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Segment Information | 6 Months Ended
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Jan. 31, 2025
Segment Reporting [Abstract] |
Segment Information | Segment Information Reportable operating segments are determined based on Comtech’s management approach. The management approach, as defined by FASB ASC 280 "Segment Reporting" is based on the way that the CODM organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. As of January 31, 2025, our CODM, for purposes of FASB ASC 280, is our Chairman, President and Chief Executive Officer, Kenneth H. Traub. Satellite and Space Communications is organized into four technology areas: satellite modem and amplifier technologies, troposcatter technologies, government services and space components. This segment offers customers: satellite ground infrastructure technologies, services and system integration that facilitate the transmission of voice, video and data over GEO, MEO and LEO satellite constellations, including traveling wave tube power amplifiers, modems, VSAT platforms and frequency converters; over-the-horizon microwave solutions that can transmit digitized voice, video, and data over distances up to 200 miles using the troposphere and diffraction; professional engineering, training and field support services, including cybersecurity, for multiple U.S. government agencies; and procurement and supply chain management of high reliability Electrical, Electronic and Electromechanical ("EEE") parts for satellite, launch vehicle and manned space applications. Terrestrial and Wireless Networks is organized into three service areas: next generation 911 and call delivery, Solacom call handling solutions, and trusted location and messaging solutions. This segment offers customers: Wireless/VolP 911 location and routing services to connect emergency calls to Public Safety Answering Points ("PSAPs"); SMS text to 911 services, providing alternate paths for individuals who need to request assistance (via text messaging) a method to reach PSAPs; next generation 911 solutions, providing emergency call routing, location validation, policy-based routing rules, logging and security functionality; Emergency Services IP Network transport infrastructure for emergency services communications and support of next generation 911 services; call handling applications for PSAPs; wireless emergency alerts solutions for network operators; and software and equipment for location-based and text messaging services for various applications, including for public safety, commercial and government services. Our CODM primarily uses a metric that we refer to as Adjusted EBITDA to measure an operating segment’s performance and to make decisions about resources to be allocated. Our Adjusted EBITDA metric for the Satellite and Space Communications and Terrestrial and Wireless Networks segments do not consider allocation of any indirect expenses that are unrelated to the segment's operations, or any of the following: interest, income taxes, depreciation, amortization of intangibles, impairment of long-lived assets, including goodwill, amortization of cost to fulfill assets, amortization of stock-based compensation, CEO transition costs, change in fair value of warrants and derivatives, proxy solicitation costs, restructuring costs, strategic emerging technology costs (for next-generation satellite technology) and write-off of deferred financing costs, and in the recent past, acquisition plan expenses, change in fair value of the convertible preferred stock purchase option liability, COVID-19 related costs, facility exit costs, strategic alternatives expenses and other and loss on business divestiture. These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results. Any amounts shown in the Adjusted EBITDA calculation for our Satellite and Space Communications and Terrestrial and Wireless Networks segments are directly attributable to those segments. Our Adjusted EBITDA is also used by our management in assessing the Company's operating results. Although closely aligned, the Company's definition of Adjusted EBITDA is different than EBITDA (as such term is defined in our Credit Facility) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and, therefore, may not be comparable to similarly titled measures used by other companies. Operating segment information, along with a reconciliation of segment Adjusted EBITDA to consolidated loss before income taxes is presented in the tables below:
|  | Three months ended January 31, 2025 |  | Six months ended January 31, 2025
|  | Satellite and Space Communications |  | Terrestrial and Wireless Networks |  | Total |  | Satellite and Space Communications |  | Terrestrial and Wireless Networks |  | Total
Net sales |  | $ | 73,721,000 |  |  | 52,853,000 |  |  | $ | 126,574,000 |  |  | $ | 132,654,000 |  |  | 109,720,000 |  |  | $ | 242,374,000 |
Adjusted EBITDA |  | $ | 4,705,000 |  |  | 8,920,000 |  |  | $ | 13,625,000 |  |  | $ | (16,443,000) |  |  | 19,904,000 |  |  | $ | 3,461,000 |
Unallocated corporate expenses |  |  |  |  |  | (10,722,000) |  |  |  |  |  |  | (19,955,000) |
Impairment of long-lived asset, including goodwill |  |  |  |  |  | — |  |  |  |  |  |  | (79,555,000) |
Restructuring expenses |  |  |  |  |  | (3,400,000) |  |  |  |  |  |  | (21,253,000) |
Strategic emerging technology costs |  |  |  |  |  | — |  |  |  |  |  |  | (280,000) |
CEO transition costs |  |  |  |  |  | 331,000 |  |  |  |  |  |  | (267,000) |
Proxy solicitation costs |  |  |  |  |  | (1,099,000) |  |  |  |  |  |  | (2,682,000) |
Amortization of cost to fulfill assets |  |  |  |  |  | — |  |  |  |  |  |  | (261,000) |
Depreciation |  |  |  |  |  | (2,779,000) |  |  |  |  |  |  | (5,674,000) |
Amortization of intangibles |  |  |  |  |  | (5,043,000) |  |  |  |  |  |  | (11,636,000) |
Amortization of stock-based compensation |  |  |  |  |  | (1,170,000) |  |  |  |  |  |  | (1,325,000) |
Change in fair value of warrants and derivatives |  |  |  |  |  | (28,568,000) |  |  |  |  |  |  | (34,092,000) |
Write-off of deferred financing costs |  |  |  |  |  | — |  |  |  |  |  |  | (1,412,000) |
Interest (income) and other |  |  |  |  |  | 126,000 |  |  |  |  |  |  | (509,000) |
Interest expense |  |  |  |  |  | (11,008,000) |  |  |  |  |  |  | (20,540,000) |
Loss before income taxes |  |  |  |  |  | $ | (49,707,000) |  |  |  |  |  |  | $ | (195,980,000) |
Purchases of property, plant and equipment |  | $ | 89,000 |  |  | 1,410,000 |  |  | 1,499,000 |  |  | $ | 139,000 |  |  | 3,518,000 |  |  | 3,657,000 |
Unallocated amounts |  |  |  |  |  | $ | 154,000 |  |  |  |  |  |  | $ | 411,000 |
Consolidated total |  |  |  |  |  | $ | 1,653,000 |  |  |  |  |  |  | $ | 4,068,000 |
Total assets |  | $ | 293,176,000 |  |  | 448,610,000 |  |  | 741,786,000 |  |  | $ | 293,176,000 |  |  | 448,610,000 |  |  | 741,786,000 |
Unallocated amounts |  |  |  |  |  | $ | 28,775,000 |  |  |  |  |  |  | $ | 28,775,000 |
Consolidated total |  |  |  |  |  | $ | 770,561,000 |  |  |  |  |  |  | $ | 770,561,000 |
|  | Three months ended January 31, 2024 |  | Six months ended January 31, 2024
|  | Satellite and Space Communications |  | Terrestrial and Wireless Networks |  | Total |  | Satellite and Space Communications |  | Terrestrial and Wireless Networks |  | Total
Net sales |  | $ | 78,603,000 |  |  | 55,622,000 |  |  | $ | 134,225,000 |  |  | $ | 180,991,000 |  |  | 105,145,000 |  |  | $ | 286,136,000 |
Adjusted EBITDA |  | $ | 7,062,000 |  |  | 13,727,000 |  |  | $ | 20,789,000 |  |  | $ | 22,193,000 |  |  | 23,364,000 |  |  | $ | 45,557,000 |
Unallocated corporate expenses |  |  |  |  |  | (5,678,000) |  |  |  |  |  |  | (12,078,000) |
Restructuring costs |  |  |  |  |  | (2,726,000) |  |  |  |  |  |  | (6,442,000) |
Strategic emerging technology costs |  |  |  |  |  | (978,000) |  |  |  |  |  |  | (2,348,000) |
Amortization of cost to fulfill assets |  |  |  |  |  | (240,000) |  |  |  |  |  |  | (480,000) |
Depreciation |  |  |  |  |  | (2,930,000) |  |  |  |  |  |  | (5,952,000) |
Amortization of intangibles |  |  |  |  |  | (5,288,000) |  |  |  |  |  |  | (10,577,000) |
Amortization of stock-based compensation |  |  |  |  |  | (2,189,000) |  |  |  |  |  |  | (4,834,000) |
Gain on business divestiture, net |  |  |  |  |  | 2,213,000 |  |  |  |  |  |  | 2,213,000 |
Interest (income) and other |  |  |  |  |  | (902,000) |  |  |  |  |  |  | (837,000) |
Interest expense |  |  |  |  |  | (5,265,000) |  |  |  |  |  |  | (10,197,000) |
Loss before income taxes |  |  |  |  |  | $ | (3,194,000) |  |  |  |  |  |  | $ | (5,975,000) |
Purchases of property, plant and equipment |  | $ | 1,724,000 |  |  | 2,285,000 |  |  | $ | 4,009,000 |  |  | $ | 2,627,000 |  |  | 4,021,000 |  |  | 6,648,000 |
Unallocated amounts |  |  |  |  |  | $ | 264,000 |  |  |  |  |  |  | $ | 841,000 |
Consolidated total |  |  |  |  |  | $ | 4,273,000 |  |  |  |  |  |  | $ | 7,489,000 |
Total assets |  | $ | 480,008,000 |  |  | 461,246,000 |  |  | $ | 941,254,000 |  |  | $ | 480,008,000 |  |  | 461,246,000 |  |  | 941,254,000 |
Unallocated amounts |  |  |  |  |  | $ | 55,501,000 |  |  |  |  |  |  | 55,501,000 |
Consolidated total |  |  |  |  |  | $ | 996,755,000 |  |  |  |  |  |  | $ | 996,755,000 |
During the three months ended January 31, 2025, we revised the presentation of our operating segment information to report segment totals and to reconcile such segment totals to our Condensed Consolidated Financial Statements. Prior period information was adjusted to conform to the current period presentation. Unallocated expenses result from corporate expenses such as executive compensation, accounting, legal and other regulatory compliance related costs and also includes all of our amortization of stock-based compensation. See Note (1) - General for information related to CEO transition and proxy solicitation related costs. During the three and six months ended January 31, 2025, our Unallocated segment also incurred $1,970,000 and $5,993,000 of restructuring costs, respectively, focused on legal and advisory fees associated with: (i) our previously announced transformation strategy to explore strategic alternatives; and (ii) operational initiatives to align our cost structure with our future anticipated business, and to improve liquidity. During the three and six months ended January 31, 2024, our Unallocated segment incurred $1,271,000 and $4,190,000, respectively, of restructuring costs focused on streamlining our operations and legal and other expenses primarily related to the PST Divestiture. During the six months ended January 31, 2025, our Satellite and Space Communications segment recorded a $79,555,000 non-cash goodwill impairment charge (see Note (16) - Long-lived Assets, including Goodwill for additional information). During the three and six months ended January 31, 2025, our Satellite and Space Communications segment also recorded $1,430,000 and $15,170,000, respectively, of restructuring costs, which included for the six month period: (i) non-cash inventory write downs of $11,369,000, recorded in the first quarter of fiscal 2025 in Cost of Sales in our Condensed Consolidated Statements of Operations (see Note (8) - Inventories for additional information); and (ii) $3,801,000 of costs included in Selling, General and Administrative expenses in our Condensed Consolidated Statements of Operations related to our transformation strategy (principally, the CGC Divestiture). During the three and six months ended January 31, 2024, our Satellite and Space Communications segment recorded $1,454,000 and $2,244,000, respectively, of restructuring costs to streamline our operations and improve efficiency, including costs related to the relocation of certain of our satellite ground infrastructure production facilities to our 146,000 square foot facility in Chandler, Arizona. In addition, strategic emerging technology costs for next-generation satellite technology for the six months ended January 31, 2025 were $280,000. Similar strategic emerging technology costs of $978,000 and $2,348,000 were incurred during the three and six months ended January 31, 2024, respectively. During the three and six months ended January 31, 2025 and 2024, our Terrestrial and Wireless Networks segment incurred nominal restructuring costs. Interest expense in the tables above primarily relates to our credit facilities, and includes the amortization of deferred financing costs. See Note (10) - Credit Facility and Note (11) - Subordinated Credit Facility for further discussion. Intersegment sales for both the three and six months ended January 31, 2025 and 2024 between the Satellite and Space Communications segment and the Terrestrial and Wireless Networks segment were nominal. All intersegment sales are eliminated in consolidation and are excluded from the tables above. Unallocated assets at January 31, 2025 consist principally of cash and cash equivalents, corporate property, plant and equipment, operating lease right of use assets and deferred financing costs. The large majority of our long-lived assets are located in the U.S.

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