide. 52 • Point in time - When a performance obligation is not satisfied over time, we must record revenue using the point in time accounting method which generally results in revenue being recognized upon shipment or delivery of a promised good or service to a customer.
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This generally occurs when we enter into short term contracts or purchase orders where items are provided to customers with relatively quick turn-around times.
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Modifications to such contracts and or purchase orders, which typically provide for additional quantities or services, are accounted for as a new contract because the pricing for these additional quantities or services are based on standalone selling prices.
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Point in time accounting is principally applied to contracts in our Satellite and Space Communications segment, which includes satellite modems, solid-state and traveling wave tube amplifiers and certain contracts for our solid-state, high-power RF amplifiers.
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The contracts related to these products do not meet the requirements for over time revenue recognition because our customers cannot utilize the equipment for its intended purpose during any phase of our manufacturing process; customers do not simultaneously receive and or consume the benefits provided by our performance; customers do not control the asset (i.e., prior to delivery, customers cannot direct the use of the asset, sell or exchange the equipment, etc.); and, although many of our contracts have termination for convenience clauses and or an enforceable right to payment for performance completed to date, our performance creates an asset with an alternative use through the point of delivery.
Removed
In determining that our equipment has alternative use, we considered the underlying manufacturing process. In the early phases of manufacturing, raw materials and work in process (including subassemblies) consist of common parts that are highly fungible among many different types of products and customer applications. Finished products are either configured to our standard configuration or based on our customers’ specifications.
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Finished products, whether built to our standard specification or to a customers’ specification, can be sold to a variety of customers and across many different end use applications with minimal rework, if needed, and without incurring a significant economic loss.
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When identifying a contract with our customer, we consider when it has approval and commitment from both parties, if the rights of the parties are identified, if the payment terms are identified, if it has commercial substance and if collectability is probable. When identifying performance obligations, we consider whether there are multiple promises and how to account for them.
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In our contracts, multiple promises are separated if they are distinct, both individually and in the context of the contract. If multiple promises in a contract are highly interrelated or comprise a series of distinct services performed over time, they are combined into a single performance obligation.
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In some cases, we may also provide the customer with an additional service-type warranty, which we recognize as a separate performance obligation. Service-type warranties do not represent a significant portion of our consolidated net sales. When service-type warranties represent a separate performance obligation, the revenue is deferred and recognized ratably over the extended warranty period.
Removed
Our contracts, from time-to-time, may also include options for additional goods and services. To date, these options have not represented material rights to the customer as the pricing for them reflects standalone selling prices. As a result, we do not consider options we offer to be performance obligations for which we must allocate a portion of the transaction price.
Removed
In many cases, we provide assurance-type warranty coverage for some of our products for a period of at least one year from the date of delivery. When identifying the transaction price, we typically utilize the contract's stated price as a starting point.
Removed
The transaction price in certain arrangements may include estimated amounts of variable consideration, including award fees, incentive fees or other provisions that can either increase or decrease the transaction price.
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We estimate variable consideration as the amount to which we expect to be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the estimation uncertainty is resolved.
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The estimation of this variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (e.g., historical, current and forecasted) that is reasonably available to us. When allocating the contract’s transaction price, we consider each distinct performance obligation.
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For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. We determine standalone selling price based on the price at which the performance obligation is sold separately.
Removed
If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions, including geographic or regional specific factors, competitive positioning, internal costs, profit objectives and internally approved pricing guidelines related to the performance obligations. 53 Most of our contracts with customers are denominated in U.S. dollars and typically are either firm fixed-price or cost reimbursable type contracts (including fixed-fee, incentive-fee and time-and-material type contracts).
Removed
In almost all of our contracts with customers, we are the principal in the arrangement and report revenue on a gross basis.
Removed
Transaction prices for contracts with U.S. domestic and international customers are usually based on specific negotiations with each customer and in the case of the U.S. government, sometimes based on estimated or actual costs of providing the goods or services in accordance with applicable regulations.
Removed
The timing of revenue recognition, billings and collections results in receivables, unbilled receivables and contract liabilities on our Consolidated Balance Sheet. Under typical payment terms for our contracts accounted for over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly) or upon achievement of contractual milestones.
Removed
For certain contracts with provisions that are intended to protect customers in the event we do not satisfy our performance obligations, billings occur subsequent to revenue recognition, resulting in unbilled receivables. Under ASC 606, unbilled receivables constitute contract assets.
Removed
On large long term contracts, and for contracts with international customers that do not do business with us regularly, payment terms typically require advanced payments and deposits. Under ASC 606, payments received from customers in excess of revenue recognized to date results in a contract liability.
Removed
These contract liabilities are not considered to represent a significant financing component of the contract because we believe these cash advances and deposits are generally used to meet working capital demands which can be higher in the earlier stages of a contract.
Removed
Also, advanced payments and deposits provide us with some measure of assurance that the customer will perform on its obligations under the contract. Under the typical payment terms for our contracts accounted for at a point in time, costs are accumulated in inventory until the time of billing, which generally coincides with revenue recognition.
Removed
We recognize the incremental costs to obtain or fulfill a contract as an expense when incurred if the amortization period of the asset is one year or less. Incremental costs to obtain or fulfill contracts with an amortization period greater than one year were not material.
Removed
As commissions payable to our internal sales and marketing employees or contractors are contingent upon multiple factors, such commissions are not considered direct costs to obtain or fulfill a contract with a customer and are expensed as incurred in selling, general and administrative expenses on our Consolidated Statements of Operations.
Removed
As for commissions payable to our third-party sales representatives related to long-term contracts, we do consider these types of commissions both direct and incremental costs to obtain and fulfill such contracts.

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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 50 Overview 51 Critical Accounting Policies 52 Results of Operations 57 Business Outlook for Fiscal 2023 58 Comparison of Fiscal 202 2 and 2021 59 Comparison of Fiscal 202 1 and 20 20 66 Liquidity and Capital Resources 72 Recent Accounting Pronouncements 75 ITEM 7A.
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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 76 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 76
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 67 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 67

Item 7. Management's Discussion & Analysis

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

75 edited+77 added−88 removed11 unchanged
Biggest changeFiscal 2022 ($ in millions, except for per share amounts) Operating Loss Net Loss Attributable to Common Stockholders Net Loss 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 CEO transition costs 13.6 13.0 0.49 Proxy solicitation costs 11.2 8.7 0.33 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 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 $ (0.7) $ (3.5) $ (0.13) Fiscal 2021 ($ in millions, except for per share amounts) Operating (Loss) Income Net (Loss) Income Net (Loss) Income per Diluted Share Reconciliation of GAAP to Non-GAAP Earnings: GAAP measures, as reported $ (68.3) $ (73.5) $ (2.86) Acquisition plan expenses 100.3 93.3 3.60 Restructuring costs 2.8 2.1 0.08 COVID-19 related costs 1.0 0.8 0.03 Strategic emerging technology costs 0.3 0.3 0.01 Interest expense — 0.9 0.04 Net discrete tax benefit — (1.6) (0.06) Non-GAAP measures $ 36.1 $ 22.4 $ 0.86 65 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 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.
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. 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.
We have not quantitatively reconciled our Q1 fiscal 2023 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.
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.
The remaining research and development expenses of $0.8 million and $1.0 million in fiscal 2022 and 2021, respectively, related to the amortization of stock-based compensation expense.
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.
Our U.S federal income tax returns for fiscal 2019 through 2021 are subject to potential future IRS audit. None of our state income tax returns prior to fiscal 2018 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. Net Loss Attributable to Common Stockholders.
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 investment policy relating to our cash and cash equivalents is intended to minimize principal loss and 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.
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.
Net cash used during fiscal 2022 primarily reflects capital expenditures to build-out cloud-based computer networks to support our recent NG-911 contract wins and capital investments and building improvements in connection with the opening of our new high-volume technology manufacturing centers.
Net cash used 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.
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. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance.
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.
Net cash used in both periods also relates to expenditures for property, plant and equipment upgrades and enhancements. • Net cash provided by financing activities was $8.4 million and $39.1 million for fiscal 2022 and 2021, respectively.
Net cash used in both periods also relates to expenditures for property, plant and equipment upgrades and enhancements. • Net cash provided by financing activities was $20.1 million and $8.4 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 2022 and 2021. Gross Profit. Gross profit was $179.8 million and $214.0 million for fiscal 2022 and 2021, 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 2023 and 2022. Gross Profit. Gross profit was $184.5 million and $179.8 million for fiscal 2023 and 2022, respectively.
During fiscal 2022 and 2021, our Satellite and Space Communications segment incurred $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.
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.
Our gross profit in both periods also reflects start-up costs associated with the opening of our new high-volume technology manufacturing centers, as well as increased costs resulting from the ongoing impacts of the COVID-19 pandemic and inflationary pressures. Gross profit, as a percentage of related segment net sales, is further discussed below.
Our gross profit in both periods reflects start-up costs associated with the opening of our new high-volume technology manufacturing centers, as well as increased costs resulting from inflationary pressures. Gross profit, as a percentage of related segment net sales, is further discussed below.
Porcelain, pursuant to his separation agreement with the Company, were $7.4 million, of which $3.8 million related to the acceleration of unamortized stock based compensation, with the remaining $3.6 million related to his severance payments and benefits upon termination of employment. The cash portion of the transition costs of $3.6 million is expected to be paid to Mr.
Porcelain, pursuant to his separation agreement with the Company, were $7.4 million, of which $3.8 million related to the acceleration of unamortized stock-based compensation, with the remaining $3.6 million related to his severance payments and benefits upon termination of employment. The cash portion of the transition costs of $3.6 million was paid to Mr. Porcelain in October 2022.
During fiscal 2022 and 2021, customers reimbursed us $9.8 million and $13.6 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 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.
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 $114.9 million and $111.8 million for fiscal 2022 and 2021, respectively.
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.
Proxy Solicitation Costs . During fiscal 2022, we incurred $11.2 million of proxy solicitation costs (including legal and advisory fees and costs associated with a related lawsuit) in our Unallocated segment as a result of a now-settled proxy contest initiated by a shareholder during the first quarter of fiscal 2022. There were no similar costs in the prior year.
During fiscal 2022, we incurred $11.2 million of proxy solicitation costs (including legal and advisory fees and costs associated with a related lawsuit) in our Unallocated segment as a result of a now settled proxy contest initiated by a shareholder. There were no similar costs during fiscal 2023. CEO Transition Costs .
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.
Because our consolidated Adjusted EBITDA, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each segment as well as unallocated spending, it is inherently difficult to forecast. Please refer to the discussion below under "Adjusted EBITDA" for more information.
Included in consolidated cost of sales for both fiscal 2022 and 2021 are provisions for excess and obsolete inventory of $4.4 million. As discussed in "Item 7.
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.
Interest (Income) and Other. Interest (income) and other for both fiscal 2022 and 2021 was nominal. All of our available cash and cash equivalents are currently invested in bank deposits and money market deposit accounts which, at this time, are currently yielding an immaterial interest rate. Change in Fair Value of Convertible Preferred Stock Purchase Option Liability.
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.
Porcelain in October 2022. Also, in connection with Mr. Peterman entering into an employment agreement with the Company, effective as of August 9, 2022, we incurred a $1.0 million expense related to a cash sign-on bonus. CEO transition costs related to Mr. Porcelain and Mr. Peterman will be expensed in our Unallocated segment during the first quarter of fiscal 2023.
Also, in connection with Mr. Peterman entering into an employment agreement with the Company, effective as of August 9, 2022, we incurred a $1.0 million expense related to a cash sign-on bonus, which was paid in January 2023. CEO transition costs related to Mr. Porcelain and Mr. Peterman were expensed in our Unallocated segment.
The period-over-period decrease in cash flow from operating activities (excluding the $15.9 million and $70.0 million payments) reflects overall changes in net working capital requirements, principally the timing of shipments, billings and payments. • Net cash used in investing activities for fiscal 2022 and 2021 was $19.6 million and $15.5 million, respectively.
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.
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 fiscal 2022 and $21.0 million (of which $5.7 million was for the Satellite and Space Communications segment and $15.3 million was for the Terrestrial and Wireless Networks segment) for fiscal 2021.
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 .
As a percentage of consolidated net sales, selling, general and administrative expenses were 23.6% and 19.2% for fiscal 2022 and 2021, respectively.
As a percentage of consolidated net sales, selling, general and administrative expenses were 21.8% and 23.6% for fiscal 2023 and 2022, respectively.
Kornberg, were $13.6 million and all expensed in our Unallocated segment during fiscal 2022. Of such amount, $10.3 million related to Mr. Kornberg's severance payments and benefits upon termination of his employment; the remainder related to Mr. Kornberg agreeing to serve as a Senior Technology Advisor for a minimum of two years.
CEO transition costs were $13.6 million for fiscal 2022 and related to our former CEO, Fred Kornberg. Of such amount, $10.3 million related to Mr. Kornberg's severance payments and benefits upon termination of his employment; the remainder related to him agreeing to serve as a Senior Technology Advisor for a minimum of two years. CEO transition costs related to Mr.
There also continues to be order and production delays, disruptions in component availability, increased pricing both for labor and parts, lower levels of factory utilization and higher logistics and operational costs.
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.
During fiscal 2022 and 2021, we incurred $6.0 million and $2.8 million, respectively, of restructuring costs to streamline our operations, including costs related to the ongoing relocation of certain of our satellite ground station production facilities to a new 146,000 square foot facility in Chandler, Arizona.
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 2022 and 2021, consolidated net loss attributable to common stockholders was $43.3 million and $73.5 million, respectively. Adjusted EBITDA.
During fiscal 2023 and 2022, consolidated net loss attributable to common stockholders was $33.9 million and $43.3 million, respectively. Adjusted EBITDA.
Our Terrestrial and Wireless Networks segment represented 42.5% of consolidated net sales for fiscal 2022 as compared to 35.6% for fiscal 2021. Our book-to-bill ratio (a measure defined as bookings divided by net sales) for this segment was 0.79x. Period-to-period fluctuations in bookings are normal for this segment.
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.
The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for fiscal 2022 was driven primarily by higher research and development expenses, as discussed above.
The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for fiscal 2023 was driven primarily by changes in products and services mix, as discussed above.
The increase in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, was driven primarily by a higher gross profit percentage and lower research and development expenses, as discussed above.
The increase in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to an increase in related segment net sales and lower research and development expenses, as discussed above.
Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2021 was 1.37x. Period-to-period fluctuations in bookings are normal for this segment.
Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2023 was 1.29x.
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 2021 was computed using 25,885,000 weighted average diluted shares outstanding during the period.
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.
During fiscal 2022, we recorded a $1.0 million non-cash benefit from the remeasurement of the convertible preferred stock purchase option liability. See "Notes to Condensed Consolidated Financial Statements - Note (15) - Convertible Preferred Stock" for more information. 63 Benefit from Income Taxes. For fiscal 2022 and 2021, we recorded tax benefits of $4.0 million and $1.5 million, respectively.
During fiscal 2022, we recorded a $1.0 million non-cash benefit from the remeasurement of the convertible preferred stock purchase option liability. There was no similar adjustment recorded during fiscal 2023. See "Notes to Consolidated Financial Statements - Note (15) - Convertible Preferred Stock" for more information. Benefit from Income Taxes.
Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both fiscal 2022 and 2021 are shown in the table below (numbers in the table may not foot due to rounding): Fiscal Years Ended July 31, 2022 2021 2022 2021 2022 2021 2022 2021 ($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated Net (loss) income $ (3.9) 24.4 18.8 24.4 (48.0) (122.2) $ (33.1) (73.5) (Benefit from) provision for income taxes (1.1) (0.4) — 0.8 (2.9) (1.9) (4.0) (1.5) Interest (income) and other (0.8) 0.2 0.1 — — (0.4) (0.7) (0.1) Change in fair value of convertible preferred stock option liability — — — — (1.0) — (1.0) — Interest expense 0.1 0.1 — — 4.9 6.8 5.0 6.8 Amortization of stock-based compensation — — — — 7.8 10.0 7.8 10.0 Amortization of intangibles 7.3 5.7 14.1 15.3 — — 21.4 21.0 Depreciation 4.0 3.7 6.1 5.3 0.2 0.3 10.3 9.4 Amortization of cost to fulfill assets 0.5 — — — — — 0.5 — CEO transition costs — — — — 13.6 — 13.6 — Proxy solicitation costs — — — — 11.2 — 11.2 — Restructuring costs 5.7 2.8 — — 0.3 — 6.0 2.8 Strategic emerging technology costs 1.2 0.3 — — — — 1.2 0.3 COVID-19 related costs 1.1 1.0 — — — — 1.1 1.0 Acquisition plan expenses — — — (1.1) — 101.3 — 100.3 Adjusted EBITDA $ 14.1 37.8 39.1 44.8 (13.9) (6.1) $ 39.3 76.5 Percentage of related net sales 5.0 % 10.1 % 18.9 % 21.7 % NA NA 8.1 % 13.2 % The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for fiscal 2022 as compared to fiscal 2021 is primarily attributable to lower consolidated net sales, as discussed above. 64 The decrease in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, was driven primarily by lower net sales and gross profit percentage, partially offset by lower research and development expenses, as discussed above.
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.
International sales for fiscal 2021 and 2020 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $138.9 million and $145.1 million, respectively.
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.
Also, during fiscal 2021, we incurred $1.0 million of incremental operating costs for our antenna facility in the United Kingdom due to the impact of the COVID-19 pandemic.
During fiscal 2022, we incurred $1.1 million of incremental operating costs related to our antenna facility in the United Kingdom due to the impact of the COVID-19 pandemic. Similar operating costs were not incurred in fiscal 2023.
Geography and Customer Type Sales by geography and customer type, as a percentage of related sales, for the fiscal years ended July 31, 2022 and 2021 are as follows: Fiscal Years Ended July 31, 2022 2021 2022 2021 2022 2021 Satellite and Space Communications Terrestrial and Wireless Networks Consolidated U.S. government 45.6 % 52.8 % 2.4 % 1.4 % 27.2 % 34.6 % Domestic 18.0 % 15.3 % 88.1 % 89.2 % 47.8 % 41.5 % Total U.S. 63.6 % 68.1 % 90.5 % 90.6 % 75.0 % 76.1 % International 36.4 % 31.9 % 9.5 % 9.4 % 25.0 % 23.9 % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 60 Sales to U.S. government customers include sales to the U.S.
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.
Excluding such items, our consolidated operating loss for fiscal 2022 would have been $0.7 million.
Excluding such items, our consolidated operating income for fiscal 2022 would have been $28.9 million.
Gross profit, as a percentage of related segment net sales, is further discussed below. Our Satellite and Space Communications segment's gross profit, as a percentage of related segment net sales, for fiscal 2021 increased in comparison to fiscal 2020 primarily reflecting 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 2023 decreased in comparison to fiscal 2022. The decrease in gross profit percentage primarily reflects changes in products and services mix, as discussed above.
Terrestrial and Wireless Networks Net sales in our Terrestrial and Wireless Networks segment were $206.5 million for fiscal 2022, as compared to $206.8 million for fiscal 2021, a decrease of $0.3 million, or 0.1%, reflecting slightly higher sales of our trusted location and messaging solutions and cyber security training services, offset by slightly lower sales of our 911 call routing services.
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 $5.7 million, or 2.8%, reflecting higher sales of our NG-911 solutions and services, offset in part by lower sales of our trusted location and messaging solutions and cyber security training services.
The decrease in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to a lower gross profit percentage, as discussed above. For a definition and explanation of Adjusted EBITDA, see "Item 7.
The decrease in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to changes in products and services mix, as discussed above.
Operating income (loss) by reportable segment is shown in the table below: Fiscal Years Ended July 31, 2022 2021 2022 2021 2022 2021 2022 2021 ($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated Operating (loss) income $ (5.7) $ 24.3 $ 18.9 $ 25.2 $ (47.0) $ (117.8) $ (33.8) $ (68.3) Percentage of related net sales NA 6.5 % 9.2 % 12.2 % NA NA NA NA Our GAAP operating loss of $33.8 million for fiscal 2022 reflects: (i) $13.6 million of CEO transition costs; (ii) $11.2 million of proxy solicitation costs; (iii) $6.0 million of restructuring costs; (iv) $1.2 million of strategic emerging technology costs; and (v) $1.1 million of incremental operating costs due to the lingering impact of COVID-19, as discussed above.
Operating income (loss) by reportable segment is shown in the table below: Fiscal Years Ended July 31, 2023 2022 2023 2022 2023 2022 2023 2022 ($ 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.
We do not expect to incur similar costs in fiscal 2023. Our Terrestrial and Wireless Networks segment's gross profit, as a percentage of related segment net sales, for fiscal 2022 was comparable to fiscal 2021. The gross profit percentage in fiscal 2022 primarily reflects changes in products and services mix, and lower than expected warranty claims, as discussed above.
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.
During fiscal 2022, we received an aggregate of $100.0 million in proceeds related to the issuance of a new series of Convertible Preferred Stock to certain investors.
During fiscal 2023, we had net borrowings under our Credit Facility of $36.9 million, as compared to net payments under our Credit Facility of $71.0 million during fiscal 2022. During fiscal 2022 we received an aggregate of $100.0 million in proceeds related to the issuance of a new series of Convertible Preferred Stock to certain investors.
There were no similar costs in the prior year. On August 9, 2022, subsequent to year end, our Board of Directors appointed our Chairman of the Board, Mr. Peterman, as President and CEO. Transition costs related to our former President and CEO, Mr.
CEO transition costs were $9.1 million for fiscal 2023. On August 9, 2022, our Board of Directors appointed our Chairman of the Board, Mr. Peterman, as President and CEO. Transition costs related to our former President and CEO, Mr.
In addition, we do not expect to make any new sales to Russian customers at this time. Bookings, sales and profitability in our Satellite and Space Communications segment can fluctuate dramatically from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by our U.S. and international government customers, and changes in the general business environment.
Bookings, sales and profitability in our Satellite and Space Communications segment can fluctuate dramatically from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by our U.S. and international government customers, and changes in the general business environment. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance.
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).
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).
Gross profit, as a percentage of consolidated net sales, for fiscal 2022 was 37.0% as compared to 36.8% for fiscal 2021. During fiscal 2022, we recorded a $2.5 million benefit to cost of sales as we reduced a warranty accrual due to lower than expected warranty claims in our NG-911 product line.
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.
Interest expense for fiscal 2021 includes $1.2 million of incremental interest expense related to a now terminated financing commitment letter. Our effective interest rate (including amortization of deferred financing costs) in fiscal 2022 was approximately 3.4%. Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our existing Credit Facility is approximately 5.1%.
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.
The Credit Facility is discussed below and in "Notes to Consolidated Financial Statements - Note (7) - Credit Facility" included in "Part II - Item 8. - Financial Statements and Supplementary Data" included in this Form 10-K.
Credit Facility As discussed further in " Notes to Consolidated Financial Statements - Note (7) - Credit Facility " included in " Part II - Item 8.
Future common stock dividends 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. Additional information related to our Business Outlook for Fiscal 2023 and a definition and explanation of Adjusted EBITDA is included in the below section "Item 7.
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.
As a percentage of consolidated net sales, research and development expenses were 10.8% and 8.4% for fiscal 2022 and 2021, respectively. For fiscal 2022 and 2021, research and development expenses of $26.5 million and $28.0 million, respectively, related to our Satellite and Space Communications segment, and $25.2 million and $20.1 million, respectively, related to our Terrestrial and Wireless Networks segment.
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 we have stated in the past, we are evaluating this new market in relation to our long-term business strategies, and we may incur additional costs in the future. Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements.
We are progressing with our evaluation of this new market in relation to our long-term business strategies, and expect to complete such evaluation in fiscal 2024. Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements.
For fiscal 2022, our cash flows reflect the following: • Net cash provided by operating activities was $2.0 million for fiscal 2022 as compared to net cash used in operating activities of $40.6 million for fiscal 2021. During fiscal 2022, we paid $15.9 million in aggregate payments related to our CEO transition and settled proxy contest.
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.
The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for fiscal 2021 was driven primarily by a lower gross profit percentage, partially offset by lower amortization of intangibles, as discussed above.
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.
Such spending is expected to continue during fiscal 2023. 61 Amortization of stock-based compensation expenses recorded as selling, general and administrative expenses was $6.3 million in fiscal 2022 as compared to $8.1 million in fiscal 2021. Such amortization for fiscal 2022 includes $0.8 million related to the retirement, in December 2021, of three, long-standing members of the Board of Directors.
Such spending is expected to continue during fiscal 2024. 58 Amortization of stock-based compensation expenses recorded as selling, general and administrative expenses was $8.0 million in fiscal 2023 as compared to $6.3 million in fiscal 2022. Fiscal 2023 includes fully vested stock-based awards granted to certain employees in lieu of fiscal 2023 non-equity incentive compensation.
Accordingly, reconciliations to the Non-GAAP forward looking metrics are not available without unreasonable effort and such unavailable reconciling items could significantly impact our financial results. Comparison of Fiscal 2021 and 2020 Net Sales. Consolidated net sales were $581.7 million and $616.7 million for fiscal 2021 and 2020, respectively, representing a decrease of $35.0 million, or 5.7%.
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.
Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. Included in domestic sales are sales to Verizon, which accounted for 10.7% of consolidated net sales for fiscal 2021. Except for the U.S. government, there were no customers that represented more than 10.0% of consolidated net sales for fiscal 2020.
Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. Included in domestic sales are sales to Verizon Communications Inc. ("Verizon"), which accounted for 10.6% and 11.1% of consolidated net sales for fiscal 2023 and 2022, respectively.
In light of these business conditions and resulting challenges, for our first quarter of fiscal 2023, we are targeting consolidated net sales to increase between 1.0% and 3.0%, sequentially, and for our consolidated Adjusted EBITDA margin to approximate 8.0%.
Despite these business conditions and resulting challenges and although we anticipate some variability from time to time as we move through our One Comtech transformational change, for our first quarter of fiscal 2024, we are targeting consolidated net sales to sequentially increase approximately 1.0% to 4.0% and for our consolidated Adjusted EBITDA margin to range between 11.0% and 13.0%.
During fiscal 2022 and 2021, we paid $11.0 million and $10.3 million, respectively, in cash dividends to our common stockholders. We also made $6.1 million and $2.8 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during fiscal 2022 and 2021, respectively.
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.
Our GAAP operating loss of $68.3 million for fiscal 2021 reflects: (i) $100.3 million of acquisition plan expenses; (ii) $2.8 million of restructuring costs; (iii) $1.0 million of incremental operating costs due to the impact of COVID-19; and (iv) $0.3 million of strategic emerging technology costs, as discussed above.
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.
Selling, general and administrative expenses were $111.8 million and $117.1 million for fiscal 2021 and 2020, respectively, representing a decrease of $5.3 million, or 4.5%. As a percentage of consolidated net sales, selling, general and administrative expenses were 19.2% and 19.0% for fiscal 2021 and 2020, respectively.
Research and development expenses were $48.6 million and $52.5 million for fiscal 2023 and 2022, respectively, representing a decrease of $3.9 million, or 7.4%. As a percentage of consolidated net sales, research and development expenses were 8.8% and 10.8% for fiscal 2023 and 2022, respectively.
Stock-based compensation expense for fiscal 2022 includes $0.8 million related to the retirement of three, long-standing Board members, who retired in December 2021. Our unallocated expenses for fiscal 2021 also reflects benefits of $3.1 million for legal expense recoveries from insurance and $2.0 million related to a refund of historical excise tax paid.
Amortization of stock-based compensation expense for fiscal 2022 includes $0.8 million related to the retirement, in December 2021, of three long-standing members of the Board of Directors. Amortization of stock-based compensation is not allocated to our two reportable operating segments. Research and Development Expenses.
These expenses are primarily recorded in our Unallocated segment. There were no similar costs incurred during fiscal 2022. 62 Operating (Loss) Income. Operating loss for fiscal 2022 and 2021 was $33.8 million and $68.3 million, respectively.
Kornberg were expensed in our Unallocated segment. Operating Income (Loss). Operating loss for fiscal 2023 and 2022 was $14.7 million and $33.8 million, respectively.
Our effective tax rate (excluding discrete tax items) for fiscal 2022 was 28.0%, as compared to a nominal effective tax rate for fiscal 2021. The increase was primarily due to expected product and geographical mix changes in fiscal 2022.
For fiscal 2023 and fiscal 2022, we recorded tax benefits of $3.9 million and $4.0 million, respectively. Our effective tax rate (excluding discrete tax items) for fiscal 2023 was 14.5%, as compared to 28.0% for fiscal 2022. The decrease in the rate was primarily due to the recognition of a valuation allowance in a foreign jurisdiction.
Army, as well as of our satellite ground station technologies, partially offset by higher sales of our satellite-based mobile communications and tracking systems and high-reliability EEE satellite-based space components.
Army) and satellite ground station technologies, offset in part by lower sales of our high reliability EEE satellite-based space components. Our Satellite and Space Communications segment represented 61.4% of consolidated net sales for fiscal 2023 as compared to 57.5% for fiscal 2022.
The period-over-period decrease in net sales primarily reflects lower net sales in our Satellite and Space Communications segment. Net sales by operating segment are discussed below. Satellite and Space Communications Net sales in our Satellite and Space Communications segment were $279.7 million for fiscal 2022 as compared to $374.9 million for fiscal 2021, a decrease of $95.2 million, or 25.4%.
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.
In addition, we received $3.1 million of legal expense recoveries from insurance in fiscal 2021. Excluding such items, selling, general and administrative expenses for fiscal 2022 and 2021 would have been $108.9 million or 22.4% and $112.1 million or 19.3%, respectively, of consolidated net sales.
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.
Terrestrial and Wireless Networks Net sales in our Terrestrial and Wireless Networks segment were $206.8 million for fiscal 2021, as compared to $205.6 million for fiscal 2020, an increase of $1.2 million, or 0.6%. Our Terrestrial and Wireless Networks segment represented 35.6% of consolidated net sales for fiscal 2021 as compared to 33.3% for fiscal 2020.
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%.
For purposes of determining our 28.0% annual effective tax rate for fiscal 2022, CEO transition costs and proxy solicitation costs are considered significant, unusual or infrequently occurring discrete tax items and are excluded from the computation of our effective tax rate.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2022 and 2021." Comparison of Fiscal 2022 and 2021 Net Sales. Consolidated net sales were $486.2 million and $581.7 million for fiscal 2022 and 2021, respectively, representing a decrease of $95.5 million, or 16.4%.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2023 and 2022." Fiscal 2023 marked a year of tremendous change and accomplishments for our organization.
As we enter fiscal 2023, business conditions have become more challenging, and the operating environment is largely unpredictable, especially now with increasing news reports of inflation, interest rate hikes and a potential global recession.
We expect to complete the foregoing prior to announcing our first quarter fiscal 2024 results. As we enter fiscal 2024, while our business performance is improving, macroeconomic conditions continue to be challenging, and the operating environment is largely unpredictable, including factors such as inflation, rising interest rates, repercussions of military conflicts and a potential global recession.
During fiscal 2021, we recorded a $2.0 million benefit to cost of sales in our Unallocated segment related to a refund of historical excise tax paid. Excluding such items, gross profit, as a percentage of consolidated net sales, for fiscal 2022 and 2021 was 36.5% and 36.4%, respectively.
Gross profit, as a percentage of consolidated net sales, for fiscal 2023 was 33.5% as compared to 37.0% for fiscal 2022.
Excluding such items, our consolidated operating income for fiscal 2021 would have been $36.1 million, or 6.2% of consolidated net sales. The decrease in operating income from $36.1 million for fiscal 2021 to an operating loss of $0.7 million for fiscal 2022 was primarily due to lower consolidated net sales, as discussed above.
The increase in operating income, excluding the above items, from $28.9 million for fiscal 2022 to $41.6 million for fiscal 2023 reflects the benefit of our One Comtech lean initiatives implemented in fiscal 2023 and, to a lesser extent, higher consolidated net sales, as discussed above. Operating income (loss) by reportable segment is further discussed below.
During the fourth quarter, we continued to execute on our plans to deploy the proceeds of our $100.0 million strategic growth investment and continued to solidify our position as a leading solutions provider in our two key end-markets: Satellite and Space Communications and Terrestrial and Wireless Networks.
In our first quarter of fiscal 2022, we secured a $100.0 million strategic growth investment to enhance our financial flexibility and strengthen our ability to capitalize on large contract awards and growing customer demand by making crucial investments in our satellite and space communications and terrestrial and wireless network solutions.
Removed
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2022 and 2021." In August 2022, we announced that Ken Peterman was appointed President and CEO. Prior to such appointment, in May 2022, Mr. Peterman joined our Board of Directors as Chairman. With over forty years in the defense sector, Mr.
Added
Led by a new management team and refreshed Board of Directors, we implemented many important lean initiatives and process improvement activities anticipated to drive sustainable, profitable growth in our business. Several of these actions have already contributed to our improved financial performance, affording us the opportunity to report our first quarter of positive GAAP operating income in almost two years.
Removed
Peterman’s significant experience in satellite technology and decades of experience with U.S. government contracting is expected to enhance our efforts to continually improve commercial success and shareholder value. Also, we progressed on our initiative to enhance our leadership team, welcoming Don Bach as our first ever Vice President of Procurement.
Added
We are greatly encouraged by the progress we have made through our One Comtech transformation, which gives us the confidence to expect that our Business Outlook for Fiscal 2024 will be even better than fiscal 2023.
Removed
In light of ongoing global supply chain disruptions, part shortages and extended lead times for components, Mr. Bach’s immediate focus is expected to be on optimizing the end-to-end management of our consolidated inventories, including efforts to enhance our buying power across the various product areas. We also appointed Anirban Chakraborty as our first ever Chief Growth Officer. Mr.

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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 changeBased on our investment portfolio balance as of July 31, 2022, 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. ITEM 8.
Biggest changeBased 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 the amount of outstanding debt under our Credit Facility, a hypothetical change in interest rates by 10% would change interest expense by approximately $0.6 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 $1.5 million over a one-year period.
As of July 31, 2022, we had cash and cash equivalents of $21.7 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.
As 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.
Removed
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reports of Independent Registered Public Accounting Firm, Consolidated Financial Statements, Notes to Consolidated Financial Statements and Related Financial Schedule are listed in the Index to Consolidated Financial Statements and Schedule annexed hereto and are hereby incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.

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