CMTL US Equity☆

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview of Business

We are a leading global provider of next-generation 911 emergency systems ("NG-911") and secure wireless and satellite communications technologies. 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. 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. We provide our solutions to both commercial and governmental customers.

In the fourth quarter of fiscal 2022, we revised our business segments to better align them with end-markets for our products and services. Our businesses have been re-organized into two new reportable segments: “Satellite and Space Communications” and “Terrestrial and Wireless Networks.” All current and prior periods reflected in this Form 10-K have been presented according to these two segments, unless otherwise noted. For more information and for financial information about our business segments, including net sales, operating income, Adjusted EBITDA (a Non-GAAP financial measure), total assets, and our operations outside the United States, refer to "Notes to Consolidated Financial Statements - Note (11) Segment Information" included in "Part II - Item 8 - Financial Statements and Supplementary Data." 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. 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 COMETTM; 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 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.

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Our Quarterly Financial Information

Quarterly and period-to-period sales and operating results may be significantly affected by either short-term or long-term contracts with our customers. In addition, our gross profit is affected by a variety of factors, including the mix of products, systems and services sold, production efficiencies, estimates of warranty expense, price competition and general economic conditions. 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. Some of these contracts are indefinite delivery/indefinite quantity ("IDIQ") contracts and, as such, the U.S. government is not obligated to purchase any equipment or services under these contracts. We have, in the past, experienced and we continue to expect significant fluctuations in sales and operating results from quarter-to-quarter and period-to-period due to these factors. 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. In accordance with FASB ASC 606 - Revenue from Contracts with Customers ("ASC 606"), we record revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. 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. 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). 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. 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. 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. 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. 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.

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. Since certain contracts extend over a long period of time, the impact of revisions in revenue and or cost estimates during the progress of work may impact current period earnings through a cumulative adjustment. Additionally, if the EAC process indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract revenue and cost estimates for significant contracts are generally reviewed and reassessed at least quarterly.

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. For service-based contracts in our Terrestrial and Wireless Networks segment, we also recognize revenue over time. 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.

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•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. 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. 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.

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. 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.

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. 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.

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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

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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). In almost all of our contracts with customers, we are the principal in the arrangement and report revenue on a gross basis. 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.

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. 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. 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. 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. 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.

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.

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. 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. Therefore, such types of commissions are included in total estimated costs at completion for such contracts and expensed over time through cost of sales on our Consolidated Statements of Operations.

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the end of a fiscal period. Remaining performance obligations, which we refer to as backlog, exclude unexercised contract options and potential orders under indefinite delivery / indefinite quantity ("IDIQ") contracts.

Impairment of Goodwill and Other Intangible Assets. 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). 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).

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. Reporting units are defined by how our Chief Executive Officer ("CEO") manages the business, which includes resource allocation decisions. We may, in the future, change our management approach which in turn may change the way we define our reporting units, as such term is defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, "Intangibles - Goodwill and Other." A change to our management approach may require us to perform an interim goodwill impairment test and possibly record impairment charges in a future period.

In accordance with FASB ASC 350, we perform a goodwill impairment analysis at least annually (in the first quarter of each fiscal year), unless indicators of impairment exist in interim periods. If we fail the quantitative assessment of goodwill impairment ("quantitative assessment"), we would be required to recognize an impairment loss equal to the amount that a reporting unit's carrying value exceeded its fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

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As a result of our segment restructuring in the fourth quarter of fiscal 2022 from the Commercial Solutions and Government Solutions segments to the Satellite and Space Communications and Terrestrial and Wireless Networks segments, we performed an interim quantitative assessment as of July 29, 2022 and estimated the fair value of each of our reporting units, both before and after the change, using a combination of the income and market approaches. 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 and 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. Given its proximity to our next regularly scheduled annual goodwill impairment testing date, we utilized our July 29, 2022 interim quantitative assessment to conclude that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment as of August 1, 2022.

In making this assessment, we considered, among other things, expectations of projected net sales and cash flows, assumptions impacting the weighted average cost of capital, trends in trading multiples of comparable companies, changes in our stock price and changes in the carrying values of our reporting units with goodwill. We also considered overall business conditions.

The income approach, also known as the discounted cash flow ("DCF") method, utilizes the present value of cash flows to estimate fair value. The future cash flows for our reporting units were projected based on our estimates, at that time, of future revenues, operating income and other factors (such as working capital and capital expenditures). For purposes of conducting our impairment analysis, we assumed revenue growth rates and cash flow projections that are below our actual long-term expectations. The discount rates used in our DCF method were based on a weighted-average cost of capital ("WACC") determined from relevant market comparisons, adjusted upward for specific reporting unit risks (primarily the uncertainty of achieving projected operating cash flows). A terminal value growth rate was applied to the final year of the projected period, which reflects our estimate of stable, perpetual growth. We then calculated a present value of the respective cash flows for each reporting unit to arrive at an estimate of fair value under the income approach. Under the market approach, we estimated a fair value based on comparable companies' market multiples of revenues and earnings before interest, taxes, depreciation and amortization and factored in a control premium. Finally, we compared our estimates of fair values to our total public market capitalization and assessed implied control premiums based on our common stock price of $11.62 as of the date of testing.

It is possible that, during fiscal 2023 or beyond, business conditions (both in the U.S. and internationally) could deteriorate from the current state, our current or prospective customers could materially postpone, reduce or even forgo purchases of our products and services to a greater extent than we currently anticipate, or our common stock price could fluctuate. Such fluctuation could be caused by uncertainty about the severity and length of the COVID-19 pandemic, and its impact on global activity.

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. If assumed net sales and cash flow projections are not achieved in future periods or our common stock price significantly declines from current levels, our Satellite and Space Communications and Terrestrial and Wireless Networks reporting units could be at risk of failing the quantitative assessment and goodwill and intangibles assigned to the respective reporting units could be impaired.

In any event, we are required to perform the next annual goodwill impairment analysis on August 1, 2023 (the start of our fiscal 2024). If our assumptions and related estimates change in the future, or if we change our reporting unit structure or other events and circumstances change (e.g., a sustained decrease in the price of our common stock (considered on both absolute terms and relative to peers)), we may be required to record impairment charges when we perform these tests, or in other future periods. In addition to our impairment analysis of goodwill, we also review net intangible assets with finite lives when an event occurs indicating the potential for impairment. We believe that the carrying values of our net intangible assets were recoverable as of July 31, 2022. 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 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. 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.

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Accounting for Income Taxes. Our deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and applying enacted tax rates expected to be in effect for the year in which we expect the differences to reverse. Our provision for income taxes is based on domestic (including federal and state) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives. We recognize potential interest and penalties related to uncertain tax positions in income tax expense. The U.S. federal government is our most significant income tax jurisdiction.

Significant judgment is required in determining income tax provisions and tax positions. We may be challenged upon review by the applicable taxing authority and positions taken by us may not be sustained. We recognize all or a portion of the benefit of income tax positions only when we have made a determination that it is "more likely than not" that the tax position will be sustained upon examination, based upon the technical merits of the position and other factors. For tax positions that are determined as "more likely than not" to be sustained upon examination, the tax benefit recognized is the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The development of valuation allowances for deferred tax assets and reserves for income tax positions requires consideration of timing and judgments about future taxable income, tax issues and potential outcomes, and are subjective critical estimates. Valuation allowances are established, when necessary, to reduce net deferred tax assets to the amount "more likely than not" expected to be realized. A portion of our deferred tax assets consist of federal research and experimentation tax credit carryforwards, some of which was acquired in connection with prior acquisitions. No valuation allowance has been established on these deferred tax assets based on our evaluation that our ability to realize such assets has met the criteria of "more likely than not." We continuously evaluate additional facts representing positive and negative evidence in determining our ability to realize these deferred tax assets. In certain circumstances, the ultimate outcome of exposures and risks involves significant uncertainties. If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations and financial condition.

Our U.S. federal income tax returns for fiscal 2019 through 2021 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state income tax returns prior to fiscal 2018 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

Research and Development Costs. We generally expense all research and development costs. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other personnel-related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Costs incurred internally in researching and developing software to be sold are charged to expense until technological feasibility has been established for the software. Judgment is required in determining when technological feasibility of a product is established. Technological feasibility for our advanced communication software solutions is generally reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to customers and when we are able to validate the marketability of such product. 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. Other factors may also influence our provision, including decisions to exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued, we would be required to recognize such costs in our financial statements at the time of such determination. Any such charge could be material to our results of operations and financial condition.

Allowance for Doubtful Accounts. We perform credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information. 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.

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We monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. In light of ongoing tight credit market conditions, we continue to see requests from our customers for higher credit limits and longer payment terms. Because of our strong cash position and the nominal amount of interest we are earning on our cash and cash equivalents, we have, on a limited basis, approved certain customer requests. 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.

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. Measurement of credit losses requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health of specific customers. Future changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition.

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,

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 %

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. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2022 and 2021 - Adjusted EBITDA."

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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. 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. 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 "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. 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. 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. Chakraborty has been with Comtech for four years, most recently serving as Senior Vice President of Strategy and Business Development within the Trusted Location and Messaging Solutions product area. Mr. Chakraborty is expected to focus on growth initiatives by seeking meaningful ways to deploy our cutting edge technological innovations in new market areas, as well as fostering centers of engineering excellence across Comtech.

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. We believe both are at the beginning of a long-term investment and upgrade cycle, and the demand environment for our products, despite the headwinds discussed below, remains strong.

Considering these trends in our end-markets, we pressed forward during the most recent quarter on our investments in capital equipment and building improvements in connection with the opening of a new 146,000 square-foot facility in Chandler, Arizona, and the establishment of a 56,000 square-foot facility in Basingstoke, United Kingdom. Although COVID-19 and supply chain issues have extended our original build-out schedules, particularly as it relates to our Chandler, Arizona facility, both manufacturing centers are expected to support production of next-generation broadband satellite technology and should be fully operational in fiscal 2023.

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Our business continues to face near-term challenges and continued uncertainties, as the repercussions of the military conflict between Russia and Ukraine remain significant. For Comtech, the conflict is directly impacting near-term elements of our sales pipelines. Certain customers have paused procurement and deployment of satellite and troposcatter communication systems, and instead are purchasing war-fighting equipment. The U.S. defense budget, and defense budgets worldwide, are being adjusted in real-time to reflect the priorities of war and changing European geopolitics. Anticipated funding for other expected orders, including for our satellite and space communication products, has been shifted to other programs and/or temporarily delayed as a result of changes in defense spending priorities.

For example, in May 2022, the U.S. authorized a $40.0 billion military and humanitarian aid package for Ukraine. While there are portions of this spending package that we could expect to benefit from in the future, such as financial support for Ukraine’s military and expanded U.S. military operations in Europe, we do not expect such spending for our communications related products and services to be immediate. Nonetheless, at the request of the Ukrainian government, in our third quarter of fiscal 2022, we donated multiple COMETTM troposcatter systems to support Ukraine’s urgent need for secure, reliable communications. Shortly thereafter, as announced in September 2022, we were awarded a funded order to supply the Ukrainian government with additional systems. We expect related deliveries to occur in the first half of fiscal 2023.

In late May 2022, at the request of the U.S. Army, we conducted in-field demonstrations of our troposcatter solutions (including the COMETTM) for both U.S. and NATO allied government customers. These demonstrations consisted of end-to-end data communications links, showcasing small, medium and large troposcatter terminals. While it is always difficult to predict the timing and amount of future orders, we feel confident that Comtech is well-positioned to participate in the uptick in demand, as conflict and uncertainties present new opportunities for the types of communications solutions we provide.

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. 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.

As the business environment relates to our operations in Russia, we are continuing to shift certain commercial software development and related support activities conducted in our Russian office to locations outside of the country. While we continue to seek and implement initiatives to lower such costs, our Business Outlook for Fiscal 2023 reflects additional expenses associated with shifting these development resources.

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%.

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. 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. 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%. 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%. Our Satellite and Space Communications segment represented 57.5% of consolidated net sales for fiscal 2022 as compared to 64.4% for fiscal 2021. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2022 was 1.01x. Period-to-period fluctuations in bookings are normal for this segment.

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Fiscal 2022 net sales primarily reflect significantly lower sales of our global field support services, advanced VSAT products and other programs to the U.S. 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. Fiscal 2021 net sales included revenue related to our performance on our 10-year, $211.0 million IDIQ contract awarded to us by a prime contractor to provide next-generation troposcatter systems in support of the U.S. Marine Corps. There were nominal corresponding sales in fiscal 2022.

In aggregate, net sales for our Satellite and Space Communications segment were anticipated to be significantly lower than the amount we achieved in fiscal 2021. As discussed in our Form 10-Q filed with the SEC on June 8, 2021, our revenues in fiscal 2022 were expected to decline due to the U.S. government’s decision to fully withdraw troops from Afghanistan and make certain program changes. In addition, as a direct result of the Russia/Ukraine military conflict, we no longer expected to receive and ship orders to Ukraine in fiscal 2022. That customer has an immediate need for wireless communication services but had redirected procurement dollars to war-fighting equipment. However, as announced in September 2022, we were awarded a funded order to supply the Ukrainian government with troposcatter systems that we expect to deliver in the first half of fiscal 2023.

The lower sales of our satellite ground station technologies primarily reflects the timing of receipt of, and performance on, orders related to our U.S. government and international customers. Our results for fiscal 2022 and 2021 include nominal sales from our TDMA satellite networking technologies acquired on March 2, 2021. Our satellite ground station product line has been impacted by overall challenging business conditions, including the COVID-19 pandemic's effect on customer demand, particularly in international markets, which historically represents a large majority of end-users for this product line. Although our backlog of our satellite ground station products has increased during fiscal 2022, lead times for components are impacting the timing of shipments. We continue to monitor our inventory needs and navigate supply chain constraints which are impacting the timing of new orders, deliveries and installations. 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. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance.

Terrestrial and Wireless Networks

Net sales in our Terrestrial and Wireless Networks segment were $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. 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.

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.

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,

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Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors.

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 11.1% and 10.7% of consolidated net sales for fiscal 2022 and 2021, respectively.

International sales for fiscal 2022 and 2021 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $121.4 million and $138.9 million, respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10% of consolidated net sales for fiscal 2022 and 2021.

Gross Profit. Gross profit was $179.8 million and $214.0 million for fiscal 2022 and 2021, respectively. 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. 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 during the most recent period reflects the impact of an overall favorable product mix and a lower provision for warranty obligations during fiscal 2022 in light of the reduced level of sales activity during the period, offset in part by lower consolidated net sales. 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 Satellite and Space Communications segment's gross profit, as a percentage of related segment net sales, for fiscal 2022 decreased in comparison to fiscal 2021. The decrease in gross profit percentage primarily reflects changes in products and services mix, as well as lower levels of factory utilization and higher logistics and operational costs resulting from global supply chain constraints. Also, during fiscal 2022 and 2021, we incurred $1.1 million and $1.0 million, respectively, of incremental operating costs related to our antenna facility in the United Kingdom due to the impact of the COVID-19 pandemic. Although operations in the United Kingdom have largely resumed, we continued to experience lingering impacts from COVID-19 and the related facility shut-down in fiscal 2021. 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.

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. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Provisions for Excess and Obsolete Inventory," we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends.

Our consolidated gross profit, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each segment, and therefore is inherently difficult to forecast.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $114.9 million and $111.8 million for fiscal 2022 and 2021, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 23.6% and 19.2% for fiscal 2022 and 2021, respectively.

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. 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. The increase in our selling, general and administrative expenses, as a percentage of consolidated net sales, is primarily due to lower consolidated net sales. Our selling, general and administrative expenses in the most recent period also reflect higher labor costs associated with a tight global labor market, increased investments in marketing, including new social media activities and other investments we are making to achieve our long term business goals. Such spending is expected to continue during fiscal 2023.

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

Research and Development Expenses.Research and development expenses were $52.5 million and $49.1 million for fiscal 2022 and 2021, respectively, representing an increase of $3.4 million, or 6.9%. 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. 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.

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. 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. 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. 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.

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

CEO Transition Costs. On December 31, 2021, our Board of Directors appointed Mr. Porcelain as CEO. Prior to that, Mr. Porcelain served as our President and COO. Transition costs related to our former CEO, Mr. 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. 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. 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 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.

Acquisition Plan Expenses. During fiscal 2021, we incurred $100.3 million of acquisition plan expenses, of which $88.3 million related to the previously announced litigation and merger termination with Gilat, including $70.0 million paid in cash to Gilat. The remaining costs primarily related to the acquisition of TDMA satellite networking technologies and GD NG-911 acquisition-related litigation. These expenses are primarily recorded in our Unallocated segment. There were no similar costs incurred during fiscal 2022.

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Operating (Loss) Income. Operating loss for fiscal 2022 and 2021 was $33.8 million and $68.3 million, respectively. Operating income (loss) by reportable segment is shown in the table below:

Fiscal Years Ended July 31,

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. Excluding such items, our consolidated operating loss for fiscal 2022 would have been $0.7 million. 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. 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. Operating income (loss) by reportable segment is further discussed below.

The decrease in our Satellite and Space Communications segment operating income for fiscal 2022 was driven primarily by lower net sales and gross profit percentage and higher restructuring costs and amortization of intangibles, partially offset by lower research and development expenses, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for fiscal 2022 was driven primarily by higher research and development expenses, as discussed above.

The decrease in unallocated expenses for fiscal 2022 as compared to fiscal 2021 was primarily due to no acquisition plan expenses incurred during the most recent fiscal year, partially offset by CEO transition costs and proxy solicitation costs during fiscal 2022, as discussed above. Amortization of stock-based compensation was $7.8 million and $10.0 million, respectively, for fiscal 2022 and 2021. 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. Excluding these items in their respective periods, unallocated expense would have been $21.4 million and $21.6 million, respectively, for fiscal 2022 and 2021.

GAAP operating results for fiscal 2023 will be impacted by start-up expenses and restructuring costs associated with the opening of Comtech’s new high-volume technology manufacturing centers, as well as the expenses associated with the CEO change that was announced in August 2022.

Interest Expense and Other. Interest expense was $5.0 million and $6.8 million for fiscal 2022 and 2021, respectively. 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%.

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. 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.

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Benefit from Income Taxes. For fiscal 2022 and 2021, we recorded tax benefits of $4.0 million and $1.5 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 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.

During fiscal 2022, we recorded a net discrete tax benefit of $0.6 million, primarily related to the deductible portion of CEO transition costs and proxy solicitation costs. These benefits were partially offset by the establishment of a valuation allowance on certain foreign related net deferred tax assets and the settlement of certain stock-based awards during fiscal 2022. During fiscal 2021, we recorded a net discrete tax benefit of $1.6 million, primarily related to the release of valuation allowances previously established on certain foreign related deferred tax assets, the finalization of certain tax accounts in connection with the filing of our fiscal 2020 federal, state and foreign income tax returns and the settlement of certain stock-based awards during fiscal 2021.

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. During fiscal 2022 and 2021, consolidated net loss attributable to common stockholders was $43.3 million and $73.5 million, respectively.

Adjusted EBITDA. 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,

Interest (income) and other (0.8) 0.2 0.1 — — (0.4) (0.7) (0.1)

Amortization of stock-based compensation — — — — 7.8 10.0 7.8 10.0

Amortization of cost to fulfill assets 0.5 — — — — — 0.5 —

CEO transition costs — — — — 13.6 — 13.6 —

Proxy solicitation costs — — — — 11.2 — 11.2 —

Strategic emerging technology costs 1.2 0.3 — — — — 1.2 0.3

Acquisition plan expenses — — — (1.1) — 101.3 — 100.3

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.

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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.

The decrease in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, was driven primarily by higher research and development expenses, as discussed above.

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

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). Non-GAAP net (loss) income attributable to common stockholders and net (loss) income per diluted common share reflect Non-GAAP provisions for income taxes based on full year results, as adjusted for the Non-GAAP reconciling items included in the tables below. We evaluate our Non-GAAP effective income tax rate on an ongoing basis, and it can change from time to time. 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.

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported $ (33.8) $ (43.3) $ (1.63)

Strategic emerging technology costs 1.2 0.9 0.03

Net discrete tax expense — 2.6 0.10

Non-GAAP measures $ (0.7) $ (3.5) $ (0.13)

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported $ (68.3) $ (73.5) $ (2.86)

Strategic emerging technology costs 0.3 0.3 0.01

Interest expense — 0.9 0.04

Net discrete tax benefit — (1.6) (0.06)

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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. Our definition of Adjusted EBITDA may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is also a measure frequently requested by our investors and analysts. We believe that investors and analysts may use Adjusted EBITDA, along with other information contained in our SEC filings, in assessing our performance and comparability of our results with other companies. Our Non-GAAP measures reflect the GAAP measures as reported, adjusted for certain items as described herein and also excludes the effects of our outstanding convertible preferred stock.

These Non-GAAP financial measures have limitations as an analytical tool as they exclude the financial impact of transactions necessary to conduct our business, such as the granting of equity compensation awards, and are not intended to be an alternative to financial measures prepared in accordance with GAAP. These measures are adjusted as described in the reconciliation of GAAP to Non-GAAP in the tables presented herein, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP. Investors are advised to carefully review the GAAP financial results that are disclosed in our SEC filings. 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. 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%. The 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 $374.9 million for fiscal 2021 as compared to $411.1 million for fiscal 2020, a decrease of $36.2 million or 8.8%. Our Satellite and Space Communications segment represented 64.4% of consolidated net sales for fiscal 2021 as compared to 66.7% for fiscal 2020. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for fiscal 2021 was 0.91x. Period-to-period fluctuations in bookings are normal for this segment.

Fiscal 2021 net sales in this segment primarily reflect lower sales of global field support services, advanced VSAT products and other programs for the U.S. Army. Such increase was offset in part by higher sales of our high reliability Electrical, Electronic and Electromechanical ("EEE") satellite-based space components (including incremental sales of X/Y antenna products that we now offer as a result of our January 2020 acquisition of CGC), performance on our 10-year, $211.0 million IDIQ contract awarded to us by a prime contractor to provide next-generation troposcatter systems in support of the U.S. Marine Corps and a nominal amount of sales related to our acquisition of UHP Networks Inc. ("UHP") on March 2, 2021, which extended our product offerings to include TDMA satellite modems.

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. 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.

Net sales in fiscal 2021 reflect increased sales of our trusted location and messaging solutions, offset in part by the absence of 911 wireless call routing sales to AT&T.

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During fiscal 2021, we were awarded several important statewide NG-911 contracts and our strong momentum was acknowledged by Frost & Sullivan, who recognized Comtech for registering the most significant year-over-year market share increase among all NG-911 primary contract holders, growing our market share from an estimated 17.3% in 2019 to 26.2% in 2020, as calculated by Frost & Sullivan.

Geography and Customer Type

Sales by geography and customer type, as a percentage of related sales, for the fiscal years ended July 31, 2021 and 2020 are as follows:

Fiscal Years Ended July 31,

Sales to U.S. government customers include sales to the DoD, intelligence and civilian agencies, as well as sales directly to or through prime contractors.

Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. Included in domestic sales are sales to Verizon, which accounted for 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.

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. 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 2021 and 2020.

Gross Profit. Gross profit was $214.0 million and $226.8 million for fiscal 2021 and 2020, respectively. The decrease of $12.8 million primarily reflects the decline in consolidated net sales, as discussed above. Gross profit as a percentage of consolidated net sales was 36.8% for both fiscal periods. Our gross profit in fiscal 2021 reflects a higher percentage of consolidated net sales generated from our Terrestrial and Wireless Networks segment, offset by increased costs due to production delays, supply chain disruptions, lower levels of factory utilization and higher logistics and operational costs resulting from the COVID-19 pandemic. In addition, our gross profit reflects start-up costs associated with the opening of our two new high-volume technology manufacturing centers. Our gross profit for fiscal 2021 also reflects a $2.0 million benefit from the refund of historical excise tax paid, which was recorded in our Unallocated segment. 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. 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.

Our Terrestrial and Wireless Networks segment's gross profit, as a percentage of related segment net sales, for fiscal 2021 decreased in comparison to fiscal 2020 primarily reflecting changes in products and services mix, including the cessation of sales to AT&T for 911 wireless call routing services and an increase in sales related to a recently awarded statewide NG-911 deployment (which has lower margins than our 911 wireless call routing services).

Included in consolidated cost of sales for fiscal 2021 and 2020 are provisions for excess and obsolete inventory of $4.4 million and $1.6 million, respectively. As discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Provisions for Excess and Obsolete Inventory," we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends.

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Selling, General and Administrative Expenses. 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.

In fiscal 2021, we incurred $2.8 million of restructuring costs to streamline our operations, including $1.8 million 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, and $1.0 million for the consolidation of certain administrative and operating functions in our troposcatter and SATCOM solution product line. In addition, we received $3.1 million of legal expense recoveries from insurance in fiscal 2021. In fiscal 2020, we incurred estimated contract settlement costs of $0.4 million principally related to the repositioning of our trusted location and messaging solutions offerings in our Terrestrial and Wireless Networks segment. Excluding these costs in both periods, our selling, general and administrative expenses would have been $112.1 million, or 19.3% of consolidated net sales in fiscal 2021 and $116.7 million, or 18.9% of consolidated net sales in fiscal 2020. The decrease in our selling, general and administrative expenses, in dollars, is largely attributable to the benefit from our efforts to streamline business operations in our Satellite and Space Communications segment.

Amortization of stock-based compensation expenses recorded as selling, general and administrative expenses was $8.1 million in fiscal 2021 as compared to $7.5 million in fiscal 2020. Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Research and Development Expenses.Research and development expenses were $49.1 million and $52.2 million for fiscal 2021 and 2020, respectively, representing a decrease of $3.1 million, or 5.9%. As a percentage of consolidated net sales, research and development expenses were 8.4% and 8.5% for fiscal 2021 and 2020, respectively.

For fiscal 2021 and 2020, research and development expenses of $28.0 million and $31.0 million, respectively, related to our Satellite and Space Communications segment, and $20.1 million and $20.3 million, respectively, related to our Terrestrial and Wireless Networks segment. The remaining research and development expenses of $1.0 million and $0.9 million in fiscal 2021 and 2020, respectively, related to the amortization of stock-based compensation expense.

During fiscal 2021, our Satellite and Space Communications segment incurred $0.3 million of strategic emerging technology costs for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations.

Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During fiscal 2021 and 2020, customers reimbursed us $13.6 million and $11.9 million, respectively, which is not reflected in the reported research and development expenses but is included in net sales with the related costs included in cost of sales.

Amortization of Intangibles. Amortization relating to intangible assets with finite lives was $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 and $21.6 million (of which $5.1 million was for the Satellite and Space Communications segment and $16.5 million was for the Terrestrial and Wireless Networks segment) for fiscal 2020.

Acquisition Plan Expenses. During fiscal 2021 and 2020, we incurred acquisition plan expenses of $100.3 million and $20.8 million, respectively. For fiscal 2021, $88.3 million related to the previously announced litigation and merger termination with Gilat, including $70.0 million paid in cash to Gilat. The remaining costs in fiscal 2021 primarily related to the April 2021 settlement of litigation associated with our 2019 acquisition of GD NG-911 as well as the March 2021 closing of our acquisition of UHP. These expenses are primarily recorded in our Unallocated segment.

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Operating (Loss) Income. Operating loss for fiscal 2021 was $68.3 million as compared to operating income of $15.2 million for fiscal 2020. Operating income (loss) by reportable segment is shown in the table below:

Fiscal Years Ended July 31,

Percentage of related net sales 6.5 % 6.2 % 12.2 % 14.3 % NA NA NA 2.5 %

The decrease in our Satellite and Space Communications segment operating income, in dollars, for fiscal 2021 was driven primarily by lower net sales, $2.8 million of restructuring costs and $1.0 million of COVID-19 related costs, partially offset by a higher gross profit percentage and lower research and development expenses, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for fiscal 2021 was driven primarily by a lower gross profit percentage, partially offset by lower amortization of intangibles, as discussed above.

The increase in unallocated expenses for fiscal 2021 as compared to fiscal 2020 is primarily due to acquisition plan expenses, as discussed above. Amortization of stock-based compensation was $10.0 million and $9.3 million, respectively, for fiscal 2021 and 2020.

Excluding (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, consolidated operating income for fiscal 2021 would have been $36.1 million, or 6.2% of consolidated net sales. Excluding $20.8 million of acquisition plan expenses and $0.4 million of estimated contract settlement costs, consolidated operating income for fiscal 2020 would have been $36.4 million, or 5.9% of consolidated net sales. The increase, as a percentage of consolidated net sales, was due primarily to lower selling, general and administrative expenses and lower research and development expenses, offset in part by lower consolidated net sales, as discussed above.

Interest Expense and Other. Interest expense was $6.8 million and $6.1 million for fiscal 2021 and 2020, respectively. Interest expense for fiscal 2021 includes $1.2 million of incremental interest expense related to a now terminated financing commitment letter. Excluding the $1.2 million, our effective interest rate (including amortization of deferred financing costs) in fiscal 2021 was approximately 2.8%.

Interest (Income) and Other. Interest (income) and other for both fiscal 2021 and 2020 was nominal.

(Benefit from) Provision for Income Taxes. For fiscal 2021, we recorded a tax benefit of $1.5 million as compared to a tax provision of $2.3 million for fiscal 2020. Our effective tax rate for fiscal 2021 (excluding discrete tax items) was nominal, as compared to 37.0% for fiscal 2020. The decrease from 37.0% is primarily due to the exclusion of the $70.0 million of acquisition plan expense paid to Gilat during our first quarter of fiscal 2021, as such amount was considered an unusual and infrequently occurring item. In addition, given the nature of such item, no financial statement benefit was recorded for the $70.0 million payment to Gilat.

During fiscal 2021, we recorded a net discrete tax benefit of $1.6 million, primarily related to: (i) the release of valuation allowances previously established on deferred tax assets of one of our foreign subsidiaries; (ii) the finalization of certain tax accounts in connection with the filing of our fiscal 2020 federal, state and foreign income tax returns; and (iii) the settlement of certain stock-based awards during fiscal 2021.

During fiscal 2020, we recorded a net discrete tax benefit of $1.2 million, primarily related to the finalization of certain tax accounts in connection with the filing of our fiscal 2019 federal and state income tax returns. These benefits were offset, in part, by: (i) the remeasurement of certain foreign deferred taxes resulting from the passage of legislation that increased the statutory tax rate in the United Kingdom from 17.0% to 19.0%; and (ii) the settlement of certain stock-based awards during fiscal 2020.

Net (Loss) Income Attributable to Common Stockholders. During fiscal 2021, our consolidated net loss attributable to common stockholders was $73.5 million as compared to net income of $7.0 million during fiscal 2020.

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Adjusted EBITDA. Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both fiscal 2021 and 2020 are shown in the table below (numbers in the table may not foot due to rounding):

Fiscal Years Ended July 31,

(Benefit from) provision for income taxes (0.4) — 0.8 0.3 (1.9) 2.0 (1.5) 2.3

Interest (income) and other 0.2 (0.2) — — (0.4) — (0.1) (0.2)

Amortization of stock-based compensation — — — — 10.0 9.3 10.0 9.3

Estimated contract settlement costs — 0.4 — — — — — 0.4

Restructuring costs 2.8 — — — — — 2.8 —

COVID-19 related costs 1.0 — — — — — 1.0 —

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

The increase in consolidated Adjusted EBITDA, as a percentage of consolidated net sales, for fiscal 2021 as compared to fiscal 2020 is primarily attributable to a higher percentage of consolidated net sales in our Terrestrial and Wireless Networks segment, as well as lower consolidated selling, general and administrative expenses and 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, was driven primarily by a higher gross profit percentage and lower research and development expenses, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to a lower gross profit percentage, as discussed above.

For a definition and explanation of Adjusted EBITDA, see "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2022 and 2021 - Adjusted EBITDA."

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Reconciliations of our GAAP consolidated operating (loss) income, net (loss) income and net (loss) income per diluted common share for fiscal 2021 and 2020 to the corresponding Non-GAAP measures are shown in the tables below (numbers and per share amounts in the table may not foot due to rounding). Non-GAAP net income and net income per diluted common share reflect Non-GAAP provisions for income taxes based on full year results, as adjusted for the Non-GAAP reconciling items included in the tables below. We evaluate our Non-GAAP effective income tax rate on an ongoing basis, and it can change from time to time. 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.

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported $ (68.3) $ (73.5) $ (2.86)

Strategic emerging technology costs 0.3 0.3 0.01

Interest expense — 0.9 0.04

Net discrete tax benefit — (1.6) (0.06)

Reconciliation of GAAP to Non-GAAP Earnings:

GAAP measures, as reported $ 15.2 $ 7.0 $ 0.28

Estimated contract settlement costs 0.4 0.3 0.01

Net discrete tax benefit — (1.2) (0.05)

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Liquidity and Capital Resources

Our cash and cash equivalents were $21.7 million and $30.9 million at July 31, 2022 and 2021, respectively. 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. Excluding such payments, net cash provided by operating activities would have been $17.9 million for fiscal 2022. During fiscal 2021, in connection with an agreement to terminate our acquisition of Gilat, we made a $70.0 million payment to Gilat. Excluding such payment, net cash provided by operating activities would have been $29.4 million for fiscal 2021. 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. 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 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. 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 2022, we also made net payments under our Credit Facility of $71.0 million as compared to net borrowings under our Credit Facility of $51.5 million during fiscal 2021, primarily due to the $70.0 million payment we made to Gilat. 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.

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.

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.

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. Many of our money market mutual funds invest in direct obligations of the U.S. government, bank securities guaranteed by the Federal Deposit Insurance Corporation, certificates of deposit and commercial paper and other securities issued by other companies. While we cannot predict future market conditions or market liquidity, we believe our investment policies are appropriate in the current environment. Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.

In addition to making capital investments for our new high-volume manufacturing centers, we have been making significant capital expenditures and building out cloud-based computer networks to support our previously announced NG-911 contract wins for the states of Pennsylvania, South Carolina and Arizona. We expect capital investments for these and other initiatives to continue in fiscal 2023.

As discussed in "Notes to Consolidated Financial Statements - Note (2) - Acquisitions - UHP Networks Inc." included in "Part II - Item 8. - Financial Statements and Supplementary Data"included in this Form 10-K, we completed our acquisition of UHP on March 2, 2021, substantially all of which was paid for with shares of our common stock.

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On July 13, 2022, we filed a $200.0 million shelf registration statement with the SEC for the sale of various types of securities, including debt. This new shelf registration statement was declared effective by the SEC as of July 25, 2022 and replaces the prior unused $400.0 million shelf registration statement that expired in December 2021.

On September 29, 2020, our Board of Directors authorized a new $100.0 million stock repurchase program, which replaced our prior program. The new $100.0 million stock repurchase program has no time restrictions and repurchases may be made from time to time in open-market or privately negotiated transactions, or by other means in accordance with federal securities laws. There were no repurchases of our common stock during fiscal 2022 and 2021.

As discussed further in "Notes to Consolidated Financial Statements - Note (16) -"Stockholders' Equity" included in "Part II - Item 8. - Financial Statements and Supplementary Data," included in this Form 10-K, on June 9, 2022, our Board of Directors declared a cash dividend of $0.10 per common share, which was paid on August 19, 2022.

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. 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.

Our material cash requirements are for working capital, CEO transition costs expected to be paid in October 2022, capital expenditures, income tax payments, debt service, facilities lease payments, dividends related to our common stock and dividends related to our Convertible Preferred Stock, which are payable in kind or in cash at our election.

We have historically met our cash requirements with funds provided by a combination of cash and cash equivalent balances, cash generated from operating activities and cash generated from equity and debt financing transactions. 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. Based on our current revenue visibility, we believe that our existing cash and cash equivalent balances, our cash generated from operating activities and amounts potentially available under our Credit Facility will be sufficient to meet our currently anticipated cash requirements in the next twelve months and beyond.

Our material cash requirements could increase beyond our current expectations due to factors such as general economic conditions, a change in government spending priorities, or larger than usual customer orders. In addition, we may choose to raise additional funds through equity and debt financing transactions to provide additional flexibility or to pursue acquisitions. Although it is difficult in the current economic and credit environment to predict the terms and conditions of financing that may be available in the future, we believe that we would have sufficient access to credit from financial institutions and/or financing from public and private debt and equity markets.

Credit Facility

As discussed further 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 (which discussion is incorporated herein by reference), on October 31, 2018, we entered into a First Amended and Restated Credit Agreement (the "Credit Facility") with a syndicate of lenders.

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. At July 31, 2022, we had $0.6 million of standby letters of credit outstanding under our Credit Facility related to our guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit. During fiscal 2022, we had outstanding balances under the Credit Facility ranging from $100.0 million to $212.0 million.

As of July 31, 2022, our Secured Leverage Ratio was 3.50x trailing twelve months ("TTM") Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA. Our Interest Expense Coverage Ratio as of July 31, 2022 was 8.81x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA. Although we expect our Secured Leverage Ratio to remain elevated during the first quarter of fiscal 2023, as we make payments to various vendors associated with the build-out of our high-volume technology manufacturing facilities, to support our working capital needs for our existing contracts and to make required CEO transition related payments, given our overall expected business performance, we anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future.

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Convertible Preferred Stock

As discussed further 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 (which discussion is incorporated herein by reference), on October 18, 2021, we entered into a Subscription Agreement (the “Subscription Agreement”) with certain affiliates and related funds of White Hat Capital Partners LP and Magnetar Capital LLC (collectively, the “Investors”), relating to the issuance and sale of up to 125,000 shares of a new series of the Company's Series A Convertible Preferred Stock, par value $0.10 per share (the "Convertible Preferred Stock"), for an aggregate purchase price of up to $125.0 million, or $1,000 per share. On October 19, 2021 (the “Initial Closing Date”), pursuant to the terms of the Subscription Agreement, the Investors purchased an aggregate of 100,000 shares of Convertible Preferred Stock (the “Initial Issuance”) for an aggregate purchase price of $100.0 million.

Commitments

In the normal course of business, other than as discussed below, we routinely enter into binding and non-binding purchase obligations primarily covering anticipated purchases of inventory and equipment. We do not expect that these commitments, as of July 31, 2022, will materially adversely affect our liquidity. At July 31, 2022, cash payments due under contractual obligations (including estimated interest expense on our Credit Facility), excluding purchase orders that we entered into in our normal course of business, are as follows:

($ in thousands) Total Due Within 1 Year

Credit Facility - principal payments $ 130,000 —

Credit Facility - interest payments 7,914 6,341

Operating and financing lease obligations 62,596 9,953

See "Notes to Consolidated Financial Statements - Note (8) -"Leases" included in "Part II - Item 8. - Financial Statements and Supplementary Data," included in this Form 10-K, for additional information on our lease commitments.

As discussed further 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, the holders of the Convertible Preferred Stock have the option to redeem such shares for cash commencing in October 2026. As the Convertible Preferred Stock are not mandatorily redeemable for cash, the redemption value of such shares are not presented in the table above.

In the ordinary course of business, we include indemnification provisions in certain of our customer contracts. Pursuant to these agreements, we have agreed to indemnify, hold harmless and reimburse the indemnified party for certain losses suffered or incurred by the indemnified party, including but not limited to losses related to third-party intellectual property claims. It is not possible to determine the maximum potential amount under these agreements due to a history of nominal claims and the unique facts and circumstances involved in each particular agreement.

As discussed further in "Notes toConsolidated Financial Statements - Note (12) - Commitments and Contingencies," included in "Part II - Item 8.- Financial Statements and Supplementary Data," included in this Form 10-K (which discussion is incorporated herein by reference), we are subject to a number of indemnification demands and we are incurring ongoing legal expenses in connection with these matters. Our insurance policies may not cover the cost of defending indemnification claims or providing indemnification. As a result, pending or future claims asserted against us by a party that we have agreed to indemnify could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition.

We have change in control agreements with certain of our executive officers and certain key employees. All of these agreements may require payments by us, in certain circumstances, including, but not limited to, a change in control of our Company or a termination of the employee.

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As further discussed in "Notes to Consolidated Financial Statements – Note (9) - "Income Taxes " included in "Part II - Item 8. - Financial Statements and Supplementary Data," included in this Form 10-K (which discussion is incorporated herein by reference), our Consolidated Balance Sheet at July 31, 2022 includes total liabilities of $10.0 million for uncertain tax positions, including interest, any or all of which may result in a cash payment. The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of any potential cash settlement with the taxing authorities.

Recent Accounting Pronouncements

We are required to prepare our consolidated financial statements in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") which is the source for all authoritative U.S. generally accepted accounting principles, which is commonly referred to as "GAAP." The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates ("ASUs").

As further discussed in "Notes to Consolidated Financial Statements – Note (1)(n) - Adoption of Accounting Standards and Updates" included in "Part II - Item 8. - Financial Statements and Supplementary Data," included in this Form 10-K, during fiscal 2022, we adopted:

•FASB ASU No. 2019-12, which simplifies various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. Our adoption of this ASU on August 1, 2021 did not have a material impact on our consolidated financial statements or disclosures.

•FASB ASU No. 2020-01, which clarifies the interactions between Topics 321, 323 and 815. This ASU clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, the amendments clarify the accounting for certain forward contracts and purchased options accounted for under Topic 815. Our adoption of this ASU on August 1, 2021 did not impact our consolidated financial statements or disclosures.

•FASB ASU No. 2020-06, which simplifies the accounting for convertible instruments by removing certain separation models (including the cash conversion model and the beneficial conversion feature model) for convertible instruments. As a result, for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815 or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features are no longer separated from the host contract. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, and convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost as long as no other features require bifurcation and recognition as derivatives. On August 1, 2021, we early adopted this ASU. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.

•FASB ASU No. 2021-08, which requires that an acquirer recognize, and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if it had originated the contracts. Prior to this ASU, an acquirer generally recognized contract assets and contract liabilities assumed that arose from contracts with customers at fair value on the acquisition date. On August 1, 2021, we early adopted this ASU. Our early adoption of this ASU did not have any impact on our consolidated financial statements or disclosures.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings and cash flows are subject to fluctuations due to changes in interest rates primarily from borrowings under our Credit Facility. 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. Although we do not currently use interest rate derivative instruments to manage exposure to interest rate changes, we may choose to do so in the future in connection with our Credit Facility.

Our earnings and cash flows are also subject to fluctuations due to changes in interest rates on our investment of available cash balances. 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. Based 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. 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.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Form 10-K, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was carried out by us under the supervision and with the participation of our management, including our President, Chief Executive Officer and Chairman and Chief Financial Officer. Based on that evaluation, our President, Chief Executive Officer and Chairman and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by the report to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of July 31, 2022. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control – Integrated Framework (2013). Based on our assessment, we determined that, as of July 31, 2022, our internal control over financial reporting was effective based on those criteria.

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Deloitte and Touche LLP, our independent registered public accounting firm, has performed an audit of our internal control over financial reporting as of July 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO. This audit is required to be performed in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our independent auditors were given unrestricted access to all financial records and related data. Deloitte’s audit reports appear on pages F-2 and F-3 of this annual report.

Changes In Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act that occurred during our fiscal quarter ended July 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Certain information concerning directors and officers is incorporated by reference to our Proxy Statement for the Annual Meeting of Stockholders (the "Proxy Statement") which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding executive compensation is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding securities authorized for issuance under equity compensation plans and certain information regarding security ownership of certain beneficial owners and management is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

Information regarding certain relationships and related transactions is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information regarding principal accountant fees and services is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1) The Registrant’s financial statements together with a separate index are annexed hereto.

(2) The Financial Statement Schedule listed in a separate index is annexed hereto.

(3) Exhibits required by Item 601 of Regulation S-K are listed below.

ExhibitNumber Description of Exhibit Incorporated ByReference to Exhibit

10(c)* 2000 Stock Incentive Plan, Amended and Restated, dated September 9, 2022

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ExhibitNumber Description of Exhibit Incorporated ByReference to Exhibit

10(l)(1)* Form of Change-in-Control Agreement (Tier 1)

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ExhibitNumber Description of Exhibit Incorporated ByReference to Exhibit

81

ExhibitNumber Description of Exhibit Incorporated ByReference to Exhibit

21 Subsidiaries of the Registrant

23.1 Consent of Independent Registered Public Accounting Firm

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

* Management contract or compensatory plan or arrangement.

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

COMTECH TELECOMMUNICATIONS CORP.

September 29, 2022 By: /s/Ken Peterman

(Date) Ken Peterman, Chairman of the BoardPresident and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title

September 29, 2022 /s/Ken Peterman Chairman of the Board

(Date) Ken Peterman President and Chief Executive Officer

(Principal Executive Officer)

September 29, 2022 /s/Michael A. Bondi Chief Financial Officer

(Date) Michael A. Bondi (Principal Financial and Accounting Officer)

September 29, 2022 /s/Wendi Carpenter Director

(Date) Wendi Carpenter

September 29, 2022 /s/Judy Chambers Director

(Date) Judy Chambers

September 29, 2022 /s/Fred Kornberg Director

(Date) Fred Kornberg

September 29, 2022 /s/Lisa Lesavoy Director

(Date) Lisa Lesavoy

September 29, 2022 /s/Mark Quinlan Director

(Date) Mark Quinlan

September 29, 2022 /s/Dr. Yacov A. Shamash Director

(Date) Dr. Yacov A. Shamash

September 29, 2022 /s/Lawrence J. Waldman Director

(Date) Lawrence J. Waldman

83

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

Index to Consolidated Financial Statements and Schedule

Page

Reports of Independent Registered Public Accounting Firms (PCAOB ID: 34) F-2

Consolidated Financial Statements:

Notes to Consolidated Financial Statements F-11

Additional Financial Information Pursuant to the Requirements of Form 10-K:

Schedule II – Valuation and Qualifying Accounts and Reserves S-1

F - 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of

Comtech Telecommunications Corp.

Melville, New York

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Comtech Telecommunications Corp. and subsidiaries (the "Company") as of July 31, 2022 and 2021, the related consolidated statements of operations, convertible preferred stock and stockholders’ equity, and cash flows, for each of the three years in the period ended July 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of July 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 29, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Net Sales – Over Time Accounting Using the Cost-to-Cost Measure for Specific Identified Material Contracts — Refer to Note 1 to the financial statements.

Critical Audit Matter Description

The Company’s determination of revenue recognition for specific identified material contracts accounted for over time involves estimating the total costs needed to complete the specific identified contracts and updating those estimates throughout the life of those specific identified contracts. This requires management to make significant estimates related to forecasts of future costs for the identified specific contracts. Changes in these estimates for the identified specific contracts could have a significant impact on the Company’s results of operations.

Given the significant judgment and estimates used in management’s projections, auditing the Company’s estimates at completion and estimates to completion involved especially subjective judgment.

F - 2

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s determination of revenue recognition for specific identified material contracts accounted for over time included the following, among others:

•We tested the design, implementation, and operating effectiveness of the controls over the development of the initial contract cost to complete estimate and monitoring of estimates at completion and estimates to completion.

•For each specific identified material contract selected, we performed the following:

◦Evaluated whether the contract was properly included in management’s calculation of overtime revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.

◦Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.

◦Tested management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly interdependent and interrelated.

◦Evaluated the estimates of total cost and profit for the performance obligation by:

▪Performing a retrospective review by comparing the estimated margins at contract inception to the actual margins as of year-end in order to assess management’s ability to accurately estimate costs.

▪Inquiring and corroborating the estimates to complete and the estimates at completion with the Project Manager (i.e., someone outside of Finance/Accounting) to understand significant variances in costs and completeness of the estimates at completion and estimates to completion.

▪Testing the estimates to complete through a combination of tests of details, in which we selected individual costs within the estimate to complete and obtained supporting documentation, and where we developed an expectation of the estimate to complete and compared it to the recorded balance.

◦Tested the accuracy and completeness of costs incurred during the current fiscal year. This testing included agreeing labor costs to employee timesheets and agreeing the labor rate to either rates agreed upon with the customer in the contract or rates from the Company’s payroll records.

◦Tested the mathematical accuracy of management’s calculation of revenue for the performance obligation.

Goodwill — Refer to Note 13 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company used the income approach, also known as the discounted cash flow ("DCF") method, to determine the present value of cash flows to estimate fair value. The future cash flows for the Company’s reporting units were projected based on their estimates, at that time, of future revenues, operating income and other factors (such as working capital and capital expenditures). Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. The Satellite and Space 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.

We identified goodwill for the reporting units as a critical audit matter because of the significant judgments made by management to estimate the fair values of these reporting units and the differences between their fair value and carrying value. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenue and operating margins.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the discount rate and forecasts of future revenue and operating margins used by management to estimate the fair values of the reporting units included the following, among others:

•We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the reporting units, such as controls related to management’s selection of the discount rate and forecasts of future revenue and operating margins.

F - 3

•We evaluated management’s ability to accurately forecast future revenues and operating margins by comparing actual results to management’s historical forecasts.

•We evaluated the reasonableness of management’s revenue forecasts and forecasts of operating margins by comparing the forecasts to:

◦Historical revenues and operating margins.

◦Internal communications to management and the Board of Directors.

◦Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:

◦Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

◦Developing a range of independent estimates and comparing those to the discount rate selected by management.

/s/ DELOITTE & TOUCHE LLP

Jericho, New York

September 29, 2022

We have served as the Company’s auditor since 2015.

F - 4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of

Comtech Telecommunications Corp.

Melville, New York

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Comtech Telecommunications Corp. and subsidiaries (the "Company") as of July 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended July 31, 2022, of the Company and our report dated September 29, 2022, expressed an unqualified opinion on those financial statements and financial statement schedule.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Jericho, New York

September 29, 2022

F - 5

COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Consolidated Balance Sheets

As of July 31, 2022 and 2021

Current assets:

Liabilities, Convertible Preferred Stock and Stockholders’ Equity

Current liabilities:

Commitments and contingencies (See Note 12)

Stockholders’ equity:

Less:

See accompanying notes to consolidated financial statements.

F - 6

COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Consolidated Statements of Operations

Fiscal Years Ended July 31, 2022, 2021 and 2020

Expenses:

Other expenses (income):

Adjustments to reflect redemption value of convertible preferred stock:

Convertible preferred stock issuance costs (4,007,000) — —

Dividend on convertible preferred stock (5,204,000) — —

Net (loss) income per share:

See accompanying notes to consolidated financial statements.

F - 7

COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

Fiscal Years Ended July 31, 2022, 2021 and 2020

Shares Amount Shares Amount Shares Amount

Equity-classified stock award compensation — — — — 9,275,000 — — — 9,275,000

Issuance of restricted stock — — 3,319 — — — — — —

Equity-classified stock award compensation — — — — 9,983,000 — — — 9,983,000

Issuance of restricted stock, net of forfeiture — — 35,495 4,000 (4,000) — — — —

Equity-classified stock award compensation — — — — 7,767,000 — — — 7,767,000

Convertible preferred stock issuance costs — (4,007,000) — — — — — — —

See accompanying notes to consolidated financial statements.

F - 8

COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Fiscal Years Ended July 31, 2022, 2021 and 2020

Cash flows from operating activities:

Loss on disposal of property, plant and equipment (310,000) 215,000 —

Changes in assets and liabilities, net of effects of business acquisitions:

Cash flows from investing activities:

Net cash acquired from acquisition of UHP — 1,304,000 —

Payment for acquisition of CGC, net of cash acquired — (750,000) (11,165,000)

Payments for acquisition of NG-911 businesses — — (1,794,000)

Cash flows from financing activities:

Proceeds from issuance of convertible preferred stock 100,000,000 — —

Payment of convertible preferred stock issuance costs (4,007,000) — —

Payment of deferred financing costs (140,000) (30,000) —

Proceeds from exercises of stock options — — 468,000

(Continued)

F - 9

COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows (continued)

Fiscal Years Ended July 31, 2022, 2021 and 2020

Supplemental cash flow disclosure

Cash paid (received) during the year for:

Non-cash investing and financing activities:

Fair value of UHP acquisition contingent earn-out consideration $ — 8,500,000 —

Accruals related to acquisitions $ — — 1,157,000

See accompanying notes to consolidated financial statements.

F - 10

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting and Reporting Policies

(a)Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Comtech Telecommunications Corp. and its subsidiaries ("Comtech," "we," "us," or "our"), all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation.

(b)Nature of Business

We design, produce and market innovative products, systems and services for advanced communications solutions. We conduct our business through two reportable operating segments: Satellite and Space Communications and Terrestrial and Wireless Networks.

Our business is highly competitive and characterized by rapid technological change. Our growth and financial position depends on our ability to keep pace with such changes and developments and to respond to the sophisticated requirements of an increasing variety of secure wireless communications technology users, among other things. Many of our competitors are substantially larger, and have significantly greater financial, marketing and operating resources and broader product lines than our own. A significant technological or sales breakthrough by others, including smaller competitors or new companies, could have a material adverse effect on our business. In addition, certain of our customers have technological capabilities in our product areas and could choose to replace our products with their own.

International 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, availability of suitable export financing, export license requirements, tariff regulations, and other United States ("U.S.") and foreign regulations that may apply to the export of our products, as well as the generally greater difficulties of doing business abroad. We attempt to reduce the risk of doing business in foreign countries by seeking contracts denominated in U.S. dollars, advance or milestone payments, credit insurance and irrevocable letters of credit in our favor.

F - 11

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(c)Revenue Recognition

In accordance with FASB ASC 606 - Revenue from Contracts with Customers ("ASC 606"), we record revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. 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. 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). 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. 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. 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. 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. 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.

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. Since certain contracts extend over a long period of time, the impact of revisions in revenue and or cost estimates during the progress of work may impact current period earnings through a cumulative adjustment. Additionally, if the EAC process indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract revenue and cost estimates for significant contracts are generally reviewed and reassessed at least quarterly.

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 in our Terrestrial and Wireless Networks segment. For service-based contracts in our Terrestrial and Wireless Networks segment, we also recognize revenue over time. 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.

•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. 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. 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.

F - 12

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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 to certain contracts for our solid-state, high-power RF amplifiers. 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.

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. 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.

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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

F - 13

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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). In almost all of our contracts with customers, we are the principal in the arrangement and report revenue on a gross basis. 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.Sales by geography and customer type, as a percentage of consolidated net sales, are as follows:

Fiscal Years Ended July 31,

United States

Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. 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 were 11.1% and 10.7% of consolidated net sales for fiscal 2022 and 2021, respectively. 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 $121,392,000, $138,943,000 and $145,107,000, 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 10.0% of consolidated net sales for fiscal 2022, 2021 and 2020.

The following tables summarize our disaggregation of revenue consistent with information reviewed by our Chief Operating Decision Maker ("CODM") for the fiscal years ended July 31, 2022, 2021 and 2020. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors which impact our business. See Note (11) - "Segment Information" for more information related to our segments.

Fiscal Year Ended July 31, 2022

Satellite and Space Communications Terrestrial and Wireless Networks Total

Geographical region and customer type

Contract type

Transfer of control

F - 14

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Fiscal Year Ended July 31, 2021

Satellite and Space Communications Terrestrial and Wireless Networks Total

Geographical region and customer type

Contract type

Transfer of control

Fiscal Year Ended July 31, 2020

Satellite and Space Communications Terrestrial and Wireless Networks Total

Geographical region and customer type

Contract type

Transfer of control

F - 15

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued