COMTECH TELECOMMUNICATIONS CORP /DE/

Comtech Telecommunications Corp. operates through its Allerium segment as a provider of mission-critical communications infrastructure and software for public safety and mobile networks worldwide, including technologies that locate, route, deliver and answer 9-1-1 calls and emergency communications, as well as carrier-grade location, messaging and public alerting capabilities. The company serves two complementary markets: Public Safety Solutions, which include Next Generation 9-1-1 infrastructure, Emergency Services IP Networks, Next Generation Core Services, cloud-native call handling, emergency communications applications, trusted location services and software designed to improve coordination across the emergency response ecosystem and cybersecurity training; and Mobile Network Solutions, which provide carrier-grade location, messaging and public alerting technologies that enable mobile network operators to support emergency services, regulatory compliance and trusted communications across evolving wireless networks. According to a 2026 Next Generation 9-1-1 report published by Frost & Sullivan, Allerium was the second leading provider of next generation core services based on both primary contracts held and U.S. population served, with an estimated market share of approximately 25% ¹. Allerium was also the third leading provider for call handling in the U.S., with an estimated market share of approximately 8% ². Allerium's solutions were also estimated to support over 250 million wireless subscribers ³. The business is highly competitive and characterized by rapid technological change, with some competitors substantially larger and having significantly greater financial, marketing, research and development, technological and operating resources and broader product lines. Competition is based primarily on technology innovation, product performance, reputation, delivery times, customer support and price. Allerium competes across multiple public safety and mobile network technology markets, including Next Generation 9-1-1 infrastructure, emergency communications software, cloud-native call handling, location technologies, messaging platforms and related cybersecurity solutions, against companies including AT&T Inc., Atos, Axon Enterprise, Inc., Bandwidth.com, Carbyne (acquired by Axon), Central Square Technologies, DataMark (Digital Data Technologies/DDTI), 8x8, Inc., Everbridge, Inc. (acquired by Thoma Bravo), Frequentis GeoComm, Immersive Labs, INdigital (acquired by Novacap), Intersec, Intrado Life & Safety, Inc., Invictus Apps, Inc. d/b/a PREPARED (acquired by Axon), LM Ericsson, Lumen Technologies, Inc. (formerly, CenturyLink, Inc.), Mavenir, Mobilaris AB, Mobile Arts AB, Motorola Solutions, Inc., NGA911, NextNav, Inc., Nokia Networks (a subsidiary of Nokia Corporation), Octave Intelligence Limited (formerly, Hexagon AB), Polaris Wireless, RapidDeploy Inc. (acquired by Motorola Solutions), RapidSOS, Sinch AB (Inteliquent), Synergem Technologies, SS8, TomTom N.V., Versaterm Public Safety Inc., WestTel and Zetron.

Comtech generates revenue through its Allerium segment by providing mission-critical communications infrastructure and software to state and local governments, public safety agencies and telecommunications carriers. The company's solutions serve two complementary markets: Public Safety Solutions and Mobile Network Solutions. Allerium operates critical infrastructure for governments and public safety agencies, creating long-term customer relationships that extend well beyond initial deployments, which the company believes provides a foundation to expand the capabilities it delivers over time, including additional software, cloud-based applications, data-driven capabilities and network services as customers continue modernizing their emergency communications environments. The company's portfolio includes four primary areas: next generation 9-1-1 and call delivery, call handling, trusted location and messaging solutions and cybersecurity training. Allerium's customer base spans the United States, Canada and Australia, with representative customer categories including U.S. state and local governments such as the Commonwealths of Kentucky, Massachusetts and Pennsylvania; the states of Arizona, Iowa, Maine, Ohio, South Carolina and Washington; and regional emergency communications authorities such as the North Central Texas Emergency Communications District, the Northern Illinois Next Generation Alliance and St. Louis County, Missouri. Leading telecommunications companies served include AT&T Inc., Bell Mobility, Inc., Comcast Corp., Nokia Corp., Rogers Communications Canada Inc., TELUS Communications Inc., Verizon Communications Inc. and Vodafone Public Limited Co. The company also serves telephone companies and federal, provincial, and local governments in Australia, Canada, Cayman Islands and New Zealand, as well as high-security U.S. government and certain commercial and university customers. For fiscal 2026, a domestic top tier mobile network operator and a Northeastern state contributed 17.0% ⁴ and 12.6% ⁵, respectively, of net sales. For fiscal 2025, the U.S. Government and a domestic top tier mobile network operator contributed 23.3% ⁶ and 15.3% ⁷, respectively, of net sales. International sales for fiscal 2026 and 2025 were $21.6 million ⁸ and $22.4 million ⁹, respectively.

Allerium's Public Safety Solutions include Next Generation 9-1-1 infrastructure, Emergency Services IP Networks, Next Generation Core Services, cloud-native call handling, emergency communications applications, trusted location services and software designed to improve coordination across the emergency response ecosystem and cybersecurity training. The NG9-1-1 solutions include ESInets, NGCS, geospatial routing, policy-based call routing, location validation, originating service provider connectivity and related network services that form the foundation of modern emergency communications. As governments replace legacy Enhanced 9-1-1 systems with IP-based NG9-1-1 networks, agencies are increasingly seeking resilient, interoperable platforms capable of supporting voice, text, multimedia, precise location and emerging forms of real-time data. Allerium provides call handling solutions that enable emergency communications centers to receive, manage and respond to emergency requests across voice, text and emerging communication channels, including both proven on-premise platforms and Allerium Mira, the company's cloud-native call handling platform designed to support the evolving operational and technology requirements of modern emergency communications centers. Mira extends existing call handling capabilities through a flexible microservices architecture that supports cloud, hybrid, private and edge deployment models while integrating directly with NG9-1-1 infrastructure. During fiscal 2026, Allerium continued to strengthen its market position through customer deployments, contract renewals and continued product innovation, including expanding statewide NG9-1-1 services in Kentucky, renewing Arizona's statewide NG9-1-1 partnership, completing over 60 NG9-1-1 upgrades across Canada, making Allerium Mira commercially available as the cloud-native call handling platform, and introducing Allerium Coral, a network-native capability designed to securely coordinate incident information across agencies and jurisdictions.

Allerium's Mobile Network Solutions provide carrier-grade location, messaging and public alerting technologies that support mobile network operators, government agencies and other communications providers worldwide. These solutions enable operators to determine subscriber location, support emergency communications, comply with evolving regulatory requirements and deliver trusted messaging services across wireless networks. The company also provides Wireless Emergency Alert solutions, location technologies and emergency communications services that help mobile network operators deliver reliable public safety capabilities while supporting the ongoing evolution of networks, such as 4G and 5G. These long-standing carrier relationships complement the public safety business while providing opportunities to extend trusted communications technologies across an increasingly connected communications ecosystem. The company also provides advanced cybersecurity training, primarily in support of mission-critical, high-security U.S. government and certain commercial and university customers, based on mature and proven training tools and programming. Cyber training is provided both at customer sites and through in-house development capabilities. Competitive advantages include proprietary methods for administration and student management, a proven track record through multiple renewal cycles on a key U.S. government program and deep, trusted customer relationships. Expansion opportunities are driven by a heightened focus on cybersecurity threats and workforce readiness, particularly in mission-critical emergency communications environments, and the company is leveraging its extensive library of cybersecurity training programs to serve state and local governments, as well as private sector enterprises, while expanding capabilities through hosted SaaS delivery models.

On June 14, 2026, Comtech entered into a definitive Securities Purchase Agreement to sell most of its Satellite and Space Communications segment to Wavestream Corporation, an affiliate of Gilat Satellite Networks Ltd. The Purchase Agreement provides for a base purchase price of $157.5 million ¹⁰ in cash, subject to customary adjustments. Upon execution of the Purchase Agreement, the company received $10.0 million ¹¹ of the purchase price as an Advance Payment. The Strategic Transaction is expected to close in calendar 2026, subject to certain closing conditions and regulatory approvals, and does not require the approval of common stockholders. Contemporaneously with signing the Strategic Transaction, the company entered into various amendments to its Credit Facility, Subordinated Credit Facility and convertible preferred stock agreements which enhance overall financial flexibility and reduce anticipated cost of capital. Such enhanced financial flexibility includes an extension of the covenant holiday under the Credit Facility and Subordinated Credit Facility to July 31, 2027; waiver of the fiscal 2026 excess cash flow prepayment under the Credit Facility; deferral of previously scheduled make whole escalations on portions of the Subordinated Credit Facility until April 1, 2027 if the loans are not prepaid by that time; a reduction in the prepayment penalty associated with the application of the net proceeds from the sale of most of S&S' business of 1.0% ¹²; upon closing of the Strategic Transaction, elimination of a provision that previously provided for the acceleration of the redemption rights of the holders of convertible preferred stock upon a refinancing; extension of the redemption rights of the holders of convertible preferred stock from October 31, 2028 to October 31, 2029, except upon consummation of certain qualified asset sales by the company or its subsidiaries or upon a change in control; and deferring the rights of the holders of convertible preferred stock to require cash dividends until October 31, 2028. Upon closing the Strategic Transaction, the company will use the net cash proceeds to substantially reduce debt and then seek a comprehensive recapitalization of the business. The company also implemented multiple reductions in force throughout its entire organization, inclusive of actions taken since August 2025, approximating 7% ¹³ of its total workforce as of July 31, 2025, or approximately $15.0 million ¹⁴ in annualized labor costs. In September 2025, the company initiated a process to further optimize operations within its S&S segment, including reducing facility footprint and migrating the manufacturing of certain products to its Chandler, Arizona facility, resulting in approximately $3.0 million ¹⁵ of anticipated annualized cost savings. The company also recorded a non-cash charge of $11.4 million ¹⁶ primarily related to the write down of inventory during the first quarter of fiscal 2025 associated with approximately 70 products ¹⁷ within its satellite ground infrastructure product line that were discontinued.

For fiscal 2026, Comtech achieved positive consolidated operating cash flows for each of the last six quarters, with fiscal 2026 totaling $37.4 million ¹⁸. The company increased its consolidated liquidity as of July 31, 2026 to $61.3 million ¹⁹ and reduced its debt. The company also secured long-term customer commitments, including a large, multi-year contract extension with a top tier mobile network operator in the U.S., valued in excess of $130.0 million ²⁰. As of July 31, 2026, total outstanding borrowings under the Credit Facility were $108.5 million ²¹, with no amounts drawn on the Revolving Loan. As of July 31, 2026, total outstanding borrowings under the Subordinated Credit Facility were $102.0 million ²², including interest paid-in-kind or accrued on the subordinated priority term loan outstanding; such amounts do not include the 50%, or $32.5 million ²³, Make-Whole Amount associated with the $65.0 million ²⁴ portion of the Subordinated Credit Facility. The company's backlog as of July 31, 2026 was $520.4 million ²⁵. The company estimates that approximately 80% ²⁶ of the backlog as of July 31, 2026 will be recognized as sales during the next thirty-six month period, of which approximately 40% ²⁷ is estimated to be recognized during fiscal 2027. At July 31, 2026, 88.9% ²⁸ of backlog consisted of orders for use by U.S. commercial customers, 2.1% ²⁹ consisted of U.S. government contracts, subcontracts and government funded programs, and 9.0% ³⁰ consisted of orders for use by international customers. Internal research and development expenses were $11.6 million ³¹ and $11.7 million ³² in fiscal 2026 and 2025, respectively, representing 4.6% ³³ and 3.9% ³⁴ of total consolidated net sales, respectively. In fiscal 2026 and 2025, the company undertook engineering efforts related to internal use software and capitalized $6.3 million ³⁵ and $3.9 million ³⁶, respectively. As of July 31, 2026, goodwill recorded on the Consolidated Balance Sheet related to continuing operations aggregated $176.1 million ³⁷, and net intangibles recorded on the Consolidated Balance Sheet related to continuing operations aggregated $120.7 million ³⁸. As of July 31, 2026, the company had $77.9 million ³⁹ of contract assets, including amounts from discontinued operations, recorded on the Consolidated Balance Sheet, commonly referred to as unbilled receivables. At July 31, 2026, the company had a total of 1,292 employees ⁴⁰ (including temporary employees and contractors), of which 475 ⁴¹ were employed by discontinued operations. Allerium had 817 employees ⁴², 463 ⁴³ of whom were engaged in production and production support, 193 ⁴⁴ in research and development and other engineering support and 161 ⁴⁵ in marketing and administrative functions, including sales, accounting and finance, tax and information technology. Of total employees, 224 ⁴⁶ are based outside of the U.S., including 124 ⁴⁷ in Canada and 84 ⁴⁸ in India.

Management's transformation plan, first announced in January 2025, has continued to contribute to improved operational and financial performance, as evidenced by the removal of the substantial doubt regarding the company's ability to continue as a going concern in November 2025; achieving positive consolidated operating cash flows for each of the last six quarters, with fiscal 2026 totaling $37.4 million ; increasing consolidated liquidity as of July 31, 2026 to $61.3 million ; reducing debt; and securing long-term customer commitments, including a large, multi-year contract extension with a top tier mobile network operator in the U.S., valued in excess of $130.0 million . The Strategic Transaction is expected to close in calendar 2026, subject to certain closing conditions and regulatory approvals. Upon closing the Strategic Transaction, the company will use the net cash proceeds to substantially reduce debt and then seek a comprehensive recapitalization of the business with the intention to further enhance financial flexibility and reduce the cost of capital. As the company awaits regulatory approval of the Strategic Transaction, it will be executing a transition plan to align the organization to be purpose-built to support Allerium's anticipated growth from increasing demand for next-generation public safety technologies and services. With an improved capital structure, streamlined organization and a clear strategic focus, Allerium is poised to capitalize on its leadership in the public safety market. The company estimates that approximately 80% of the backlog as of July 31, 2026 will be recognized as sales during the next thirty-six month period, of which approximately 40% is estimated to be recognized during fiscal 2027. Such estimate could be impacted by the transformation plan.

Allerium believes several long-term industry trends support continued demand for its technologies and services. Governments across North America continue replacing legacy emergency communications infrastructure with standards-based NG9-1-1 networks capable of supporting voice, text, multimedia, location and real-time data, and the company believes this multi-year transition will continue to create opportunities for network modernization, software adoption and managed services. Allerium's long-term relationships with statewide, regional and local public safety agencies create opportunities to expand the capabilities delivered over time. As agencies modernize emergency communications, the opportunity is shifting beyond connecting calls and data to enabling more intelligent coordination across systems, agencies and jurisdictions. The strategy is to extend the value of the NG9-1-1 network through software and data-driven capabilities. Recent innovations, including Allerium Coral, leverage the intelligence, security and trusted routing capabilities of the network infrastructure to support secure coordination of incident information and improved situational awareness through AI-assisted workflows. The company believes this approach strengthens existing customer relationships while creating opportunities to deliver additional software and services as agencies continue to modernize their emergency communications environments.

Emergency communications centers continue evaluating cloud-based deployment models that provide greater flexibility, scalability and operational resilience, and Allerium believes cloud-native applications will become an increasingly important component of future emergency communications environments. Mobile network operators continue investing in network modernization, advanced location technologies, public alerting capabilities and messaging platforms to support emergency services, regulatory compliance and evolving subscriber expectations. As 5G networks mature, operators are increasingly seeking more intelligent location capabilities that improve positioning accuracy, resilience and operational awareness across increasingly complex wireless environments. Allerium continues to invest in next-generation location technologies, including AI-assisted approaches that leverage contextual network intelligence to enhance positioning performance and support emerging commercial and public safety applications. The company believes its long-standing relationships with leading global mobile network operators position it to participate in these ongoing investments and technology transitions. Allerium continues to support customers across Canada, Australia and other international markets, and the company believes its experience delivering mission-critical communications infrastructure provides opportunities to expand its presence internationally as governments and communications providers continue modernizing emergency communications and mobile network technologies. In fiscal 2027, the company expects to continue expanding its social media and Internet presence and further developing an updated marketing and branding strategy, such as fully transitioning to the new Allerium brand. The company anticipates fully adopting the Allerium name during fiscal 2027 and anticipates trading under a new Nasdaq symbol to be announced in the future.

With a simpler operating model, a strengthened balance sheet and a single strategic focus, Allerium hopes to accelerate its growth of recurring software and services revenue and expand margins and operating leverage while investing more decisively in the innovation its public safety customers depend upon. The company's transformation plan includes initiatives to enhance operational efficiency, streamline product lines with a focus on strategic, higher operating margin products, improve production efficiency, reduce cost structures, enhance customer satisfaction, improve contractual terms with customers and vendors, and improve capital structure through amended and improved terms with creditors and reduction of principal and interest amounts due. Cumulatively, such expanded transformation plan initiatives have resulted in the company taking actions including the PST Divestiture completed on November 7, 2023, with net proceeds in fiscal 2024 of $33.2 million ⁴⁹ used in part to repay a portion of outstanding debt at the time, as well as to fund working capital needs. The company also made the decision to exit its underperforming operations in Basingstoke, United Kingdom, and conducted an intensive review of its product portfolio to focus future investment on its most strategic, high-margin revenue opportunities within the S&S segment, recording a non-cash charge of $11.4 million primarily related to the write down of inventory during the first quarter of fiscal 2025 associated with approximately 70 products within its satellite ground infrastructure product line that were discontinued. In September 2025, the company initiated a process to further optimize its operations within its S&S segment, including reducing facility footprint and migrating the manufacturing of certain products to its Chandler, Arizona facility, resulting in approximately $3.0 million of anticipated annualized cost savings. The company implemented multiple reductions in force throughout its entire organization, inclusive of actions taken since August 2025, approximating 7% of its total workforce as of July 31, 2025, or approximately $15.0 million in annualized labor costs. While anticipated to improve profitability in future periods, such actions will likely result in near-term restructuring charges.

The company's operational outlook includes continuing to operate the Disposal Group in accordance with the terms of the Purchase Agreement through the closing date of the Strategic Transaction. Following the classification of the Disposal Group as discontinued operations, the company has one reportable segment, which is also its one operating segment, that constitutes consolidated results consisting of the public safety business. As the company awaits regulatory approval of the Strategic Transaction, it will be executing a transition plan to align the organization to be purpose-built to support Allerium's anticipated growth. The company's sales and marketing strategies include direct sales through sales, marketing and engineering personnel, indirect sales through independent representatives, value-added resellers, and sales through a combination of the foregoing. The company devotes resources to evaluating and responding to requests for proposals by customers around the world and, as needed, employs the use of specialized consultants to develop proposals and bids. The company intends to continue to expand international marketing efforts, as needed, by engaging additional independent sales representatives, distributors and value-added resellers and by establishing foreign sales offices. In addition, the company expects to leverage its relationships with larger companies (such as large mobile wireless operators) to market its technology solutions. The company is pre-qualified as an approved vendor for certain government contracts and collaborates in sales efforts under various arrangements with integrators. The company's marketing efforts also include advertising, public relations, speaking engagements and attending and sponsoring industry conferences. The company's sales strategies include a commitment to providing ongoing customer support for its solutions, which involves providing direct access to engineering staff or trained technical representatives to resolve technical or operational issues. The company's solutions in many product areas have long sales cycles, and once a solution is designed into a system, application or platform, customers may be reluctant to change the incumbent supplier due to the extensive qualification process and potential redesign required in using alternative sources. In recent years, overall sales cycles for each of the company's product areas have significantly increased as the company continues to support its customers' overall migration and upgrade to newer designs and technologies.

The company's capital allocation priorities include using the net cash proceeds from the Strategic Transaction to substantially reduce debt and then seek a comprehensive recapitalization of the business with the intention to further enhance financial flexibility and reduce the cost of capital. The company's Credit Facility consists of a term loan and an asset-based revolving loan. As of July 31, 2026 and October 13, 2026, total outstanding borrowings under the Credit Facility were $108.5 million at each date, with no amounts drawn on the Revolving Loan. As of July 31, 2026 and October 13, 2026, total outstanding borrowings under the Subordinated Credit Facility were $102.0 million and $103.1 million ⁵⁰, respectively, including interest paid-in-kind or accrued on the subordinated priority term loan outstanding at each date; such amounts do not include the 50%, or $32.5 million , Make-Whole Amount associated with the $65.0 million portion of the Subordinated Credit Facility. At July 31, 2026 and October 13, 2026, available sources of consolidated liquidity totaled $61.3 million and $51.3 million ⁵¹, respectively, which includes qualified cash and cash equivalents of $34.0 million ⁵² and $24.0 million ⁵³, respectively (including cash and cash equivalents related to discontinued operations), and the remaining available portion of the Revolving Loan facility of $27.3 million ⁵⁴ as of each such date. The company's internal research and development expenses were $11.6 million and $11.7 million in fiscal 2026 and 2025, respectively, representing 4.6% and 3.9% of total consolidated net sales, respectively. In fiscal 2026 and 2025, the company undertook engineering efforts related to internal use software and capitalized $6.3 million and $3.9 million , respectively. The company's transformation plan includes investing in next-generation solutions for customers' expanding and emerging needs and exploring strategic alternatives for various businesses and product lines, including the potential sale or divestiture of assets or business lines.

The company faces structural headwinds and execution risks to its growth plan. The global supply chain for certain raw materials and components, including those used in satellite ground station and troposcatter equipment, has experienced significant strain in recent periods, adversely affecting availability and lead times of raw materials and components. The effects of inflation and labor challenges have caused, and are expected to continue to cause, further delays in the supply chain. The company obtains certain components and subsystems from a single source or a limited number of sources, and some single source suppliers, particularly those providing satellite ground station and troposcatter components, have reported disruptions in their respective supply chains. These single source components are in limited supply with very long lead times, and in some cases the company has depleted its stock inventory and is on waiting lists to obtain additional components. Heading into fiscal 2027, the company has a significant portion of its anticipated revenues in funded backlog, but if shipments from backlog are delayed, the company is unable to perform as expected on orders accounted for over time, or the company is unable to obtain expected orders or components, it may not achieve its business outlook. The company's business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile. The company's backlog is subject to customer cancellation or modification, and almost all contracts in backlog are subject to cancellation at the convenience of the customer or for default in the event the company is unable to perform under the contract. A significant portion of the backlog from U.S. commercial customers relates to large, multi-year contracts to provide state and local governments with 9-1-1 public safety and location technology solutions, and funding of these contracts is often subject to the approval of budgets on an annual or bi-annual basis. The company's efforts to invoice and collect unbilled accounts receivable may be unsuccessful, and as of July 31, 2026, the company had $77.9 million of contract assets, including amounts from discontinued operations, recorded on the Consolidated Balance Sheet. Contract cost growth on firm fixed-price contracts exposes the company to reduced profitability and the potential loss of future business. A change in the company's relationship with its large wireless carrier customers could have a material adverse effect on its business, results of operations and financial condition. The company's substantial debt obligations could impede, restrict or delay the implementation of its business strategy or prevent it from entering into transactions that would otherwise benefit its business.

The company's business, in particular its legacy Satellite & Space Communications segment, is highly dependent on the budgetary decisions of its government customers, including the U.S. government (including prime contractors to the U.S. government), and changes in the U.S. government's fiscal policies or budgetary priorities may have a material adverse effect on its business, operating results and financial condition. During fiscal years ended July 31, 2026 and 2025, sales to the U.S. government (including sales to prime contractors to the U.S. government), including discontinued operations, were $78.2 million ⁵⁵ and $151.3 million ⁵⁶, or 18.0% ⁵⁷ and 30.3% ⁵⁸ of consolidated net sales, respectively. In addition, 11.4% ⁵⁹ of existing backlog consists of orders related to U.S. government contracts and future sales depend, in part, on significant new orders from the U.S. government, which undergoes extreme budgetary pressures from time to time. The U.S. federal government experienced a shutdown from October 1, 2025 to November 12, 2025 due to a lapse in appropriations, a brief government-wide lapse from January 31, 2026 to February 3, 2026, and a subsequent 76-day lapse affecting certain Department of Homeland Security operations from February 14, 2026 to April 30, 2026. Congress has since enacted full-year appropriations legislation for all federal agencies for 2026. Federal budget delays and federal government shutdowns are unpredictable and may occur in the future. Prolonged or repeated shutdowns may result in delayed contract awards, delayed payments and adverse impacts on results of operations and or cash flows. The company's dependence on sales to international customers exposes it to unique business, commercial and export compliance risks. Sales for use by international customers (including sales to U.S. companies for inclusion in products that will be sold to international customers and sales from discontinued operations) represented approximately 26.3% ⁶⁰ and 21.0% ⁶¹ of consolidated net sales for the fiscal years ended July 31, 2026 and 2025, respectively, and the company expects that international sales will continue to be a significant portion of consolidated net sales. These sales expose the company to risks including barriers to trade, declining trade relations, fluctuations in foreign currency exchange rates, political, legal, social and economic instability, exposure to public health epidemics, availability of suitable export financing, tariff regulations and other U.S. and foreign regulations that may apply to the export of products. The company must comply with all applicable export control laws and regulations of the U.S. and other countries, and certain products and systems may require licenses from U.S. government agencies for export from the U.S., and some products are not permitted to be exported. The company cannot be certain that it will be able to obtain necessary export licenses, and such failure would materially adversely affect its operations.

The most material risks to Comtech's business include the pending Strategic Transaction with Gilat, which is subject to closing conditions including CFIUS Approval and other regulatory approvals, and failure to complete the transaction could adversely affect the business and market price of common stock. The portion of the Satellite and Space Communications business being sold to Gilat generated 42.7% ⁶² and 39.8% ⁶³ of consolidated net sales for fiscal 2026 and 2025, respectively, and if the sale is completed, the company would be a smaller and less diversified business with increased exposure to risks inherent in the remaining Allerium business. The company has substantial indebtedness outstanding, with total outstanding borrowings under the Credit Facility of $108.5 million and under the Subordinated Credit Facility of $102.0 million as of July 31, 2026, including interest paid-in-kind or accrued, and such amounts do not include the 50%, or $32.5 million , Make-Whole Amount associated with the $65.0 million portion of the Subordinated Credit Facility. The company must maintain compliance with various covenants under credit facilities that impose restrictions on its business, and failure to comply could result in an event of default, which, if not cured or waived, could accelerate repayment obligations. The company's business is highly dependent on the budgetary decisions of government customers, and during fiscal years ended July 31, 2026 and 2025, sales to the U.S. government (including sales to prime contractors), including discontinued operations, were $78.2 million and $151.3 million , or 18.0% and 30.3% of consolidated net sales, respectively. In addition, 11.4% of existing backlog consists of orders related to U.S. government contracts. The company's backlog is subject to customer cancellation or modification, and almost all contracts in backlog are subject to cancellation at the convenience of the customer or for default. As of July 31, 2026, the company had $77.9 million of contract assets, including amounts from discontinued operations, recorded on the Consolidated Balance Sheet, commonly referred to as unbilled receivables, which remain at risk for collection due to factors including inability to meet invoicing milestones, customer contracts being terminated for default, or actual indirect rates on cost reimbursable contracts ultimately being less than those rates estimated for revenue recognition purposes. The company's dependence on sales to international customers exposes it to unique business, commercial and export compliance risks, and sales for use by international customers represented approximately 26.3% and 21.0% of consolidated net sales for fiscal years ended July 31, 2026 and 2025, respectively. The company's investments in recorded goodwill and other intangible assets could be impaired as a result of future business conditions, and as of July 31, 2026, goodwill recorded on the Consolidated Balance Sheet related to continuing operations aggregated $176.1 million , and net intangibles recorded on the Consolidated Balance Sheet related to continuing operations aggregated $120.7 million . The company's business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile.

Management's message to shareholders emphasizes that the transformation plan first announced in January 2025 has continued to contribute to improved operational and financial performance, as evidenced by the removal of the substantial doubt regarding the company's ability to continue as a going concern in November 2025; achieving positive consolidated operating cash flows for each of the last six quarters, with fiscal 2026 totaling $37.4 million ; increasing consolidated liquidity as of July 31, 2026 to $61.3 million ; reducing debt; and securing long-term customer commitments, including a large, multi-year contract extension with a top tier mobile network operator in the U.S., valued in excess of $130.0 million . The company entered into a definitive Securities Purchase Agreement on June 14, 2026 to sell most of its Satellite and Space Communications segment to Wavestream Corporation, an affiliate of Gilat Satellite Networks Ltd, for a base purchase price of $157.5 million in cash, subject to customary adjustments, and received a $10.0 million Advance Payment upon execution. The Strategic Transaction is expected to close in calendar 2026, subject to certain closing conditions and regulatory approvals, and does not require the approval of common stockholders. Contemporaneously with signing the Strategic Transaction, at a time when the company was in compliance with the terms and covenants of each of its credit facilities, the company entered into various amendments to its Credit Facility, Subordinated Credit Facility and convertible preferred stock agreements which enhance overall financial flexibility and reduce anticipated cost of capital. Such enhanced financial flexibility includes an extension of the covenant holiday under the Credit Facility and Subordinated Credit Facility to July 31, 2027; waiver of the fiscal 2026 excess cash flow prepayment under the Credit Facility; deferral of previously scheduled make whole escalations on portions of the Subordinated Credit Facility until April 1, 2027 if the loans are not prepaid by that time; a reduction in the prepayment penalty associated with the application of the net proceeds from the sale of most of S&S' business of 1.0% ; upon closing of the Strategic Transaction, elimination of a provision that previously provided for the acceleration of the redemption rights of the holders of convertible preferred stock upon a refinancing; extension of the redemption rights of the holders of convertible preferred stock from October 31, 2028 to October 31, 2029, except upon consummation of certain qualified asset sales by the company or its subsidiaries or upon a change in control; and deferring the rights of the holders of convertible preferred stock to require cash dividends until October 31, 2028. Upon closing the Strategic Transaction, the company will use the net cash proceeds to substantially reduce debt and then seek a comprehensive recapitalization of the business with the intention to further enhance financial flexibility and reduce the cost of capital. Collectively, the Strategic Transaction and fiscal 2026 amendments to the Credit Facility, Subordinated Credit Facility and convertible preferred stock agreements represent a successful outcome of the previously announced strategic review process. As the company awaits regulatory approval of the Strategic Transaction, it will be executing a transition plan to align the organization to be purpose-built to support Allerium's anticipated growth from increasing demand for next-generation public safety technologies and services. With an improved capital structure, streamlined organization and a clear strategic focus, Allerium is poised to capitalize on its leadership in the public safety market. The company's strategic priorities for the period ahead include completing the Strategic Transaction and using net proceeds to substantially reduce debt and seek a comprehensive recapitalization; executing a transition plan to align the organization around Allerium; and accelerating growth of recurring software and services revenue and expanding margins and operating leverage while investing more decisively in innovation for public safety customers. The company also expects to complete its rebranding initiative by formally changing its name to Allerium no later than six months from the consummation of the Strategic Transaction, and anticipates fully adopting the Allerium name during fiscal 2027 and trading under a new Nasdaq symbol to be announced in the future.