COMTECH TELECOMMUNICATIONS: DE / ANALYSIS BY THE DEPARTMENT OF FINANCIAL POSITION AND OPERATING RESULTS (form 10-K)

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Overview

We are a leading global provider of next-generation 911 emergency systems and
secure wireless communications technologies to commercial and government
customers around the world. Our solutions fulfill our customers' needs for
secure wireless communications in some of 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 manage our activities through two operational sectors to present:

•Commercial Solutions - offers satellite ground station technologies (such as
Single Channel per Carrier ("SCPC") and time division multiple access ("TDMA")
modems and amplifiers) and public safety and location technologies (such as 911
call routing, 911 call handling and mapping solutions) to commercial customers
and smaller government customers, such as state and local governments. This
segment also serves certain large government customers (including the U.S.
government) that have requirements for off-the-shelf commercial equipment.

•Government Solutions - provides tactical satellite-based networks and ongoing
support for complicated communications networks, troposcatter systems and
solid-state, high-power amplifiers to large government end-users (including
those of foreign countries), large international customers and domestic prime
contractors.

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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.

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. 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 of them.

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
Government Solutions segment and, to a lesser extent, certain location-based and
messaging infrastructure contracts in our public safety and location
technologies product line within our Commercial Solutions segment. For
service-based contracts in our public safety and location technologies product
line, 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
ground station technologies product line (which includes satellite modems,
solid-state and traveling wave tube amplifiers) and certain contracts for our
solid-state, high-power RF amplifiers in our Government Solutions segment. The
contracts related to these product lines 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 for our products. 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, 2021, total
goodwill recorded on our Consolidated Balance Sheet aggregated $347.7 million
(of which $270.4 million relates to our Commercial Solutions segment and $77.3
million relates to our Government Solutions segment). Additionally, as of
July 31, 2021, net intangibles recorded on our Consolidated Balance Sheet
aggregated $268.7 million (of which $222.6 million relates to our Commercial
Solutions segment and $46.1 million relates to our Government Solutions
segment). Each of our two operating segments constitutes a reporting unit and we
must make various assumptions in determining their estimated fair values.

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.

On August 1, 2021 (the first day of our fiscal 2022), we performed our annual
quantitative assessment using market participant assumptions to determine if the
fair value of each of our reporting units with goodwill exceeded its carrying
value. 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.


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In performing the quantitative assessment, we estimated the fair value of each
of our reporting units using a combination of the income and market approaches.
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 August 1, 2021 total public market
capitalization and assessed implied control premiums based on our common stock
price of $24.97 as of August 1, 2021.

Based on our quantitative evaluation, we determined that our Commercial
Solutions and Government Solutions reporting units had estimated fair values in
excess of their carrying values of at least 22.7% and 94.1%, 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.

It is possible that, during fiscal 2022 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 2022 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 Commercial Solutions and
Government Solutions 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, 2022 (the start of our fiscal 2023). 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,
2021. 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.

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.


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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. A portion of our deferred tax assets consist of federal research and
experimentation tax credit carryforwards, some of which was acquired in
connection with our acquisition of TCS. 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 we Federal income tax returns for fiscal years 2018 to 2020 are subject to a possible future audit by the Internal Revenue Service (“IRS”). None of our state income tax returns prior to fiscal 2017 are audited. Future tax assessments or payments could have a material adverse effect on our consolidated operating results 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.

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 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.


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Results of operations

The following table presents, for the periods indicated, certain items of income and expense expressed as a percentage of our consolidated sales:

Closed exercises July 31,

                                                                           2021                  2020                 2019
Gross margin                                                                  36.8  %              36.8  %              36.8  %
Selling, general and administrative expenses                                  19.2  %              19.0  %              19.1  %
Research and development expenses                                              8.4  %               8.5  %               8.4  %
Settlement of intellectual property litigation                                   -  %                 -  %              (0.5) %
Acquisition plan expenses                                                     17.2  %               3.4  %               0.9  %
Amortization of intangibles                                                    3.6  %               3.5  %               2.7  %
Operating (loss) income                                                      (11.7) %               2.5  %               6.2  %
Interest expense (income) and other                                            1.2  %               1.0  %               1.4  %
Write-off of deferred financing costs                                            -  %                 -  %               0.5  %
(Loss) income before (benefit from) provision for income taxes               (12.9) %               1.5  %               4.3  %
Net (loss) income                                                            (12.6) %               1.1  %               3.7  %
Adjusted EBITDA (a Non-GAAP measure)                                          13.2  %              12.6  %              13.9  %



For a definition and explanation of Adjusted EBITDA, see “Article 6. Selected consolidated financial data – Non-GAAP financial data” and “Article 7. Management report and analysis of financial position and operating results – Comparison of fiscal years 2021 and 2020 – Adjusted EBITDA. “

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COVID-19 Impact and Business Outlook for Fiscal Year 2022

For the year ended July 31, 2021, we achieved solid operational performance and generated:

• Net sales of $ 581.7 million;

• GAAP operating loss of $ 68.3 million and GAAP net loss of $ 73.5 million
(including $ 70.0 million paid in cash to Gilat in October 2020);

•Non-GAAP operating income of $36.1 million and Non-GAAP net income of $22.4
million. These Non-GAAP financial measures 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 2021 and 2020;"

• GAAP net cash used in the operating activities of $ 40.6 million (including the above $ 70.0 million Gilat payment); and

• Adjusted EBITDA (a non-GAAP financial measure discussed below) of $ 76.5 million.

From July 31, 2021, our cash and cash equivalents were $ 30.9 million and our total debt was $ 201.0 million.

We achieved a fiscal 2021 consolidated book-to-bill ratio (a measure defined as
bookings divided by net sales) of 1.07 and ended the year with consolidated
backlog of $658.9 million, which represent substantial improvements as compared
to our fiscal 2020. During fiscal 2021, we were awarded several multi-year
contracts to deploy and operate next generation 911 ("NG-911") services for the
states of Arizona, Iowa, Pennsylvania and South Carolina, collectively valued
over $200.0 million. In addition, in connection with a multi-year contract
award, we received an initial $13.0 million order from a large new customer to
customize our next-generation broadband satellite technology that can be used
with the thousands of Low Earth Orbit ("LEO") satellites reportedly being
launched over the next several years. Our backlog (sometimes referred to herein
as orders or bookings) are more fully defined in "Part I - Item 1. Business"
included in this Annual Report on Form 10-K and the total value of multi-year
contracts that we have received is substantially higher than our reported
backlog. When adding our backlog and the total unfunded value of multi-year
contracts that we have received and for which we expect future orders, our
revenue visibility approximates $1.1 billion, excluding potential future orders
from this large new customer that could amount to hundreds of millions of
dollars.

With COVID-19 continuing to impact global markets and supply chains, reliable
forecasting remains challenging. Against that background, Comtech is targeting
to achieve fiscal 2022 net sales within a range of $580.0 million to $600.0
million and Adjusted EBITDA between $70.0 million and $76.0 million. These
targets reflect the strength of our backlog and a strong sales pipeline, offset
by the lingering impacts of COVID-19, timing considerations associated with
tightening global supply chain constraints and start-up costs associated with
the opening of two new high-volume technology manufacturing facilities. In
addition, our fiscal 2022 financial targets reflect the impact of the recently
completed withdrawal of U.S. troops from Afghanistan and other U.S. government
program changes.

Our consolidated net sales in fiscal 2022 are anticipated to reflect a higher
percentage of total Commercial Solutions segment sales due to strong demand for
our public safety and location technology solutions, including work on our
recent contracts to design, deploy and operate NG-911 services for the states of
South Carolina and Pennsylvania, and a higher level of annual sales in our
satellite earth station product line as compared to fiscal 2021, including
incremental contributions from our recently acquired TDMA modem technologies. In
addition, our consolidated net sales in fiscal 2022 are anticipated to reflect
strong demand for: (i) high reliability Electrical, Electronic and
Electromechanical ("EEE") satellite-based space components and X/Y steerable
antennas; (ii) ongoing sustainment services to the U.S. Army for the AN/TSC-198A
SNAP terminal; (iii) Joint Cyber Analysis Course ("JCAC") training solutions;
and (iv) sustainment services for the U.S. Army's Project Manager Mission
Command ("PM MC") Blue Force Tracking ("BFT-1") program. Also, we expect
additional orders for the newly introduced Comtech COMETTM, the world's smallest
deployable troposcatter terminal, and our next generation troposcatter system
used by the U.S. Marine Corps.


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Our GAAP operating income in fiscal 2022 will be impacted by both start-up
manufacturing expenses and restructuring costs associated with the opening of
our two new high-volume technology manufacturing centers, as well as COVID-19
related costs. Global supply chain issues make the amount and timing of these
expenses difficult to predict. In addition, GAAP operating income in fiscal 2022
is likely to be impacted by greater than normal proxy solicitation related
costs, as well as expenses associated with the appointment of a new CEO, as
further discussed below. Because the amount and timing of these costs remain
largely unpredictable, we are not providing GAAP operating income, GAAP net
income or any GAAP EPS guidance or a reconciliation of our projected results to
the most comparable GAAP measure, as such a reconciliation cannot be prepared
without unreasonable effort. For the same reasons, we are unable to address the
probable significance of the unavailable information, which could be material to
future results.

On October 4, 2021, we announced that our Board of Directors has appointed
Michael D. Porcelain, our President and Chief Operating Officer, to be Chief
Executive Officer, taking over from Fred Kornberg after a short transition
period. The change of leadership is expected to occur by the end of calendar
2021, at which point Mr. Porcelain will also join our Board of Directors and
continue as President. Mr. Kornberg will serve as non-executive Chairman of the
Board and is expect to take on a technology advisory role. Costs associated with
this leadership transition will be announced once they are finalized.

At October 4, 2021, our board of directors declared a dividend of $ 0.10 per common share, payable on November 12, 2021 to shareholders of record at the close of business on October 13, 2021. Future dividends on common shares remain subject to compliance with financial covenants under our credit facility, as well as approval by the Board of Directors.

Additional information related to our Business Outlook for Fiscal 2022 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 2021 and 2020."

Comparison of fiscal years 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 period-over-period decrease in net sales reflects lower net sales in
our Government Solutions segment, partially offset by higher net sales in our
Commercial Solutions segment. Net sales by operating segment are discussed
below.

Commercial Solutions
Net sales in our Commercial Solutions segment were $360.1 million for fiscal
2021, as compared to $353.7 million for fiscal 2020, an increase of $6.4
million, or 1.8%. Our Commercial Solutions segment represented 61.9% of
consolidated net sales for fiscal 2021 as compared to 57.4% for fiscal 2020. Our
book-to-bill ratio (a measure defined as bookings divided by net sales) for this
segment was 1.23. Period-to-period fluctuations in bookings are normal for this
segment. As further discussed below, long-term demand for our Commercial
Solutions segment's products and technologies appears strong and we believe
fiscal 2022 net sales for this segment will be higher than the amount we
achieved in fiscal 2021.

Net sales of our satellite ground station technologies for fiscal 2021 were
higher than fiscal 2020. Fiscal 2021 benefited from 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. We believe UHP
developed revolutionary technology, which has the potential to transform the
growing Very Small Aperture Terminal ("VSAT") market, as demand for high-speed
satellite-based networks are projected to grow significantly. As a result of the
acquisition, we believe we are well positioned for long-term growth in this
market.

While our satellite ground station product line continues to be impacted by
COVID-19's effect on customer demand, particularly in international markets,
which historically represents a large majority of end-users for this product
line, we benefited during fiscal 2021 from a number of awards, including: (i)
$11.4 million in delivery orders from the U.S. Naval Information Warfare Systems
Command for our latest generation SLM-5650B satellite modems and firmware; (ii)
multiple contracts aggregating $6.3 million for 500W Ka-band traveling wave tube
amplifiers ("TWTAs") for both military and commercial high throughput satellite
systems; (iii) multiple contracts aggregating $3.6 million from a U.S. system
integrator for X-band solid-state power amplifiers ("SSPAs") and block up
converters for transportable satellite communication terminals; (iv) a contract
valued at more than $3.0 million for QV-band TWTAs to support a new high-speed
satellite network; (v) an order valued at more than $2.0 million for
state-of-the-art 500W Ka-band high power amplifiers supporting a leading high
throughput satellite customer; and (vi) a $2.0 million order for rugged Ka-band
high power TWTAs for a U.S. military communications system, among others.


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We expect sales of our satellite earth station products in fiscal 2022 to grow
as compared to fiscal 2021 due to increased demand. This product line will also
benefit from a full twelve months of sales of our new TDMA satellite network
platform that we acquired in March 2021. At the same time, recent spikes in
COVID-19 infection rates have curtailed travel and business in many parts of the
world. In addition, global supply chain constraints have become more prevalent
in recent months, with lead times for certain parts extending meaningfully. We
believe these issues are suppressing orders from many of our satellite earth
station product line customers and impacting the timing of deliveries and
installations. Although we are closely monitoring our inventory needs and
supplier base, these constraints represent a significant performance headwind as
we enter fiscal 2022.

Net sales in fiscal 2021 of our public safety and location technology solutions
were slightly higher than fiscal 2020, reflecting increased sales of our NG-911
services and location-based technology solutions, offset in part by the absence
of 911 wireless call routing sales to AT&T.

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.

During fiscal 2021, we were awarded and began work on a statewide contract
valued at up to $175.1 million to design, deploy, and operate NG-911 services
for the Commonwealth of Pennsylvania. The total contract value includes
multi-year contract extension options and was initially funded at $137.4
million, of which $111.6 million was booked in fiscal 2021. This contract was
awarded to us shortly after we announced the receipt of a $54.0 million contract
to design, deploy and operate NG-911 services for the State of South Carolina,
for which we received over $7.5 million of additional funding in fiscal 2021. In
addition to these contracts, we were awarded a multi-year statewide contract
valued at $35.8 million to design, deploy and operate NG-911 services for the
State of Arizona, which includes a multi-year extension option. Excluding such
option, the contract is valued at $23.5 million. Also, in fiscal 2021, we were
awarded a statewide contract to provide NG-911 services for the State of Iowa.
This multi-year contract includes contract extension options, is valued up to
$48.5 million and was initially funded $23.0 million. Lastly, although not yet
funded, we have also been notified that we were selected as the winner of a
multi-year NG-911 contract for the State of Ohio. We anticipate that such
contract will be initially funded in fiscal 2022.

Other notable orders received for our public safety and location technology
solutions during fiscal 2021 include: (i) a $9.8 million contract with a major
tier-one mobile network operator ("MNO") for a broad suite of new capabilities
and services centered around virtualized applications and 5G products; (ii) a
$7.1 million contract for the deployment of a cellular-based Wireless Emergency
Alerts ("WEA") solution with a tier-one MNO, which was our first major award for
a WEA solution; (iii) a $5.0 million NG-911 modernization project for a U.S.
government end customer; (iv) a contract valued at up to $4.7 million with a
channel partner to supply new releases to messaging application software for a
U.S. tier-one MNO; (v) a contract renewal worth $4.2 million for location and
mapping technologies for a tier-one MNO; (vi) a $4.0 million maintenance
agreement with a channel partner to continue providing messaging application
support for a U.S. tier-one MNO; (vii) orders exceeding $3.8 million with a
tier-one MNO for additional capabilities related to our Virtual Mobility
Location Center platform; and (viii) multiple contracts valued over $6.5 million
to provide NG-911 services, including our Solacom Guardian Intelligent 911
Workstations, to various police and fire rescue services in Canada, among
others.

We are continuing to work on other opportunities and believe there is strong
interest in our public safety and location technology solutions. To-date, the
business impact of COVID-19 on our public safety and location technology
solutions has been relatively muted and long-term demand for our products and
services appears strong. Although COVID-19 has resulted in the cancellation of
some key public safety trade shows and some states and municipalities have
announced budget constraints, we believe that other potential customers are
increasing their funding for NG-911 solutions, recognizing the critical
importance of upgrading their 911 systems. Although public safety and location
technology solutions have long sales cycles and are subject to
difficult-to-predict changes in the overall procurement strategies of wireless
carrier customers, we believe that sales of our NG-911 solutions will be higher
than the amount we achieved in fiscal 2022. Further, we believe we are well
positioned for long-term growth in this market.

Overall, we remain optimistic that fiscal 2022 net sales for this segment will
be higher than the amount we achieved in fiscal 2021. Bookings, sales and
profitability in our Commercial Solutions 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.


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Government Solutions
Net sales in our Government Solutions segment were $221.5 million for fiscal
2021 as compared to $263.0 million for fiscal 2020, a decrease of $41.5 million
or 15.8%. Our Government Solutions segment represented 38.1% of consolidated net
sales for fiscal 2021 as compared to 42.6% for fiscal 2020. Our book-to-bill
ratio (a measure defined as bookings divided by net sales) in this segment for
fiscal 2021 was 0.82. Period-to-period fluctuations in bookings are normal for
this segment.

Fiscal 2021 net sales primarily reflect lower sales of global field support
services, advanced VSAT products and other programs for the U.S. Army, 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). Fiscal 2021 net sales also included
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.

During fiscal 2021, we were awarded $27.0 million of orders related to a new
contract to provide system refurbishment, sustainment services and baseband
equipment to the U.S Army. Such orders support the sustainment of the U.S.
Army's AN/TSC-198 SNAP family of ground satellite terminals. This multi-year
contract, valued at up to $235.7 million, includes a base year award and three
one-year option periods exercisable by the U.S. Army. We expect that additional
funding will be authorized over the remaining contract period.

Other notable orders awarded in fiscal 2021 include: (i) $16.3 million of orders
from the U.S. government for our JCAC training solutions; (ii) a $10.4 million
contract from the U.S. military for the first phase of a full-motion large
aperture antenna tracking system; (iii) $7.2 million of funding to support the
U.S. Army's PM MC's BFT-1 program; (iv) $5.5 million of funding on our contract
to provide the U.S. Army with global field support services for military
satellite communication ("SATCOM") terminals around the world; (v) a $3.5
million contract for solid-state, high-power RF amplifiers from a major domestic
medical instrumentation provider; (vi) a $3.2 million follow-on contract from
the Brazilian military to supply additional satellite equipment and services for
its Air Traffic Control network; (vii) a $3.0 million order from an overseas
agency for maintenance of down range tracking stations; (viii) $3.0 million of
additional funding for a 12-month extension on an existing contract to provide
the State of Maryland's Department of Human Services with statewide information
technology ("IT") services; and (ix) $2.9 million of funding on our contract to
provide ongoing sustainment services and baseband equipment, among others.

We are seeing strong interest across the board for our Comtech COMETTM terminals
and other new solutions we are discussing with our customers. During fiscal
2021, we conducted successful in-field demonstrations including our industry
leading troposcatter solution that we are currently providing to the U.S. Marine
Corps. Other military commands have also shown strong interest and recently, in
fiscal 2021, we were awarded a $1.7 million contract by a non-U.S. NATO family
customer for multiple COMETTM terminals. This represents the second procurement
of COMETTM terminals by a non-U.S. NATO family customer, in addition to the
multiple COMETTM terminals already procured by the U.S. Special Operations
Command.

In April 2021, the U.S. government announced that it intended to fully withdraw
troops from Afghanistan. This change resulted in lower revenues than previously
anticipated for certain programs that we currently participate in. In addition,
the U.S. presidential administration released its fiscal 2022 budget request.
This budget request includes less money for certain legacy programs but
additional funding for modernization and new programs. We believe these budget
changes will benefit us over the longer-term, but will result in a decline in
overall revenues in our Government Solutions segment in fiscal 2022, as compared
to fiscal 2021. Although still difficult to predict, we expect that revenues in
this segment for each of the first three quarters of fiscal 2022 will be
slightly lower than the $46.6 million achieved during the fourth quarter of
fiscal 2021. Thereafter, this segment is expected to benefit from higher margin
programs, including the receipt of new orders for the Comtech COMETTM and other
troposcatter solutions.

Reservations, sales and profitability of our Government Solutions segment can fluctuate significantly from period to period due to many factors including unpredictable funding, deployment and technology decisions on our part. we and international government clients. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance.

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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,
                                            2021                 2020                   2021                   2020                  2021                 2020
                                               Commercial Solutions                        Government Solutions                            
Consolidated
U.S. government                               14.7  %               14.8  %                 66.8  %               65.0  %              34.6  %               36.2  %
Domestic                                      58.5  %               58.9  %                 14.1  %               15.2  %              41.5  %               40.3  %
Total U.S.                                    73.2  %               73.7  %                 80.9  %               80.2  %              76.1  %               76.5  %

International                                 26.8  %               26.3  %                 19.1  %               19.8  %              23.9  %               23.5  %
Total                                        100.0  %              100.0  %                100.0  %              100.0  %             100.0  %              100.0  %


Sales to we government customers understand sales to US 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 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 Commercial Solutions segment (which historically
achieves higher gross margins than our Government Solutions 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 Commercial Solutions segment's gross profit, as a percentage of related
segment net sales, for fiscal 2021 decreased in comparison to fiscal 2020. The
decrease in gross profit percentage in fiscal 2021 primarily reflects 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).

Our Government Solutions segment's gross profit, as a percentage of related
segment net sales, for fiscal 2021 decreased in comparison to fiscal 2020. The
decrease in gross profit percentage primarily reflects lower segment net sales
and 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. Although operations in the United Kingdom have largely resumed, we
continue to experience lingering impacts from COVID-19 and the shut-down.

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.

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

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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 earth 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 tactical
communications technologies 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 location technologies solutions offerings in our
Commercial Solutions 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 both of our segments.

Selling, general and administrative expenses in fiscal 2022 will likely be impacted by higher than normal proxy solicitation fees as well as expenses associated with the change of CEO that was announced on October 4, 2021.

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 $41.0 million and
$45.2 million, respectively, related to our Commercial Solutions segment, and
$7.1 million and $6.1 million, respectively, related to our Government Solutions
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 Government Solutions 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. We are evaluating this new market in relation to our long-term
business strategies, and we may incur additional costs in fiscal 2022.

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 $17.1 million was for the Commercial
Solutions segment and $4.0 million was for the Government Solutions segment) for
fiscal 2021 and $21.6 million (of which $17.3 million was for the Commercial
Solutions segment and $4.3 million was for the Government Solutions segment) for
fiscal 2020.

Our business outlook for fiscal year 2022 assumes a total annual amortization of intangible assets of approximately $ 21.8 million.

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 $15.2 million for fiscal 2020. Operating income
(loss) by reportable segment is shown in the table below:
                                                                                             Fiscal Years Ended July 31,
                                          2021                   2020              2021              2020             2021              2020             2021            2020
       ($ in millions)                      Commercial Solutions                   Government Solutions                    Unallocated                       Consolidated
Operating income (loss)              $     41.1                $ 34.8          $     8.4           $ 20.0          $ (117.8)         $ (39.6)         $ (68.3)         $ 15.2
Percentage of related
net sales                                  11.4   %               9.8  %             3.8   %          7.6  %                NA               NA               NA          2.5  %



The increase in our Commercial Solutions segment operating income, both in
dollars and as a percentage of the related segment net sales, for fiscal 2021
was driven primarily by higher net sales, lower research and development
expenses and lower amortization of intangibles, offset in part by a lower gross
profit percentage and $1.8 million of restructuring costs, as discussed above.

The decrease in our Government Solutions segment operating income, both in
dollars and as a percentage of related segment net sales, for fiscal 2021 was
driven primarily by lower net sales, a lower gross profit percentage, higher
research and development expenses and $1.0 million of restructuring costs,
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.

GAAP operating income in fiscal 2022 will be impacted by both start-up expenses
and restructuring costs associated with the opening of Comtech's new high-volume
technology manufacturing centers, as well as COVID-19 related costs. In
addition, as discussed above, we will likely incur greater than normal proxy
solicitation costs in fiscal 2022 as well expenses associated with the CEO
change that was announced on October 4, 2021.

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%. Our current cash borrowing rate (which
excludes the amortization of deferred financing costs) under our existing Credit
Facility approximates 2.4%.

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

(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.


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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 Canadian 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.

In fiscal 2020, we recorded a separate net tax benefit of $ 1.2 million, mainly related to the finalization of certain tax accounts in connection with the filing of our federal and state income tax returns for fiscal 2019. These benefits were offset, in part, by: (i) the reassessment of certain taxes foreign deferrals resulting from the adoption of a law that increased the tax rate UK from 17.0% to 19.0%; and (ii) the settlement of certain share-based awards during fiscal year 2020.

Our federal income tax returns for fiscal 2018 through 2020 are subject to
potential future IRS audit. None of our state income tax returns prior to fiscal
2017 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 income (loss). During fiscal year 2021, our consolidated net loss was $ 73.5 million compared to the net income of $ 7.0 million during fiscal year 2020.

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,
                                       2021                2020                2021                 2020               2021               2020             2021              2020
($ in millions)                         Commercial Solutions                     Government Solutions                       Unallocated                         Consolidated
Net income (loss)                 $     39.2                34.4                   9.6               20.2            (122.2)             (47.6)         $ (73.5)               7.0
Provision for (benefit
from) income taxes                       1.8                 0.4                  (1.4)              (0.1)             (1.9)               2.0             (1.5)               2.3
Interest (income) and other              0.1                   -                   0.2               (0.2)             (0.4)                 -             (0.1)              (0.2)
Interest expense                           -                   -                   0.1                  -               6.8                6.0              6.8                6.1
Amortization of stock-based
compensation                               -                   -                     -                  -              10.0                9.3             10.0                9.3
Amortization of intangibles             17.1                17.3                   4.0                4.3                 -                  -             21.0               21.6
Depreciation                             7.5                 8.3                   1.6                1.4               0.3                0.8              9.4               10.6
Estimated contract
settlement costs                           -                 0.4                     -                  -                 -                  -                -                0.4
Acquisition plan expenses               (1.1)                0.8                     -                  -             101.3               20.0            100.3               20.8
Restructuring costs                      1.8                   -                   1.0                  -                 -                  -              2.8                  -
COVID-19 related costs                     -                   -                   1.0                  -                 -                  -              1.0                  -
Strategic emerging
technology costs                           -                   -                   0.3                  -                 -                  -              0.3                  -
Adjusted EBITDA                   $     66.3                61.7                  16.3               25.7              (6.1)              (9.6)         $  76.5               77.8
Percentage of related net
sales                                   18.4   %            17.4  %                7.4  %             9.8  %                  NA               NA          13.2  %            12.6  %



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 Commercial Solutions
segment, as well as lower consolidated selling, general and administrative
expenses and research and development expenses, as discussed above.

The increase in our Commercial Solutions segment's Adjusted EBITDA, both in
dollars and as a percentage of related segment net sales, is due to higher
segment net sales, lower research and development expense and the benefit from
cost savings measures previously implemented, partially offset by a lower gross
profit percentage, as discussed above.

The decrease in our Government Solutions segment's Adjusted EBITDA, both in
dollars and as a percentage of related segment net sales, was driven primarily
by lower segment net sales, a lower gross profit percentage and higher research
and development expenses, as discussed above.


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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 individual segment as well as unallocated spending, it is inherently
difficult to forecast.

Reconciliations of our GAAP consolidated operating income (loss), net income
(loss) and net income (loss) per diluted 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 EPS 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 income per diluted share adjustments for
fiscal 2021 were computed using 25,885,000 weighted average diluted shares
outstanding during the respective period:
                                                                                       Fiscal 2021
                                                                                                            Net (Loss) Income
                                                            Operating (Loss)                                       per
($ in millions, except for per share amount)                     Income             Net (Loss) Income         Diluted Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported                                         $ (68.3)                $ (73.5)                 $ (2.86)
  Acquisition plan expenses                                          100.3                    93.3                     3.60
Restructuring costs                                                    2.8                     2.1                     0.08
COVID-19 related costs                                                 1.0                     0.8                     0.03
Strategic emerging technology costs                                    0.3                     0.3                     0.01
Interest expense                                                         -                     0.9                     0.04
  Net discrete tax benefit                                               -                    (1.6)                   (0.06)
Non-GAAP measures                                                  $  36.1                 $  22.4                  $  0.86

                                                                                       Fiscal 2020
                                                                                                              Net Income per
($ in millions, except for per share amount)                Operating Income           Net Income             Diluted Share
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
  Acquisition plan expenses                                           20.8                    13.1                     0.53
  Net discrete tax benefit                                               -                    (1.2)                   (0.05)
Non-GAAP measures                                                  $  36.4                 $  19.2                  $  0.77




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Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before
income taxes, interest (income) and other, write-off of deferred financing
costs, interest expense, amortization of stock-based compensation, amortization
of intangibles, depreciation expense, 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, 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 for consolidated operating income, net income and net income
per diluted share reflect the GAAP measures as reported, adjusted for certain
items as described. 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 above tables, 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 fiscal 2022 Adjusted EBITDA target to the most
directly comparable GAAP measure because items such as stock-based compensation,
adjustments to the provision for income taxes, amortization of intangibles,
interest expense and estimated proxy solicitation related costs, which are
specific items that impact these measures, have not yet occurred, are out of our
control, or cannot be predicted. For example, quantification of stock-based
compensation expense requires inputs such as the number of shares granted and
market price that are not currently ascertainable. Accordingly, reconciliations
to the Non-GAAP forward looking metrics are not available without unreasonable
effort and such unavailable reconciling items could significantly impact our
financial results.

Comparison of fiscal years 2020 and 2019

Net Sales. Consolidated net sales were $616.7 million and $671.8 million for
fiscal 2020 and 2019, respectively, representing a decrease of $55.1 million, or
8.2%. The period-over-period decrease in net sales reflects lower net sales in
both our Government Solutions and Commercial Solutions segments. Net sales by
operating segment are discussed below.

Commercial Solutions
Net sales in our Commercial Solutions segment were $353.7 million for fiscal
2020, as compared to $357.3 million for fiscal 2019, a decrease of $3.6 million,
or 1.0%. Our Commercial Solutions segment represented 57.4% of consolidated net
sales for fiscal 2020 as compared to 53.2% for fiscal 2019. Our book-to-bill
ratio (a measure defined as bookings divided by net sales) for this segment was
0.91. Period-to-period fluctuations in bookings are normal for this segment.

Net sales of our satellite ground station technologies in fiscal 2020 were significantly lower than in fiscal 2019, primarily due to the business impact of the COVID-19 pandemic.

Net sales of our public safety and location technology solutions were higher in
fiscal 2020 as compared to fiscal 2019. Sales in fiscal 2020 of these products
included an insignificant amount of sales from our February 2020 acquisition of
NG-911. During fiscal 2020, the business impact of COVID-19 on our public safety
and location technology solutions was relatively muted.

Reservations, sales and profitability of our Business Solutions segment may 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.

Government Solutions
Net sales in our Government Solutions segment were $263.0 million for fiscal
2020 as compared to $314.5 million for fiscal 2019, a decrease of $51.5 million
or 16.4%. Our Government Solutions segment represented 42.6% of consolidated net
sales for fiscal 2020 as compared to 46.8% for fiscal 2019. Our book-to-bill
ratio (a measure defined as bookings divided by net sales) in this segment for
fiscal 2020 was 1.0. Period-to-period fluctuations in bookings are normal for
this segment.

Net sales of our tactical communications technologies during fiscal 2020 were
significantly lower as compared to fiscal 2019, due primarily to the timing of
and performance on orders related to our $98.6 million U.S. Army global field
support contract and lower sales for high reliability Electrical, Electronic and
Electromechanical ("EEE") satellite based space components. While fiscal 2020
benefited from a nominal amount of sales related to our new X/Y satellite
tracking antenna product line acquired in connection with our January 2020
acquisition of CGC, it also reflected the absence of sales of our next
generation MT-2025 mobile satellite transceivers. In fiscal 2019, we sold $11.7
million of such transceivers.


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Net sales of our high-performance transmission technologies in fiscal 2020 were
slightly lower as compared to fiscal 2019 with increased sales of solid-state,
high-power amplifiers and related switching technologies being offset by lower
sales of our over-the-horizon microwave system technologies.

Reservations, sales and profitability of our Government Solutions segment can fluctuate significantly from period to period due to many factors including unpredictable funding, deployment and technology decisions on our part. we and international government clients. 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, 2020 and 2019 are as follows:
                                                                                        Fiscal Years Ended July 31,
                                            2020                 2019                   2020                   2019                  2020                 2019
                                               Commercial Solutions                        Government Solutions                            
Consolidated
U.S. government                               14.8  %               19.2  %                 65.0  %               63.8  %              36.2  %               40.1  %
Domestic                                      58.9  %               53.9  %                 15.2  %               12.5  %              40.3  %               34.5  %
Total U.S.                                    73.7  %               73.1  %                 80.2  %               76.3  %              76.5  %               74.6  %

International                                 26.3  %               26.9  %                 19.8  %               23.7  %              23.5  %               25.4  %
Total                                        100.0  %              100.0  %                100.0  %              100.0  %             100.0  %              100.0  %


Sales to we government customers understand sales to DoD, intelligence and civilian agencies, as well as sales directly to or through contractors.

Domestic sales include sales to commercial customers, as well as to U.S. state
and local governments. Except for the U.S. government, there were no customers
that represented more than 10.0% of consolidated net sales for fiscal 2020 and
2019.

International sales for fiscal 2020 and 2019 (which include sales to U.S.
domestic companies for inclusion in products that are sold to international
customers) were $145.1 million and $170.6 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 2020 and 2019.

Gross Profit. Gross profit was $226.8 million and $247.4 million for fiscal 2020
and 2019, respectively. The decrease of $20.6 million primarily reflects the
decline in consolidated net sales, as discussed above.

The gross margin, as a percentage of consolidated net sales, for fiscal 2020 and 2019 was 36.8%. Our gross margin for fiscal 2020 reflects minor cost increases due to a lower level of plant utilization and higher logistics and operational costs resulting from COVID-19. The gross margin, as a percentage of the related segment’s net sales, is discussed in more detail below.

Our Commercial Solutions segment's gross profit, as a percentage of related
segment net sales, for fiscal 2020 decreased in comparison to fiscal 2019. The
decrease in gross profit percentage in fiscal 2020 primarily reflects changes in
products and services mix, primarily lower net sales of our satellite ground
station technologies.

Our Government Solutions segment's gross profit, as a percentage of related
segment net sales, for fiscal 2020 increased slightly in comparison to fiscal
2019. The slight increase in gross profit percentage primarily reflects a more
favorable mix of mission-critical technology solutions, despite lower fiscal
2020 sales of such solutions.

Included in consolidated cost of sales for fiscal 2020 and 2019 are provisions
for excess and obsolete inventory of $1.6 million and $6.0 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.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $117.1 million and $128.6 million for fiscal 2020
and 2019, respectively, representing a decrease of $11.5 million, or 8.9%. As a
percentage of consolidated net sales, selling, general and administrative
expenses were 19.0% and 19.1% for fiscal 2020 and 2019, respectively.


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Our selling, general and administrative expenses in fiscal 2020 reflect certain
cost reduction actions taken in response to lower levels of business activity
resulting from COVID-19. These cost savings measures included reducing global
headcount, temporarily reducing salaries, suspending merit increases and
eliminating certain discretionary expenses. Severance costs related to these
actions were not material. Although we incurred lower travel expenses in fiscal
2020 than we did in fiscal 2019, there was a corresponding increase in
information technology costs and COVID-19 safety related expenses.

In fiscal 2020, we incurred estimated contract settlement costs of $0.4 million
related to the repositioning of our location technologies solutions offerings in
our Commercial Solutions segment. In fiscal 2019, we incurred $6.4 million of
such costs and also incurred $1.4 million of facility exit costs in our
Government Solutions segment. Excluding all of these costs in both periods, our
selling, general and administrative expenses would have been $116.7 million, or
18.9% of consolidated net sales for fiscal 2020 and $120.8 million, or 18.0% of
consolidated net sales for fiscal 2019.

Amortization of stock-based compensation expenses recorded as selling, general
and administrative expenses was $7.5 million in fiscal 2020 as compared to $9.3
million in fiscal 2019. This year-over-year decrease largely occurred due to the
temporary suspension of stock-based awards for certain employees to reduce
expenses as a response to COVID-19. Amortization of stock-based compensation is
not allocated to our two reportable operating segments.

Research and Development Expenses. Research and development expenses were $52.2
million and $56.4 million for fiscal 2020 and 2019, respectively, representing a
decrease of $4.2 million, or 7.4%. As a percentage of consolidated net sales,
research and development expenses were 8.5% and 8.4% for fiscal 2020 and 2019,
respectively.

For fiscal 2020 and 2019, research and development expenses of $45.2 million and
$48.2 million, respectively, related to our Commercial Solutions segment, and
$6.1 million and $7.2 million, respectively, related to our Government Solutions
segment. The remaining research and development expenses of $0.9 million and
$1.0 million in fiscal 2020 and 2019, respectively, related to the amortization
of stock-based compensation expense.

Whenever possible, we seek customer funding for research and development to
adapt our products to specialized customer requirements. During fiscal 2020 and
2019, customers reimbursed us $11.9 million and $14.7 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 $21.6 million (of which $17.3 million was for the Commercial
Solutions segment and $4.3 million was for the Government Solutions segment) for
fiscal 2020 and $18.3 million (of which $14.9 million was for the Commercial
Solutions segment and $3.4 million was for the Government Solutions segment) for
fiscal 2019. The increase of $3.3 million was primarily due to our 2019
acquisitions of Solacom and the GD NG-911 business and our 2020 acquisition of
CGC.

Settlement of Intellectual Property Litigation. In fiscal 2019, we recorded a
$3.2 million benefit in our Unallocated segment as a result of a favorable
ruling issued by the U.S. Court of Appeals for the Federal Circuit related to a
legacy TCS intellectual property matter. There was no comparable adjustment in
fiscal 2020.

Acquisition Plan Expenses. During fiscal 2020, we incurred acquisition plan
expenses of $20.8 million, primarily related to the now terminated acquisition
of Gilat (including significant litigation expenses) and our acquisition of UHP,
which was completed in March 2021. Fiscal 2020 acquisition plan expenses also
include costs associated with our completed acquisitions of CGC and NG-911. In
fiscal 2019, our acquisition plan expenses of $5.9 million primarily related to
our acquisitions of Solacom and the GD NG-911 business. Except for $0.8 million
of fiscal 2020 costs which are reflected in our Commercial Solutions segment,
all of these expenses are primarily recorded in our Unallocated segment.


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Operating Income. Operating income for fiscal 2020 was $15.2 million as compared
$41.4 million for fiscal 2019. Operating income by reportable segment is shown
in the table below:
                                                                                               Fiscal Years Ended July 31,
                                          2020                   2019               2020                   2019             2020             2019            2020            2019
       ($ in millions)                      Commercial Solutions                      Government Solutions                       Unallocated                     Consolidated
Operating income (loss)              $     34.8                $ 36.1          $     20.0                $ 29.0          $ (39.6)         $ (23.6)         $ 15.2          $ 41.4
Percentage of related
net sales                                   9.8   %              10.1  %              7.6   %               9.2  %               NA               NA          2.5  %          6.2  %



The Commercial Solutions segment's operating income for fiscal 2020 and fiscal
2019 reflects $0.4 million and $6.4 million of estimated contract settlement
costs, as discussed above. The segment's operating income for fiscal 2020 also
reflects $0.8 million of the total acquisition plan expenses, as discussed
above. Excluding such charges, operating income in our Commercial Solutions
segment would have been $36.0 million, or 10.2% of related segment net sales for
fiscal 2020, and $42.5 million, or 11.9% of related segment net sales for fiscal
2019. The decrease in operating income, both in dollars and as a percentage of
related segment net sales, was driven primarily by lower net sales and a lower
gross profit percentage and increased amortization of intangibles, as discussed
above.

The Government Solutions segment's operating income for fiscal 2019 included
$1.4 million of facility exit costs, as discussed above. Excluding such facility
exist costs, operating income in our Government Solutions segment for fiscal
2019 would have been $30.4 million, or 9.7% of related segment net sales as
compared to fiscal 2020 operating income of $20.0 million, or 7.6% of related
segment net sales. The decrease in our Government Solutions segment's operating
income, both in dollars and as a percentage of related segment net sales, in
fiscal 2020 was driven primarily by lower net sales and increased amortization
of intangibles, as discussed above.

The increase in unallocated expenses in fiscal 2020 as compared to fiscal 2019
is primarily due to higher acquisition plan expenses and the absence of the $3.2
million benefit related to the fiscal 2019 favorable ruling issued by the U.S.
Court of Appeals for the Federal Circuit for a legacy TCS intellectual property
matter, as discussed above. Amortization of stock-based compensation was $9.3
million and $11.4 million, respectively, for fiscal 2020 and 2019.

Excluding the $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. Excluding
net costs of $10.5 million, consisting of $6.4 million of estimated contract
settlement costs, $1.4 million of facility exit costs, $5.9 million of
acquisition plan expenses and a $3.2 million benefit related to a legacy TCS
intellectual property matter (all of which are discussed above), consolidated
operating income for fiscal 2019 would have been $51.8 million, or 7.7% of
consolidated net sales. The decrease in dollars, and as a percentage of
consolidated net sales, was due primarily to lower consolidated net sales and
increased amortization of intangibles, as discussed above.

Interest Expense and Other. Interest expense was $6.1 million and $9.2 million
for fiscal 2020 and 2019, respectively. The decrease is attributable to lower
interest rates and lower outstanding indebtedness under our existing Credit
Facility. Our effective interest rate (including amortization of deferred
financing costs) in fiscal 2020 was approximately 3.9%.

Write-off of Deferred Financing Costs. In connection with the establishment of a
new Credit Facility in fiscal 2019, we wrote-off $3.2 million of deferred
financing costs which primarily related to the term loan portion of our prior
credit facility. There was no comparable charge in fiscal 2020.

Interest (income) and others. Interest (income) and others for fiscal years 2020 and 2019 were nominal.

Provision for Income Taxes. The provision for income taxes for fiscal 2020 and
2019 was $2.3 million and $3.9 million, respectively. Our effective tax rate
(excluding discrete tax items) for fiscal 2020 and 2019 was 37.0% and 23.25%,
respectively. The increase from 23.25% to 37.0% is primarily due to the decrease
in fiscal 2020 consolidated net sales.

In fiscal 2020, we recorded a separate net tax benefit of $ 1.2 million, mainly related to the finalization of certain tax accounts in connection with the filing of our federal and state income tax returns for fiscal 2019. These benefits were offset, in part, by (i) the revaluation of certain deferred taxes foreigners resulting from the adoption of a law that increased the tax rate UK from 17.0% to 19.0% and (ii) the settlement of certain share-based awards during fiscal year 2020.

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In fiscal 2019, we recorded a separate net tax benefit of $ 2.9 million, mainly related to: (i) the favorable resolution of the IRS ‘ audit of our federal income tax return for fiscal 2016; (ii) separate tax benefits for share-based awards that were settled during fiscal year 2019; and (iii) the reversal of tax contingencies which are no longer necessary due to the expiration of the applicable limitation periods.

Net revenue. During fiscal year 2020, the consolidated net income was $ 7.0 million compared to $ 25.0 million during the 2019 financial year.

Adjusted EBITDA. Adjusted EBITDA (both in dollars and as a percentage of related
net sales) for both fiscal 2020 and 2019 are shown in the table below (numbers
in the table may not foot due to rounding):
                                                                                             Fiscal Years Ended July 31,
                                       2020                2019                2020                 2019               2020              2019             2020              2019
($ in millions)                         Commercial Solutions                     Government Solutions                       Unallocated                        Consolidated
Net income (loss)                 $     34.4                35.9                  20.2               29.0            (47.6)             (39.9)         $   7.0               25.0
Provision for (benefit
from) income taxes                       0.4                   -                  (0.1)                 -              2.0                3.9              2.3                3.9
Interest (income) and other                -                 0.1                  (0.2)                 -                -                  -             (0.2)                 -
Write-off of deferred
financing costs                            -                   -                     -                  -                -                3.2                -                3.2
Interest expense                           -                 0.1                     -                  -              6.0                9.2              6.1                9.2
Amortization of stock-based
compensation                               -                   -                     -                  -              9.3               11.4              9.3               11.4
Amortization of intangibles             17.3                14.9                   4.3                3.4                -                  -             21.6               18.3
Depreciation                             8.3                 9.3                   1.4                1.9              0.8                0.8             10.6               11.9
Estimated contract
settlement costs                         0.4                 6.4                     -                  -                -                  -              0.4                6.4
Settlement of intellectual
property litigation                        -                   -                     -                  -                -               (3.2)               -               (3.2)
Acquisition plan expenses                0.8                   -                     -                  -             20.0                5.9             20.8                5.9
Facility exit costs                        -                   -           
         -                1.4                -                  -                -                1.4
Adjusted EBITDA                   $     61.7                66.6                  25.7               35.6             (9.6)              (8.8)         $  77.8               93.5
Percentage of related net
sales                                   17.4   %            18.6  %                9.8  %            11.3  %                 NA               NA          12.6  %            13.9  %


The decrease in Consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for fiscal 2020 compared to fiscal 2019 is mainly attributable to the decrease in consolidated net sales, as discussed above.

The decrease in Adjusted EBITDA for our Business Solutions segment, both in dollars and as a percentage of related segment net sales, is due to lower net sales and a lower gross margin percentage, as noted above.

The decrease in Adjusted EBITDA for our Government Solutions segment, both in dollars and as a percentage of net sales from related segments, is mainly due to lower net sales, as noted above.

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Reconciliations of our GAAP consolidated operating income, net income and net
income per diluted share for fiscal 2020 and 2019 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 EPS 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:
                                                                                           Fiscal 2020
                                                                                                                    Net Income per
($ in millions, except for per share amount)                   Operating Income             Net Income              Diluted Share
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

  Acquisition plan expenses                                               20.8                      13.1                     0.53

  Net discrete tax benefit                                                   -                      (1.2)                   (0.05)
Non-GAAP measures                                                       $ 36.4                    $ 19.2                   $ 0.77

                                                                                           Fiscal 2019
                                                                                                                    Net Income per
($ in millions, except for per share amount)                   Operating Income             Net Income              Diluted Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported                                              $ 41.4                    $ 25.0                   $ 1.03
  Estimated contract settlement costs                                      6.4                       4.9                     0.20
  Settlement of intellectual property litigation                          (3.2)                     (2.5)                   (0.10)
  Facility exit costs                                                      1.4                       1.1                     0.04
  Acquisition plan expenses                                                5.9                       4.5                     0.19
  Write-off of deferred financing costs                                      -                       2.5                     0.10
  Net discrete tax benefit                                                   -                      (2.9)                   (0.12)
Non-GAAP measures                                                       $ 51.8                    $ 32.6                   $ 1.34



Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before
income taxes, interest (income) and other, write-off of deferred financing
costs, interest expense, amortization of stock-based compensation, amortization
of intangibles, depreciation expense, 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, strategic
alternatives analysis expenses, proxy solicitation related costs 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 for consolidated
operating income, net income and net income per diluted share reflect the GAAP
measures as reported, adjusted for certain items as described. 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 above tables, 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.

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Liquidity and capital resources

Our cash and cash equivalents were $30.9 million at July 31, 2021 as compared to
$47.9 million at July 31, 2020, a decrease of $17.0 million. The decrease in
cash and cash equivalents during fiscal 2021 was driven by the following:

•Net cash used in operating activities was $40.6 million for fiscal 2021 as
compared to net cash provided by operating activities of $52.8 million for
fiscal 2020. 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. The period-over-period decrease in cash flow from operating activities
(excluding the $70.0 million payment to Gilat) reflects lower consolidated net
sales and overall changes in net working capital requirements, principally the
timing of shipments, billings and payments.

•Net cash used in investing activities for fiscal 2021 was $15.5 million as
compared to $20.2 million for fiscal 2020. During fiscal 2021, we paid $0.8
million in connection with our acquisition of CGC Technology Limited ("CGC").
During fiscal 2020, we paid $13.0 million in connection with our acquisitions of
CGC and NG-911, net of cash acquired. The remaining portion of net cash used in
both periods relates to expenditures for property, plant and equipment upgrades
and enhancements. Also, offsetting cash used during the most recent period is
$1.3 million of net cash acquired from our acquisition of UHP, as discussed
further 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 Annual Report on Form 10-K.

•Net cash provided by financing activities was $39.1 million for fiscal 2021 as
compared to net cash used in financing activities of $30.3 million for fiscal
2020. During fiscal 2021, we had net borrowings under our Credit Facility of
$51.5 million, primarily due to the $70.0 million payment we made to Gilat.
During fiscal 2021 and 2020, we paid $10.3 million and $10.0 million,
respectively, in cash dividends to our stockholders. We also made $2.8 million
and $5.3 million of payments to remit employees' statutory tax withholding
requirements related to the net settlement of stock-based awards during the
fiscal 2021 and 2020, 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 Annual Report on
Form 10-K.

Our investment policy relating to our cash and cash equivalents is intended to
minimize principal loss while at the same time maximize the income we receive
without significantly increasing risk. To minimize risk, we generally invest our
cash and cash equivalents in money market mutual funds (both government and
commercial), certificates of deposit, bank deposits, and U.S. Treasury
securities. 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.

As of July 31, 2021, our material short-term cash requirements primarily consist
of: (i) capital investments and tenant improvements in connection with the
opening of our two new high-volume technology manufacturing centers, (ii)
interest payments under our Credit Facility; (iii) payments related to lease
commitments; (iv) our ongoing working capital needs, including income tax
payments and other capital expenditures; and (v) payment of accrued quarterly
dividends.

In addition to making fiscal 2022 capital investments for our two new
high-volume manufacturing centers, we plan to make significant capital
expenditures to build-out cloud-based computer networks to support our NG-911
contract wins for the states of Pennsylvania, South Carolina and Arizona.
Aggregate capital investments for these and other initiatives in fiscal 2022 are
expected to approximate $30.0 million.



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As discussed further 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 Annual Report on Form 10-K,
we completed our acquisition of UHP on March 2, 2021. Pursuant to the stock
purchase agreement, the initial upfront payment of approximately $24.0 million
was paid mostly in shares of our common stock, with a nominal amount paid in
cash. In August 2021, approximately $4.0 million of the $5.0 million hold back
amount previously placed into escrow at closing, was paid to the seller in
shares of our common stock, as the conditions pursuant to the stock purchase
agreement were met. The stock purchase agreement also provides for an earn-out
payment of up to $9.0 million, also payable at our option in cash and or shares
of our common stock, if specified sales milestones are reached during the
eighteen-month period ending September 30, 2022.

On March 3, 2021, we filed a shelf registration statement with the SEC for the
sale of 1,381,567 shares of our common stock by the selling shareholder of UHP.
The shelf registration statement was declared effective by the SEC as of March
15, 2021. To-date, we issued 1,026,567 shares pursuant to this shelf
registration statement to satisfy initial payment and escrow arrangements under
the terms of the stock purchase agreement.

In December 2018, we filed a $400.0 million shelf registration statement with
the SEC for the sale of various types of securities, including debt. The shelf
registration statement was declared effective by the SEC as of December 14,
2018.

As of July 31, 2021, we were authorized to repurchase up to an additional $100.0
million of our common stock, pursuant to a $100.0 million stock repurchase
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
2021 and 2020.

On September 29, 2020, December 9, 2020, March 11, 2021 and June 8, 2021, our
Board of Directors declared a dividend of $0.10 per common share, which was paid
on October 27, 2020, February 19, 2021, May 21, 2021 and August 20, 2021,
respectively.

At October 4, 2021, our board of directors declared a dividend of $ 0.10 per common share, payable on November 12, 2021 to shareholders of record at the close of business on October 13, 2021. Future dividends on common shares remain subject to compliance with financial covenants under our credit facility, as well as approval by the Board of Directors.

Our significant long-term cash requirements consist primarily of mandatory interest payments in accordance with our credit facility and lease commitments.

We have historically met both our short-term and long-term cash requirements
with funds provided by a combination of cash and cash equivalent balances, cash
generated from operating activities and cash generated from financing
transactions. Based on our anticipated level of future sales and operating
income, 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 both our currently anticipated
short-term and long-term operating cash requirements.

Although it is difficult to predict the terms and conditions of financing that
may be available in the future, should our short-term or long-term cash
requirements increase beyond our current expectations, 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 activated October 31, 2018, we entered into a first amended and restated credit agreement (the “Credit Facility”) with a syndicate of lenders.

The Credit Facility provides a senior secured loan facility of up to $550.0
million consisting of: (i) a revolving loan facility ("Revolving Loan Facility")
with a borrowing limit of $300.0 million; (ii) an accordion feature allowing us
to borrow up to an additional $250.0 million; (iii) a $35.0 million letter of
credit sublimit; and (iv) a swingline loan credit sublimit of $25.0 million.

The Credit Facility matures on October 31, 2023 (the "Revolving Maturity Date").
If we issue new unsecured debt in excess of $5.0 million with a maturity date
that is less than 91 days from October 31, 2023, the Revolving Maturity Date
would automatically accelerate so that it would be 91 days earlier than the
maturity date of the new unsecured debt.


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As of July 31, 2021, the amount outstanding under our Credit Facility was $201.0
million, which is reflected in the non-current portion of long-term debt on our
Consolidated Balance Sheet. At July 31, 2021, we had $1.5 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 2021, we had outstanding
balances under the Credit Facility ranging from $125.0 million to $219.0
million.

Borrowings under the Credit Facility shall be either: (i) Alternate Base Rate
borrowings, which bear interest from the applicable borrowing date at a rate per
annum equal to (x) the greatest of (a) the Prime Rate (as defined) in effect on
such day, (b) the Federal Funds Effective Rate (as defined) in effect on such
day plus 1/2 of 1.00% per annum and (c) the Adjusted LIBO Rate (as defined) on
such day (or, if such day is not a business day, the immediately preceding
business day) plus 1.00% per annum, plus (y) the Applicable Rate (as defined),
or (ii) Eurodollar borrowings, which bear interest from the applicable borrowing
date at a rate per annum equal to (x) the Adjusted LIBO Rate for such interest
period plus (y) the Applicable Rate. Determination of the Applicable Rate is
based on a pricing grid that is dependent upon our Secured Leverage Ratio (as
defined) as of the end of each fiscal quarter for which consolidated financial
statements have been most recently delivered.

The Credit Facility contains customary representations, warranties and
affirmative covenants. The Credit Facility also contains customary negative
covenants, subject to negotiated exceptions, including but not limited to: (i)
liens, (ii) investments, (iii) indebtedness, (iv) significant corporate changes,
including mergers and acquisitions, (v) dispositions, (vi) restricted payments,
including stockholder dividends, and (vii) certain other restrictive agreements.
The Credit Facility also contains certain financial covenants and customary
events of default (subject to grace periods, as appropriate), such as payment
defaults, cross-defaults to other material indebtedness, bankruptcy and
insolvency, the occurrence of a defined change in control and the failure to
observe the negative covenants and other covenants related to the operation of
our business. In addition, under certain circumstances, we may be required to
enter into amendments to the Credit Facility in connection with any further
syndication of the Credit Facility.

The Credit Facility provides for, among other things: (i) no scheduled payments
of principal until maturity; (ii) a maximum Secured Leverage Ratio of 3.75x
trailing twelve months ("TTM") Adjusted Earnings Before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") and a Maximum Total Leverage
Ratio of 4.50x TTM Adjusted EBITDA, each with no step downs; and (iii) a Minimum
Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA.

As of July 31, 2021, our Secured Leverage Ratio was 2.53x 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, 2021 was 13.05x TTM
Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x
TTM Adjusted EBITDA.

The obligations under the Credit Facility are guaranteed by certain of our
domestic and foreign subsidiaries (the "Guarantors"). As collateral security
under the Credit Facility and the guarantees thereof, we and the Guarantors have
granted to the administrative agent, for the benefit of the lenders, a lien on,
and first priority security interest in, substantially all of our tangible and
intangible assets.

Capitalized terms used but not defined herein have the meanings set forth for
such terms in the Credit Facility and the Prior Credit Facility, which have been
documented and filed with the SEC.

Off-Balance Sheet Arrangements
As of July 31, 2021, we did not have any off-balance sheet arrangements within
the meaning of Item 303 of Regulation S-K.


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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, 2021, will materially adversely affect our
liquidity.

TO July 31, 2021, cash payments due under long-term obligations (including estimated interest expense on our credit facility), excluding purchase orders that we have entered into in the normal course of business, are the following:

Bonds due by year or by maturity date (in thousands)

                                                                                                   2023                2025
                                                                                                    and                 and                After
                                                       Total                   2022                2024                2026                 2026
Credit Facility - principal payments            $         201,000                   -             201,000                   -                   -
Credit Facility - interest payments                        11,537               5,133               6,404                   -                   -
Operating and finance lease obligations                    56,705              10,408              14,689              10,798              20,810
Contractual cash obligations                    $         269,242              15,541             222,093              10,798              20,810



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 Annual Report on Form 10-K, our Credit
Facility provides a senior secured loan facility of up to $550.0 million
consisting of: (i) a revolving loan facility ("Revolving Loan Facility") with a
borrowing limit of $300.0 million; (ii) an accordion feature allowing us to
borrow up to an additional $250.0 million; (iii) a $35.0 million letter of
credit sublimit; and (iv) a swingline loan credit sublimit of $25.0 million. The
Credit Facility matures on October 31, 2023 (the "Revolving Maturity Date"). In
addition, if we issue new unsecured debt in excess of $5.0 million with a
maturity date that is less than 91 days from October 31, 2023, the Revolving
Maturity Date would automatically accelerate so that it would be 91 days earlier
than the maturity date of the new unsecured debt. At July 31, 2021, we have
approximately $1.5 million of standby letters of credit outstanding under our
Credit Facility related to our guarantees of future performance on certain
customer contracts. Such amounts are not included in the above table.

As discussed further in "Notes to Consolidated Financial Statements - Note (15)
- Stockholders' Equity" included in "Part II - Item 8. - Financial Statements
and Supplementary Data," included in this Annual Report on Form 10-K, on
October 4, 2021, our Board of Directors declared a dividend of $0.10 per common
share, payable on November 12, 2021 to stockholders of record at the close of
business on October 13, 2021. Future Common Stock dividends remain subject to
compliance with financial covenants under our Credit Facility, as well as Board
approval.

As discussed further 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 Annual Report on Form 10-K,
we completed our acquisition of UHP on March 2, 2021. Pursuant to the stock
purchase agreement, the initial upfront payment of approximately $24.0 million
was paid mostly in shares of our common stock, with a nominal amount paid in
cash. In August 2021, approximately $4.0 million of the $5.0 million hold back
amount previously placed into escrow at closing, was paid to the seller in
shares of our common stock, as the conditions pursuant to the stock purchase
agreement were met. The stock purchase agreement also provides for an earn-out
payment of up to $9.0 million, also payable at our option in cash and or shares
of our common stock, if specified sales milestones are reached during the
eighteen-month period ending September 30, 2022.

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 in the Comtech legacy business and the unique facts
and circumstances involved in each particular agreement.

As discussed further in "Notes to Consolidated Financial Statements - Note (12)
- Commitments and Contingencies," included in "Part II - Item 8.- Financial
Statements and Supplementary Data," included in this Annual Report on Form 10-K,
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.


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We have change in control agreements, severance agreements and indemnification
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 an
involuntary termination of employment without cause. These costs are not
included in the above table.

Our Consolidated Balance Sheet at July 31, 2021 includes total liabilities of
$9.2 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 positions

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 Annual
Report on Form 10-K, during fiscal 2021, we adopted:

•FASB ASU No. 2016-13, which requires companies to utilize an impairment model
(current expected credit loss ("CECL")) for most financial assets measured at
amortized cost and certain other financial instruments, which include, but are
not limited to trade receivables and contract assets. This accounting standard
replaced the incurred loss model with a model that reflects expected credit
losses and requires consideration of a broader range of reasonable and
supportable information to estimate those losses. On August 1, 2020, we adopted
this ASU on a modified-retrospective basis and recorded a $0.2 million decrease
to opening retained earnings.

•FASB ASU No. 2018-13, which modifies the disclosure requirements for fair value
measurements in Topic 820. On August 1, 2020, we adopted this ASU. Our adoption
of this ASU did not have any impact on our consolidated financial statements or
disclosures.

•FASB ASU No. 2018-15, which aligns the requirements for capitalizing
implementation costs incurred in a hosting arrangement that is a service
contract with the requirements for capitalizing implementation costs incurred to
develop or obtain internal use software (and hosting arrangements that include
an internal use software license). The accounting for the service element of a
hosting arrangement that is a service contract is not affected by the amendments
in this ASU. On August 1, 2020, we adopted this ASU. Our adoption of this ASU
did not have any impact on our consolidated financial statements or disclosures.

•FASB ASU No. 2018-17, which requires entities to consider indirect interests
held through related parties under common control on a proportional basis,
rather than as the equivalent of a direct interest in its entirety, when
determining whether a decision-making fee is a variable interest. On August 1,
2020, we adopted this ASU. Our adoption of this ASU did not have any impact on
our consolidated financial statements or disclosures.

•FASB ASU No. 2018-18, which clarifies when certain transactions between
collaborative arrangement participants should be accounted for under ASC 606 and
incorporates unit-of-account guidance consistent with ASC 606 to aid in this
determination. The ASU also precludes entities from presenting consideration
from transactions with a collaborator that is not a customer together with
revenue recognized from contracts with customers. On August 1, 2020, we adopted
this ASU. Our adoption of this ASU did not have any impact on our consolidated
financial statements or disclosures.

•FASB ASU No. 2019-08, which requires that an entity measure and classify
share-based payment awards granted to a customer by applying the guidance in
Topic 718. The amount recorded as a reduction of the transaction price is
required to be measured on the basis of the grant-date fair value of the
share-based payment award. On August 1, 2020, we adopted this ASU. Our adoption
of this ASU did not have any impact on our consolidated financial statements or
disclosures.


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In addition, the following FASB ASUs have been issued and incorporated into the FASB ASC and have not yet been adopted by us at July 31, 2021:

•FASB ASU No. 2019-12, issued in December 2019 is intended to simplify 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. This ASU is effective for
fiscal years beginning after December 15, 2020. 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, issued in January 2020, 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. This ASU is effective for fiscal years beginning after December
15, 2020. Our adoption of this ASU on August 1, 2021 did not impact our
consolidated financial statements or disclosures.

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