10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended October 31, 2019

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number:    0-7928

(Exact name of registrant as specified in its charter)

Delaware	11-2139466
(State or other jurisdiction of incorporation /organization)	(I.R.S. Employer Identification Number)
68 South Service Road, Suite 230, Melville, NY	11747
(Address of principal executive offices)	(Zip Code)

(631) 962-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $0.10 per share	CMTL	NASDAQ Stock Market LLC
Series A Junior Participating Cumulative Preferred Stock, par value $0.10 per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes              No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes              No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer		Accelerated filer		Emerging growth company
Non-accelerated filer		Smaller reporting company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes              No

As of November 29, 2019, the number of outstanding shares of Common Stock, par value $0.10 per share, of the registrant was 24,389,774 shares.

COMTECH TELECOMMUNICATIONS CORP. INDEX
			Page
PART I. FINANCIAL INFORMATION
	Item 1.	Condensed Consolidated Financial Statements	2
		Condensed Consolidated Balance Sheets - October 31, 2019 and July 31, 2019 (Unaudited)	2
		Condensed Consolidated Statements of Operations - Three Months Ended October 31, 2019 and 2018 (Unaudited)	3
		Condensed Consolidated Statements of Stockholders' Equity - Three Months Ended October 31, 2019 and 2018 (Unaudited)	4
		Condensed Consolidated Statements of Cash Flows - Three Months Ended October 31, 2019 and 2018 (Unaudited)	5
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
	Item 4.	Controls and Procedures	54
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	55
	Item 1A.	Risk Factors	55
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
	Item 4.	Mine Safety Disclosures	55
	Item 6.	Exhibits	55
		Signature Page	56

1

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	October 31, 2019			July 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	46,873,000		45,576,000
Accounts receivable, net	161,044,000			145,032,000
Inventories, net	71,810,000			74,839,000
Prepaid expenses and other current assets	15,995,000			14,867,000
Total current assets	295,722,000			280,314,000
Property, plant and equipment, net	26,873,000			28,026,000
Operating lease right-of-use assets, net	34,148,000			—
Finance lease right-of-use assets, net	447,000			—
Goodwill	309,871,000			310,489,000
Intangibles with finite lives, net	256,684,000			261,890,000
Deferred financing costs, net	2,943,000			3,128,000
Other assets, net	4,334,000			3,864,000
Total assets	$	931,022,000		887,711,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	29,380,000		24,330,000
Accrued expenses and other current liabilities	72,807,000			78,584,000
Operating lease liabilities, current	9,248,000			—
Finance lease and other obligations, current	567,000			757,000
Dividends payable	2,428,000			2,406,000
Contract liabilities	36,989,000			38,682,000
Interest payable	447,000			588,000
Total current liabilities	151,866,000			145,347,000
Non-current portion of long-term debt	169,000,000			165,000,000
Operating lease liabilities, non-current	27,725,000			—
Income taxes payable	2,298,000			325,000
Deferred tax liability, net	13,768,000			12,481,000
Long-term contract liabilities	11,457,000			10,654,000
Other liabilities	17,264,000			18,822,000
Total liabilities	393,378,000			352,629,000
Commitments and contingencies (See Note 19)
Stockholders’ equity:
Preferred stock, par value $0.10 per share; shares authorized and unissued 2,000,000	—			—
Common stock, par value $0.10 per share; authorized 100,000,000 shares; issued 39,402,226 shares and 39,276,161 shares at October 31, 2019 and July 31, 2019, respectively	3,940,000			3,928,000
Additional paid-in capital	551,316,000			552,670,000
Retained earnings	424,237,000			420,333,000
	979,493,000			976,931,000
Less:
Treasury stock, at cost (15,033,317 shares at October 31, 2019 and July 31, 2019)	(441,849,000		)	(441,849,000	)
Total stockholders’ equity	537,644,000			535,082,000
Total liabilities and stockholders’ equity	$	931,022,000		887,711,000

See accompanying notes to condensed consolidated financial statements.

2

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended October 31,
	2019			2018
Net sales	$	170,267,000		160,844,000
Cost of sales	106,700,000			103,075,000
Gross profit	63,567,000			57,769,000
Expenses:
Selling, general and administrative	31,851,000			31,847,000
Research and development	14,861,000			13,210,000
Amortization of intangibles	5,206,000			4,289,000
Acquisition plan expenses	2,389,000			1,130,000
	54,307,000			50,476,000
Operating income	9,260,000			7,293,000
Other expenses:
Interest expense	1,804,000			2,669,000
Write-off of deferred financing costs	—			3,217,000
Interest (income) and other	(77,000		)	66,000
Income before provision for (benefit from) income taxes	7,533,000			1,341,000
Provision for (benefit from) income taxes	1,145,000			(2,127,000	)
Net income	$	6,388,000		3,468,000
Net income per share (See Note 6):
Basic	$	0.26		0.14
Diluted	$	0.26		0.14
Weighted average number of common shares outstanding – basic	24,555,000			23,999,000
Weighted average number of common and common equivalent shares outstanding – diluted	24,737,000			24,375,000

See accompanying notes to condensed consolidated financial statements.

3

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

THREE MONTHS ENDED OCTOBER 31, 2019 AND 2018

(Unaudited)

	Common Stock			Additional Paid-in Capital			Retained Earnings			Treasury Stock				Stockholders' Equity
	Shares	Amount								Shares	Amount
Balance as of July 31, 2018	38,860,571	$	3,886,000	$	538,453,000		$	405,194,000		15,033,317	$	(441,849,000	)	$	505,684,000
Equity-classified stock award compensation	—	—		1,046,000			—			—	—			1,046,000
Proceeds from exercises of stock options	6,100	1,000		173,000			—			—	—			174,000
Proceeds from issuance of employee stock purchase plan shares	8,861	1,000		240,000			—			—	—			241,000
Issuance of restricted stock	10,386	1,000		(1,000		)	—			—	—			—
Net settlement of stock-based awards	52,926	5,000		(2,059,000		)	—			—	—			(2,054,000		)
Cash dividends declared ($0.10 per share)	—	—		—			(2,381,000		)	—	—			(2,381,000		)
Accrual of dividend equivalents, net of reversal ($0.10 per share)	—	—		—			(82,000		)	—	—			(82,000		)
Net income	—	—		—			3,468,000			—	—			3,468,000
Balance as of October 31, 2018	38,938,844	$	3,894,000	$	537,852,000		$	406,199,000		15,033,317	$	(441,849,000	)	$	506,096,000
Balance as of July 31, 2019	39,276,161	$	3,928,000	$	552,670,000		$	420,333,000		15,033,317	$	(441,849,000	)	$	535,082,000
Equity-classified stock award compensation	—	—		879,000			—			—	—			879,000
Proceeds from exercises of stock options	10,600	1,000		305,000			—			—	—			306,000
Proceeds from issuance of employee stock purchase plan shares	10,135	1,000		245,000			—			—	—			246,000
Issuance of restricted stock	21,510	2,000		(2,000		)	—			—	—			—
Net settlement of stock-based awards	83,820	8,000		(2,781,000		)	—			—	—			(2,773,000		)
Cash dividends declared ($0.10 per share)	—	—		—			(2,428,000		)	—	—			(2,428,000		)
Accrual of dividend equivalents, net of reversal ($0.10 per share)	—	—		—			(56,000		)	—	—			(56,000		)
Net income	—	—		—			6,388,000			—	—			6,388,000
Balance as of October 31, 2019	39,402,226	$	3,940,000	$	551,316,000		$	424,237,000		15,033,317	$	(441,849,000	)	$	537,644,000

See accompanying notes to condensed consolidated financial statements.

4

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Three months ended October 31,
	2019			2018
Cash flows from operating activities:
Net income	$	6,388,000		3,468,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property, plant and equipment	2,651,000			2,851,000
Amortization of intangible assets with finite lives	5,206,000			4,289,000
Amortization of stock-based compensation	879,000			1,046,000
Amortization of deferred financing costs	185,000			548,000
Estimated contract settlement costs	230,000			—
Write-off of deferred financing costs	—			3,217,000
Changes in other liabilities	(1,033,000		)	—
(Gain) loss on disposal of property, plant and equipment	(3,000		)	32,000
Benefit from allowance for doubtful accounts	(343,000		)	(7,000	)
Provision for excess and obsolete inventory	373,000			747,000
Deferred income tax expense	2,286,000			2,273,000
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable	(15,947,000		)	(12,267,000	)
Inventories	2,656,000			(15,240,000	)
Prepaid expenses and other current assets	930,000			3,054,000
Other assets	(44,000		)	64,000
Accounts payable	4,299,000			(9,180,000	)
Accrued expenses and other current liabilities	(1,095,000		)	8,526,000
Contract liabilities	(822,000		)	(2,947,000	)
Other liabilities, non-current	3,000			275,000
Interest payable	(133,000		)	(455,000	)
Income taxes payable	(1,221,000		)	(4,424,000	)
Net cash provided by (used in) operating activities	5,445,000			(14,130,000	)
Cash flows from investing activities:
Purchases of property, plant and equipment	(1,250,000		)	(1,645,000	)
Net cash used in investing activities	(1,250,000		)	(1,645,000	)
Cash flows from financing activities:
Net borrowings of long-term debt under Credit Facility	4,000,000			193,400,000
Net payments under Revolving Loan portion of Prior Credit Facility	—			(48,603,000	)
Repayment of debt under Term Loan portion of Prior Credit Facility	—			(120,121,000	)
Remittance of employees' statutory tax withholdings for stock awards	(4,560,000		)	(5,017,000	)
Cash dividends paid	(2,692,000		)	(2,615,000	)
Payment of deferred financing costs	—			(1,771,000	)
Repayment of principal amounts under finance lease and other obligations	(198,000		)	(454,000	)
Proceeds from issuance of employee stock purchase plan shares	246,000			241,000
Proceeds from exercises of stock options	306,000			174,000
Net cash (used in) provided by financing activities	(2,898,000		)	15,234,000
Net increase (decrease) in cash and cash equivalents	1,297,000			(541,000	)
Cash and cash equivalents at beginning of period	45,576,000			43,484,000
Cash and cash equivalents at end of period	$	46,873,000		42,943,000
See accompanying notes to condensed consolidated financial statements. (Continued)

5

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited)
	Three months ended October 31,
	2019		2018
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest	$	1,701,000	2,470,000
Income taxes, net	$	79,000	25,000
Non-cash investing and financing activities:
Reclass of finance lease right-of-use assets to property, plant and equipment	$	295,000	—
Cash dividends declared but unpaid (including dividend equivalents)	$	2,484,000	2,463,000
Accrued additions to property, plant and equipment	$	692,000	795,000
Accrued deferred financing costs	$	—	41,000

See accompanying notes to condensed consolidated financial statements.

6

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)    General

The accompanying condensed consolidated financial statements of Comtech Telecommunications Corp. and its subsidiaries ("Comtech," "we," "us," or "our") as of and for the three months ended October 31, 2019 and 2018 are unaudited. In the opinion of management, the information furnished reflects all material adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the unaudited interim periods. Our results of operations for such periods are not necessarily indicative of the results of operations to be expected for the full fiscal year.

The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the condensed consolidated financial statements, and the reported amounts of net sales and expenses during the reported period. Actual results may differ from those estimates.

Our condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements, filed with the Securities and Exchange Commission ("SEC"), for the fiscal year ended July 31, 2019 and the notes thereto contained in our Annual Report on Form 10-K, and all of our other filings with the SEC.

As disclosed in more detail in Note (15) -"Segment Information," we manage our business in two reportable segments: Commercial Solutions and Government Solutions.

(2)    Acquisitions

Solacom Technologies Inc.

On February 28, 2019, we completed our acquisition of Solacom Technologies Inc. ("Solacom"), pursuant to the Arrangement Agreement, dated as of January 7, 2019, by and among Solacom, Comtech and Solar Acquisition Corp., a Canadian corporation and a direct, wholly-owned subsidiary of Comtech. Solacom is a leading provider of Next Generation 911 ("NG-911") solutions for public safety agencies. The acquisition of Solacom was a significant step in our strategy of enhancing our public safety and location technologies.

The acquisition has an aggregate purchase price for accounting purposes of $32,934,000, of which $27,328,000 was settled in cash and $5,606,000 was settled with the issuance of 208,669 shares of Comtech’s common stock at a volume weighted average stock price of $26.86. The fair value of consideration transferred in connection with this acquisition was $31,489,000, which was net of $1,445,000 of cash acquired. The cash portion of the purchase price was funded principally through borrowings under our Credit Facility.

We are accounting for the acquisition of Solacom under the acquisition method of accounting in accordance with FASB ASC 805, "Business Combinations" ("ASC 805"). The purchase price was allocated to the assets acquired and liabilities assumed, based on their fair value as of February 28, 2019, pursuant to the business combination accounting rules. Acquisition plan expenses were not included as a component of consideration transferred and were expensed in the period incurred. Pro forma financial information is not disclosed, as the acquisition is not material.

7

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The following table summarizes the fair value of the assets acquired and liabilities assumed in connection with the Solacom acquisition:

	Purchase Price Allocation (1)			Measurement Period Adjustments		Purchase Price Allocation (as adjusted)
Settled in cash	$	27,328,000		—		$	27,328,000
Settled in common stock issued by Comtech	5,606,000			—		5,606,000
Aggregate purchase price at fair value	$	32,934,000		—		$	32,934,000
Allocation of aggregate purchase price:
Cash and cash equivalents	$	1,445,000		—		$	1,445,000
Current assets	9,896,000			1,000		9,897,000
Property, plant and equipment	777,000			—		777,000
Deferred tax assets	5,059,000			419,000		5,478,000
Accrued warranty obligations	(1,431,000		)	—		(1,431,000		)
Current liabilities	(4,477,000		)	—		(4,477,000		)
Contract liabilities, non-current	(1,604,000		)	—		(1,604,000		)
Net tangible assets at fair value	$	9,665,000		420,000		$	10,085,000
Identifiable intangibles, deferred taxes and goodwill:									Estimated Useful Lives
Technology	$	6,779,000		—		$	6,779,000		10 years
Customer relationships	7,007,000			—		7,007,000			20 years
Trade name	1,828,000			—		1,828,000			20 years
Deferred tax liabilities	(4,153,000		)	—		(4,153,000		)
Goodwill	11,808,000			(420,000	)	11,388,000			Indefinite
Allocation of aggregate purchase price	$	32,934,000		—		$	32,934,000

⁽¹⁾ As reported in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2019.

The acquired identifiable intangible assets are being amortized on a straight-line basis, which we believe approximates the pattern in which the assets are utilized over their estimated useful lives. The fair value of customer relationships was estimated primarily based on the value of the discounted cash flows that the related intangible asset could be expected to generate in the future. The fair value of technology and trade name was estimated based on the discounted capitalization of royalty expense saved because we now own the assets. Among the factors contributing to the recognition of goodwill, as a component of the purchase price allocation, were synergies in products and technologies and the addition of a skilled, assembled workforce. This goodwill has been assigned to our Commercial Solutions segment based on specific identification and is generally not deductible for income tax purposes.

GD NG-911 Business

On April 29, 2019, we completed the acquisition of a state and local government NG-911 business pursuant to the Asset Purchase Agreement, dated as of April 29, 2019, by and among General Dynamics Information Technology, Inc., Comtech and Comtech NextGen LLC, a Delaware limited liability company and indirect, wholly-owned subsidiary of Comtech. The acquisition of this NG-911 business from GD (the "GD NG-911 business") has a preliminary cash purchase price of $10,000,000 (which is subject to a net working capital adjustment). In connection with this acquisition, we also announced an award of a five-year contract to develop, implement and operate a NG-911 emergency communications system for a Northeastern state. Immediately after our announcement of this acquisition, we hired approximately sixty GD NG-911 employees and completed the integration of this business into our Commercial Solutions segment’s public safety and location technologies product line. The acquisition, contract award and hiring of talented employees are expected to strengthen Comtech’s position in the growing NG-911 solutions market.

8

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

We are accounting for the acquisition of this business under the acquisition method of accounting in accordance with FASB ASC 805. The purchase price, which is subject to a pending closing date balance sheet adjustment process under the purchase agreement, was allocated to the assets acquired and liabilities assumed, based on their preliminary fair value as of April 29, 2019, pursuant to the business combination accounting rules. Acquisition plan expenses were not included as a component of consideration transferred and were expensed in the period incurred. Pro forma financial information is not disclosed, as the acquisition is not material.

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed in connection with the acquisition of the GD NG-911 business:

	Purchase Price Allocation (1)			Measurement Period Adjustments		Purchase Price Allocation (as adjusted)
Aggregate purchase price at fair value	$	10,000,000		—		$	10,000,000
Allocation of aggregate purchase price:
Current assets	$	4,460,000		180,000		$	4,640,000
Property, plant and equipment	646,000			—		646,000
Deferred tax assets	3,426,000			(50,000	)	3,376,000
Accrued warranty obligations	(5,000,000		)	—		(5,000,000		)
Current liabilities	(3,162,000		)	68,000		(3,094,000		)
Net tangible assets at preliminary fair value	$	370,000		198,000		$	568,000
Identifiable intangibles, deferred taxes and goodwill:									Estimated Useful Lives
Customer relationships	$	20,300,000		—		$	20,300,000		10 years
Technology	3,500,000			—		3,500,000			15 years
Other liabilities	(21,700,000		)	—		(21,700,000		)
Deferred tax liabilities	(518,000		)	—		(518,000		)
Goodwill	8,048,000			(198,000	)	7,850,000			Indefinite
Allocation of aggregate purchase price	$	10,000,000		—		$	10,000,000

⁽¹⁾ As reported in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2019.

The acquired identifiable intangible assets are being amortized on a straight-line basis, which we believe approximates the pattern in which the assets are utilized over their estimated useful lives. The fair value of customer relationships was estimated based on the value of the discounted cash flows that the related intangible asset could be expected to generate in the future. The fair value of technology was estimated based on the discounted capitalization of royalty expense saved because we now own the assets. The preliminary fair value of other liabilities was based on the difference in discounted cash flows related to remaining performance obligations under a certain acquired contract as compared to current market terms for similar arrangements that a market participant would expect. Other liabilities will be credited against cost of sales over the remaining performance of the contract, which was 5.25 years as of the acquisition date.

Among the factors contributing to the recognition of goodwill, as a component of the purchase price allocation, were synergies in solution offerings and the addition of a skilled, assembled workforce. We currently estimate that approximately $7,100,000 of goodwill resulting from the acquisition will be tax deductible. This goodwill has been assigned to our Commercial Solutions segment based on specific identification.

We are currently finalizing a net working capital adjustment, pursuant to the terms of the purchase agreement. In August 2019, the seller proposed and requested an approximate $2,900,000 upward adjustment to the preliminary purchase price. We do not agree with their proposed adjustment and believe that we are entitled to a reduction of approximately $1,000,000 to the preliminary purchase price. As the parties could not reach an agreement during the stipulated period of time, the matter is now in arbitration.

9

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The allocation of the preliminary purchase price shown in the above table was based on a valuation and estimates and assumptions that are subject to change within the purchase price allocation period (generally one year from the acquisition date). The primary areas of the purchase price allocation not yet finalized include the purchase price (due to a pending closing date balance sheet adjustment process under the purchase agreement) and residual goodwill.

Subsequent Event

On November 14, 2019, we entered into an agreement to acquire UHP Networks Inc. and its sister company (together, "UHP"), a leading provider of innovative and disruptive satellite ground station solutions, for a purchase price of approximately $40,000,000, of which we anticipate $5,000,000 to be paid in Comtech common stock with the remaining balance payable in cash. The purchase agreement also provides an earn-out up to an additional $10,000,000 payable, at our election, in cash and or shares of Comtech common stock, if certain agreed upon sales milestones are reached in the twelve-month period following completion of the acquisition. We believe that our acquisition of UHP will be a significant step in enhancing our solutions offerings for the satellite ground station market. The transaction is subject to customary closing conditions and is expected to occur late in the second half of our fiscal 2020.

(3)    Adoption of Accounting Standards and Updates

We are required to prepare our condensed 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"). During the three months ended October 31, 2019, we adopted:

• FASB ASU No. 2016-02 Leases (Topic 842). See Note (12) - "Leases" for further information.

• FASB ASU No. 2017-11, which provides guidance on the accounting for certain financial instruments with embedded features that result in the strike price of the instrument or embedded conversion option being reduced on the basis of the pricing of future equity offerings (commonly referred to as "down round" features). On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we did not have any financial instruments with such "down round" features.

• FASB ASU No. 2017-12, which expands and refines hedge accounting for both non-financial and financial risk components and simplifies and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we are not a party to any such hedging transactions.

• FASB ASU No. 2018-07, which expands the scope of Topic 718 to include certain share-based payment transactions for acquiring goods and services from nonemployees. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we did not have any outstanding share-based awards with nonemployees that required remeasurement.

• FASB ASU No. 2018-16, which expands the list of eligible U.S. benchmark interest rates permitted in the application of hedge accounting due to broad concerns about the long-term sustainability of the LIBO Rate. This ASU adds the Overnight Index Swap ("OIS") rate, based on the Secured Overnight Financing Rate ("SOFR"), as an eligible U.S. benchmark interest rate. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we are not a party to any such hedging transactions.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

(4)    Revenue

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 mission-critical technologies and high-performance transmission technologies product lines and, to a lesser extent, certain location-based and messaging infrastructure contracts in our public safety and location technologies product line. For service-based contracts in our public safety and location technologies product line, we recognize revenue over time. These services are typically recognized as a series of services performed over the contract term using the straight-line method, or based on our customers’ actual usage of the networks and platforms which we provide.

• Point in time - When a performance obligation is not satisfied over time, we must record revenue using the point in time accounting method which generally results in revenue being recognized upon shipment or delivery of a promised good or service to a customer. This generally occurs when we enter into short term contracts or purchase orders where items are provided to customers with relatively quick turn-around times. Modifications to such contracts and or purchase orders, which typically provide for additional quantities or services, are accounted for as a new contract because the pricing for these additional quantities or services are based on standalone selling prices.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

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 amplifiers in our high-performance transmission technologies product line. Point in time accounting is also applied to certain contracts in our mission-critical technologies product line. 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Almost all of our contracts with customers are denominated in U.S. dollars and typically are either firm fixed-price or cost reimbursable type contracts (including fixed-fee, incentive-fee and time-and-material type contracts). In almost all of our contracts with customers, we are the principal in the arrangement and report revenue on a gross basis. Transaction prices for contracts with U.S. domestic and international customers are usually based on specific negotiations with each customer and in the case of the U.S. government, sometimes based on estimated or actual costs of providing the goods or services in accordance with applicable regulations. Sales by geography and customer type, as a percentage of consolidated net sales, are as follows:

	Three months ended October 31,
	2019		2018
United States
U.S. government	40.8	%	44.2	%
Domestic	36.1	%	31.4	%
Total United States	76.9	%	75.6	%
International	23.1	%	24.4	%
Total	100.0	%	100.0	%

Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. Except for the U.S. government, there were no customers that represented more than 10.0% of consolidated net sales during the three months ended October 31, 2019 and 2018. International sales include sales to U.S. domestic companies for inclusion in products that are sold to international customers. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10.0% of consolidated net sales for the three months ended October 31, 2019 and 2018.

The following tables summarize our disaggregation of revenue consistent with information reviewed by our chief operating decision-maker ("CODM") for the three months ended October 31, 2019 and 2018. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors which impact our business:

	Three months ended October 31, 2019
	Commercial Solutions		Government Solutions	Total
Geographical region and customer type
U.S. government	$	16,748,000	52,773,000	$	69,521,000
Domestic	53,354,000		8,041,000	61,395,000
Total United States	70,102,000		60,814,000	130,916,000
International	24,212,000		15,139,000	39,351,000
Total	$	94,314,000	75,953,000	$	170,267,000
Contract type
Firm fixed price	$	92,548,000	50,724,000	$	143,272,000
Cost reimbursable	1,766,000		25,229,000	26,995,000
Total	$	94,314,000	75,953,000	$	170,267,000
Transfer of control
Point in time	$	37,723,000	37,786,000	$	75,509,000
Over time	56,591,000		38,167,000	94,758,000
Total	$	94,314,000	75,953,000	$	170,267,000

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

	Three months ended October 31, 2018
	Commercial Solutions		Government Solutions	Total
Geographical region and customer type
U.S. government	$	14,220,000	56,824,000	$	71,044,000
Domestic	42,237,000		8,274,000	50,511,000
Total United States	56,457,000		65,098,000	121,555,000
International	21,516,000		17,773,000	39,289,000
Total	$	77,973,000	82,871,000	$	160,844,000
Contract type
Firm fixed price	$	76,290,000	63,611,000	$	139,901,000
Cost reimbursable	1,683,000		19,260,000	20,943,000
Total	$	77,973,000	82,871,000	$	160,844,000
Transfer of control
Point in time	$	37,945,000	52,623,000	$	90,568,000
Over time	40,028,000		30,248,000	70,276,000
Total	$	77,973,000	82,871,000	$	160,844,000

The timing of revenue recognition, billings and collections results in receivables, unbilled receivables and contract liabilities on our Condensed 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. There were no material impairment losses recognized on contract assets during the three months ended October 31, 2019 and 2018, respectively. 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. Of the contract liability balance at July 31, 2019 and August 1, 2018, $18,609,000 and $23,127,000 was recognized as revenue during the three months ended October 31, 2019 and 2018, respectively.

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 Condensed Consolidated Statements of Operations. As for commissions payable to our third-party sales representatives related to large long-term contracts, we do consider these types of commissions both direct and incremental costs to obtain and fulfill such contracts. Therefore, such commissions are included in total estimated costs at completion for such contracts and expensed over time through cost of sales on our Condensed Consolidated Statements of Operations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

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. As of October 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $648,343,000 (which represents the amount of our consolidated backlog). We estimate that a substantial portion of our remaining performance obligations at October 31, 2019 will be completed and recognized as revenue during the next twenty-four month period, with the rest thereafter. During the three months ended October 31, 2019, revenue recognized from performance obligations satisfied, or partially satisfied, in previous periods (for example due to changes in the transaction price) was not material.

(5)    Fair Value Measurements and Financial Instruments

Using the fair value hierarchy described in FASB ASC 820 "Fair Value Measurements and Disclosures," we valued our cash and cash equivalents using Level 1 inputs that were based on quoted market prices.

We believe that the carrying amounts of our other current financial assets (such as accounts receivable) and other current liabilities (including accounts payable, accrued expenses and the current portion of our favorable AT&T warranty settlement) approximate their fair values due to their short-term maturities. See Note (9) - "Accrued Expenses and Other Current Liabilities" for further discussion of the favorable AT&T warranty settlement.

We believe the fair values of our operating lease liabilities and our finance lease and other obligations, which currently reflect weighted-average discount rates of approximately 4.05% and 4.21%, respectively, would not be materially different than their carrying values as of October 31, 2019. See Note (12) - "Leases" for further information.

The fair value of our Credit Facility that we entered into on October 31, 2018 approximates its carrying amount due to its variable interest rate and pricing grid that is dependent upon our leverage ratio as of the end of each fiscal quarter.

As of October 31, 2019 and July 31, 2019, other than the financial instruments discussed above, we had no other significant assets or liabilities included in our Condensed Consolidated Balance Sheets recorded at fair value, as such term is defined by FASB ASC 820.

(6)    Earnings Per Share

Our basic earnings per share ("EPS") is computed based on the weighted average number of common shares (including vested but unissued stock units, share units, performance shares and restricted stock units ("RSUs")), outstanding during each respective period. Our diluted EPS reflects the dilution from potential common stock issuable pursuant to the exercise of equity-classified stock-based awards, if dilutive, outstanding during each respective period. Pursuant to FASB ASC 260 "Earnings Per Share," equity-classified stock-based awards that are subject to performance conditions are not considered in our diluted EPS calculations until the respective performance conditions have been satisfied. When calculating our diluted earnings per share, we consider the amount an employee must pay upon assumed exercise of stock-based awards and the amount of stock-based compensation cost attributed to future services and not yet recognized.

There were no repurchases of our common stock during the three months ended October 31, 2019 or 2018. See Note (18) - "Stockholders’ Equity" for more information.

Weighted average stock options, RSUs and restricted stock outstanding of 382,000 and 279,000 for the three months ended October 31, 2019 and 2018, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive.

Our EPS calculations exclude 197,000 and 236,000 weighted average performance shares outstanding for the three months ended October 31, 2019 and 2018, respectively, as the performance conditions have not yet been satisfied. However, net income (the numerator) for EPS calculations for each respective period, is reduced by the compensation expense related to these awards.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations:

	Three months ended October 31,
	2019		2018
Numerator:
Net income for basic calculation	$	6,388,000	3,468,000
Numerator for diluted calculation	$	6,388,000	3,468,000
Denominator:
Denominator for basic calculation	24,555,000		23,999,000
Effect of dilutive securities:
Stock-based awards	182,000		376,000
Denominator for diluted calculation	24,737,000		24,375,000

(7)    Accounts Receivable

Accounts receivable consist of the following at:

	October 31, 2019		July 31, 2019
Receivables from commercial and international customers	$	82,140,000	85,556,000
Unbilled receivables from commercial and international customers	22,824,000		20,469,000
Receivables from the U.S. government and its agencies	55,590,000		38,856,000
Unbilled receivables from the U.S. government and its agencies	1,955,000		2,018,000
Total accounts receivable	162,509,000		146,899,000
Less allowance for doubtful accounts	1,465,000		1,867,000
Accounts receivable, net	$	161,044,000	145,032,000

Unbilled receivables as of October 31, 2019 relate to contracts-in-progress for which revenue has been recognized, but for which we have not yet earned the right to bill the customer for work performed to date. Under ASC 606, unbilled receivables constitute contract assets. Management estimates that substantially all amounts not yet billed at October 31, 2019 will be billed and collected within one year.

As of October 31, 2019 and July 31, 2019, except for the U.S. government (and its agencies), which represented 35.4% and 27.8%, respectively, of total accounts receivable, there were no other customers which accounted for greater than 10.0% of total accounts receivable.

(8)    Inventories

Inventories consist of the following at:

	October 31, 2019		July 31, 2019
Raw materials and components	$	52,423,000	53,959,000
Work-in-process and finished goods	38,867,000		40,576,000
Total inventories	91,290,000		94,535,000
Less reserve for excess and obsolete inventories	19,480,000		19,696,000
Inventories, net	$	71,810,000	74,839,000

As of October 31, 2019 and July 31, 2019, the amount of inventory directly related to long-term contracts (including contracts-in-progress) was $4,661,000 and $4,053,000, respectively, and the amount of inventory related to contracts from third-party commercial customers who outsource their manufacturing to us was $1,395,000 and $1,513,000, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

(9)    Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at:

	October 31, 2019		July 31, 2019
Accrued wages and benefits	$	21,261,000	23,295,000
Accrued contract costs	13,725,000		15,007,000
Accrued warranty obligations	16,068,000		15,968,000
Accrued legal costs	2,781,000		2,835,000
Accrued commissions and royalties	4,587,000		5,114,000
Other	14,385,000		16,365,000
Accrued expenses and other current liabilities	$	72,807,000	78,584,000

As discussed further in Note (12) - "Leases," on August 1, 2019, we adopted Topic 842 and, as required by the new standard, reclassified $2,934,000 of accrued expenses and other current liabilities as follows: (i) $2,366,000 of short-term deferred rent liabilities related to operating leases were offset against the respective operating lease right-of-use assets; and (ii) the remaining $568,000 of estimated facility exit costs were reclassified to the current portion of operating lease liabilities.

Accrued contract costs represent direct and indirect costs on contracts as well as estimates of amounts owed for invoices not yet received from vendors or reflected in accounts payable.

Accrued warranty obligations as of October 31, 2019 relate to estimated liabilities for assurance-type warranty coverage that we provide to our customers. We generally provide warranty coverage for some of our products for a period of at least one year from the date of delivery. We record a liability for estimated warranty expense based on historical claims, product failure rates, consideration of contractual obligations, future costs to resolve software issues and other factors. Some of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates of total contract costs.

Changes in our accrued warranty obligations during the three months ended October 31, 2019 and 2018 were as follows:

	Three months ended October 31,
	2019			2018
Balance at beginning of period	$	15,968,000		11,738,000
Reclass to contract liabilities (see below)	—			(1,679,000	)
Provision for warranty obligations	989,000			1,020,000
Charges incurred	(1,191,000		)	(1,515,000	)
Warranty settlement and reclass (see below)	302,000			418,000
Balance at end of period	$	16,068,000		9,982,000

On August 1, 2018, in connection with our adoption of ASC 606, $1,679,000 of accrued warranty obligations presented in the above table were reclassified to contract liabilities, as they represented deferred revenue related to service-type warranty performance obligations.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Our current accrued warranty obligations at October 31, 2019 and July 31, 2019 include $3,781,000 and $3,999,000, respectively, of warranty obligations for a small product line that we refer to as the TCS 911 call handling software solution. This solution was licensed to customers prior to our acquisition of TeleCommunication Systems, Inc. ("TCS"). During the fiscal year ended July 31, 2018, we entered into a full and final warranty settlement with AT&T, the largest customer/distributor of this product line, pursuant to which we issued thirty-six credits to AT&T of $153,000 which AT&T can apply on a monthly basis to purchases of solutions from us, beginning October 2017 through September 2020. As of October 31, 2019, the total present value of these monthly credits is $1,611,000, all of which is included in our current accrued warranty obligations on our Condensed Consolidated Balance Sheet.

In connection with our acquisition of Solacom and the GD NG-911 business during the fiscal year ended July 31, 2019, we assumed warranty obligations related to certain contracts acquired. See Note (2) - "Acquisitions" for further information pertaining to these acquisitions.

(10) Cost Reduction Actions

During the three months ended October 31, 2018, we took steps to improve our future operating results and successfully consolidated our Government Solutions segment’s manufacturing facility located in Tampa, Florida with another facility that we maintain in Orlando, Florida. In doing so, during the three months ended October 31, 2018, we recorded $1,373,000 of facility exit costs in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations. As discussed further in Note (12) - "Leases," on August 1, 2019, we adopted Topic 842 and, as required by the new standard, reclassified $568,000 of estimated facility exit costs to the current portion of operating lease liabilities.

During the second quarter of fiscal 2019, we began an evaluation and repositioning of our public safety and location technologies solutions in order to focus on providing higher margin solution offerings. To date, we have ceased offering certain solutions, have worked with customers to wind-down certain legacy contracts and have not renewed certain contracts. In connection with this ongoing evaluation and repositioning, during the three months ended October 31, 2019, we recorded $230,000 of estimated contract settlement costs in our Commercial Solutions segment.

(11)    Credit Facility

On October 31, 2018, we entered into a First Amended and Restated Credit Agreement (the "Credit Facility") with a syndicate of lenders, replacing our prior Credit Agreement dated as of February 23, 2016 (as amended by that certain First Amendment, dated as of June 6, 2017 (the "Prior Credit Facility")). In connection with the establishment of our new Credit Facility, during the three months ended October 31, 2018, we wrote-off $3,217,000 of deferred financing costs primarily related to the Term Loan Facility portion of our Prior Credit Facility and capitalized deferred financing costs of $1,813,000 related to the new Credit Facility.

The Credit Facility provides a senior secured loan facility of up to $550,000,000 consisting of: (i) a revolving loan facility ("Revolving Loan Facility") with a borrowing limit of $300,000,000; (ii) an accordion feature allowing us to borrow up to an additional $250,000,000; (iii) a $35,000,000 letter of credit sublimit; and (iv) a swingline loan credit sublimit of $25,000,000.

The Credit Facility matures on October 31, 2023 (the "Revolving Maturity Date"). If we issue new unsecured debt in excess of $5,000,000 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.

The proceeds of the Credit Facility were used, in part, to repay in full the outstanding borrowings under the Prior Credit Facility, and additional proceeds of the Credit Facility are expected to be used by us for working capital and other general corporate purposes. As of October 31, 2019, the amount outstanding under our Credit Facility was $169,000,000, which is reflected in the non-current portion of long-term debt on our Condensed Consolidated Balance Sheet. At October 31, 2019, we had $2,632,000 of standby letters of credit outstanding under our Credit Facility related to guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit. During the three months ended October 31, 2019, we had outstanding balances under the Credit Facility ranging from $142,000,000 to $169,000,000.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

As of October 31, 2019, total net deferred financing costs related to the Credit Facility were $2,943,000 and are being amortized over the term of our Credit Facility through October 31, 2023.

Interest expense related to our credit facilities, including amortization of deferred financing costs, recorded during the three months ended October 31, 2019 and 2018, was $1,753,000 and $2,542,000, respectively. The amount for the three months ended October 31, 2019 relates to our new Credit Facility; whereas, the amount for the three months ended October 31, 2018 relates to our Prior Credit Facility. During the three months ended October 31, 2019 and 2018, our blended interest rate approximated 4.70% and 6.00%, respectively.

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 October 31, 2019, our Secured Leverage Ratio was 1.75x TTM Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA. Our Interest Expense Coverage Ratio as of October 31, 2019 was 13.07x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA. Given our expected future business performance, we anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future.

The obligations under the Credit Facility are guaranteed by certain of our domestic 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.

On December 6, 2018, we entered into the first amendment to the Credit Facility. The purpose of the amendment is to provide for a mechanism to replace the LIBO Rate for Eurodollar borrowings with an alternative benchmark interest rate, should the LIBO Rate generally become unavailable in the future on an other-than-temporary basis.

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.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

(12)    Leases

On August 1, 2019, we adopted ASU No. 2016-02 - Leases (Topic 842), which requires the recognition of lease rights and obligations as assets and liabilities on the balance sheet. Previously, operating leases were not recognized on the balance sheet. As we elected the modified retrospective adoption method, prior-period information was not restated. We also elected the transition package of practical expedients available in the standard, which permits us to not reassess under the new standard our prior conclusions about lease identification, classification and initial direct costs. As part of our adoption, however, we did not elect to use the hindsight or land easements practical expedients.

On August 1, 2019, in connection with our adoption of Topic 842, we recognized $35,825,000 of operating lease right-of-use ("ROU") assets (net of a $3,023,000 deferred rent liability that existed as of August 1, 2019 under prior applicable GAAP) and $38,848,000 of related liabilities. Except for the recording of the ROU assets and lease liabilities on our Condensed Consolidated Balance Sheet, and the expanded disclosures about our leasing activities, our adoption did not have a material impact on our condensed consolidated financial statements. Our adoption also did not result in any cumulative-effect adjustment to opening retained earnings.

Our leases historically relate to the leasing of facilities and equipment. We determine at inception whether an arrangement is, or contains, a lease and whether the lease should be classified as an operating or a financing lease. At lease commencement, we recognize an ROU asset and lease liability based on the present value of the future lease payments over the estimated lease term. We have elected to not recognize an ROU asset or lease liability for any leases with terms of twelve months or less. Instead, for such short-term leases, we recognize lease expense on a straight-line basis over the lease term. Certain of our leases include options to extend the term of the lease or to terminate the lease early. When it is reasonably certain that we will exercise a renewal option or will not exercise a termination option, we include the impact of exercising or not exercising such option, respectively, in the estimate of the lease term. As our lease agreements do not explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate ("IBR") on the commencement date to calculate the present value of future lease payments. Such IBR represents our estimated rate of interest to borrow on a collateralized basis over a term commensurate with the expected lease term.

Some of our leases include payments that are based on the Consumer Price Index ("CPI") or other similar indices. These variable lease payments are included in the calculation of the ROU asset and lease liability using the index as of the lease commencement date. Other variable lease payments, such as common area maintenance, property taxes, and usage-based amounts, are required by Topic 842 to be excluded from the ROU asset and lease liability and expensed as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset would also consider, to the extent applicable, any deferred rent upon adoption, lease pre-payments or initial direct costs of obtaining the lease (e.g., such as commissions).

For all classes of leased assets, we elected the practical expedient to not separate lease components (i.e., the actual item being leased, such as the facility or piece of equipment) from non-lease components (i.e., the distinct elements of a contract not related to securing the use of the leased asset, such as common area maintenance and consumable supplies).

Certain of our facility lease agreements (which are classified as operating leases) contain rent holidays or rent escalation clauses. For rent holidays and rent escalation clauses during the lease term, we record rental expense on a straight-line basis over the term of the lease. As of October 31, 2019, none of our leases contained a residual value guarantee and covenants included in our lease agreements are customary for the types of facilities and equipment being leased.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The components of lease expense are as follows:

	Three months ended October 31, 2019
Finance lease expense:
Amortization of ROU assets	$	108,000
Interest on lease liabilities	2,000
Operating lease expense	2,637,000
Short-term lease expense	863,000
Variable lease expense	993,000
Sublease income	—
Total lease expense	$	4,603,000

Additional information related to leases is as follows:

	Three months ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases - Operating cash outflows	$	2,843,000
Finance leases - Operating cash outflows	2,000
Finance leases - Financing cash outflows	198,000
ROU assets obtained in the exchange for lease liabilities:
Operating leases	$	598,000

The following table is a reconciliation of future cash flows relating to operating and finance lease liabilities presented on our Condensed Consolidated Balance Sheet as of October 31, 2019:

	Operating			Finance		Total
Remaining portion of fiscal 2020	$	8,192,000		109,000		$	8,301,000
Fiscal 2021	8,619,000			—		8,619,000
Fiscal 2022	7,387,000			—		7,387,000
Fiscal 2023	5,877,000			—		5,877,000
Fiscal 2024	4,170,000			—		4,170,000
Thereafter	6,555,000			—		6,555,000
Total future undiscounted cash flows	40,800,000			109,000		40,909,000
Less: Present value discount	3,827,000			2,000		3,829,000
Lease liabilities	$	36,973,000		107,000		$	37,080,000
Weighted-average remaining lease terms (in years)	4.59			0.22
Weighted-average discount rate	4.05		%	4.21	%

We lease our Melville, New York production facility from a partnership controlled by our President, CEO and Chairman. Lease payments made during the three months ended October 31, 2019 were $160,000. The current lease provides for our use of the premises as they exist through December 2021 with an option for an additional ten years. The annual rent of the facility for calendar year 2020 is $657,000 and is subject to customary adjustments. We have a right of first refusal in the event of a sale of the facility.

As of October 31, 2019, we do not have any rental commitments that have not commenced.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

As we have not restated prior year information given our method of adopting the new standard, the following represents our future minimum lease payments for operating leases and capital leases as of July 31, 2019 under ASC Topic 840 and as reported in our Form 10-K filed with the SEC on September 24, 2019:

	Operating		Capital		Total
Fiscal 2020	$	11,812,000	789,000		$	12,601,000
Fiscal 2021	8,723,000		—		8,723,000
Fiscal 2022	7,343,000		—		7,343,000
Fiscal 2023	5,776,000		—		5,776,000
Fiscal 2024	3,430,000		—		3,430,000
Thereafter	7,130,000		—		7,130,000
Total	$	44,214,000	789,000		$	45,003,000
Less amount representing interest	*		32,000		32,000
Present value of net minimum lease payments	*		$	757,000	$	44,971,000

*Not applicable for operating leases

(13)    Income Taxes

At October 31, 2019 and July 31, 2019, total unrecognized tax benefits were $7,839,000 and $7,215,000, respectively, including interest of $31,000 and $12,000, respectively. At October 31, 2019 and July 31, 2019, $2,298,000 and $325,000, respectively, of our unrecognized tax benefits were recorded as non-current income taxes payable on our Condensed Consolidated Balance Sheets. The remaining unrecognized tax benefits of $5,541,000 and $6,890,000 at October 31, 2019 and July 31, 2019, respectively, were presented as an offset to the associated non-current deferred tax assets on our Condensed Consolidated Balance Sheets. Of the total unrecognized tax benefits, $7,259,000 and $6,670,000, at October 31, 2019 and July 31, 2019, respectively, net of the reversal of the federal benefit recognized as a deferred tax asset relating to state reserves, would favorably impact our effective tax rate, if recognized. Unrecognized tax benefits result from income tax positions taken or expected to be taken on our income tax returns for which a tax benefit has not been recorded in our condensed consolidated financial statements. We do not expect that there will be any significant changes to our total unrecognized tax benefits within the next twelve months.

Our federal income tax returns for fiscal 2017 and 2018 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state income tax returns prior to fiscal 2015 are subject to audit. TCS's federal income tax return for the tax period from January 1, 2016 to February 23, 2016, the date we acquired TCS, is subject to potential future IRS audit. None of TCS's state income tax returns prior to calendar year 2015 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

(14)    Stock-Based Compensation

Overview

We issue stock-based awards to certain of our employees and our Board of Directors pursuant to our 2000 Stock Incentive Plan, as amended, (the "Plan") and our 2001 Employee Stock Purchase Plan (the "ESPP"), and recognize related stock-based compensation in our condensed consolidated financial statements. The Plan provides for the granting to employees and consultants of Comtech (including prospective employees and consultants): (i) incentive and non-qualified stock options, (ii) restricted stock units ("RSUs"), (iii) RSUs with performance measures (which we refer to as "performance shares"), (iv) restricted stock, (v) stock units (reserved for issuance to non-employee directors) and share units (reserved for issuance to employees) (collectively, "share units") and (vi) stock appreciation rights ("SARs"), among other types of awards. Our non-employee directors are eligible to receive non-discretionary grants of stock-based awards, subject to certain limitations.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

As of October 31, 2019, the aggregate number of shares of common stock which may be issued, pursuant to the Plan, may not exceed 10,362,500. At the Fiscal 2019 Annual Meeting of Stockholders held on December 3, 2019, stockholders approved an amendment to our Plan to increase the share reserve under the Plan by 600,000 shares, to a total 10,962,500 shares. Stock options granted may not have a term exceeding ten years or, in the case of an incentive stock award granted to a stockholder who owns stock representing more than 10.0% of the voting power, no more than five years. We expect to settle all outstanding awards under the Plan and employee purchases under the ESPP with the issuance of new shares of our common stock.

As of October 31, 2019, we had granted stock-based awards pursuant to the Plan representing the right to purchase and/or acquire an aggregate of 8,723,732 shares (net of 4,031,305 expired and canceled awards), of which an aggregate of 6,286,882 have been exercised or settled.

As of October 31, 2019, the following stock-based awards, by award type, were outstanding:

	October 31, 2019
Stock options	1,503,295
Performance shares	217,839
RSUs and restricted stock	476,036
Share units	239,680
Total	2,436,850

Our ESPP provides for the issuance of up to 1,050,000 shares of our common stock. Our ESPP is intended to provide our eligible employees the opportunity to acquire our common stock at 85% of fair market value at the date of issuance. Through October 31, 2019, we have cumulatively issued 797,186 shares of our common stock to participating employees in connection with our ESPP.

Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations:

	Three months ended October 31,
	2019			2018
Cost of sales	$	59,000		58,000
Selling, general and administrative expenses	743,000			905,000
Research and development expenses	77,000			83,000
Stock-based compensation expense before income tax benefit	879,000			1,046,000
Estimated income tax benefit	(189,000		)	(228,000	)
Net stock-based compensation expense	$	690,000		818,000

Stock-based compensation for equity-classified awards is measured at the date of grant, based on an estimate of the fair value of the award and is generally expensed over the vesting period of the award. At October 31, 2019, unrecognized stock-based compensation of $11,885,000, net of estimated forfeitures of $1,085,000, is expected to be recognized over a weighted average period of 3.3 years. Total stock-based compensation capitalized and included in ending inventory at both October 31, 2019 and July 31, 2019 was $48,000. There are no liability-classified stock-based awards outstanding as of October 31, 2019 or July 31, 2019.

23

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Stock-based compensation expense (benefit), by award type, is summarized as follows:

	Three months ended October 31,
	2019			2018
Stock options	$	82,000		171,000
Performance shares	352,000			406,000
RSUs and restricted stock	698,000			547,000
ESPP	57,000			52,000
Share units	(310,000		)	(130,000	)
Stock-based compensation expense before income tax benefit	879,000			1,046,000
Estimated income tax benefit	(189,000		)	(228,000	)
Net stock-based compensation expense	$	690,000		818,000

ESPP stock-based compensation expense primarily relates to the 15% discount offered to participants in the ESPP. During the three months ended October 31, 2019 and 2018, we recorded benefits of $310,000 and $130,000, respectively, which primarily represents the recoupment of certain share units.

The estimated income tax benefit as shown in the above table was computed using income tax rates expected to apply when the awards are settled. Such deferred tax asset was recorded net as part of our non-current deferred tax liability on our Condensed Consolidated Balance Sheet as of October 31, 2019 and July 31, 2019. The actual income tax benefit recognized for tax reporting is based on the fair market value of our common stock at the time of settlement and can significantly differ from the estimated income tax benefit recorded for financial reporting.

Stock Options

The following table summarizes the Plan's activity during the three months ended October 31, 2019:

	Awards (in Shares)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2019	1,555,555		$	28.72
Exercised	(51,460	)	28.45
Expired/canceled	(800	)	27.35
Outstanding at October 31, 2019	1,503,295		$	28.73	3.27	$	9,346,000
Exercisable at October 31, 2019	1,431,765		$	28.83	3.14	$	8,761,000
Vested and expected to vest at October 31, 2019	1,477,967		$	28.76	3.23	$	9,148,000

Stock options outstanding as of October 31, 2019 have exercise prices ranging from $20.90 - $33.94, representing the fair market value of our common stock on the date of grant, a contractual term of five or ten years and a vesting period of three or five years. The total intrinsic value relating to stock options exercised during the three months ended October 31, 2019 and 2018 was $305,000 and $561,000, respectively.

During the three months ended October 31, 2019 and 2018, at the election of certain holders of vested stock options, 40,860 and 72,830, respectively, of stock options were net settled upon exercise. As a result, 4,764 and 9,345 shares of our common stock were issued during the three months ended October 31, 2019 and 2018, respectively, net of shares retained to satisfy the exercise price and minimum statutory tax withholding requirements.

24

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Performance Shares, RSUs, Restricted Stock and Share Unit Awards

The following table summarizes the Plan's activity relating to performance shares, RSUs, restricted stock and share units:

	Awards (in Shares)		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at July 31, 2019	954,676		$	22.40
Granted	219,425		27.69
Settled	(199,466	)	16.80
Forfeited	(41,080	)	21.00
Outstanding at October 31, 2019	933,555		$	24.91	$	32,628,000
Vested at October 31, 2019	328,791		$	24.92	$	11,491,000
Vested and expected to vest at October 31, 2019	890,374		$	25.06	$	31,119,000

The total intrinsic value relating to fully-vested awards settled during the three months ended October 31, 2019 and 2018 was $5,806,000 and $4,210,000, respectively.

The performance shares granted to employees since fiscal 2014 principally vest over a three-year performance period, if pre-established performance goals are attained or as specified pursuant to the Plan and related agreements. As of October 31, 2019, the number of outstanding performance shares included in the above table, and the related compensation expense prior to consideration of estimated pre-vesting forfeitures, assume achievement of the pre-established goals at a target level.

RSUs and restricted stock granted to non-employee directors prior to July 31, 2019 have a vesting period of three years and are convertible into shares of our common stock generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. RSUs and restricted stock granted to non-employee directors after July 31, 2019 have a vesting period of five years. RSUs granted to employees have a vesting period of five years and are convertible into shares of our common stock, generally at the time of vesting, on a one-for-one basis for no cash consideration.

Share units granted prior to July 31, 2017 were vested when issued and are convertible into shares of our common stock, generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. Share units granted on or after July 31, 2017 were granted to certain employees in lieu of non-equity incentive compensation and are convertible into shares of our common stock on the one-year anniversary of the respective grant date. Cumulatively through October 31, 2019, 431,142 share units granted have been settled.

The fair value of performance shares, RSUs, restricted stock and share units is determined using the closing market price of our common stock on the date of grant, less the present value of any estimated future dividend equivalents such awards are not entitled to receive and an applicable estimated discount for any post vesting transfer restrictions. RSUs, performance shares and restricted stock granted since fiscal 2013 are entitled to dividend equivalents unless forfeited before vesting occurs. Share units granted since fiscal 2014 are entitled to dividend equivalents while the underlying shares are unissued.

Dividend equivalents are subject to forfeiture, similar to the terms of the underlying stock-based awards, and are payable in cash generally at the time of settlement of the underlying award. During the three months ended October 31, 2019, we accrued $56,000 of dividend equivalents (net of forfeitures) and paid out $285,000. Accrued dividend equivalents were recorded as a reduction to retained earnings. As of October 31, 2019 and July 31, 2019, accrued dividend equivalents were $548,000 and $777,000, respectively.

25

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

With respect to the actual settlement of stock-based awards for income tax reporting, during the three months ended October 31, 2019 and 2018, we recorded income tax benefits of $612,000 and $457,000, respectively, which primarily represent the net excess income tax benefits upon settlement of stock-based awards during each of the respective periods.

(15)    Segment Information

Reportable operating segments are determined based on Comtech’s management approach. The management approach, as defined by FASB ASC 280 "Segment Reporting" is based on the way that the CODM organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. Our CODM, for purposes of FASB ASC 280, is our Chief Executive Officer and President.

Our Commercial Solutions segment offers satellite ground station technologies (such as modems and amplifiers) and public safety and location technologies (such as 911 call routing 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.

Our Government Solutions segment provides mission-critical technologies (such as tactical satellite-based networks and ongoing support for complicated communications networks) and high-performance transmission technologies (such as 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.

Our CODM primarily uses a metric that we refer to as Adjusted EBITDA to measure an operating segment’s performance and to make decisions about resources to be allocated. Our Adjusted EBITDA metric for the Commercial Solutions and Government Solutions segments do not consider any allocation of indirect expense, or any of the following: income taxes, interest (income) and other, write-off of deferred financing costs, interest expense, amortization of stock-based compensation, amortization of intangible assets, depreciation expenses, estimated contract settlement costs, settlement of intellectual property litigation, acquisition plan expenses, facility exit costs or strategic alternatives analysis expenses and other expenses that relate to our Unallocated segment. These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results. Any amounts shown in the Adjusted EBITDA calculation for our Commercial Solutions and Government Solutions segments are directly attributable to those segments. Our Adjusted EBITDA is also used by our management in assessing the Company's operating results. Although closely aligned, the Company's definition of Adjusted EBITDA is different than the Consolidated EBITDA (as such term is defined in our Credit Facility) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and, therefore, may not be comparable to similarly titled measures used by other companies.

26

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Operating segment information, along with a reconciliation of segment net income (loss) and consolidated net income to Adjusted EBITDA is presented in the tables below:

	Three months ended October 31, 2019
	Commercial Solutions			Government Solutions		Unallocated		Total
Net sales	$	94,314,000		75,953,000		—		$	170,267,000
Operating income (loss)	$	9,841,000		7,083,000		(7,664,000	)	$	9,260,000
Net income (loss)	$	9,867,000		7,095,000		(10,574,000	)	$	6,388,000
Provision for income taxes	13,000			—		1,132,000		1,145,000
Interest (income) and other	(47,000		)	(13,000	)	(17,000	)	(77,000		)
Interest expense	8,000			1,000		1,795,000		1,804,000
Amortization of stock-based compensation	—			—		879,000		879,000
Amortization of intangibles	4,362,000			844,000		—		5,206,000
Depreciation	2,196,000			313,000		142,000		2,651,000
Estimated contract settlement costs	230,000			—		—		230,000
Acquisition plan expenses	—			—		2,389,000		2,389,000
Adjusted EBITDA	$	16,629,000		8,240,000		(4,254,000	)	$	20,615,000
Purchases of property, plant and equipment	$	1,000,000		224,000		26,000		$	1,250,000
Total assets at October 31, 2019	$	675,344,000		211,125,000		44,553,000		$	931,022,000

	Three months ended October 31, 2018
		Commercial Solutions		Government Solutions	Unallocated		Total
Net sales		$	77,973,000	82,871,000	—		$	160,844,000
Operating income (loss)		$	7,058,000	6,644,000	(6,409,000	)	$	7,293,000
Net income (loss)		$	6,971,000	6,609,000	(10,112,000	)	$	3,468,000
Provision for (benefit from) income taxes		12,000		—	(2,139,000	)	(2,127,000		)
Interest (income) and other		53,000		32,000	(19,000	)	66,000
Write-off of deferred financing costs		—		—	3,217,000		3,217,000
Interest expense		22,000		3,000	2,644,000		2,669,000
Amortization of stock-based compensation		—		—	1,046,000		1,046,000
Amortization of intangibles		3,445,000		844,000	—		4,289,000
Depreciation		2,228,000		379,000	244,000		2,851,000
Acquisition plan expenses		—		—	1,130,000		1,130,000
Facility exit costs		—		1,373,000	—		1,373,000
Adjusted EBITDA		$	12,731,000	9,240,000	(3,989,000	)	$	17,982,000
Purchases of property, plant and equipment		$	892,000	629,000	124,000		$	1,645,000
Total assets at October 31, 2018		$	602,567,000	222,587,000	41,786,000		$	866,940,000

27

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Unallocated expenses result from corporate expenses such as executive compensation, accounting, legal and other regulatory compliance related costs and also includes all of our amortization of stock-based compensation. During the three months ended October 31, 2019 and 2018, unallocated expenses also include $2,389,000 and $1,130,000 of acquisition plan expenses, respectively.

Interest expense in the tables above relate to our Prior Credit Facility and new Credit Facility, and includes the amortization of deferred financing costs. In addition, during the three months ended October 31, 2018, we recorded a $3,217,000 loss from the write-off of deferred financing costs primarily related to the Term Loan Facility portion of our Prior Credit Facility. See Note (11) - "Credit Facility" for further discussion.

Intersegment sales for the three months ended October 31, 2019 and 2018 by the Commercial Solutions segment to the Government Solutions segment were $1,899,000 and $8,540,000, respectively. There were nominal sales by the Government Solutions segment to the Commercial Solutions segment for these periods. All intersegment sales are eliminated in consolidation and are excluded from the tables above.

Unallocated assets at October 31, 2019 consist principally of cash and cash equivalents, income taxes receivable, corporate property, plant and equipment and deferred financing costs. Substantially all of our long-lived assets are located in the U.S.

(16)    Goodwill

The following table represents goodwill by reportable operating segment, including the changes in the net carrying value of goodwill during the three months ended October 31, 2019:

	Commercial Solutions			Government Solutions	Total
Balance as of July 31, 2019	$	251,296,000		59,193,000	$	310,489,000
Change resulting from Solacom acquisition	(420,000		)	—	(420,000		)
Change resulting from the GD NG-911 acquisition	(198,000		)	—	(198,000		)
Balance as of October 31, 2019	$	250,678,000		59,193,000	$	309,871,000

As discussed further in Note (2) -"Acquisitions," the goodwill resulting from the acquisitions of Solacom and the GD NG-911 business was based upon valuation and estimates and assumptions that are subject to change within the purchase price allocation period (generally one year from the acquisition date).

In accordance with FASB ASC 350 "Intangibles - Goodwill and Other," 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, 2019 (the first day of our fiscal 2020), 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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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

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, 2019 total public market capitalization and assessed implied control premiums based on our common stock price of $29.54 as of August 1, 2019.

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 29.0% and 122.2%, 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 2020 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 decline. 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 2020 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 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, 2020 (the start of our fiscal 2021). 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. Any impairment charges that we may record in the future could be material to our results of operations and financial condition.

(17)    Intangible Assets

Intangible assets with finite lives are as follows:

	As of October 31, 2019
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization	Net Carrying Amount
Customer relationships	20.5	$	276,834,000	69,694,000	$	207,140,000
Technologies	12.7	92,649,000		60,948,000	31,701,000
Trademarks and other	16.7	31,026,000		13,183,000	17,843,000
Total		$	400,509,000	143,825,000	$	256,684,000

	As of July 31, 2019
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization	Net Carrying Amount
Customer relationships	20.5	$	276,834,000	66,484,000	$	210,350,000
Technologies	12.7	92,649,000		59,522,000	33,127,000
Trademarks and other	16.7	31,026,000		12,613,000	18,413,000
Total		$	400,509,000	138,619,000	$	261,890,000

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The weighted average amortization period in the above table excludes fully amortized intangible assets.

Amortization expense for the three months ended October 31, 2019 and 2018 was $5,206,000 and $4,289,000, respectively.

The estimated amortization expense consists of the following for the fiscal years ending July 31:

2020	$	20,700,000
2021	19,563,000
2022	18,322,000
2023	18,322,000
2024	17,631,000

We review net intangible assets with finite lives for impairment when an event occurs indicating the potential for impairment. No such event has occurred during the three months ended October 31, 2019. We believe that the carrying values of our net intangible assets were recoverable as of October 31, 2019. Any impairment charges that we may record in the future could be material to our results of operations and financial condition.

(18)    Stockholders’ Equity

Sale of Common Stock

In December 2018, we filed a $400,000,000 shelf registration statement with the SEC for the sale of various types of securities, including debt. The shelf registration was declared effective by the SEC as of December 14, 2018. To date, we have not issued any securities pursuant to our $400,000,000 shelf registration statement.

Stock Repurchase Program

As of October 31, 2019 and December 4, 2019, we were authorized to repurchase up to an additional $8,664,000 of our common stock, pursuant to our current $100,000,000 stock repurchase program. Our stock repurchase program has no time restrictions and repurchases may be made in open-market or privately negotiated transactions and may be made pursuant to SEC Rule 10b5-1 trading plans. There were no repurchases made during the three months ended October 31, 2019 or 2018.

Dividends

Since September 2010, we have paid quarterly dividends pursuant to an annual targeted dividend amount that was established by our Board of Directors. On September 24, 2019, our Board of Directors declared a dividend of $0.10 per common share, which was paid on November 15, 2019. On December 4, 2019, our Board of Directors declared a dividend of $0.10 per common share, payable on February 14, 2020 to stockholders of record at the close of business on January 15, 2020.

Future dividends remain subject to compliance with financial covenants under our Credit Facility as well as Board approval.

(19)    Legal Proceedings and Other Matters

Legacy TCS 911 Call Handling Software Matter

A customer that purchased a TCS 911 call handling software solution in December 2014 (which was more than one year prior to our acquisition of TCS) (the "TCS Legacy Customer") informed us in fiscal 2019 that it experienced several network outages and that it would seek indemnification for any claims made against it as a result of such outages.

In connection with these outages, the TCS Legacy Customer informed us that it believed certain communication failover redundancies promised to it by former senior management of TCS were never completed and had originally demanded that we refund to it all amounts previously paid to us under the contract, which through October 31, 2019 exceeded $14,000,000. In response to such claim, we engaged legal counsel to review the claims made by our customer.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

In September 2019, the customer filed a lawsuit in the Sixth Judicial Circuit Court of the State of South Dakota alleging, among other things, our failure to provide them with certain system redundancies. We believe that TCS has complied with its contractual requirements, that the customer's allegations are baseless, and that it is not entitled to a return of any amounts previously paid to us under the contract. Our contract to provide services to this customer expires in December 2019 and the amount of annual revenue we generate from this customer is immaterial.

We have notified our insurance carriers of the lawsuit and are reviewing with counsel our multiple counter claims against this TCS Legacy Customer.

An agreement in principle has been reached with this TCS Legacy Customer and we are currently negotiating the terms of such settlement which is not expected to have a material impact on our condensed consolidated financial statements. However, if we are unable to reach a final settlement, the ultimate resolution of this matter could vary and possibly have a material adverse effect on our consolidated results of operations, financial position or cash flows in future periods.

Separately, we also filed a lawsuit in March 2019 against a former employee and her new employer arising from such former employee's violation of her obligation to TCS of confidentiality, non-competition and non-solicitation of customers, including the TCS Legacy Customer. The former employee has responded with her own lawsuit against us. The ultimate resolution of this lawsuit is not expected to have any material impact.

Other Matters

In October 2014, we disclosed to the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC") that we learned during a self-assessment of our export transactions that a shipment of modems sent to a Canadian customer by Comtech EF Data Corp. was incorporated into a communication system, the ultimate end user of which was the Sudan Civil Aviation Authority. The sales value of this equipment was approximately $288,000. At the time of shipment, OFAC regulations prohibited U.S. persons from doing business directly or indirectly with Sudan. In late 2015, OFAC issued an administrative subpoena seeking information about the disclosed transaction. We responded to the subpoena, including alerting OFAC to Comtech’s repair of three modems for a customer in Lebanon who may have rerouted the modems from Lebanon to Sudan without the required U.S. licensing authorization. In September 2018, Comtech agreed to enter into a Tolling Agreement with OFAC, which extended the statute of limitations in this matter through December 31, 2019. The Tolling Agreement was shortly followed by a second administrative subpoena seeking additional information about the disclosed transaction. In December 2018, Comtech responded to a second administrative subpoena from OFAC, answering the questions it posed and providing all the documents it sought. In November 2019, Comtech agreed to enter into a second Tolling Agreement with OFAC, which extends the statute of limitations in this matter through June 30, 2020. U.S. sanctions with respect to Sudan were revoked in 2017 and we are in the process of responding to certain additional questions that OFAC asked of us based on its review. Consistent with the revocation of the Sudan Sanction Regulations ("SSR"), shipments to the Sudan Civil Aviation Authority by U.S. persons are now permissible. We are not able to predict whether OFAC will take any enforcement action against us in light of the revocation of the SSR. If OFAC determines that we have violated U.S. trade sanctions, civil and criminal penalties could apply, and we may suffer reputational harm. Even though we take precautions to avoid engaging in transactions that may violate U.S. trade sanctions, those measures may not be effective in every instance.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

In May 2018, we were informed by the Office of Export Enforcement ("OEE") of the Department of Commerce ("DoC") that it was forwarding to the OEE's Office of Chief Counsel, the results of its audit of international shipments by Comtech Xicom Technology, Inc. for further review and possible determination of an administrative penalty. We fully cooperated with the OEE in their audit and, based on our self-assessment of the approximately 7,800 individual transactions audited, have determined that six (6) transactions may not have been fully in compliance with the Export Administration Regulations ("EAR"). These six (6) items, for which export licenses were not obtained, were either spares or repaired power amplifier subassembly components valued at less than $100,000 (in aggregate) and were shipped to Brazil, Italy, Russia, Thailand and the United Arab Emirates. The EAR provides an exception to the requirement to obtain an export license for the replacement of a defective or damaged component. During our self-assessment, we determined that we inadvertently did not obtain export licenses for the spares or evidence of the return or destruction of the defective or damaged components necessary to authorize our use of the export license exception for the replacements. Since discovering this issue, we have implemented additional controls and procedures and have increased awareness of these specific export requirements throughout the Company to help avoid similar occurrences in the future. Administrative penalties under the EAR can range from a warning letter to a denial of export privileges. A civil monetary penalty not to exceed the amount set forth in the Export Administration Act ("EAA") may be imposed for each violation, and in the event that any provision of the EAR is continued by any other authority, the maximum monetary civil penalty for each violation shall be that provided by such other authority. Administrative penalties under the EAR are currently determined pursuant to the International Emergency Economic Powers Act ("IEEPA"), which can reach the greater of twice the amount of the transaction that is the basis of the violation or approximately $300,000 per violation. We have not recorded an accrual related to a possible administrative penalty and continue to work cooperatively with the OEE.

In the ordinary course of business, we include indemnification provisions in certain of our customer contracts to indemnify, hold harmless and reimburse such customers for certain losses, including but not limited to losses related to third-party claims of intellectual property infringement arising from the customer’s use of our products or services. We may also, from time to time, receive indemnification requests from customers related to third-party claims that 911 calls were improperly routed during an emergency. We evaluate such claims as and when they arise. We do not always agree with customers that they are entitled to indemnification and in such cases reject their claims. Despite maintaining that we have properly carried out our duties, we may seek coverage under our various insurance policies; however, we cannot be sure that we will be able to maintain or obtain insurance coverage at acceptable costs or in sufficient amounts or that our insurer will not disclaim coverage as to such claims. Accordingly, pending or future claims asserted against us by a party that we agree 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.

There are certain other pending and threatened legal actions which arise in the normal course of business. Although the ultimate outcome of litigation is difficult to accurately predict, we believe that the outcome of these other pending and threatened actions will not have a material adverse effect on our consolidated financial condition or results of operations.

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ITEM 2. 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this Quarterly Report on Form 10-Q contains forward-looking statements, including but not limited to, information relating to our future performance and financial condition, plans and objectives of our management and our assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under our control which may cause our actual results, future performance and financial condition, and achievement of our plans and objectives to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, among other things: the risk that the acquisition of UHP Networks Inc. and its sister company (together, "UHP") may not be consummated for reasons including that the conditions precedent to the completion of the acquisition may not be satisfied or the occurrence of any event, change or circumstance could give rise to the termination of the agreement; the possibility that the expected synergies from recent or pending acquisitions will not be fully realized, or will not be realized within the anticipated time periods; the risk that acquired businesses will not be integrated with Comtech successfully; the possibility of disruption from recent or pending acquisitions, making it more difficult to maintain business and operational relationships or retain key personnel; the risk that Comtech will be unsuccessful in implementing a tactical shift in its Government Solutions segment away from bidding on large commodity service contracts and toward pursuing contracts for its niche products with higher margins; the risks associated with Comtech's ongoing evaluation and repositioning of its public safety and location technologies solutions offering in its Commercial Solutions segment; the nature and timing of our receipt of, and our performance on, new or existing orders that can cause significant fluctuations in net sales and operating results; the timing and funding of government contracts; adjustments to gross profits on long-term contracts; risks associated with international sales; rapid technological change; evolving industry standards; new product announcements and enhancements, including the risks associated with Comtech's launch of its Heights^TM Network Platform ("HEIGHTS"); changing customer demands and or procurement strategies; changes in prevailing economic and political conditions; changes in the price of oil in global markets; changes in foreign currency exchange rates; risks associated with Comtech's legal proceedings, customer claims for indemnification, and other similar matters; risks associated with our obligations under our Credit Facility; risks associated with our large contracts; and other factors described in this and our other filings with the Securities and Exchange Commission ("SEC").

OVERVIEW

We are a leading provider of advanced communications solutions for both commercial and government customers worldwide. 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 business through two reportable operating segments:

• Commercial Solutions - offers satellite ground station technologies (such as modems and amplifiers), public safety and location technologies (such as 911 call routing 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 mission-critical technologies (such as tactical satellite-based networks and ongoing support for complicated communication networks) and high-performance transmission technologies (such as 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.

In fiscal 2020, we have rebranded our operating segment product groups to better align with our end markets. Prior descriptions of these product lines were updated to reflect such changes.

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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.

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 mission-critical technologies and high-performance transmission technologies product lines and, to a lesser extent, certain location-based and messaging infrastructure contracts in our public safety and location technologies product line. For service-based contracts in our public safety and location technologies product line, we 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 amplifiers in our high-performance transmission technologies product line. Point in time accounting is also applied to certain contracts in our mission-critical technologies product line. 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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Almost all 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 Condensed 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 Condensed Consolidated Statements of Operations. As for commissions payable to our third-party sales representatives related to large 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 Condensed 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 October 31, 2019, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $309.9 million (of which $250.7 million relates to our Commercial Solutions segment and $59.2 million relates to our Government Solutions segment). Additionally, as of October 31, 2019, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $256.7 million (of which $219.1 million relates to our Commercial Solutions segment and $37.6 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 "Intangibles - Goodwill and Other," 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, 2019 (the first day of our fiscal 2020), 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, 2019 total public market capitalization and assessed implied control premiums based on our common stock price of $29.54 as of August 1, 2019.

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 29.0% and 122.2%, 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 2020 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 decline. 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 2020 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, 2020 (the start of our fiscal 2021). 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 October 31, 2019. 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, most 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 federal income tax returns for fiscal 2017 and 2018 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state income tax returns prior to fiscal 2015 are subject to audit. TCS's federal income tax return for the tax period from January 1, 2016 to February 23, 2016, the date we acquired TCS, is subject to potential future IRS audit. None of TCS's state income tax returns prior to calendar year 2015 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

Research and Development Costs. We generally expense all research and development costs. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other personnel-related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Costs incurred internally in researching and developing software to be sold are charged to expense until technological feasibility has been established for the software. Judgment is required in determining when technological feasibility of a product is established. Technological feasibility for our advanced communication software solutions is generally reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to customers and when we are able to validate the marketability of such product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. To date, capitalized internally developed software costs were not material.

Provisions for Excess and Obsolete Inventory. We record a provision for excess and obsolete inventory based on historical and projected usage trends. Other factors may also influence our provision, including decisions to exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued, we would be required to recognize such costs in our financial statements at the time of such determination. Any such charge could be material to our results of operations and financial condition.

Allowance for Doubtful Accounts.  We perform credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information. Generally, we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international customer that we do not do business with regularly. In addition, we seek to obtain insurance for certain domestic and international customers.

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. Our overall credit losses have historically been within our expectations of the allowances established; however, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. 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. Changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition.

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Business Outlook for Fiscal 2020

Fiscal 2020 is off to a great start. Our first quarter results exceeded our expectations and we generated consolidated:

• Net sales of $170.3 million;

• Operating income of $9.3 million (or $11.9 million excluding $2.4 million of acquisition plan expenses and $0.2 million of estimated contract settlement costs);

• Net income of$6.4 million (or $7.8 million excluding acquisition plan expenses of $1.8 million (net of tax), estimated contract settlement costs of $0.2 million (net of tax) and a net discrete tax benefit of $0.6 million);

• Cash flows from operating activities of $5.4 million; and

• Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $20.6 million.

Our business momentum remains strong and we achieved a consolidated book-to-bill ratio (a measure defined as bookings divided by net sales) of 0.80. We finished the first quarter with consolidated backlog of $648.3 million. We have a number of large opportunities in our pipeline and are targeting to achieve a fiscal 2020 book-to-bill ratio in excess of 1.0. Our backlog (sometimes referred to herein as orders or bookings) is more fully defined in our most recent 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. As of October 31, 2019, our cash and cash equivalents were $46.9 million and total debt outstanding under our Credit Facility was $169.0 million.

Recent positive developments in our business include:

• In October 2019, we announced that the U.S. Army awarded us a contract with a $98.6 million ceiling to provide global field support services for military satellite communication (“SATCOM”) terminals around the world. The field support contract covers diverse engineering and technical skills to support these SATCOM terminals, including logistics, help desk, network engineering, security engineering, RF and satellite system engineering and support. To date, the contract has been funded at $24.4 million with additional funding expected to occur across the twelve-month performance period.

• In November 2019, the U.S. government announced that our teaming partner on a U.S. Marine Corps troposcatter opportunity was awarded a 10-year $325.0 million “IDIQ” contract to provide 172 next-generation troposcatter systems and related services. Our teaming partner announced that it intends to subcontract the manufacture and delivery of these troposcatter systems to Comtech and we are currently negotiating contract terms and expect our initial order soon. We believe this multi-year opportunity validates Comtech’s market leading troposcatter technologies and expertise and bodes well for the future, as we continue to see strong demand for these products.

• In November 2019, we announced that we entered into an agreement to acquire UHP Networks Inc. and its sister company (together, “UHP”), a leading provider of innovative and disruptive satellite ground station technology solutions, for a purchase price of approximately $40.0 million. UHP is based in Canada and has developed revolutionary technology that is transforming the Very Small Aperture Terminal (“VSAT”) market. With end-markets for high-speed satellite-based networks significantly growing, our acquisition of UHP is a significant step in enhancing our solution offerings for the satellite ground station market. After months of extensive testing, we believe that UHP’s innovative implementation techniques for time division multiple access (“TDMA”) technology are best-in-class and provide the highest TDMA efficiency at the lowest cost available. We are very excited about UHP and expect the use of their incredible technology to expand globally for many years ahead. The acquisition of UHP is expected to close late in the second half of fiscal 2020.

Based on our fiscal 2020 performance to date and our anticipated timing of performance related to orders currently in our backlog and the timing of expected new orders, we believe we are on track to making fiscal 2020 a very successful year. We have updated our fiscal 2020 consolidated financial targets as follows:

• We are increasing our consolidated net sales target to a new range of approximately $712.0 million to $732.0 million as compared to the prior range of $710.0 million to $730.0 million.

• We are increasing our Adjusted EBITDA goal to a new range of $99.0 million to $103.0 million as compared to the prior range of $98.0 million to $102.0 million. Our Adjusted EBITDA goal reflects a target of approximately 14.0% of our expected fiscal 2020 consolidated net sales.

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• Despite incurring $2.4 million of actual acquisition plan expenses and $0.2 million of estimated contract settlement costs in the first quarter of fiscal 2020, as well as an additional $2.4 million of such costs expected during the second quarter of fiscal 2020, GAAP operating income, as a percentage of the consolidated net sales, is still expected to approximate 7.0%. Excluding such expenses, operating income, as a percentage of fiscal 2020 consolidated net sales, is expected to approximate 7.7%.

• There is no change to our expected interest expense rate (including amortization of deferred financing costs) of approximately 4.6% or total interest expense of approximately $7.5 million. Our current and fiscal 2020 expected cash borrowing rate is approximately 4.0%.

• Our effective income tax rate (excluding discrete tax items) for each of the remaining quarters of fiscal 2020 is expected to approximate 23.0%.

• Consistent with Comtech's business cycle for the past several years, our financial performance in the second half of fiscal 2020 is anticipated to be higher than the first half. Based on anticipated product mix and timing assumptions, we expect our second quarter consolidated net sales to range from $168.0 million to $170.0 million, with Adjusted EBITDA ranging from $19.0 million to approximately $21.0 million. Our fourth quarter of fiscal 2020 is still expected to be the peak quarter - by far - for our consolidated net sales, GAAP operating income, GAAP net income and Adjusted EBITDA.

Our fiscal 2020 targets reflect several items, the timing of which could shift and impact our expected quarterly financial performance. In addition, the aforementioned fiscal 2020 financial targets do not include the impact of the pending acquisition of UHP or the impact of any other expense we may incur in order to achieve our strategic objectives. If we achieve all of our fiscal 2020 business goals, it is possible that financial results could be higher than our targeted amounts.

Our Business Outlook for Fiscal 2020 depends, in large part, on timely deliveries and the receipt of, and performance on, orders from our customers and could be adversely impacted if orders and/or deliveries are delayed, business conditions deteriorate, or our current or prospective customers materially postpone, reduce or even forgo purchases of our products and services. Additionally, we continue to evaluate cost reduction initiatives in our business, including in connection with the repositioning of our location technology solutions offerings. Our updated fiscal 2020 financial targets do not consider the financial impact of any additional future actions we may take in this regard.

On December 4, 2019, our Board of Directors declared a dividend of $0.10 per common share, payable on February 14, 2020 to stockholders of record at the close of business on January 15, 2020. Future dividends remain subject to compliance with financial covenants under our Credit Facility, as amended, as well as Board approval.

Additional information related to our Business Outlook for Fiscal 2020 and a definition and explanation of Adjusted EBITDA is included in the below section "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended October 31, 2019 and 2018."

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COMPARISON OF THE RESULTS OF OPERATIONS FOR THREE MONTHS ENDED OCTOBER 31, 2019 AND 2018

Net Sales. Consolidated net sales were $170.3 million and $160.8 million for the three months ended October 31, 2019 and 2018, respectively, representing an increase of $9.5 million, or 5.9%. The period-over-period increase in net sales reflects significantly higher net sales in our Commercial Solutions segment, offset in part by a decrease in our Government Solutions segment. Net sales by operating segment are discussed below.

Commercial Solutions

Net sales in our Commercial Solutions segment were $94.3 million for the three months ended October 31, 2019, as compared to $78.0 million for the three months ended October 31, 2018, a significant increase of $16.3 million, or 20.9%. Our Commercial Solutions segment represented 55.4% of consolidated net sales for the three months ended October 31, 2019 as compared to 48.5% for the three months ended October 31, 2018. As further discussed below, demand for our products appears strong and looking forward, we believe this segment will grow in fiscal 2020.

Bookings in our Commercial Solutions segment during our first quarter of fiscal 2020 were comparable to our first quarter of fiscal 2019 and significantly higher than the bookings we achieved in our fourth quarter of fiscal 2019. Our book-to-bill ratio (a measure defined as bookings divided by net sales) for this segment was 0.80. Period-to-period fluctuations in bookings is normal for this segment.

Net sales of our satellite ground station technologies during the three months ended October 31, 2019 were slightly higher than the three months ended October 31, 2018. Growth in the first quarter of fiscal 2020 was driven by higher net sales to both U.S. government and international customers. This strength was offset, in part, by lower sales for inflight communication amplifiers sold primarily to a U.S. domestic customer. Our Heights^TM solutions continue to gain traction and related bookings during the first quarter of fiscal 2020 remained strong. For example, our Heights^TM networking platform was recently selected by Telefonica, one of the largest telecommunications companies in the world by number of customers, for a multi-year program to upgrade Vivo Brazil and Telefonica Argentina mobile networks in support of 2G, 3G and LTE backhaul. Based on the anticipated increase in the number of high-throughput satellites and low earth orbit and medium earth orbit satellites expected to be launched, and the migration of networks from 3G to 4G and ultimately 5G technologies in emerging countries, we believe that we are in the early stages of a multi-year period of growing demand for satellite ground station technologies which are used to backhaul cellular traffic. Sales to U.S. government customers for fiscal 2020 are expected to remain strong with a small amount of year-to-year growth anticipated. As a result, we expect fiscal 2020 to be a year of net sales growth for our satellite earth station product line.

Net sales in the three months ended October 31, 2019 of our public safety and location technology solutions were significantly higher as compared to the net sales we achieved in the three months ended October 31, 2018. During the first quarter of fiscal 2020, we benefited from incremental sales to key wireless customers for 911 call routing and incremental sales to state and local agencies for our next-generation 911 products. Sales during our most recent quarter reflect the benefit of our fiscal 2019 acquisitions of Solacom and the GD NG-911 business. Sales of our location technology solutions during the first quarter of fiscal 2020 were comparable to the first quarter of fiscal 2019. Our 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, but we believe we are positioned well. For instance, we recently announced a $4.4 million contract award from a key customer, which renewed the licensing of our GPS-enabled navigation platform. We also recently announced that this same customer awarded us a two-year renewal agreement worth $6.4 million for various location-based services ("LBS") in the telecommunications industry. Overall market conditions remain favorable; as such, we expect fiscal 2020 to be another year of growth for our public safety and location technology solutions.

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.

Government Solutions

Net sales in our Government Solutions segment were $76.0 million for the three months ended October 31, 2019 as compared to $82.9 million for the three months ended October 31, 2018, a decrease of $6.9 million, or 8.3%. Our Government Solutions segment represented 44.6% of consolidated net sales for the three months ended October 31, 2019, as compared to 51.5% for the three months ended October 31, 2018. As further discussed below, our business remains strong and demand for our solutions still appears robust. Looking forward, we believe that sales in our Government Solutions segment will be similar or slightly higher than the level we achieved in fiscal 2019, with the ultimate level largely determined by the timing of orders and sales.

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Bookings in our Government Solutions segment during our first quarter of fiscal 2020 were lower than our first quarter of fiscal 2019 but significantly higher than the bookings we achieved in our fourth quarter of fiscal 2019. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the first quarter of fiscal 2020 was 0.80. Period-to-period fluctuations in bookings is normal for this segment; and as discussed further below, bookings this quarter do not reflect the full amount of orders expected from a large U.S. Army global field support contract that we won or any amount from a forthcoming multi-million dollar contract to provide troposcatter equipment for use by the U.S. Marine Corps.

In October 2019, we announced that the U.S Army awarded us a contract with a $98.6 million ceiling to provide global field support services for military satellite communication ("SATCOM") terminals around the world. These SATCOM terminals provide inter and intra-theater network communications with worldwide reach back capability. The field support contract covers diverse engineering and technical skills to support these SATCOM terminals, including logistics, help desk, network engineering, security engineering, RF and satellite system engineering and support. To date, the contract has been funded at $24.4 million with additional funding expected to occur across the twelve-month performance period plus a possible six-month extension period. Additionally, in November 2019, the U.S. government announced that our teaming partner on a U.S. Marine Corps troposcatter opportunity was awarded a 10-year $325.0 million "IDIQ" contract to provide 172 next-generation troposcatter systems and related services. The teaming partner announced that it intends to subcontract the manufacture and delivery of these troposcatter systems to Comtech, including the test support, logistics and training documentation, training execution, fielding support and sustainment. We are currently negotiating contract terms with our teaming partner and expect our initial order soon. We believe this multi-year opportunity validates Comtech’s market leading troposcatter technologies and expertise.

Net sales of our mission-critical technologies during the three months ended October 31, 2019 were significantly lower as compared to the three months ended October 31, 2018, due primarily to deliveries of our next generation MT-2025 mobile satellite transceivers in the comparable period of the prior fiscal year.

Net sales of our high-performance transmission technologies during the three months ended October 31, 2019 were higher than the three months ended October 31, 2018, driven by increased sales of our solid-state, high-power amplifiers and related switching technologies, as well as increased sales of our troposcatter technologies (including our Modular Transportable Transmission System ("MTTS") troposcatter terminals to an Asia Pacific military service).

Bookings, sales and profitability in our Government Solutions segment can fluctuate dramatically from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by our U.S. and international government customers. 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 three months ended October 31, 2019 and 2018 are as follows:

	Three months ended October 31,
	2019		2018		2019		2018		2019		2018
	Commercial Solutions				Government Solutions				Consolidated
U.S. government	17.7	%	18.2	%	69.5	%	68.6	%	40.8	%	44.2	%
Domestic	56.6	%	54.2	%	10.6	%	10.0	%	36.1	%	31.4	%
Total U.S.	74.3	%	72.4	%	80.1	%	78.6	%	76.9	%	75.6	%
International	25.7	%	27.6	%	19.9	%	21.4	%	23.1	%	24.4	%
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

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

Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. Except for the U.S. government, there were no customers that represented more than 10.0% of consolidated net sales during the three months ended October 31, 2019 and 2018.

International sales for the three months ended October 31, 2019 and 2018 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $39.4 million and $39.3 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 10.0% of consolidated net sales for the three months ended October 31, 2019 and 2018.

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Gross Profit. Gross profit was $63.6 million and $57.8 million for the three months ended October 31, 2019 and 2018, respectively. The increase of $5.8 million reflects significantly higher net sales in our Commercial Solutions segment, offset in part by a decrease in sales in our Government Solutions segment, as discussed above.

Gross profit, as a percentage of consolidated net sales, for the three months ended October 31, 2019 was 37.3% as compared to 35.9% for the three months ended October 31, 2018. This increase was almost entirely driven by product mix changes as a result of the significant period-over-period increase in net sales in our Commercial Solutions segment. This segment historically achieves higher gross margins than our Government Solutions 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 the three months ended October 31, 2019 decreased slightly in comparison to the three months ended October 31, 2018. The decrease in gross profit percentage in the three months ended October 31, 2019 primarily reflects changes in products and services mix, including significantly higher net sales of our public safety and location technologies. Our gross profit percentage in this segment during the most recent fiscal quarter also includes net sales of our Heights^TM solutions, which currently have lower gross margins than our traditional satellite ground station technologies. Looking forward, we expect our gross profit as a percentage of this segment's net sales in fiscal 2020 to be slightly lower than the percentage achieved in fiscal 2019, primarily due to anticipated mix changes, including higher net sales of our Heights^TM solutions and the cessation of sales to AT&T for 911 wireless call routing which is expected to occur in the second half of fiscal 2020.

Our Government Solutions segment's gross profit, as a percentage of related segment net sales, for the three months ended October 31, 2019 increased slightly in comparison to the three months ended October 31, 2018. Based on the mix and anticipated timing of shipments and performance related to orders currently in our backlog and the mix and timing of expected new orders and related net sales, gross profit for this segment, as a percentage of related segment net sales, for fiscal 2020 is expected to be similar or slightly lower than the level achieved in fiscal 2019.

Included in consolidated cost of sales for the three months ended October 31, 2019 and 2018 are provisions for excess and obsolete inventory of $0.4 million and $0.7 million, respectively. As discussed in "Item 2. 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.

Because our consolidated gross profit, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each individual segment, it is inherently difficult to forecast. Nevertheless, based on expected bookings, expected timing of our performance on orders and the anticipated mix of net sales between our Commercial Solutions and Government Solutions segments, we currently expect our consolidated gross profit, as a percentage of consolidated net sales, for fiscal 2020 to be the same or slightly lower than the percentage we achieved in fiscal 2019.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $31.9 million and $31.8 million for the three months ended October 31, 2019 and 2018, respectively, representing an increase of $0.1 million, or 0.3%. As a percentage of consolidated net sales, selling, general and administrative expenses were 18.7% and 19.8% for the three months ended October 31, 2019 and 2018, respectively. The decrease, as a percentage of consolidated net sales, is primarily attributable to the increase in our consolidated net sales.

During the three months ended October 31, 2018, we incurred $1.4 million of facility exit costs in our Government Solutions segment. Excluding such costs, our selling, general and administrative expenses would have been $30.4 million, or 18.9% of consolidated net sales for the three months ended October 31, 2018.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $0.7 million in the three months ended October 31, 2019 as compared to $0.9 million in the three months ended October 31, 2018. Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Based on our current spending plans, we expect total fiscal 2020 selling, general and administrative expenses, in dollars, to be higher and, as a percentage of consolidated net sales, to be slightly lower than the 19.1% recorded in fiscal 2019.

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Research and Development Expenses.Research and development expenses were $14.9 million and $13.2 million for the three months ended October 31, 2019 and 2018, respectively, representing an increase of $1.7 million, or 12.9%. As a percentage of consolidated net sales, research and development expenses were 8.7% and 8.2% for the three months ended October 31, 2019 and 2018, respectively.

For the three months ended October 31, 2019 and 2018, research and development expenses of $12.9 million and $11.4 million, respectively, related to our Commercial Solutions segment, and $1.9 million and $1.7 million, respectively, related to our Government Solutions segment. The remaining research and development expenses of $0.1 million for both the three months ended October 31, 2019 and 2018, 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 the three months ended October 31, 2019 and 2018, customers reimbursed us $2.7 million and $5.0 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.

We continue to invest in enhancements to existing products as well as in new products across almost all of our product lines. Based on our current spending plans, we expect fiscal 2020 research and development expenses, in dollars, to be higher and, as a percentage of consolidated net sales, to be slightly lower than the 8.4% achieved in fiscal 2019.

Amortization of Intangibles. Amortization relating to intangible assets with finite lives was $5.2 million (of which $4.4 million was for the Commercial Solutions segment and $0.8 million was for the Government Solutions segment) for the three months ended October 31, 2019 and $4.3 million (of which $3.5 million was for the Commercial Solutions segment and $0.8 million was for the Government Solutions segment) for the three months ended October 31, 2018. The increase of $0.9 million was due to our fiscal 2019 acquisitions of Solacom and the GD NG-911 business.

Our Business Outlook for Fiscal 2020 assumes total annual amortization of intangible assets of approximately $21.0 million which reflects a full year of amortization of intangibles related to our fiscal 2019 acquisitions of Solacom and the GD NG-911 business. Such amount, however, does not include the impact of any pending or future acquisitions.

Acquisition Plan Expenses. During the three months ended October 31, 2019, we incurred acquisition plan expenses of $2.4 million, including expenses related to our pending acquisition of UHP, as discussed above. During the three months ended October 31, 2018, we incurred acquisition plan expenses of $1.1 million, which primarily related to our fiscal 2019 acquisition of Solacom. These expenses are recorded in our Unallocated segment.

In order to position ourselves to take advantage of additional growth opportunities and meet our strategic objectives, during the second quarter of fiscal 2020, we expect to incur approximately $2.4 million of acquisition plan expenses for companies whose solution offerings are complementary to our business. There is no certainty that our acquisition plan efforts will be successful and total acquisition plan expenses in the second quarter of fiscal 2020 may ultimately be higher.

Operating Income. Operating income for the three months ended October 31, 2019 was $9.3 million as compared to $7.3 million for the three months ended October 31, 2018. Operating income by reportable segment is shown in the table below:

	Three months ended October 31,
	2019			2018		2019		2018		2019		2018		2019			2018
($ in millions)	Commercial Solutions					Government Solutions				Unallocated				Consolidated
Operating income (loss)	$	9.8		7.1		7.1		6.7		(7.7	)	(6.4	)	$	9.3		7.3
Percentage of related net sales	10.4		%	9.1	%	9.3	%	8.1	%	NA		NA		5.5		%	4.5	%

The increase in our Commercial Solutions segment’s operating income for the three months ended October 31, 2019, both in dollars and as a percentage of related segment net sales, was due primarily to the significant increase in this segment’s net sales offset, in part, by a slight decrease in this segment’s gross profit percentage, higher research and development expenses and increased amortization of intangibles, as discussed above. Looking forward, given expected sales and product mix assumptions, as discussed above, we expect fiscal 2020 operating income, both in dollars and as a percentage of related segment net sales, to be higher than the 10.1% achieved in fiscal 2019.

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The increase in our Government Solutions segment’s operating income for the three months ended October 31, 2019, both in dollars and as a percentage of related segment net sales, was due primarily to the $1.4 million of facility exit costs that we incurred during the three months ended October 31, 2018, as discussed above. Excluding such facility exit costs, operating income in our Government Solutions segment for the three months ended October 31, 2018 would have been $8.0 million, or 9.7% of related segment sales. The decrease, both in dollars and as a percentage of related segment net sales, in the three months ended October 31, 2019 was due primarily to the decrease in net sales, as discussed above. Looking forward, given expected sales and product mix assumptions, as discussed above, we expect fiscal 2020 operating income, in dollars, to be comparable to the amount achieved in fiscal 2019, and as a percentage of related segment net sales, to be slightly lower than the 9.2% achieved in fiscal 2019.

The increase in unallocated expenses for the three months ended October 31, 2019 as compared to the three months ended October 31, 2018 is primarily due to increased business and sales activity, as well as higher acquisition plan expenses during the most recent fiscal quarter, as discussed above. Amortization of stock-based compensation was $0.9 million and $1.0 million, respectively, for the three months ended October 31, 2019 and 2018.

Excluding the $2.4 million of acquisition plan expenses and $0.2 million of estimated contract settlement costs, consolidated operating income for the three months ended October 31, 2019 would have been $11.9 million, or 7.0% of consolidated net sales. Excluding the $1.1 million of acquisition plan expenses and $1.4 million of facility exit costs in the three months ended October 31, 2018, consolidated operating income would have been $9.8 million, or 6.1% of consolidated net sales. The increase from 6.1% to 7.0% reflects the benefit of incremental sales growth and changes in overall spending, as discussed above.

Our Business Outlook for Fiscal 2020 assumes, similar to the prior three fiscal years, that we will continue to pay certain annual non-equity incentive awards in the form of fully-vested share units. Amortization of stock-based compensation can fluctuate from period-to-period based on the type and timing of stock-based awards, estimated forfeitures and the achievement of applicable performance goals. If we do not achieve our fiscal 2020 business goals, amortization of stock-based compensation expense would be lower than our current expected fiscal 2020 range.

Looking forward, unallocated operating expenses in fiscal 2020 are expected to be higher than the $23.6 million incurred in fiscal 2019. The increase in unallocated expenses is expected to be driven by: (i) increased amortization of stock-based compensation (which is not allocated to our two reportable segments) which, in fiscal 2020, is expected to range from $12.0 million to $14.0 million; (ii) increased compensation costs, including incremental costs for additional personnel to support our anticipated growth; (iii) the absence of a $3.2 million benefit in fiscal 2020 resulting from the favorable ruling in the prior fiscal year related to a legacy TCS intellectual property matter; (iv) incremental acquisition plan expenses; and (iv) other increased spending as a result of increased business activity assumed in fiscal 2020.

Despite the incurrence of $2.4 million of acquisition plan expenses and $0.2 million of estimated contract settlement costs in the first quarter of fiscal 2020 as well as an additional $2.4 million of such costs expected during the second quarter of fiscal 2020, our fiscal 2020 GAAP consolidated operating income (in dollars) is anticipated to be higher than the $41.4 million we achieved in fiscal 2019, and as a percentage of consolidated net sales, to approximate 7.0% as compared to the 6.2% we achieved in fiscal 2019.

Interest Expense and Other. Interest expense was $1.8 million and $2.7 million for the three months ended October 31, 2019 and 2018, respectively. The amount for the three months ended October 31, 2019 primarily relates to our new Credit Facility. The amount for the three months ended October 31, 2018 primarily relates to our Prior Credit Facility. Our effective interest rate (including amortization of deferred financing costs) in the three months ended October 31, 2019 was approximately 4.7%.

Looking forward, we expect our fiscal 2020 interest expense rate to approximate 4.6% and total interest expense to approximate $7.5 million. Our current and expected fiscal 2020 cash borrowing rate (which excludes the amortization of deferred financing costs) is approximately 4.0%.

Write-off of Deferred Financing Costs. In connection with the establishment of our new Credit Facility in the three months ended October 31, 2018, we wrote-off $3.2 million of deferred financing costs which primarily related to the term loan portion of our Prior Credit Facility. See "Notes to Condensed Consolidated Financial Statements - Note (11) - Credit Facility" for further information. There was no comparable charge in the three months ended October 31, 2019.

Interest (Income) and Other. Interest (income) and other for both the three months ended October 31, 2019 and 2018 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.

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Provision for (Benefit from) Income Taxes. The provision for income taxes during the three months ended October 31, 2019 was $1.1 million as compared to a benefit from income taxes of $2.1 million for the three months ended October 31, 2018. Our effective tax rate (excluding discrete tax items) for the three months ended October 31, 2019 was 23.0% as compared to 22.75% for the three months ended October 31, 2018. The increase from 22.75% to 23.0% is primarily due to expected product and geographical mix changes reflected in our Business Outlook for Fiscal 2020.

During the three months ended October 31, 2019, we recorded a net discrete tax benefit of $0.6 million, primarily related to discrete tax benefits for stock-based awards that were settled during the quarter. During the three months ended October 31, 2018, we recorded a net discrete tax benefit of $2.4 million, primarily related to (i) the favorable resolution of the IRS audit of our fiscal 2016 federal income tax return, and (ii) discrete tax benefits for stock-based awards that were settled during the quarter.

Our federal income tax returns for fiscal 2017 and 2018 are subject to potential future IRS audit. None of our state income tax returns prior to fiscal 2015 are subject to audit. TCS's federal income tax return for the tax period from January 1, 2016 to February 23, 2016, the date we acquired TCS, is subject to potential future IRS audit. None of TCS's state income tax returns prior to calendar year 2015 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. During the three months ended October 31, 2019, consolidated net income was $6.4 million as compared to $3.5 million during the three months ended October 31, 2018.

Adjusted EBITDA. Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the three months ended October 31, 2019 and 2018 are shown in the table below (numbers in the table may not foot due to rounding):

	Three months ended October 31,
	2019			2018		2019		2018		2019		2018		2019			2018
($ in millions)	Commercial Solutions					Government Solutions				Unallocated				Consolidated
Net income (loss)	$	9.9		7.0		7.1		6.6		(10.6	)	(10.1	)	$	6.4		3.5
Provision for (benefit from) income taxes	—			—		—		—		1.1		(2.1	)	1.1			(2.1	)
Interest (income) and other	(0.1		)	0.1		—		—		—		—		(0.1		)	0.1
Write-off of deferred financing costs	—			—		—		—		—		3.2		—			3.2
Interest expense	—			—		—		—		1.8		2.6		1.8			2.7
Amortization of stock-based compensation	—			—		—		—		0.9		1.0		0.9			1.0
Amortization of intangibles	4.4			3.4		0.8		0.8		—		—		5.2			4.3
Depreciation	2.2			2.2		0.3		0.4		0.1		0.2		2.7			2.9
Estimated contract settlement costs	0.2			—		—		—		—		—		0.2			—
Acquisition plan expenses	—			—		—		—		2.4		1.1		2.4			1.1
Facility exit costs	—			—		—		1.4		—		—		—			1.4
Adjusted EBITDA	$	16.6		12.7		8.2		9.2		(4.3	)	(4.0	)	$	20.6		18.0
Percentage of related net sales	17.6		%	16.3	%	10.8	%	11.1	%	NA		NA		12.1		%	11.2	%

The increase in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, during the three months ended October 31, 2019 as compared to the three months ended October 31, 2018 is primarily attributable to higher consolidated net sales and operating income, 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, was primarily driven by significantly higher net sales, 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 primarily driven by lower net sales, 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. In addition, our Business Outlook for Fiscal 2020 includes several items, the timing of which can still shift and impact our expected quarterly financial performance.

Looking forward, based on the mix and anticipated timing of shipments and performance related to orders currently in our backlog and the mix and timing of expected new orders and related sales, we are targeting consolidated Adjusted EBITDA (in dollars) to be higher in fiscal 2020 as compared to the $93.5 million we achieved in fiscal 2019. As a percentage of consolidated net sales, Adjusted EBITDA is expected to approximate 14.0% in fiscal 2020. If order flow remains strong and we are able to achieve all of our fiscal 2020 business goals, it is possible that our fiscal 2020 Adjusted EBITDA could be higher than our targeted amount.

A reconciliation of our fiscal 2019 GAAP Net Income to Adjusted EBITDA of $93.5 million is shown in the table below (numbers in the table may not foot due to rounding):

($ in millions)	Fiscal Year 2019
Reconciliation of GAAP Net Income to Adjusted EBITDA:
Net income	$	25.0
Provision for income taxes	3.9
Interest income and other	—
Write-off of deferred financing costs	3.2
Interest expense	9.2
Amortization of stock-based compensation	11.4
Amortization of intangibles	18.3
Depreciation	11.9
Estimated contract settlement costs	6.4
Settlement of intellectual property litigation	(3.2		)
Acquisition plan expenses	5.9
Facility exit costs	1.4
Adjusted EBITDA	$	93.5

In addition, a reconciliation of our GAAP consolidated operating income, net income and net income per diluted share during the three months ended October 31, 2019 and 2018 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):

	Three months ended October 31, 2019
($ in millions, except for per share amount)	Operating Income		Net Income			Net Income per Diluted Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported	$	9.3	$	6.4		$	0.26
Acquisition plan expenses	2.4		1.8			0.07
Estimated contract settlement costs	0.2		0.2			0.01
Net discrete tax benefit	—		(0.6		)	(0.02		)
Non-GAAP measures	$	11.9	$	7.8		$	0.32

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	Three months ended October 31, 2018
($ in millions, except for per share amount)	Operating Income		Net Income			Net Income per Diluted Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported	$	7.3	$	3.5		$	0.14
Facility exit costs	1.4		1.1			0.04
Acquisition plan expenses	1.1		0.9			0.04
Write-off of deferred financing costs	—		2.5			0.10
Net discrete tax benefit	—		(2.4		)	(0.10		)
Non-GAAP measures	$	9.8	$	5.5		$	0.22

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, facility exit costs and 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 2020 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 and interest expense, 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.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents increased $1.3 million from $45.6 million at July 31, 2019 to $46.9 million at October 31, 2019. The increase in cash and cash equivalents during the three months ended October 31, 2019 was driven by the following:

• Net cash provided by operating activities was $5.4 million for the three months ended October 31, 2019 as compared to net cash used in operating activities of $14.1 million for the three months ended October 31, 2018. The period-over-period increase in cash flow from operating activities reflects overall changes in net working capital requirements, principally the timing of shipments, billings and payments.

• Net cash used in investing activities for the three months ended October 31, 2019 was $1.3 million as compared to $1.6 million for the three months ended October 31, 2018. Both of these amounts primarily represented expenditures relating to ongoing equipment upgrades and enhancements.

• Net cash used in financing activities was $2.9 million for the three months ended October 31, 2019 as compared to net cash provided by financing activities of $15.2 million for the three months ended October 31, 2018. During the three months ended October 31, 2018, we entered into a new Credit Facility and repaid in full the outstanding borrowings under our Prior Credit Facility. During the three months ended October 31, 2019, we had net borrowings under our Credit Facility of $4.0 million. During the three months ended October 31, 2019 and 2018, we paid $2.7 million and $2.6 million, respectively, in cash dividends to our stockholders. We also made $4.6 million and $5.0 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during the three months ended October 31, 2019 and 2018, respectively.

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The Credit Facility is discussed below and in "Notes to Condensed Consolidated Financial Statements - Note (11) - Credit Facility."

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 October 31, 2019, our material short-term cash requirements primarily consist of: (i) interest payments under our Credit Facility; (ii) payments related to lease commitments; (iii) our ongoing working capital needs, including income tax payments; and (iv) payment of accrued quarterly dividends. Also, in November 2019, we entered into an agreement to acquire UHP and its sister company (together, "UHP") for a purchase price of approximately $40.0 million, of which we anticipate $5.0 million to be paid in Comtech common stock with the remaining balance payable in cash. The purchase agreement also provides an earn-out up to an additional $10.0 million payable, at our election, in cash and or shares of Comtech common stock, if certain agreed upon sales milestones are reached in the twelve-month period following the completion of the acquisition. We expect to use existing cash and cash equivalents and increased borrowings under our Credit Facility to complete the UHP acquisition.

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 October 31, 2019 and December 4, 2019, we were authorized to repurchase up to an additional $8.7 million of our common stock, pursuant to our current $100.0 million stock repurchase program. Our stock repurchase program has no time restrictions and repurchases may be made in open-market or privately negotiated transactions and may be made pursuant to SEC Rule 10b5-1 trading plans. There were no repurchases of our common stock during the three months ended October 31, 2019 and 2018.

On September 24, 2019, our Board of Directors declared a dividend of $0.10 per common share, which was paid on November 15, 2019. On December 4, 2019, our Board of Directors declared a dividend of $0.10 per common share, payable on February 14, 2020 to stockholders of record at the close of business on January 15, 2020. Future dividends remain subject to compliance with financial covenants under our Credit Facility, as amended, as well as Board approval.

Our material long-term cash requirements primarily consist of mandatory interest payments pursuant to 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 in the current economic and credit environment 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

On October 31, 2018, we entered into a First Amended and Restated Credit Agreement (the "Credit Facility") with a syndicate of lenders, replacing our prior Credit Agreement dated as of February 23, 2016 (as amended by that certain First Amendment, dated as of June 6, 2017 (the "Prior Credit Facility")).

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.

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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.

The proceeds of the Credit Facility were used, in part, to repay in full the outstanding borrowings under the Prior Credit Facility, and additional proceeds of the Credit Facility are expected to be used by us for working capital and other general corporate purposes. As of October 31, 2019, the amount outstanding under our Credit Facility was $169.0 million, which is reflected in the non-current portion of long-term debt on our Condensed Consolidated Balance Sheet. At October 31, 2019, we had $2.6 million of standby letters of credit outstanding under our Credit Facility related to our guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit. During the three months ended October 31, 2019, we had outstanding balances under the Credit Facility ranging from $142.0 million to $169.0 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 October 31, 2019, our Secured Leverage Ratio was 1.75x TTM Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA. Our Interest Expense Coverage Ratio as of October 31, 2019 was 13.07x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA. Given our expected future business performance, we anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future.

The obligations under the Credit Facility are guaranteed by certain of our domestic 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.

On December 6, 2018, we entered into the first amendment to the Credit Facility. The purpose of the amendment is to provide for a mechanism to replace the LIBO Rate for Eurodollar borrowings with an alternative benchmark interest rate, should the LIBO Rate generally become unavailable in the future on an other-than-temporary basis.

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 October 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) 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 October 31, 2019, will materially adversely affect our liquidity.

At October 31, 2019, cash payments due under long-term obligations (including estimated interest expense on our Credit Facility), excluding purchase orders that we entered into in our normal course of business, are as follows:

	Obligations Due by Fiscal Years or Maturity Date (in thousands)
	Total		Remainder of 2020	2021 and 2022	2023 and 2024	After 2024
Credit Facility - principal payments	$	169,000	—	—	169,000	—
Credit Facility - interest payments	29,428		5,595	14,674	9,159	—
Operating lease liabilities	40,800		8,192	16,006	10,047	6,555
Finance lease and other obligations	588		588	—	—	—
Contractual cash obligations	$	239,816	14,375	30,680	188,206	6,555

As discussed further in "Notes to Condensed Consolidated Financial Statements - Note (11) - Credit Facility," 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.

As discussed further in "Notes to Condensed Consolidated Financial Statements - Note (18) - Stockholders’ Equity," on December 4, 2019, our Board of Directors declared a dividend of $0.10 per common share, payable on February 14, 2020 to stockholders of record at the close of business on January 15, 2020. Future dividends remain subject to compliance with financial covenants under our Credit Facility, as amended, as well as Board approval.

At October 31, 2019, we have approximately $2.6 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.

In fiscal 2018, we entered into a full and final warranty settlement with AT&T, the largest customer/distributor of a small product line that we refer to as the TCS 911 call handling software solution. As discussed in "Notes to Condensed Consolidated Financial Statements - Note (9) - Accrued Expenses and Other Current Liabilities," pursuant to the settlement agreement, we issued thirty-six credits to AT&T of $0.2 million which AT&T can apply on a monthly basis to purchases of solutions from us, beginning October 2017 through September 2020. As of October 31, 2019, the total present value of these monthly credits is $1.6 million, all of which is included in our current accrued warranty obligations on our Condensed Consolidated Balance Sheet. Such amount is not shown in the above commitment table.

As discussed further in "Notes to Condensed Consolidated Financial Statements - Note (2) - Acquisitions," in November 2019, we entered into an agreement to acquire UHP for a total purchase price payable at closing of approximately $40.0 million, of which we anticipate $5.0 million to be paid in Comtech common stock with the remaining balance payable in cash. The purchase agreement also provides an earn-out up to an additional $10.0 million payable, at our election, in cash and or shares of Comtech common stock, if certain agreed upon sales milestones are reached in the twelve-month period following closing. The transaction is subject to customary closing conditions and is expected to occur late in the second half of our fiscal 2020. We expect to fund a significant portion of the UHP purchase price in cash. Such amount is not shown in the above commitment table.

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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 Condensed Consolidated Financial Statements - Note (19) - Legal Proceedings and Other Matters," TCS is subject to a number of indemnification demands and we are incurring ongoing legal expenses in connection with these matters. Our insurance policies may not cover the cost of defending indemnification claims or providing indemnification. As a result, pending or future claims asserted against us by a party that we have agreed to indemnify could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition.

We have change in control agreements, 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.

Our Condensed Consolidated Balance Sheet as of October 31, 2019 includes total liabilities of $7.8 million for uncertain tax positions, including interest, any or all of which may result in a cash payment. The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of any potential cash settlement with the taxing authorities.

RECENT ACCOUNTING PRONOUNCEMENTS

We are required to prepare our condensed 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 Condensed Consolidated Financial Statements - Note (3) - Adoption of Accounting Standards and Updates," during the three months ended October 31, 2019, we adopted:

• FASB ASU No. 2016-02 - Leases (Topic 842). See "Notes to Condensed Consolidated Financial Statements - Note (12) - Leases" for further information.

• FASB ASU No. 2017-11, which provides guidance on the accounting for certain financial instruments with embedded features that result in the strike price of the instrument or embedded conversion option being reduced on the basis of the pricing of future equity offerings (commonly referred to as "down round" features). On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we did not have any financial instruments with such "down round" features.

• FASB ASU No. 2017-12, which expands and refines hedge accounting for both non-financial and financial risk components and simplifies and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we are not a party to any such hedging transactions.

• FASB ASU No. 2018-07, which expands the scope of Topic 718 to include certain share-based payment transactions for acquiring goods and services from nonemployees. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we did not have any outstanding share-based awards with nonemployees that required remeasurement.

• FASB ASU No. 2018-16, which expands the list of eligible U.S. benchmark interest rates permitted in the application of hedge accounting due to broad concerns about the long-term sustainability of the LIBO Rate. This ASU adds the Overnight Index Swap ("OIS") rate, based on the Secured Overnight Financing Rate ("SOFR"), as an eligible U.S. benchmark interest rate. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we are not a party to any such hedging transactions.

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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 as of October 31, 2019:

• FASB ASU No. 2016-13 issued in June 2016 and ASU No. 2018-19 issued in November 2018, which require the measurement of expected credit losses for financial assets held at the reporting date to be based on historical experience, current conditions and reasonable and supportable forecasts. In April 2019, FASB ASU No. 2019-04 was issued to provide clarification guidance in the following areas: (i) accrued interest; (ii) recoveries; (iii) projections of the interest rate environment; (iv) consideration of prepayments; and (v) other topics. In May 2019, FASB ASU No. 2019-05 was issued to provide entities with an option to irrevocably elect the fair value option applied on an instrument by instrument basis for eligible instruments. In November 2019, FASB ASU No. 2019-11 was issued to provide clarification guidance in the following areas: (i) expected recoveries for purchased financial assets with credit deterioration; (ii) transition relief for troubled debt restructurings; (iii) disclosures related to accrued interest receivables; (iv) financial assets secured by collateral maintenance provisions; and (v) conforming amendment to subtopic 805-20. These ASUs are effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020), including interim periods within those fiscal years. All entities may adopt the amendments in this ASU earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Except for a prospective transition approach required for debt securities for which an other-than-temporary impairment had been recognized before the effective date, an entity will apply the amendments in this ASU through a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, on a modified-retrospective approach). We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures.

• FASB ASU No. 2018-13, issued in August 2018, which modifies the disclosure requirements for fair value measurements in Topic 820. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020). Upon the effective date, certain provisions are to be applied prospectively, while others are to be applied retrospectively to all periods presented. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. We are evaluating the impact of this ASU on our condensed consolidated financial statement disclosures.

• FASB ASU No. 2018-15, issued in August 2018, 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. This ASU is effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020), and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. This ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures.

• FASB ASU No. 2018-17, issued in October 2018, 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. This ASU is effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020) and for interim periods therein, with early adoption permitted. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we currently do not have any indirect interests held through related parties under common control.

• FASB ASU No. 2018-18, issued in November 2018, 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. This ASU is effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020) and for interim periods therein, with early adoption permitted. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we are currently not engaged in such collaborative arrangement transactions.

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• FASB ASU No. 2019-08, issued in November 2019, 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. his ASU is effective for fiscal years beginning after December 15, 2019 (our fiscal year beginning on August 1, 2020) and interim periods therein. We are evaluating the impact of this ASU on our condensed consolidated financial statements and disclosures; however, we do not expect the adoption to have any effect given that we have not historically issued such share based awards to customers.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Our earnings and cash flows are subject to fluctuations due to changes in interest rates primarily from borrowings under our Credit Facility. Based on the amount of outstanding debt under our Credit Facility, a hypothetical change in interest rates by 10% would change interest expense by approximately $0.6 million over a one-year period. Although we do not currently use interest rate derivative instruments to manage exposure to interest rate changes, we may choose to do so in the future in connection with our Credit Facility.

Our earnings and cash flows are also subject to fluctuations due to changes in interest rates on our investment of available cash balances. As of October 31, 2019, we had cash and cash equivalents of $46.9 million, which consisted of cash and highly-liquid money market deposit accounts. Many of these investments are subject to fluctuations in interest rates, which could impact our results. Based on our investment portfolio balance as of October 31, 2019, a hypothetical change in interest rates of 10% would have a nominal impact on interest income over a one-year period. Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.

Item 4.     Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934), was carried out by us under the supervision and with the participation of our management, including our President, Chief Executive Officer and Chairman and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by the report to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There have been no changes in our internal controls over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

The certifications of our President, Chief Executive Officer and Chairman and Chief Financial Officer, that are Exhibits 31.1 and 31.2, respectively, should be read in conjunction with the foregoing information for a more complete understanding of the references in those Exhibits to disclosure controls and procedures and internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.     Legal Proceedings

See "Notes to Condensed Consolidated Financial Statements - Note (19) - Legal Proceedings and Other Matters," of this Form 10-Q for information regarding legal proceedings and other matters.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in our Form 10-K for the fiscal year ended July 31, 2019.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 4.     Mine Safety Disclosures

Not applicable.

Item 6.    Exhibits

Exhibit 10.1 - Retirement and Transition Agreement

Exhibit 10.2 - Consulting Agreement

Exhibit 31.1 - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS - XBRL Instance Document

Exhibit 101.SCH - XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.LAB - XBRL Taxonomy Extension Labels Linkbase Document

Exhibit 101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 101.DEF - XBRL Taxonomy Extension Definition Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

COMTECH TELECOMMUNICATIONS CORP.

(Registrant)

Date:	December 4, 2019	By:  /s/ Fred Kornberg
		Fred Kornberg
		Chairman of the Board
		Chief Executive Officer and President
		(Principal Executive Officer)
Date:	December 4, 2019	By:  /s/ Michael A. Bondi
		Michael A. Bondi
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

RETIREMENT ANDTRANSITION AGREEMENT

This Retirement and Transition Agreement (“Agreement”) is entered into by and between Richard L. Burt (“you”) and Comtech Telecommunications Corp., a Delaware corporation (the “Company”) on behalf of itself and its subsidiaries (including Comtech Systems, Inc. (“CSI”)), divisions, affiliates and related business entities, successors and assigns, assets, employee benefit plans or funds, and each of its or their respective past and/or present directors, officers, shareholders, fiduciaries, agents, trustees, administrators, employees, representatives, heirs and assigns, whether acting as agents for the Company or in their individual capacities (collectively the “Company Entities”).

In exchange for and as a condition of receiving the payments and benefits set forth in Section 3 below, you and the Company hereby agree as follows:

1.Status.     As of the “Effective Date” (as defined in Section 15 below), you will retire and cease to serve as a Senior Vice President of the Company and as the President of CSI, and will be deemed to have retired and resigned from any other positions you may hold as an officer, director, or fiduciary of any Company-related entity. You agree to take any and all necessary actions to effectuate your retirement and resignation from any positions you hold at the Company and any of its subsidiaries as of the Effective Date. On the Effective Date, you will begin to provide services as an employee in the capacity of a Senior Advisor to the Chief Executive Officer, Chief Financial Officer and Chief Officer of the Company. All of your stock awards granted under Comtech Telecommunication Corp. 2000 Stock Incentive Plan, as Amended and Restated effective March 6, 2018 (the “2000 Plan”) that are outstanding as of the Effective Date will be treated as set forth on Schedule A (the “Employee Awards. You hereby acknowledge and agree, notwithstanding anything to the contrary in the CIC Agreement (as defined below), including any notice requirements, that the Change-in-Control Agreement (Tier 2) by and between you and the Company, dated as of June 14, 2017 (the “CIC Agreement”), will be terminated as of the Effective Date and you will not be entitled to any compensation (including award vesting) or benefits pursuant to the terms of the CIC Agreement from and after the Effective Date. You also acknowledge and agree that you will not be entitled to receive any severance payments or benefits in connection with the termination of your employment during or at the end of the Senior Advisor Period (as defined below), other than payment of any accrued and unpaid base salary, which will be paid within thirty (30) days of the date of termination, and reimbursement for unreimbursed business-related expenses in accordance with Company policy, which will be reimbursed within thirty (30) days of the date of termination (the “Accrued Benefits”). Except as otherwise provided herein, from and after the Effective Date, you shall not represent yourself as being an officer, agent or representative of any Company Entity for any purpose.

2.Senior Advisor Services.

a.During the period beginning on the Effective Date and ending on the later of the first anniversary thereof and the Final Certification Date (as defined in the Long Term Performance Share Award Agreement Pursuant to the 2000 Plan, by and between you and the Company, dated as of August 9, 2017) (such period, the “Senior Advisor Period”), you agree for at least eight hours per week to act as a Senior Advisor to the Company, in which capacity you

will perform such duties as are assigned to you by the Company, including, but not limited to, attendance at customer and employee meetings (whether in the US or internationally). During the Senior Advisor Period, you will be subject to the direction and control of, and report directly to, the Chief Executive Officer of the Company. Your services during the Senior Advisor Period may be performed by phone or by in-person attendance at meetings, in each case as directed by the Chief Executive Officer of the Company. If no services are directly requested by the Company, you will be required to provide a monthly email report detailing market conditions, business conditions and items of note that can assist the Company achieve its business strategies.

b.Upon the receipt of reasonable notice from the Company (including outside counsel), you agree that, during the Senior Advisor Period and thereafter, you will respond and provide accurate information with regard to matters in which you have knowledge as a result of your employment with the Company, and will provide reasonable assistance to the Company, its subsidiaries and affiliates and their respective representatives in defense of any claims that may be made against the Company or its subsidiaries or affiliates, and will assist the Company and its subsidiaries and affiliates in the prosecution of any claims that may be made by the Company or its subsidiaries or affiliates, to the extent that such claims may relate to the period of your employment with the Company. You agree to promptly inform the Company if you become aware of any lawsuits involving such claims that may be filed or threatened against the Company or its subsidiaries or affiliates. You also agree to promptly inform the Company (to the extent that you are legally permitted to do so) if you are asked to assist in any investigation of the Company or its subsidiaries or affiliates (or their actions), regardless of whether a lawsuit or other proceeding has then been filed against the Company or its subsidiaries or affiliates with respect to such investigation, and shall not assist in any investigation unless legally required. Upon presentation of appropriate documentation, the Company shall pay or reimburse you for all reasonable out-of-pocket travel, duplicating or telephonic expenses incurred by you in complying with this Section 2.b.

3.Payments and Benefits.    In consideration of your agreement to act as a Senior Advisor and in exchange for your execution and non-revocation of this Agreement and your compliance with the other terms and conditions of this Agreement and the Restrictive Covenant Agreements (as defined below), the Company agrees to provide you the following payments and benefits in full satisfaction of any obligations it may have to you:

a.Unless otherwise notified earlier, you may continue to use your previously issued Company computer equipment to perform services during the Senior Advisor Period. If you are requested to return Company computer equipment and you refuse to do so, all payments and benefits herein shall immediately stop and no longer be owed or provided. At the end of the Senior Advisor Period, you may purchase your company issued cell phone and tablet computer at fair market value, or return them to the Company, at your option. All proprietary, confidential or trade secret information of the Company Entities shall be removed from said devices by company IT personnel prior to their purchase.

b.So long as you continue to satisfactorily perform your duties during the Senior Advisor Period and comply with the terms of this Agreement and the Consulting Agreement (as defined below), you will continue to receive continued vesting of the 5,400 unvested stock options (as described on Schedule A). Any and all awards previously granted pursuant to the 2000

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Plan not listed on Schedule A will be immediately forfeited and cancelled for no consideration on the Effective Date.

c.At the end of the Senior Advisor Period, you will receive the Accrued Benefits.

4.Consulting Services with CSI.    CSI has agreed to retain you (or an entity that agrees to make your services available to CSI) to provide certain consulting services in connection with the transition of Richard Luhrs from General Manager to President of CSI pursuant to a written consulting agreement to be entered into between you and CSI as of the date hereof (the “Consulting Agreement”), a copy of which is attached hereto as Exhibit A. You acknowledge and agree that the Consulting Agreement shall become void and of no force or effect if you breach any of the terms of this Agreement.

5.Acknowledgement.    You acknowledge and agree that the payments and other benefits provided pursuant to this Agreement (other than the Accrued Benefits): (a) are in full satisfaction and discharge of any and all liabilities and obligations of the Company to you, monetarily or with respect to employee benefits or otherwise, to which you may be entitled; (b) are in lieu of any termination or severance payments or benefits for which you may be eligible under any of the plans, policies or programs of the Company; and (c) exceed the amount you are entitled to receive from the Company and are consideration for your entering into this Agreement. You hereby further acknowledge and agree that, except as otherwise provided in this Agreement, the Effective Date is the date you will cease to participate in and be eligible for coverage under the employee benefit plans and programs maintained by the Company, and that as of the Effective Date you will only be entitled to receive from the Company other rights or benefits specifically provided under the terms of this Agreement. During the Senior Advisor Period, you will be entitled to reimbursement for pre-approved business-related expenses in accordance with Company policy. On the Effective Date, you will cease to receive car allowance. As required by law or regulation, you will be eligible to participate in the Company’s medical, dental and vision plans through COBRA following the Effective Date.

6.Release.

a.For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and conditioned upon the substantial performance by the Company of its obligations hereunder you, on behalf of yourself and your successors, assigns, heirs and representatives (each, a “Releasing Party”), hereby release and forever discharge the Company Entities (each, a “Released Party”), individually and collectively, from any and all claims, demands, causes of action, liabilities or obligations, known or unknown, pending or not pending, liquidated or not liquidated, of every kind and nature whatsoever (collectively, the “Released Claims”) which the Releasing Party has, has had or may have against any one or more of the Released Parties arising out of, based upon or in any way, directly or indirectly, related to the Company’s business, your employment with the Company or the termination of such employment; provided, however, that this Agreement shall have no effect whatsoever upon: (i) the Company’s obligations, if any, to pay or provide all payments and benefits pursuant to this Agreement or your rights to enforce such obligations; (ii) any and all obligations of the Released Parties to defend, indemnify, hold harmless or reimburse you under applicable law and/or under the respective

3

charters and by-laws of the Released Parties, and/or pursuant to insurance policies, if any, for acts or omissions in your capacity as a director, officer and/or employee thereof; and (iii) any and all rights you may have to vested or accrued benefits or entitlements under and in accordance with any applicable plan, agreement, program, award, policy or arrangement of a Released Party, including, without limitation, the CIC Agreement and the Employee Awards.

b.The Released Claims include, without limitation, (i) all claims arising out of or relating to breach of contract, covenants of good faith and fair dealing, or personnel policies or guidelines, (ii) all claims arising out of or relating to violations of any applicable federal, state or local statute, law, ordinance, regulation or order as the same may be amended or supplemented from time to time, including, without limitation, the Fair Labor Standards Act, the Equal Pay Act, the Age Discrimination in Employment Act, as amended by the Older Workers’ Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the National Labor Relations Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act, the Occupational Safety and Health Act, the Florida Civil Rights Act of 1992, the Florida Equal Pay Law, the Florida Private Whistleblower Protection Law, the New York State Human Rights Law,, the New York Labor Law, the New York Minimum Wage Act, the New York City Human Rights Law, the New York City Earned Sick Time Act, and the New York City Administrative Code, (iii) all claims for back pay, lost benefits, reinstatement, liquidated damages, punitive damages, and damages on account of any alleged personal, physical or emotional injury, and (iv) all claims for attorneys’ fees and costs.

c.You agree that you are voluntarily executing this Agreement. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the Age Discrimination in Employment Act of 1967, as amended by the Older Workers’ Benefit Protection Act, and that the consideration given for the waiver and release is in addition to anything of value to which you were already entitled. You further acknowledge that you have been advised by this writing, as required by the Age Discrimination in Employment Act of 1967, as amended by the Older Workers’ Benefit Protection Act, that: (i) your waiver and release specified herein does not apply to any rights or claims that may arise after the date you sign this Agreement; (ii) you have the right to consult with an attorney prior to signing this Agreement; (iii) you have at least twenty-one (21) days to consider this Agreement (although you may choose to sign it earlier); (iv) you have seven (7) days after you sign this Agreement to revoke it; and (v) this Agreement will not be effective until the date on which the revocation period has expired, which will be the eighth day after you sign this Agreement, assuming you have returned it to the Company by such date.

7.Waiver of Relief.    You acknowledge and agree that by virtue of the foregoing release, you have waived any relief available to you (including without limitation, monetary damages, equitable relief and reinstatement) under any of the claims and/or causes of action waived in Section 6. Therefore, you agree that you will not accept any award or settlement from any source or proceeding (including but not limited to any proceeding brought by any other person or by any government agency) with respect to any claim or right waived in this Agreement.

8.Restrictive Covenants.

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a.You agree that you will not use or disclose to anyone any of the confidential, proprietary or trade secret information of or regarding the Company Entities that you have learned or obtained, or will learn or obtain, during the course of your employment with the Company, including during the Senior Advisor Period, consistent with Company policies, any agreement(s) with the Company or applicable law.

b.You agree, on behalf of yourself and anyone acting on your behalf, not to disparage the Company or the Company Entities, in any manner likely to be harmful to them or their business, business reputation or personal reputation. Nothing in this Agreement or in the Restrictive Covenant Agreement shall be construed to prevent or limit you from (i) responding truthfully to a valid subpoena; (ii) filing a charge or complaint with, or participating in any investigation conducted by, a governmental agency including the Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the Equal Employment Opportunity Commission and/or any state or local human rights agency; or (iii) filing, testifying or participating in or otherwise assisting in a proceeding relating to, or reporting, an alleged violation of any federal, state or municipal law relating to fraud or any rule or regulation of the Securities Exchange Commission (“SEC”), the Commodity Futures Trading Commission (“CFTC”) or any self-regulatory organization (including, but not limited to, the Financial Industry Regulatory Authority), or making other disclosures that are protected under the whistleblower provisions of federal or state law or regulation. Prior authorization of the Company shall not be required to make any reports or disclosures under this Section 8.b. and you are not required to notify the Company that you have made such reports or disclosures. Nevertheless, you acknowledge and agree that by virtue of the release set forth in Section 6 above, you have waived any relief available to you (including without limitation, monetary damages, equitable relief and reinstatement) under any of the claims and/or causes of action waived in this Agreement. Therefore, except as set forth herein, you agree that you will not seek or accept any award or settlement from any source or proceeding (including but not limited to any proceeding brought by any other person or by any government agency) with respect to any claim or right waived in this Agreement. This Agreement does not, however, waive or release your right to receive a monetary award from the SEC or CFTC for information provided to the SEC or CFTC. In addition, notwithstanding any other provision of this Agreement or the Restrictive Covenant Agreement, you understand that you may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (x) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney if such disclosure is made solely for the purpose of reporting or investigating a suspected violation of law or for pursuing an anti-retaliation lawsuit; or (y) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and you do not disclose the trade secret except pursuant to a court order.

c.During the Senior Advisor Period and for a period of twenty-four (24) months thereafter, you agree that you shall not, except on behalf of the Company, directly or indirectly, engage in performing, providing, or selling Competitive Services in any jurisdiction in which you worked or performed, provided, or sold Competitive Services during the twenty-four (24) month period immediately preceding the Senior Advisor Period and during the Senior Advisor Period. The term “Competitive Services” shall refer to products or services competitive with the products or services performed, provided, or sold by the Company or CSI to a customer or proposed to be performed, provided or sold to a prospective customer. For the avoidance of doubt,

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if you do perform Competitive Services, you will have committed a material breach of this Agreement.

d.Without limiting the foregoing, you also acknowledge and agree to your continuing obligations, both during and after your employment, under the restrictive covenants set forth in your Conflict of Interest Declaration, dated October 15, 1998, Conflict of Interest Declaration, dated August 19, 1980, Employee Disclosure and Assignment Agreement, dated October 12, 1998, Employee Disclosure and Assignment Agreement, dated November 26, 1979, and letter agreement with CSI, dated February 24, 1994 (collectively, the “Restrictive Covenant Agreements”) and the other provisions the Restrictive Covenant Agreements intended to survive termination of employment. Such provisions of the Restrictive Covenant Agreements shall remain in full force and effect in accordance with their terms.

9.Severability.    If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, void or unenforceable, such provision shall have no effect; however, the remaining provisions shall be enforced to the maximum extent possible. Further, if a court should determine that any portion of this Agreement is overbroad or unreasonable, such provision shall be given effect to the maximum extent possible by narrowing or enforcing in part that aspect of the provision found overbroad or unreasonable.

10.Breach of Agreement.    You agree that any breach of this Agreement shall constitute a material breach as to which the Company may immediately cease making any payments or providing any benefits owed to you under this or any other agreement and seek all relief available under the law or at equity, including recoupment of the payments and benefits provided pursuant to this Agreement. You further acknowledge that any breach of the promises set forth in this Agreement will cause the Company irreparable harm for which there is no adequate remedy at law, and you therefore consent to the issuance of an injunction in favor of Company enjoining the breach of any of those promises by any court of competent jurisdiction.

11.Miscellaneous.

a.This Agreement is not intended, and shall not be construed, as an admission that any of the Company Entities have violated any federal, state or local law (statutory or decisional), ordinance or regulation, breached any contract or committed any wrong whatsoever against you.

b.If any provision of this Agreement requires interpretation or construction, it is agreed by the parties that the entity interpreting or construing this Agreement shall not apply a presumption against one party by reason of the rule of construction that a document is to be construed more strictly against the party who prepared the document.

c.Subject to Section 3.a. herein, not later than the end of the Senior Advisor Period, you will return to the Company all property belonging to the Company or its affiliates (including, but not limited to, any Company-provided laptops, computers, cell phones, wireless electronic mail devices and other equipment, or documents and property belonging to the Company). You may retain your rolodex and similar address books provided that such items only include contact information. To the extent that you were provided with a cell phone number by

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the Company during your employment the Company will cooperate with you in transferring such cell phone number to your individual name following the end of the Senior Advisor Period.

12.Assignment.     This Agreement is binding upon, and shall inure to the benefit of, the parties and their respective heirs, executors, administrators, successors and assigns.

13.Governing Law.     This Agreement shall be construed and enforced in accordance with the laws of the State of New York without regard to the principles of conflicts of law.

14.Entire Agreement.     You understand that this Agreement and the surviving provisions of the Restrictive Covenant Agreements constitute the complete understanding between the Company and you, and supersede any and all agreements, understandings, and discussions, whether written or oral, between you and any of the Company Entities. No other promises or agreements shall be binding unless in writing and signed by both the Company and you after the Effective Date of this Agreement. No modification or waiver of this Agreement shall be effective unless in writing and signed by the party against whom it is sought to be enforced.

15.Acceptance.     You may accept this Agreement by signing it and returning it to Mr. Michael Porcelain, on or before October 21, 2019. After executing this Agreement, you shall have seven (7) days (the “Revocation Period”) to revoke it by indicating your desire to do so in writing delivered to Mr. Michael Porcelain by no later than 5:00 p.m. on the seventh (7th) day after the date you sign this Agreement. The effective date of this Agreement shall be the eighth (8th) day after you sign it (the “Effective Date”). If the last day of the Revocation Period falls on a Saturday, Sunday or holiday, the last day of the Revocation Period will be deemed to be the next business day. In the event you do not accept this Agreement as set forth above, or in the event you revoke this Agreement during the Revocation Period, this Agreement, including but not limited to the obligation of the Company to provide payments and benefits, shall be deemed automatically null and void.

16.Headings and Captions.     The headings and captions herein are provided for reference and convenience only. They shall not be considered part of the Agreement and shall not be employed in the construction of the Agreement.

[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

Richard L. Burt

/s/ Richard L. Burt                        Date: September 30, 2019

COMTECH TELECOMMUNICATIONS CORP.

By: /s/ Michael Porcelain                    Date: September 30, 2019

Name: Michael Porcelain    

Its: Senior Vice President, Chief Operating Officer

Signature Page – Retirement and Transition Agreement

between Comtech Telecommunications Corp. and Richard L. Burt

Schedule A

Non-Qualified Stock Options
Grant Date	Grant Number	Vesting Date	Exercise Price	# Shares Vesting	# Shares Already Vested and Outstanding	Exercisability and Vesting
6/6/2012	NQ2425	N/A	$29.51	-	7,000	As a result of your Retirement, these vested options will be exercisable for one year following the date of your Retirement.
6/5/2013	NQ2524	N/A	$26.08	-	2,500	As a result of your Retirement, these vested options will be exercisable for one year following the date of your Retirement.
8/1/2013	NQ2550	N/A	$27.25	-	4,800	As a result of your Retirement, these vested options will be exercisable for one year following the date of your Retirement.
8/4/2014	NQ2685	N/A	$33.94	-	25,000	As a result of your Retirement, these vested options will be exercisable for one year following the date of your Retirement.
8/4/2015	NQ2753	8/4/2020	$28.35	5,400	10,800	As a result of your Retirement, the 10,800 vested options will be exercisable for one year following the date of your Retirement. The 5,400 unvested options shall continue to vest during the Senior Advisor Period. Any termination of the Senior Advisor Period shall not be deemed a Retirement with respect to these options and the 5,400 options, once vested, will remain exercisable for [90] days following the end of the Senior Advisor Period.
Total				5,400	50,100

Restricted Stock
Grant Date	Grant Number	Vesting Date	# Shares Vesting
8/9/2016	RS0003	8/9/2020	2,585
8/29/2016	RS0012	8/29/2020	356
Total			2,941

Restricted Stock Units
Grant Date	Grant Number	Vesting Date	# Shares Vesting
8/9/2017	RSU429	8/9/2020	1,960
8/8/2018	RSU642	8/8/2020	1,031
Total			2,991

Share Units
Grant Date	Grant Number	Deferral Date	# Shares Vesting
7/31/2019	ESU1082	7/31/2020	3,361
Total			3,361

Long Term Performance Shares
Grant Date	Grant Number	Vesting Date	# Shares Vesting
8/9/2017	LTPS0043	TBD	TBD
8/8/2019	LTPS0052	TBD	TBD
Total			TBD

10

EX-10.2

Exhibit 10.2

CONSULTING AGREEMENT

This Consulting Agreement (the “Agreement”), dated as of September 30, 2019 (the “Effective Date”), by and between Comtech Systems, Inc., a Delaware corporation, (the “Company”) and Richard Burt (“Consultant”).

WHEREAS, immediately prior to the Effective Date, Consultant was employed by the Company as its President;

WHEREAS, the Company and Consultant desire for Consultant to be available to provide certain transition-related services to the Company; and

WHEREAS, effective as of the Effective Date, Consultant and the Company desire to enter into this Agreement to set forth the terms pursuant to which Consultant will provide services to the Company.

NOW, THEREFORE, in consideration of the agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Consultant and the Company agree as follows:

1.CONSULTING ENGAGEMENT.

1.1    Engagement; Duties. As of the Effective Date, the Company hereby engages Consultant to provide the consulting services described herein, and Consultant hereby accepts such engagement (the “Consulting Engagement”). The services to be provided by Consultant hereunder shall consist of providing transition services requested by the Company, monitoring of business and market trends relevant to the Company’s business and such other services requested by the Company consistent with Consultant’s experience (collectively, the “Consulting Services”). Consultant shall coordinate with Michael Porcelain, Senior Vice President and Chief Operating Officer of Comtech Telecommunications Corp. (“Comtech”) and Richard Luhrs, President of Comtech Systems, Inc.

1.2    Consulting Period. The Consulting Engagement hereunder shall be for the period commencing on the Effective Date and continuing until the first anniversary thereof, unless Consultant’s engagement hereunder is terminated earlier in accordance with Section 3 hereof. The period during which Consult provides Consulting Services is referred to as the “Consulting Period.”

1.3    Independent Contractor. During the Consulting Period, Consultant’s relationship to the Company hereunder shall be that of an independent contractor. Consultant shall not be the agent of the Company and shall have no authority to act on behalf of the Company in any manner except in the manner and to the extent that the Company may expressly agree in writing. Without limiting the generality of the foregoing, under no circumstances shall Consultant have any authority to incur on behalf of the Company any debt, obligation or liability. Consultant shall be responsible for the payment of all federal, state, local and foreign withholding taxes and other such employment related taxes on his compensation hereunder. Consultant also agrees that during the Consulting Period, Consultant shall not be eligible to participate in any employee benefit plans or arrangements of the Company or its affiliates, unless otherwise provided in accordance with the terms and conditions of the applicable plan as determined by the Company in its sole discretion.

1.4    Expenses. During the Consulting Period, Consultant shall be solely responsible for all fees, costs and expenses incurred in the performance of the Consulting Services, including, without limitation,

meals, commuting and transportation expenses and cell phone costs; provided, however, the Company shall reimburse Consultant for fees, costs and expenses incurred by Consultant in the

performance of the Consulting Services to the extent the Company requests or requires Consultant in writing to incur such fees, costs or expenses and such expense are approved in advance in writing/email by Michael Porcelain or Richard Luhrs. Any amounts for which Consultant is eligible or entitled to reimbursement shall be reimbursed by the Company in accordance with the Company’s expense reimbursement policy upon Consultant’s submission of appropriate documentation of such expenses.

2.COMPENSATION

2.1    Consulting Fee. As consideration for the Consulting Services, for each week during the Consulting Period that Consultant provides Consulting Services, the Company will pay Consultant a retainer of $7,403.84 per week (the “Consulting Fee”). Consultant shall provide the Company a monthly invoice (the “Invoice”) for Consulting Services within five (5) days of the end of each month, and the Company shall pay Consultant the Consulting Fee for such month within thirty (30) days of the Company’s receipt of the Invoice. The Consulting Fee will be pro-rated on a daily basis for any period of less than seven (7) days.

2.2    Additional Payment. As additional consideration for the Consulting Services, for three (3) months following the Effective Date (or if earlier, until the date Consultant ceases providing Consulting Services), the Company will pay Consultant an additional fee of $666.47 per month (the “Additional Payment”). The Additional Payment shall be included in the Invoice and will be paid by the Company at the same time the Company pays the Consulting Fee to Consultant.

3.TERMINATION

Termination of Engagement. Either party may terminate this Agreement and the Consulting Engagement and the Consulting Services any time upon ten (10) days’ written notice, provided that this Agreement, the Consulting Engagement and the Consulting Services will terminate immediately upon Consultant’s death or upon a material breach by Consultant of any written agreement with the Company or any of its parents, subsidiaries or affiliates.

4.CONSEQUENCES OF TERMINATION

Accrued Retainer. Upon termination of the Consulting Engagement for any reason, Consultant shall be paid promptly after such termination, the accrued Consulting Fee or, if applicable, the Additional Payment, to the extent unpaid, through the date of termination. Upon termination of the Consulting Engagement for any reason, Consultant shall promptly return, or cause to be returned, to the Company all files, documents and other papers and copies thereof relating, directly or indirectly, to the business or affairs of the Company.

5.STANDARDS OF BUSINESS CONDUCT.

5.1    Standards of Business Conduct. During the Consulting Period, Consult agrees to comply with all applicable policies of the Company and Comtech, including the Comtech Telecommunications Corp. Standards of Business, as well as all applicable laws, rules and regulations.

6.SUCCESSORS; BINDING AGREEMENT

This Agreement shall inure to the benefit of and be enforceable by (i) the Company and its successors and permitted assigns, and (ii) Consultant and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Owing to the personal service nature of the Consulting Services, Consultant may not delegate any of Consultant’s

2

responsibilities, nor may Consultant assign this Agreement without the prior written consent of the Company.

7.INDEMNIFICATION

Nothing in this Agreement is intended to waive, expand or limit any right to indemnification to which Consultant may be entitled as a result of his service as an officer of the Company or Comtech prior to the Effective Date.

8.MISCELLANEOUS

8.1    Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery, if delivered by hand, (b) on the date of transmission, if delivered by confirmed facsimile or electronic mail, (c) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows::

If to the Company:

Comtech Systems, Inc.

c/o Comtech Telecommunications Corp.

68 South Service Road, Suite 230

Melville, New York 11747

Fax: 631-962-7203

Attention: Michael D. Porcelain

If to Consultant:

At the last address in the Company’s records

8.2    Amendments; Waiver. No provision of this Agreement may be modified, waived or discharged except by a waiver, modification or discharge in writing signed by the party against which enforcement is sought. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time.

8.3    Entire Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. This Agreement represents the entire agreement of the parties with respect to the subject matter hereof and shall supersede any and all previous contracts, arrangements or understandings between the Company and Consultant with respect to the subject matter hereof.

8.4    Governing Law. This Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of New York, without reference to rules relating to conflicts of law.

8.5    Headings. The section headings herein are for the purpose of convenience only and are not intended to define or limit the contents of any section.

3

8.6    Counterparts. The parties may sign this Agreement in counterparts, all of which shall be considered one and the same instrument.

[END OF TEXT - SIGNATURE PAGES TO FOLLOW]

4

IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and year first above written.

Comtech Systems, Inc.

By:/s/ Richard Luhrs

Richard Luhrs

President of Comtech Systems, Inc.

/s/ Richard L. Burt

Consultant

[Signature Page to Consulting Agreement]

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Fred Kornberg, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Comtech Telecommunications Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: December 4, 2019

/s/ Fred Kornberg

Fred Kornberg

Chairman of the Board

Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael A. Bondi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Comtech Telecommunications Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: December 4, 2019

/s/ Michael A. Bondi

Michael A. Bondi

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Comtech Telecommunications Corp. (the “Company”) on Form 10-Q for the period ended October 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fred Kornberg, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 4, 2019

/s/ Fred Kornberg

Fred Kornberg

Chairman of the Board

Chief Executive Officer and President

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Comtech Telecommunications Corp. (the “Company”) on Form 10-Q for the period ended October 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Bondi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 4, 2019

/s/ Michael A. Bondi

Michael A. Bondi

Chief Financial Officer

XML

Leases - Lease Maturity Under Topic 840 (Details)	Jul. 31, 2019 USD ($)
Leases [Abstract]
Operating Leases, Future Minimum Payments Due, Next Twelve Months	$ 11,812,000
Operating Leases, Future Minimum Payments, Due in Two Years	8,723,000
Operating Leases, Future Minimum Payments, Due in Three Years	7,343,000
Operating Leases, Future Minimum Payments, Due in Four Years	5,776,000
Operating Leases, Future Minimum Payments, Due in Five Years	3,430,000
Operating Leases, Future Minimum Payments, Due Thereafter	7,130,000
Operating Leases, Future Minimum Payments Due	44,214,000
Capital Leases, Future Minimum Payments Due, Next Twelve Months	789,000
Capital Leases, Future Minimum Payments Due in Two Years	0
Capital Leases, Future Minimum Payments Due in Three Years	0
Capital Leases, Future Minimum Payments Due in Four Years	0
Capital Leases, Future Minimum Payments Due in Five Years	0
Capital Leases, Future Minimum Payments Due Thereafter	0
Capital Leases, Future Minimum Payments Due	789,000
Capital Leases, Future Minimum Payments, Interest Included in Payments	32,000
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments	757,000
Operating And Capital Leases, Future Minimum Payments Due, Next Twelve Months	12,601,000
Operating And Capital Leases, Future Minimum Payments Due In Two Years	8,723,000
Operating And Capital Leases, Future Minimum Payments Due In Three Years	7,343,000
Operating And Capital Leases, Future Minimum Payments Due In Four Years	5,776,000
Operating And Capital Leases, Future Minimum Payments Due In Five Years	3,430,000
Operating And Capital Leases, Future Minimum Payments Due Thereafter	7,130,000
Operating And Capital Leases, Future Minimum Payments Due	45,003,000
Operating Leases, Future Minimum Payments Due And Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments	$ 44,971,000

XML

Credit Facility (Details)		3 Months Ended
	Oct. 31, 2019 USD ($)	Oct. 31, 2019 USD ($)	Oct. 31, 2018 USD ($)
Line of Credit Facility [Line Items]
New debt issuance maximum amount	$ 5,000,000	$ 5,000,000
Triggering event, days before maturity of old debt		91 days
Long-term line of credit	169,000,000	$ 169,000,000
Write-off of deferred financing costs		0	$ 3,217,000
Secured Credit Facility
Line of Credit Facility [Line Items]
Secured credit facility, maximum borrowing capacity	550,000,000	550,000,000
Outstanding standby letters of credit at period end	2,632,000	2,632,000
Outstanding commercial letters of credit at period end	0	0
Unamortized deferred financing costs	$ 2,943,000	2,943,000
Interest expense including amortization of deferred financing costs		$ 1,753,000	$ 2,542,000
Blended interest rate (percent)		4.70%	6.00%
Maximum amount of available cash on hand that can be used in leverage ratio calculation			$ 1,813,000
Leverage ratio	3.75
Maximum total leverage ratio	4.50
Fixed charge coverage ratio	3.25
Swingline Loan | Secured Credit Facility
Line of Credit Facility [Line Items]
Secured credit facility, maximum borrowing capacity	$ 25,000,000	$ 25,000,000
October 2018 Credit Facility [Member]
Line of Credit Facility [Line Items]
Minimum amount outstanding during period		142,000,000
Maximum amount outstanding during period		169,000,000
Revolving Loan Facility | Secured Credit Facility
Line of Credit Facility [Line Items]
Secured credit facility, maximum borrowing capacity	300,000,000	300,000,000
Line of credit facility, accordion feature	250,000,000	250,000,000
Letter of Credit | Secured Credit Facility
Line of Credit Facility [Line Items]
Secured credit facility, maximum borrowing capacity	$ 35,000,000	$ 35,000,000
Federal Funds Effective Swap Rate | Revolving Loan Facility | Secured Credit Facility
Line of Credit Facility [Line Items]
Variable interest rate (percent)		0.50%
Adjusted LIBO rate | Revolving Loan Facility | Secured Credit Facility
Line of Credit Facility [Line Items]
Variable interest rate (percent)		1.00%
Minimum | Secured Credit Facility
Line of Credit Facility [Line Items]
Interest expense coverage ratio	13.07
Maximum | Secured Credit Facility
Line of Credit Facility [Line Items]
Leverage ratio	1.75

XML

Inventories (Tables)

3 Months Ended

Oct. 31, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories consist of the following at:

	October 31, 2019		July 31, 2019
Raw materials and components	$	52,423,000	53,959,000
Work-in-process and finished goods	38,867,000		40,576,000
Total inventories	91,290,000		94,535,000
Less reserve for excess and obsolete inventories	19,480,000		19,696,000
Inventories, net	$	71,810,000	74,839,000

XML

Segment Information (Tables)

3 Months Ended

Oct. 31, 2019

Segment Reporting [Abstract]

Segment information

Operating segment information, along with a reconciliation of segment net income (loss) and consolidated net income to Adjusted EBITDA is presented in the tables below:

	Three months ended October 31, 2019
	Commercial Solutions			Government Solutions		Unallocated		Total
Net sales	$	94,314,000		75,953,000		—		$	170,267,000
Operating income (loss)	$	9,841,000		7,083,000		(7,664,000	)	$	9,260,000
Net income (loss)	$	9,867,000		7,095,000		(10,574,000	)	$	6,388,000
Provision for income taxes	13,000			—		1,132,000		1,145,000
Interest (income) and other	(47,000		)	(13,000	)	(17,000	)	(77,000		)
Interest expense	8,000			1,000		1,795,000		1,804,000
Amortization of stock-based compensation	—			—		879,000		879,000
Amortization of intangibles	4,362,000			844,000		—		5,206,000
Depreciation	2,196,000			313,000		142,000		2,651,000
Estimated contract settlement costs	230,000			—		—		230,000
Acquisition plan expenses	—			—		2,389,000		2,389,000
Adjusted EBITDA	$	16,629,000		8,240,000		(4,254,000	)	$	20,615,000
Purchases of property, plant and equipment	$	1,000,000		224,000		26,000		$	1,250,000
Total assets at October 31, 2019	$	675,344,000		211,125,000		44,553,000		$	931,022,000

	Three months ended October 31, 2018
		Commercial Solutions		Government Solutions	Unallocated		Total
Net sales		$	77,973,000	82,871,000	—		$	160,844,000
Operating income (loss)		$	7,058,000	6,644,000	(6,409,000	)	$	7,293,000
Net income (loss)		$	6,971,000	6,609,000	(10,112,000	)	$	3,468,000
Provision for (benefit from) income taxes		12,000		—	(2,139,000	)	(2,127,000		)
Interest (income) and other		53,000		32,000	(19,000	)	66,000
Write-off of deferred financing costs		—		—	3,217,000		3,217,000
Interest expense		22,000		3,000	2,644,000		2,669,000
Amortization of stock-based compensation		—		—	1,046,000		1,046,000
Amortization of intangibles		3,445,000		844,000	—		4,289,000
Depreciation		2,228,000		379,000	244,000		2,851,000
Acquisition plan expenses		—		—	1,130,000		1,130,000
Facility exit costs		—		1,373,000	—		1,373,000
Adjusted EBITDA		$	12,731,000	9,240,000	(3,989,000	)	$	17,982,000
Purchases of property, plant and equipment		$	892,000	629,000	124,000		$	1,645,000
Total assets at October 31, 2018		$	602,567,000	222,587,000	41,786,000		$	866,940,000

XML

Inventories

3 Months Ended

Oct. 31, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consist of the following at:

	October 31, 2019		July 31, 2019
Raw materials and components	$	52,423,000	53,959,000
Work-in-process and finished goods	38,867,000		40,576,000
Total inventories	91,290,000		94,535,000
Less reserve for excess and obsolete inventories	19,480,000		19,696,000
Inventories, net	$	71,810,000	74,839,000

As of October 31, 2019 and July 31, 2019, the amount of inventory directly related to long-term contracts (including contracts-in-progress) was $4,661,000 and $4,053,000, respectively, and the amount of inventory related to contracts from third-party commercial customers who outsource their manufacturing to us was $1,395,000 and $1,513,000, respectively.

XML

Revenue (Notes)

3 Months Ended

Oct. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

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 mission-critical technologies and high-performance transmission technologies product lines and, to a lesser extent, certain location-based and messaging infrastructure contracts in our public safety and location technologies product line. For service-based contracts in our public safety and location technologies product line, we recognize revenue over time. These services are typically recognized as a series of services performed over the contract term using the straight-line method, or based on our customers’ actual usage of the networks and platforms which we provide.

• Point in time - When a performance obligation is not satisfied over time, we must record revenue using the point in time accounting method which generally results in revenue being recognized upon shipment or delivery of a promised good or service to a customer. This generally occurs when we enter into short term contracts or purchase orders where items are provided to customers with relatively quick turn-around times. Modifications to such contracts and or purchase orders, which typically provide for additional quantities or services, are accounted for as a new contract because the pricing for these additional quantities or services are based on standalone selling prices.

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 amplifiers in our high-performance transmission technologies product line. Point in time accounting is also applied to certain contracts in our mission-critical technologies product line. 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.

Almost all of our contracts with customers are denominated in U.S. dollars and typically are either firm fixed-price or cost reimbursable type contracts (including fixed-fee, incentive-fee and time-and-material type contracts). In almost all of our contracts with customers, we are the principal in the arrangement and report revenue on a gross basis. Transaction prices for contracts with U.S. domestic and international customers are usually based on specific negotiations with each customer and in the case of the U.S. government, sometimes based on estimated or actual costs of providing the goods or services in accordance with applicable regulations. Sales by geography and customer type, as a percentage of consolidated net sales, are as follows:

	Three months ended October 31,
	2019		2018
United States
U.S. government	40.8	%	44.2	%
Domestic	36.1	%	31.4	%
Total United States	76.9	%	75.6	%
International	23.1	%	24.4	%
Total	100.0	%	100.0	%

Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. Except for the U.S. government, there were no customers that represented more than 10.0% of consolidated net sales during the three months ended October 31, 2019 and 2018. International sales include sales to U.S. domestic companies for inclusion in products that are sold to international customers. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10.0% of consolidated net sales for the three months ended October 31, 2019 and 2018.

The following tables summarize our disaggregation of revenue consistent with information reviewed by our chief operating decision-maker ("CODM") for the three months ended October 31, 2019 and 2018. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors which impact our business:

	Three months ended October 31, 2019
	Commercial Solutions		Government Solutions	Total
Geographical region and customer type
U.S. government	$	16,748,000	52,773,000	$	69,521,000
Domestic	53,354,000		8,041,000	61,395,000
Total United States	70,102,000		60,814,000	130,916,000
International	24,212,000		15,139,000	39,351,000
Total	$	94,314,000	75,953,000	$	170,267,000
Contract type
Firm fixed price	$	92,548,000	50,724,000	$	143,272,000
Cost reimbursable	1,766,000		25,229,000	26,995,000
Total	$	94,314,000	75,953,000	$	170,267,000
Transfer of control
Point in time	$	37,723,000	37,786,000	$	75,509,000
Over time	56,591,000		38,167,000	94,758,000
Total	$	94,314,000	75,953,000	$	170,267,000

	Three months ended October 31, 2018
	Commercial Solutions		Government Solutions	Total
Geographical region and customer type
U.S. government	$	14,220,000	56,824,000	$	71,044,000
Domestic	42,237,000		8,274,000	50,511,000
Total United States	56,457,000		65,098,000	121,555,000
International	21,516,000		17,773,000	39,289,000
Total	$	77,973,000	82,871,000	$	160,844,000
Contract type
Firm fixed price	$	76,290,000	63,611,000	$	139,901,000
Cost reimbursable	1,683,000		19,260,000	20,943,000
Total	$	77,973,000	82,871,000	$	160,844,000
Transfer of control
Point in time	$	37,945,000	52,623,000	$	90,568,000
Over time	40,028,000		30,248,000	70,276,000
Total	$	77,973,000	82,871,000	$	160,844,000

The timing of revenue recognition, billings and collections results in receivables, unbilled receivables and contract liabilities on our Condensed 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. There were no material impairment losses recognized on contract assets during the three months ended October 31, 2019 and 2018, respectively. 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. Of the contract liability balance at July 31, 2019 and August 1, 2018, $18,609,000 and $23,127,000 was recognized as revenue during the three months ended October 31, 2019 and 2018, respectively.

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 Condensed Consolidated Statements of Operations. As for commissions payable to our third-party sales representatives related to large long-term contracts, we do consider these types of commissions both direct and incremental costs to obtain and fulfill such contracts. Therefore, such commissions are included in total estimated costs at completion for such contracts and expensed over time through cost of sales on our Condensed 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. As of October 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $648,343,000 (which represents the amount of our consolidated backlog). We estimate that a substantial portion of our remaining performance obligations at October 31, 2019 will be completed and recognized as revenue during the next twenty-four month period, with the rest thereafter. During the three months ended October 31, 2019, revenue recognized from performance obligations satisfied, or partially satisfied, in previous periods (for example due to changes in the transaction price) was not material.

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Leases

3 Months Ended

Oct. 31, 2019

Leases [Abstract]

Leases

Leases

On August 1, 2019, we adopted ASU No. 2016-02 - Leases (Topic 842), which requires the recognition of lease rights and obligations as assets and liabilities on the balance sheet. Previously, operating leases were not recognized on the balance sheet. As we elected the modified retrospective adoption method, prior-period information was not restated. We also elected the transition package of practical expedients available in the standard, which permits us to not reassess under the new standard our prior conclusions about lease identification, classification and initial direct costs. As part of our adoption, however, we did not elect to use the hindsight or land easements practical expedients.

On August 1, 2019, in connection with our adoption of Topic 842, we recognized $35,825,000 of operating lease right-of-use ("ROU") assets (net of a $3,023,000 deferred rent liability that existed as of August 1, 2019 under prior applicable GAAP) and $38,848,000 of related liabilities. Except for the recording of the ROU assets and lease liabilities on our Condensed Consolidated Balance Sheet, and the expanded disclosures about our leasing activities, our adoption did not have a material impact on our condensed consolidated financial statements. Our adoption also did not result in any cumulative-effect adjustment to opening retained earnings.

Our leases historically relate to the leasing of facilities and equipment. We determine at inception whether an arrangement is, or contains, a lease and whether the lease should be classified as an operating or a financing lease. At lease commencement, we recognize an ROU asset and lease liability based on the present value of the future lease payments over the estimated lease term. We have elected to not recognize an ROU asset or lease liability for any leases with terms of twelve months or less. Instead, for such short-term leases, we recognize lease expense on a straight-line basis over the lease term. Certain of our leases include options to extend the term of the lease or to terminate the lease early. When it is reasonably certain that we will exercise a renewal option or will not exercise a termination option, we include the impact of exercising or not exercising such option, respectively, in the estimate of the lease term. As our lease agreements do not explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate ("IBR") on the commencement date to calculate the present value of future lease payments. Such IBR represents our estimated rate of interest to borrow on a collateralized basis over a term commensurate with the expected lease term.

Some of our leases include payments that are based on the Consumer Price Index ("CPI") or other similar indices. These variable lease payments are included in the calculation of the ROU asset and lease liability using the index as of the lease commencement date. Other variable lease payments, such as common area maintenance, property taxes, and usage-based amounts, are required by Topic 842 to be excluded from the ROU asset and lease liability and expensed as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset would also consider, to the extent applicable, any deferred rent upon adoption, lease pre-payments or initial direct costs of obtaining the lease (e.g., such as commissions).

For all classes of leased assets, we elected the practical expedient to not separate lease components (i.e., the actual item being leased, such as the facility or piece of equipment) from non-lease components (i.e., the distinct elements of a contract not related to securing the use of the leased asset, such as common area maintenance and consumable supplies).

Certain of our facility lease agreements (which are classified as operating leases) contain rent holidays or rent escalation clauses. For rent holidays and rent escalation clauses during the lease term, we record rental expense on a straight-line basis over the term of the lease. As of October 31, 2019, none of our leases contained a residual value guarantee and covenants included in our lease agreements are customary for the types of facilities and equipment being leased.

The components of lease expense are as follows:

	Three months ended October 31, 2019
Finance lease expense:
Amortization of ROU assets	$	108,000
Interest on lease liabilities	2,000
Operating lease expense	2,637,000
Short-term lease expense	863,000
Variable lease expense	993,000
Sublease income	—
Total lease expense	$	4,603,000

Additional information related to leases is as follows:

	Three months ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases - Operating cash outflows	$	2,843,000
Finance leases - Operating cash outflows	2,000
Finance leases - Financing cash outflows	198,000
ROU assets obtained in the exchange for lease liabilities:
Operating leases	$	598,000

The following table is a reconciliation of future cash flows relating to operating and finance lease liabilities presented on our Condensed Consolidated Balance Sheet as of October 31, 2019:

	Operating			Finance		Total
Remaining portion of fiscal 2020	$	8,192,000		109,000		$	8,301,000
Fiscal 2021	8,619,000			—		8,619,000
Fiscal 2022	7,387,000			—		7,387,000
Fiscal 2023	5,877,000			—		5,877,000
Fiscal 2024	4,170,000			—		4,170,000
Thereafter	6,555,000			—		6,555,000
Total future undiscounted cash flows	40,800,000			109,000		40,909,000
Less: Present value discount	3,827,000			2,000		3,829,000
Lease liabilities	$	36,973,000		107,000		$	37,080,000
Weighted-average remaining lease terms (in years)	4.59			0.22
Weighted-average discount rate	4.05		%	4.21	%

We lease our Melville, New York production facility from a partnership controlled by our President, CEO and Chairman. Lease payments made during the three months ended October 31, 2019 were $160,000. The current lease provides for our use of the premises as they exist through December 2021 with an option for an additional ten years. The annual rent of the facility for calendar year 2020 is $657,000 and is subject to customary adjustments. We have a right of first refusal in the event of a sale of the facility.

As of October 31, 2019, we do not have any rental commitments that have not commenced.

As we have not restated prior year information given our method of adopting the new standard, the following represents our future minimum lease payments for operating leases and capital leases as of July 31, 2019 under ASC Topic 840 and as reported in our Form 10-K filed with the SEC on September 24, 2019:

	Operating		Capital		Total
Fiscal 2020	$	11,812,000	789,000		$	12,601,000
Fiscal 2021	8,723,000		—		8,723,000
Fiscal 2022	7,343,000		—		7,343,000
Fiscal 2023	5,776,000		—		5,776,000
Fiscal 2024	3,430,000		—		3,430,000
Thereafter	7,130,000		—		7,130,000
Total	$	44,214,000	789,000		$	45,003,000
Less amount representing interest	*		32,000		32,000
Present value of net minimum lease payments	*		$	757,000	$	44,971,000

*Not applicable for operating leases

Leases

Leases

On August 1, 2019, we adopted ASU No. 2016-02 - Leases (Topic 842), which requires the recognition of lease rights and obligations as assets and liabilities on the balance sheet. Previously, operating leases were not recognized on the balance sheet. As we elected the modified retrospective adoption method, prior-period information was not restated. We also elected the transition package of practical expedients available in the standard, which permits us to not reassess under the new standard our prior conclusions about lease identification, classification and initial direct costs. As part of our adoption, however, we did not elect to use the hindsight or land easements practical expedients.

On August 1, 2019, in connection with our adoption of Topic 842, we recognized $35,825,000 of operating lease right-of-use ("ROU") assets (net of a $3,023,000 deferred rent liability that existed as of August 1, 2019 under prior applicable GAAP) and $38,848,000 of related liabilities. Except for the recording of the ROU assets and lease liabilities on our Condensed Consolidated Balance Sheet, and the expanded disclosures about our leasing activities, our adoption did not have a material impact on our condensed consolidated financial statements. Our adoption also did not result in any cumulative-effect adjustment to opening retained earnings.

Our leases historically relate to the leasing of facilities and equipment. We determine at inception whether an arrangement is, or contains, a lease and whether the lease should be classified as an operating or a financing lease. At lease commencement, we recognize an ROU asset and lease liability based on the present value of the future lease payments over the estimated lease term. We have elected to not recognize an ROU asset or lease liability for any leases with terms of twelve months or less. Instead, for such short-term leases, we recognize lease expense on a straight-line basis over the lease term. Certain of our leases include options to extend the term of the lease or to terminate the lease early. When it is reasonably certain that we will exercise a renewal option or will not exercise a termination option, we include the impact of exercising or not exercising such option, respectively, in the estimate of the lease term. As our lease agreements do not explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate ("IBR") on the commencement date to calculate the present value of future lease payments. Such IBR represents our estimated rate of interest to borrow on a collateralized basis over a term commensurate with the expected lease term.

Some of our leases include payments that are based on the Consumer Price Index ("CPI") or other similar indices. These variable lease payments are included in the calculation of the ROU asset and lease liability using the index as of the lease commencement date. Other variable lease payments, such as common area maintenance, property taxes, and usage-based amounts, are required by Topic 842 to be excluded from the ROU asset and lease liability and expensed as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset would also consider, to the extent applicable, any deferred rent upon adoption, lease pre-payments or initial direct costs of obtaining the lease (e.g., such as commissions).

For all classes of leased assets, we elected the practical expedient to not separate lease components (i.e., the actual item being leased, such as the facility or piece of equipment) from non-lease components (i.e., the distinct elements of a contract not related to securing the use of the leased asset, such as common area maintenance and consumable supplies).

Certain of our facility lease agreements (which are classified as operating leases) contain rent holidays or rent escalation clauses. For rent holidays and rent escalation clauses during the lease term, we record rental expense on a straight-line basis over the term of the lease. As of October 31, 2019, none of our leases contained a residual value guarantee and covenants included in our lease agreements are customary for the types of facilities and equipment being leased.

The components of lease expense are as follows:

	Three months ended October 31, 2019
Finance lease expense:
Amortization of ROU assets	$	108,000
Interest on lease liabilities	2,000
Operating lease expense	2,637,000
Short-term lease expense	863,000
Variable lease expense	993,000
Sublease income	—
Total lease expense	$	4,603,000

Additional information related to leases is as follows:

	Three months ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases - Operating cash outflows	$	2,843,000
Finance leases - Operating cash outflows	2,000
Finance leases - Financing cash outflows	198,000
ROU assets obtained in the exchange for lease liabilities:
Operating leases	$	598,000

The following table is a reconciliation of future cash flows relating to operating and finance lease liabilities presented on our Condensed Consolidated Balance Sheet as of October 31, 2019:

	Operating			Finance		Total
Remaining portion of fiscal 2020	$	8,192,000		109,000		$	8,301,000
Fiscal 2021	8,619,000			—		8,619,000
Fiscal 2022	7,387,000			—		7,387,000
Fiscal 2023	5,877,000			—		5,877,000
Fiscal 2024	4,170,000			—		4,170,000
Thereafter	6,555,000			—		6,555,000
Total future undiscounted cash flows	40,800,000			109,000		40,909,000
Less: Present value discount	3,827,000			2,000		3,829,000
Lease liabilities	$	36,973,000		107,000		$	37,080,000
Weighted-average remaining lease terms (in years)	4.59			0.22
Weighted-average discount rate	4.05		%	4.21	%

We lease our Melville, New York production facility from a partnership controlled by our President, CEO and Chairman. Lease payments made during the three months ended October 31, 2019 were $160,000. The current lease provides for our use of the premises as they exist through December 2021 with an option for an additional ten years. The annual rent of the facility for calendar year 2020 is $657,000 and is subject to customary adjustments. We have a right of first refusal in the event of a sale of the facility.

As of October 31, 2019, we do not have any rental commitments that have not commenced.

As we have not restated prior year information given our method of adopting the new standard, the following represents our future minimum lease payments for operating leases and capital leases as of July 31, 2019 under ASC Topic 840 and as reported in our Form 10-K filed with the SEC on September 24, 2019:

	Operating		Capital		Total
Fiscal 2020	$	11,812,000	789,000		$	12,601,000
Fiscal 2021	8,723,000		—		8,723,000
Fiscal 2022	7,343,000		—		7,343,000
Fiscal 2023	5,776,000		—		5,776,000
Fiscal 2024	3,430,000		—		3,430,000
Thereafter	7,130,000		—		7,130,000
Total	$	44,214,000	789,000		$	45,003,000
Less amount representing interest	*		32,000		32,000
Present value of net minimum lease payments	*		$	757,000	$	44,971,000

*Not applicable for operating leases

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Adoption of Accounting Standards and Updates Adoption of Accounting Standards and Updates (Policies)

3 Months Ended

Oct. 31, 2019

Accounting Policies [Abstract]

Adoption of Accounting Standards and Updates

Adoption of Accounting Standards and Updates

We are required to prepare our condensed 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"). During the three months ended October 31, 2019, we adopted:

• FASB ASU No. 2016-02 Leases (Topic 842). See Note (12) - "Leases" for further information.

• FASB ASU No. 2017-11, which provides guidance on the accounting for certain financial instruments with embedded features that result in the strike price of the instrument or embedded conversion option being reduced on the basis of the pricing of future equity offerings (commonly referred to as "down round" features). On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we did not have any financial instruments with such "down round" features.

• FASB ASU No. 2017-12, which expands and refines hedge accounting for both non-financial and financial risk components and simplifies and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we are not a party to any such hedging transactions.

• FASB ASU No. 2018-07, which expands the scope of Topic 718 to include certain share-based payment transactions for acquiring goods and services from nonemployees. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we did not have any outstanding share-based awards with nonemployees that required remeasurement.

• FASB ASU No. 2018-16, which expands the list of eligible U.S. benchmark interest rates permitted in the application of hedge accounting due to broad concerns about the long-term sustainability of the LIBO Rate. This ASU adds the Overnight Index Swap ("OIS") rate, based on the Secured Overnight Financing Rate ("SOFR"), as an eligible U.S. benchmark interest rate. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we are not a party to any such hedging transactions.

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Goodwill

3 Months Ended

Oct. 31, 2019

Goodwill [Abstract]

Goodwill

Goodwill

The following table represents goodwill by reportable operating segment, including the changes in the net carrying value of goodwill during the three months ended October 31, 2019:

	Commercial Solutions			Government Solutions	Total
Balance as of July 31, 2019	$	251,296,000		59,193,000	$	310,489,000
Change resulting from Solacom acquisition	(420,000		)	—	(420,000		)
Change resulting from the GD NG-911 acquisition	(198,000		)	—	(198,000		)
Balance as of October 31, 2019	$	250,678,000		59,193,000	$	309,871,000

As discussed further in Note (2) -"Acquisitions," the goodwill resulting from the acquisitions of Solacom and the GD NG-911 business was based upon valuation and estimates and assumptions that are subject to change within the purchase price allocation period (generally one year from the acquisition date).

In accordance with FASB ASC 350 "Intangibles - Goodwill and Other," 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, 2019 (the first day of our fiscal 2020), 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.

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, 2019 total public market capitalization and assessed implied control premiums based on our common stock price of $29.54 as of August 1, 2019.

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 29.0% and 122.2%, 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 2020 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 decline. 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 2020 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 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, 2020 (the start of our fiscal 2021). 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. Any impairment charges that we may record in the future could be material to our results of operations and financial condition.

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Goodwill (Details)	3 Months Ended		8 Months Ended
	Oct. 31, 2019 USD ($) operating_segment	Jul. 31, 2019 USD ($)	Oct. 31, 2019 USD ($)	Aug. 01, 2019 $ / shares	Apr. 29, 2019 USD ($)	Feb. 28, 2019 USD ($)
Goodwill [Line Items]
Goodwill	$ 309,871,000	$ 310,489,000	$ 309,871,000
Number of reportable segments | operating_segment	2
Commercial Solutions Segment
Goodwill [Line Items]
Goodwill	$ 250,678,000	251,296,000	250,678,000
Reporting unit, percentage of fair value in excess of carrying amount				29.00%
Government Solutions Segment
Goodwill [Line Items]
Goodwill	59,193,000	59,193,000	59,193,000
Reporting unit, percentage of fair value in excess of carrying amount				122.20%
Common Stock
Goodwill [Line Items]
Common stock price (in dollars per share) | $ / shares				$ 29.54
Solacom
Goodwill [Line Items]
Goodwill	11,388,000		11,388,000			$ 11,808,000
Goodwill, Purchase Accounting Adjustments	(420,000)		(420,000)
Solacom | Commercial Solutions Segment
Goodwill [Line Items]
Goodwill, Purchase Accounting Adjustments	(420,000)
GD NG-911 business
Goodwill [Line Items]
Goodwill	7,850,000		$ 7,850,000		$ 8,048,000
Goodwill, Purchase Accounting Adjustments	(198,000)	$ (198,000)
GD NG-911 business | Commercial Solutions Segment
Goodwill [Line Items]
Goodwill, Purchase Accounting Adjustments	$ (198,000)

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Stock-Based Compensation - Stock Options (Details) - USD ($)		3 Months Ended
	Oct. 31, 2019	Oct. 31, 2019	Oct. 31, 2018
Additional Disclosures
Stock Issued During The Period, Shares, Net Settlement Of Stock-Based Awards		4,764	9,345
Stock Options
Awards (in Shares)
Outstanding, Beginning Balance (in shares)		1,555,555
Exercised (in shares)		(51,460)
Expired/canceled (in shares)		(800)
Outstanding, Ending Balance (in shares)	1,503,295	1,503,295
Exercisable (in shares)	1,431,765	1,431,765
Vested and Expected to Vest, Ending Balance (in shares)	1,477,967	1,477,967
Weighted Average Exercise Price
Outstanding, Beginning Balance (in dollars per share)		$ 28.72
Exercised (in dollars per share)		28.45
Expired/canceled (in dollars per share)		27.35
Outstanding, Ending Balance (in dollars per share)	$ 28.73	28.73
Exercisable, Ending Balance (in dollars per share)	28.83	28.83
Vested and Expected to Vest, Ending Balance (in dollars per share)	$ 28.76	$ 28.76
Weighted Average Remaining Contractual Term (Years)
Outstanding, Ending Balance		3 years 3 months 9 days
Exercisable, Ending Balance		3 years 1 month 22 days
Vested And Expected To Vest, Ending Balance		3 years 2 months 23 days
Aggregate Intrinsic Value
Outstanding, Ending Balance	$ 9,346,000	$ 9,346,000
Exercisable, Ending Balance	8,761,000	8,761,000
Vested and Expected to Vest, Ending Balance	$ 9,148,000	9,148,000
Additional Disclosures
Exercise price, lower range limit (in dollars per share)	$ 20.90
Exercise price, upper range limit (in dollars per share)	$ 33.94
Granted (in shares)			0
Total intrinsic value of stock-based awards settled		$ 305,000	$ 561,000
Vested stock based awards net settled upon exercise (in shares)		40,860	72,830
Minimum | Stock Options
Additional Disclosures
Contractual term (in years)	5 years
Vesting period (in years)	3 years
Maximum | Stock Options
Additional Disclosures
Contractual term (in years)	10 years
Vesting period (in years)	5 years

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Revenue Revenue - Sale Information, Percent (Details)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Concentration Risk [Line Items]
Entity wide revenue percentage by major customer type	100.00%	100.00%
U.S. government
Concentration Risk [Line Items]
Entity wide revenue percentage by major customer type	40.80%	44.20%
Domestic
Concentration Risk [Line Items]
Entity wide revenue percentage by major customer type	36.10%	31.40%
Total United States
Concentration Risk [Line Items]
Entity wide revenue percentage by major customer type	76.90%	75.60%
International
Concentration Risk [Line Items]
Entity wide revenue percentage by major customer type	23.10%	24.40%

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Earnings Per Share (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Share repurchased during period (in shares)	0	0
Weighted average performance shares outstanding during the period that are excluded from EPS Calculation (in shares)	197,000	236,000
Numerator:
Net income for basic calculation	$ 6,388,000	$ 3,468,000
Numerator for diluted calculation	$ 6,388,000	$ 3,468,000
Denominator:
Denominator for basic calculation (in shares)	24,555,000	23,999,000
Effect of dilutive securities: Stock-based awards (in shares)	182,000	376,000
Denominator for diluted calculation (in shares)	24,737,000	24,375,000
Stock options, performance shares (with the performance conditions satisfied), RSUs and restricted stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive equity-classified stock-based awards not included in calculation of diluted earnings per share (in shares)	382,000	279,000

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General

3 Months Ended

Oct. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

General

The accompanying condensed consolidated financial statements of Comtech Telecommunications Corp. and its subsidiaries ("Comtech," "we," "us," or "our") as of and for the three months ended October 31, 2019 and 2018 are unaudited. In the opinion of management, the information furnished reflects all material adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the unaudited interim periods. Our results of operations for such periods are not necessarily indicative of the results of operations to be expected for the full fiscal year.

The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the condensed consolidated financial statements, and the reported amounts of net sales and expenses during the reported period. Actual results may differ from those estimates.

Our condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements, filed with the Securities and Exchange Commission ("SEC"), for the fiscal year ended July 31, 2019 and the notes thereto contained in our Annual Report on Form 10-K, and all of our other filings with the SEC.

As disclosed in more detail in Note (15) -"Segment Information," we manage our business in two reportable segments: Commercial Solutions and Government Solutions.

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Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Income Statement [Abstract]
Net sales	$ 170,267,000	$ 160,844,000
Cost of sales	106,700,000	103,075,000
Gross profit	63,567,000	57,769,000
Expenses:
Selling, general and administrative	31,851,000	31,847,000
Research and development	14,861,000	13,210,000
Amortization of intangibles	5,206,000	4,289,000
Acquisition plan expenses	2,389,000	1,130,000
Total operating expenses	54,307,000	50,476,000
Operating income	9,260,000	7,293,000
Other expenses:
Interest expense	1,804,000	2,669,000
Write-off of deferred financing costs	0	3,217,000
Interest (income) and other	(77,000)	66,000
Income before provision for (benefit from) income taxes	7,533,000	1,341,000
Provision for (benefit from) income taxes	1,145,000	(2,127,000)
Net income	$ 6,388,000	$ 3,468,000
Net income per share (See Note 6):
Basic (in dollars per share)	$ 0.26	$ 0.14
Diluted (in dollars per share)	$ 0.26	$ 0.14
Weighted average number of common shares outstanding – basic (in shares)	24,555,000	23,999,000
Weighted average number of common and common equivalent shares outstanding – diluted (in shares)	24,737,000	24,375,000

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Legal Proceedings and Other Matters

3 Months Ended

Oct. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings and Other Matters

Legal Proceedings and Other Matters

Legacy TCS 911 Call Handling Software Matter

A customer that purchased a TCS 911 call handling software solution in December 2014 (which was more than one year prior to our acquisition of TCS) (the "TCS Legacy Customer") informed us in fiscal 2019 that it experienced several network outages and that it would seek indemnification for any claims made against it as a result of such outages.

In connection with these outages, the TCS Legacy Customer informed us that it believed certain communication failover redundancies promised to it by former senior management of TCS were never completed and had originally demanded that we refund to it all amounts previously paid to us under the contract, which through October 31, 2019 exceeded $14,000,000. In response to such claim, we engaged legal counsel to review the claims made by our customer.

In September 2019, the customer filed a lawsuit in the Sixth Judicial Circuit Court of the State of South Dakota alleging, among other things, our failure to provide them with certain system redundancies. We believe that TCS has complied with its contractual requirements, that the customer's allegations are baseless, and that it is not entitled to a return of any amounts previously paid to us under the contract. Our contract to provide services to this customer expires in December 2019 and the amount of annual revenue we generate from this customer is immaterial.

We have notified our insurance carriers of the lawsuit and are reviewing with counsel our multiple counter claims against this TCS Legacy Customer.

An agreement in principle has been reached with this TCS Legacy Customer and we are currently negotiating the terms of such settlement which is not expected to have a material impact on our condensed consolidated financial statements. However, if we are unable to reach a final settlement, the ultimate resolution of this matter could vary and possibly have a material adverse effect on our consolidated results of operations, financial position or cash flows in future periods.

Separately, we also filed a lawsuit in March 2019 against a former employee and her new employer arising from such former employee's violation of her obligation to TCS of confidentiality, non-competition and non-solicitation of customers, including the TCS Legacy Customer. The former employee has responded with her own lawsuit against us. The ultimate resolution of this lawsuit is not expected to have any material impact.

Other Matters

In October 2014, we disclosed to the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC") that we learned during a self-assessment of our export transactions that a shipment of modems sent to a Canadian customer by Comtech EF Data Corp. was incorporated into a communication system, the ultimate end user of which was the Sudan Civil Aviation Authority. The sales value of this equipment was approximately $288,000. At the time of shipment, OFAC regulations prohibited U.S. persons from doing business directly or indirectly with Sudan. In late 2015, OFAC issued an administrative subpoena seeking information about the disclosed transaction. We responded to the subpoena, including alerting OFAC to Comtech’s repair of three modems for a customer in Lebanon who may have rerouted the modems from Lebanon to Sudan without the required U.S. licensing authorization. In September 2018, Comtech agreed to enter into a Tolling Agreement with OFAC, which extended the statute of limitations in this matter through December 31, 2019. The Tolling Agreement was shortly followed by a second administrative subpoena seeking additional information about the disclosed transaction. In December 2018, Comtech responded to a second administrative subpoena from OFAC, answering the questions it posed and providing all the documents it sought. In November 2019, Comtech agreed to enter into a second Tolling Agreement with OFAC, which extends the statute of limitations in this matter through June 30, 2020. U.S. sanctions with respect to Sudan were revoked in 2017 and we are in the process of responding to certain additional questions that OFAC asked of us based on its review. Consistent with the revocation of the Sudan Sanction Regulations ("SSR"), shipments to the Sudan Civil Aviation Authority by U.S. persons are now permissible. We are not able to predict whether OFAC will take any enforcement action against us in light of the revocation of the SSR. If OFAC determines that we have violated U.S. trade sanctions, civil and criminal penalties could apply, and we may suffer reputational harm. Even though we take precautions to avoid engaging in transactions that may violate U.S. trade sanctions, those measures may not be effective in every instance.

In May 2018, we were informed by the Office of Export Enforcement ("OEE") of the Department of Commerce ("DoC") that it was forwarding to the OEE's Office of Chief Counsel, the results of its audit of international shipments by Comtech Xicom Technology, Inc. for further review and possible determination of an administrative penalty. We fully cooperated with the OEE in their audit and, based on our self-assessment of the approximately 7,800 individual transactions audited, have determined that six (6) transactions may not have been fully in compliance with the Export Administration Regulations ("EAR"). These six (6) items, for which export licenses were not obtained, were either spares or repaired power amplifier subassembly components valued at less than $100,000 (in aggregate) and were shipped to Brazil, Italy, Russia, Thailand and the United Arab Emirates. The EAR provides an exception to the requirement to obtain an export license for the replacement of a defective or damaged component. During our self-assessment, we determined that we inadvertently did not obtain export licenses for the spares or evidence of the return or destruction of the defective or damaged components necessary to authorize our use of the export license exception for the replacements. Since discovering this issue, we have implemented additional controls and procedures and have increased awareness of these specific export requirements throughout the Company to help avoid similar occurrences in the future. Administrative penalties under the EAR can range from a warning letter to a denial of export privileges. A civil monetary penalty not to exceed the amount set forth in the Export Administration Act ("EAA") may be imposed for each violation, and in the event that any provision of the EAR is continued by any other authority, the maximum monetary civil penalty for each violation shall be that provided by such other authority. Administrative penalties under the EAR are currently determined pursuant to the International Emergency Economic Powers Act ("IEEPA"), which can reach the greater of twice the amount of the transaction that is the basis of the violation or approximately $300,000 per violation. We have not recorded an accrual related to a possible administrative penalty and continue to work cooperatively with the OEE.

In the ordinary course of business, we include indemnification provisions in certain of our customer contracts to indemnify, hold harmless and reimburse such customers for certain losses, including but not limited to losses related to third-party claims of intellectual property infringement arising from the customer’s use of our products or services. We may also, from time to time, receive indemnification requests from customers related to third-party claims that 911 calls were improperly routed during an emergency. We evaluate such claims as and when they arise. We do not always agree with customers that they are entitled to indemnification and in such cases reject their claims. Despite maintaining that we have properly carried out our duties, we may seek coverage under our various insurance policies; however, we cannot be sure that we will be able to maintain or obtain insurance coverage at acceptable costs or in sufficient amounts or that our insurer will not disclaim coverage as to such claims. Accordingly, pending or future claims asserted against us by a party that we agree 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.

There are certain other pending and threatened legal actions which arise in the normal course of business. Although the ultimate outcome of litigation is difficult to accurately predict, we believe that the outcome of these other pending and threatened actions will not have a material adverse effect on our consolidated financial condition or results of operations.

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Segment Information

3 Months Ended

Oct. 31, 2019

Segment Reporting [Abstract]

Segment Information

Segment Information

Reportable operating segments are determined based on Comtech’s management approach. The management approach, as defined by FASB ASC 280 "Segment Reporting" is based on the way that the CODM organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. Our CODM, for purposes of FASB ASC 280, is our Chief Executive Officer and President.

Our Commercial Solutions segment offers satellite ground station technologies (such as modems and amplifiers) and public safety and location technologies (such as 911 call routing 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.

Our Government Solutions segment provides mission-critical technologies (such as tactical satellite-based networks and ongoing support for complicated communications networks) and high-performance transmission technologies (such as 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.

Our CODM primarily uses a metric that we refer to as Adjusted EBITDA to measure an operating segment’s performance and to make decisions about resources to be allocated. Our Adjusted EBITDA metric for the Commercial Solutions and Government Solutions segments do not consider any allocation of indirect expense, or any of the following: income taxes, interest (income) and other, write-off of deferred financing costs, interest expense, amortization of stock-based compensation, amortization of intangible assets, depreciation expenses, estimated contract settlement costs, settlement of intellectual property litigation, acquisition plan expenses, facility exit costs or strategic alternatives analysis expenses and other expenses that relate to our Unallocated segment. These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results. Any amounts shown in the Adjusted EBITDA calculation for our Commercial Solutions and Government Solutions segments are directly attributable to those segments. Our Adjusted EBITDA is also used by our management in assessing the Company's operating results. Although closely aligned, the Company's definition of Adjusted EBITDA is different than the Consolidated EBITDA (as such term is defined in our Credit Facility) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and, therefore, may not be comparable to similarly titled measures used by other companies.

Operating segment information, along with a reconciliation of segment net income (loss) and consolidated net income to Adjusted EBITDA is presented in the tables below:

	Three months ended October 31, 2019
	Commercial Solutions			Government Solutions		Unallocated		Total
Net sales	$	94,314,000		75,953,000		—		$	170,267,000
Operating income (loss)	$	9,841,000		7,083,000		(7,664,000	)	$	9,260,000
Net income (loss)	$	9,867,000		7,095,000		(10,574,000	)	$	6,388,000
Provision for income taxes	13,000			—		1,132,000		1,145,000
Interest (income) and other	(47,000		)	(13,000	)	(17,000	)	(77,000		)
Interest expense	8,000			1,000		1,795,000		1,804,000
Amortization of stock-based compensation	—			—		879,000		879,000
Amortization of intangibles	4,362,000			844,000		—		5,206,000
Depreciation	2,196,000			313,000		142,000		2,651,000
Estimated contract settlement costs	230,000			—		—		230,000
Acquisition plan expenses	—			—		2,389,000		2,389,000
Adjusted EBITDA	$	16,629,000		8,240,000		(4,254,000	)	$	20,615,000
Purchases of property, plant and equipment	$	1,000,000		224,000		26,000		$	1,250,000
Total assets at October 31, 2019	$	675,344,000		211,125,000		44,553,000		$	931,022,000

	Three months ended October 31, 2018
		Commercial Solutions		Government Solutions	Unallocated		Total
Net sales		$	77,973,000	82,871,000	—		$	160,844,000
Operating income (loss)		$	7,058,000	6,644,000	(6,409,000	)	$	7,293,000
Net income (loss)		$	6,971,000	6,609,000	(10,112,000	)	$	3,468,000
Provision for (benefit from) income taxes		12,000		—	(2,139,000	)	(2,127,000		)
Interest (income) and other		53,000		32,000	(19,000	)	66,000
Write-off of deferred financing costs		—		—	3,217,000		3,217,000
Interest expense		22,000		3,000	2,644,000		2,669,000
Amortization of stock-based compensation		—		—	1,046,000		1,046,000
Amortization of intangibles		3,445,000		844,000	—		4,289,000
Depreciation		2,228,000		379,000	244,000		2,851,000
Acquisition plan expenses		—		—	1,130,000		1,130,000
Facility exit costs		—		1,373,000	—		1,373,000
Adjusted EBITDA		$	12,731,000	9,240,000	(3,989,000	)	$	17,982,000
Purchases of property, plant and equipment		$	892,000	629,000	124,000		$	1,645,000
Total assets at October 31, 2018		$	602,567,000	222,587,000	41,786,000		$	866,940,000

Unallocated expenses result from corporate expenses such as executive compensation, accounting, legal and other regulatory compliance related costs and also includes all of our amortization of stock-based compensation. During the three months ended October 31, 2019 and 2018, unallocated expenses also include $2,389,000 and $1,130,000 of acquisition plan expenses, respectively.

Interest expense in the tables above relate to our Prior Credit Facility and new Credit Facility, and includes the amortization of deferred financing costs. In addition, during the three months ended October 31, 2018, we recorded a $3,217,000 loss from the write-off of deferred financing costs primarily related to the Term Loan Facility portion of our Prior Credit Facility. See Note (11) - "Credit Facility" for further discussion.

Intersegment sales for the three months ended October 31, 2019 and 2018 by the Commercial Solutions segment to the Government Solutions segment were $1,899,000 and $8,540,000, respectively. There were nominal sales by the Government Solutions segment to the Commercial Solutions segment for these periods. All intersegment sales are eliminated in consolidation and are excluded from the tables above.

Unallocated assets at October 31, 2019 consist principally of cash and cash equivalents, income taxes receivable, corporate property, plant and equipment and deferred financing costs. Substantially all of our long-lived assets are located in the U.S.

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Legal Proceedings and Other Matters Commitments and Contingencies (Details)	1 Months Ended				3 Months Ended
	May 31, 2018 USD ($)	May 31, 2018 action	May 31, 2018 transaction	Oct. 31, 2014 USD ($)	Jan. 31, 2019 USD ($)	Oct. 31, 2019 USD ($)
Loss Contingencies [Line Items]
Settlement Of Intellectual Property Litigation					$ 3,204,000
Legacy TCS 911 Call Handling Software Matter [Member]
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss						$ 14,000,000
Other Matters
Loss Contingencies [Line Items]
Sales value of equipment				$ 288,000
Approximate number of transactions audited by the Office of Export Enforcement relating to international shipments by Xicom Technologies, Inc. | transaction			7,800
Number of transactions that may not have been fully in compliance with the Export Administrative Regulations, based on Company's self assessment of transactions audited		6	6
Aggregated value of international shipments that may not have been fully in compliance with Export Administration Regulations (less than)	$ 100,000

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Segment Information (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Jul. 31, 2019
Segment Reporting Information [Line Items]
Net sales	$ 170,267,000	$ 160,844,000
Operating income (loss)	9,260,000	7,293,000
Net income (loss)	6,388,000	3,468,000
Provision for (benefit from) income taxes	1,145,000	(2,127,000)
Interest (income) and other expense	(77,000)	66,000
Write-off of deferred financing costs	0	3,217,000
Interest expense	1,804,000	2,669,000
Amortization of stock-based compensation	879,000	1,046,000
Amortization of intangibles	5,206,000	4,289,000
Depreciation	2,651,000	2,851,000
Estimated contract settlement costs	230,000	0
Facility exit costs		1,373,000
Adjusted EBITDA	20,615,000	17,982,000
Purchases of property, plant and equipment	1,250,000	1,645,000
Total assets	931,022,000	866,940,000	$ 887,711,000
Acquisition plan expenses	2,389,000	1,130,000
Unallocated
Segment Reporting Information [Line Items]
Net sales	0	0
Operating income (loss)	(7,664,000)	(6,409,000)
Net income (loss)	(10,574,000)	(10,112,000)
Provision for (benefit from) income taxes	1,132,000	(2,139,000)
Interest (income) and other expense	(17,000)	(19,000)
Write-off of deferred financing costs		3,217,000
Interest expense	1,795,000	2,644,000
Amortization of stock-based compensation		1,046,000
Amortization of intangibles	0	0
Depreciation	142,000	244,000
Estimated contract settlement costs	0
Facility exit costs		0
Adjusted EBITDA	(4,254,000)	(3,989,000)
Purchases of property, plant and equipment	26,000	124,000
Total assets	44,553,000	41,786,000
Acquisition plan expenses	2,389,000	1,130,000
Commercial Solutions Segment
Segment Reporting Information [Line Items]
Net sales	94,314,000	77,973,000
Commercial Solutions Segment | Operating Segments
Segment Reporting Information [Line Items]
Net sales	94,314,000	77,973,000
Operating income (loss)	9,841,000	7,058,000
Net income (loss)	9,867,000	6,971,000
Provision for (benefit from) income taxes	13,000	12,000
Interest (income) and other expense	(47,000)	53,000
Write-off of deferred financing costs		0
Interest expense	8,000	22,000
Amortization of stock-based compensation	0	0
Amortization of intangibles	4,362,000	3,445,000
Depreciation	2,196,000	2,228,000
Estimated contract settlement costs	230,000
Facility exit costs		0
Adjusted EBITDA	16,629,000	12,731,000
Purchases of property, plant and equipment	1,000,000	892,000
Total assets	675,344,000	602,567,000
Acquisition plan expenses	0	0
Commercial Solutions Segment | Intersegment Eliminations
Segment Reporting Information [Line Items]
Net sales	1,899,000	8,540,000
Government Solutions Segment
Segment Reporting Information [Line Items]
Net sales	75,953,000	82,871,000
Government Solutions Segment | Operating Segments
Segment Reporting Information [Line Items]
Net sales	75,953,000	82,871,000
Operating income (loss)	7,083,000	6,644,000
Net income (loss)	7,095,000	6,609,000
Provision for (benefit from) income taxes	0	0
Interest (income) and other expense	(13,000)	32,000
Write-off of deferred financing costs		0
Interest expense	1,000	3,000
Amortization of stock-based compensation	0	0
Amortization of intangibles	844,000	844,000
Depreciation	313,000	379,000
Estimated contract settlement costs	0
Facility exit costs		1,373,000
Adjusted EBITDA	8,240,000	9,240,000
Purchases of property, plant and equipment	224,000	629,000
Total assets	211,125,000	222,587,000
Acquisition plan expenses	$ 0	0
June Two Thousand Seventeen Amendment To Credit Facility [Member]
Segment Reporting Information [Line Items]
Write-off of deferred financing costs		$ 3,217,000

XML

Stock-Based Compensation - Expenses (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Jul. 31, 2019
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	$ 879,000	$ 1,046,000
Estimated income tax benefit	(189,000)	(228,000)
Net stock-based compensation expense	690,000	818,000
Total remaining unrecognized compensation cost related to the unvested stock-based awards	11,885,000
Estimated forfeitures related to unvested stock-based awards	$ 1,085,000
Weighted average number of years net compensation cost is expected to be recognized over	3 years 3 months 18 days
Stock-based compensation capitalized and included in ending inventory	$ 48,000		$ 48,000
Stock Options
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	$ 82,000	171,000
Number of stock-based option awards outstanding at period end (in shares)	1,503,295		1,555,555
Performance Shares
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	$ 352,000	406,000
RSUs and restricted stock
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	698,000	547,000
ESPP
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	57,000	52,000
Share units
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	$ (310,000)	(130,000)
Stock Appreciation Rights (SARs)
Stock-based Compensation Expenses
Number of stock-based option awards outstanding at period end (in shares)	0		0
Cost of sales
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	$ 59,000	58,000
Selling, general and administrative expenses
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	743,000	905,000
Research and development expenses
Stock-based Compensation Expenses
Stock-based compensation expense before income tax benefit	$ 77,000	$ 83,000
2001 Employee Stock Purchase Plan | ESPP
Stock-based Compensation Expenses
Discount offered to employees participating in the ESPP as a percentage of market price	15.00%	15.00%

XML

Document and Entity Information - shares	3 Months Ended
	Oct. 31, 2019	Nov. 29, 2019
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 31, 2019
Current Fiscal Year End Date	--07-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020
Entity Registrant Name	COMTECH TELECOMMUNICATIONS CORP /DE/
Entity Central Index Key	0000023197
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		24,389,774

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($)	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock
Common stock, beginning balance (in shares) at Jul. 31, 2018		38,860,571
Beginning balance at Jul. 31, 2018	$ 505,684,000	$ 3,886,000	$ 538,453,000	$ 405,194,000	$ (441,849,000)
Treasury stock, beginning balance (in shares) at Jul. 31, 2018					15,033,317
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-classified stock award compensation	1,046,000		1,046,000
Proceeds from exercises of stock options (in shares)		6,100
Proceeds from exercises of stock options	174,000	$ 1,000	173,000
Proceeds from issuance of employee stock purchase plan shares	241,000	$ 1,000	240,000
Proceeds from issuance of employee stock purchase plan shares (in shares)		8,861
Issuance of restricted stock	0	$ 1,000	(1,000)
Issuance of restricted stock (in shares)		10,386
Net settlement of stock-based awards	$ (2,054,000)	$ 5,000	(2,059,000)
Net settlement of stock-based awards (in shares)	9,345	52,926
Cash dividends declared ($0.10 per share)	$ (2,381,000)			(2,381,000)
Accrual of dividend equivalents, net of reversal ($0.10 per share)	(82,000)			(82,000)
Net income	3,468,000			3,468,000
Ending balance at Oct. 31, 2018	$ 506,096,000	$ 3,894,000	537,852,000	406,199,000	$ (441,849,000)
Common stock, ending balance (in shares) at Oct. 31, 2018		38,938,844
Treasury stock, ending balance (in shares) at Oct. 31, 2018					15,033,317
Common stock, beginning balance (in shares) at Jul. 31, 2019	39,276,161	39,276,161
Beginning balance at Jul. 31, 2019	$ 535,082,000	$ 3,928,000	552,670,000	420,333,000	$ (441,849,000)
Treasury stock, beginning balance (in shares) at Jul. 31, 2019	15,033,317				15,033,317
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-classified stock award compensation	$ 879,000		879,000
Proceeds from exercises of stock options (in shares)		10,600
Proceeds from exercises of stock options	306,000	$ 1,000	305,000
Proceeds from issuance of employee stock purchase plan shares	246,000	$ 1,000	245,000
Proceeds from issuance of employee stock purchase plan shares (in shares)		10,135
Issuance of restricted stock	0	$ 2,000	(2,000)
Issuance of restricted stock (in shares)		21,510
Net settlement of stock-based awards	$ (2,773,000)	$ 8,000	(2,781,000)
Net settlement of stock-based awards (in shares)	4,764	83,820
Cash dividends declared ($0.10 per share)	$ (2,428,000)			(2,428,000)
Accrual of dividend equivalents, net of reversal ($0.10 per share)	(56,000)			(56,000)
Net income	6,388,000			6,388,000
Ending balance at Oct. 31, 2019	$ 537,644,000	$ 3,940,000	$ 551,316,000	$ 424,237,000	$ (441,849,000)
Common stock, ending balance (in shares) at Oct. 31, 2019	39,402,226	39,402,226
Treasury stock, ending balance (in shares) at Oct. 31, 2019	15,033,317				15,033,317

XML

Revenue - Disaggregation of Revenues (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Disaggregation of Revenue [Line Items]
Revenues	$ 170,267,000	$ 160,844,000
Point in time
Disaggregation of Revenue [Line Items]
Revenues	75,509,000	90,568,000
Over time
Disaggregation of Revenue [Line Items]
Revenues	94,758,000	70,276,000
Firm fixed price
Disaggregation of Revenue [Line Items]
Revenues	143,272,000	139,901,000
Cost reimbursable
Disaggregation of Revenue [Line Items]
Revenues	26,995,000	20,943,000
U.S. government
Disaggregation of Revenue [Line Items]
Revenues	69,521,000	71,044,000
Domestic
Disaggregation of Revenue [Line Items]
Revenues	61,395,000	50,511,000
Total United States
Disaggregation of Revenue [Line Items]
Revenues	130,916,000	121,555,000
International
Disaggregation of Revenue [Line Items]
Revenues	39,351,000	39,289,000
Commercial Solutions
Disaggregation of Revenue [Line Items]
Revenues	94,314,000	77,973,000
Commercial Solutions | Point in time
Disaggregation of Revenue [Line Items]
Revenues	37,723,000	37,945,000
Commercial Solutions | Over time
Disaggregation of Revenue [Line Items]
Revenues	56,591,000	40,028,000
Commercial Solutions | Firm fixed price
Disaggregation of Revenue [Line Items]
Revenues	92,548,000	76,290,000
Commercial Solutions | Cost reimbursable
Disaggregation of Revenue [Line Items]
Revenues	1,766,000	1,683,000
Commercial Solutions | U.S. government
Disaggregation of Revenue [Line Items]
Revenues	16,748,000	14,220,000
Commercial Solutions | Domestic
Disaggregation of Revenue [Line Items]
Revenues	53,354,000	42,237,000
Commercial Solutions | Total United States
Disaggregation of Revenue [Line Items]
Revenues	70,102,000	56,457,000
Commercial Solutions | International
Disaggregation of Revenue [Line Items]
Revenues	24,212,000	21,516,000
Government Solutions
Disaggregation of Revenue [Line Items]
Revenues	75,953,000	82,871,000
Government Solutions | Point in time
Disaggregation of Revenue [Line Items]
Revenues	37,786,000	52,623,000
Government Solutions | Over time
Disaggregation of Revenue [Line Items]
Revenues	38,167,000	30,248,000
Government Solutions | Firm fixed price
Disaggregation of Revenue [Line Items]
Revenues	50,724,000	63,611,000
Government Solutions | Cost reimbursable
Disaggregation of Revenue [Line Items]
Revenues	25,229,000	19,260,000
Government Solutions | U.S. government
Disaggregation of Revenue [Line Items]
Revenues	52,773,000	56,824,000
Government Solutions | Domestic
Disaggregation of Revenue [Line Items]
Revenues	8,041,000	8,274,000
Government Solutions | Total United States
Disaggregation of Revenue [Line Items]
Revenues	60,814,000	65,098,000
Government Solutions | International
Disaggregation of Revenue [Line Items]
Revenues	$ 15,139,000	$ 17,773,000

XML

Accounts Receivable (Details) - USD ($)	Oct. 31, 2019	Jul. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable	$ 162,509,000	$ 146,899,000
Less allowance for doubtful accounts	1,465,000	1,867,000
Accounts receivable, net	$ 161,044,000	$ 145,032,000
Accounts Receivable | Major customer | U.S. government
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of total accounts receivable	35.40%	27.80%
Billed Receivables | Commercial and International
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable	$ 82,140,000	$ 85,556,000
Billed Receivables | U.S. government
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable	$ 55,590,000	38,856,000
Unbilled Receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maximum period that management estimates unbilled accounts receivable to be billed and collected	1 year
Unbilled Receivables | Commercial and International
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable	$ 22,824,000	20,469,000
Unbilled Receivables | U.S. government
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable	$ 1,955,000	$ 2,018,000

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Acquisitions

3 Months Ended

Oct. 31, 2019

Business Combinations [Abstract]

Acquisitions

Acquisitions

Solacom Technologies Inc.

On February 28, 2019, we completed our acquisition of Solacom Technologies Inc. ("Solacom"), pursuant to the Arrangement Agreement, dated as of January 7, 2019, by and among Solacom, Comtech and Solar Acquisition Corp., a Canadian corporation and a direct, wholly-owned subsidiary of Comtech. Solacom is a leading provider of Next Generation 911 ("NG-911") solutions for public safety agencies. The acquisition of Solacom was a significant step in our strategy of enhancing our public safety and location technologies.

The acquisition has an aggregate purchase price for accounting purposes of $32,934,000, of which $27,328,000 was settled in cash and $5,606,000 was settled with the issuance of 208,669 shares of Comtech’s common stock at a volume weighted average stock price of $26.86. The fair value of consideration transferred in connection with this acquisition was $31,489,000, which was net of $1,445,000 of cash acquired. The cash portion of the purchase price was funded principally through borrowings under our Credit Facility.

We are accounting for the acquisition of Solacom under the acquisition method of accounting in accordance with FASB ASC 805, "Business Combinations" ("ASC 805"). The purchase price was allocated to the assets acquired and liabilities assumed, based on their fair value as of February 28, 2019, pursuant to the business combination accounting rules. Acquisition plan expenses were not included as a component of consideration transferred and were expensed in the period incurred. Pro forma financial information is not disclosed, as the acquisition is not material.

The following table summarizes the fair value of the assets acquired and liabilities assumed in connection with the Solacom acquisition:

	Purchase Price Allocation (1)			Measurement Period Adjustments		Purchase Price Allocation (as adjusted)
Settled in cash	$	27,328,000		—		$	27,328,000
Settled in common stock issued by Comtech	5,606,000			—		5,606,000
Aggregate purchase price at fair value	$	32,934,000		—		$	32,934,000
Allocation of aggregate purchase price:
Cash and cash equivalents	$	1,445,000		—		$	1,445,000
Current assets	9,896,000			1,000		9,897,000
Property, plant and equipment	777,000			—		777,000
Deferred tax assets	5,059,000			419,000		5,478,000
Accrued warranty obligations	(1,431,000		)	—		(1,431,000		)
Current liabilities	(4,477,000		)	—		(4,477,000		)
Contract liabilities, non-current	(1,604,000		)	—		(1,604,000		)
Net tangible assets at fair value	$	9,665,000		420,000		$	10,085,000
Identifiable intangibles, deferred taxes and goodwill:									Estimated Useful Lives
Technology	$	6,779,000		—		$	6,779,000		10 years
Customer relationships	7,007,000			—		7,007,000			20 years
Trade name	1,828,000			—		1,828,000			20 years
Deferred tax liabilities	(4,153,000		)	—		(4,153,000		)
Goodwill	11,808,000			(420,000	)	11,388,000			Indefinite
Allocation of aggregate purchase price	$	32,934,000		—		$	32,934,000

⁽¹⁾ As reported in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2019.

The acquired identifiable intangible assets are being amortized on a straight-line basis, which we believe approximates the pattern in which the assets are utilized over their estimated useful lives. The fair value of customer relationships was estimated primarily based on the value of the discounted cash flows that the related intangible asset could be expected to generate in the future. The fair value of technology and trade name was estimated based on the discounted capitalization of royalty expense saved because we now own the assets. Among the factors contributing to the recognition of goodwill, as a component of the purchase price allocation, were synergies in products and technologies and the addition of a skilled, assembled workforce. This goodwill has been assigned to our Commercial Solutions segment based on specific identification and is generally not deductible for income tax purposes.

GD NG-911 Business

On April 29, 2019, we completed the acquisition of a state and local government NG-911 business pursuant to the Asset Purchase Agreement, dated as of April 29, 2019, by and among General Dynamics Information Technology, Inc., Comtech and Comtech NextGen LLC, a Delaware limited liability company and indirect, wholly-owned subsidiary of Comtech. The acquisition of this NG-911 business from GD (the "GD NG-911 business") has a preliminary cash purchase price of $10,000,000 (which is subject to a net working capital adjustment). In connection with this acquisition, we also announced an award of a five-year contract to develop, implement and operate a NG-911 emergency communications system for a Northeastern state. Immediately after our announcement of this acquisition, we hired approximately sixty GD NG-911 employees and completed the integration of this business into our Commercial Solutions segment’s public safety and location technologies product line. The acquisition, contract award and hiring of talented employees are expected to strengthen Comtech’s position in the growing NG-911 solutions market.

We are accounting for the acquisition of this business under the acquisition method of accounting in accordance with FASB ASC 805. The purchase price, which is subject to a pending closing date balance sheet adjustment process under the purchase agreement, was allocated to the assets acquired and liabilities assumed, based on their preliminary fair value as of April 29, 2019, pursuant to the business combination accounting rules. Acquisition plan expenses were not included as a component of consideration transferred and were expensed in the period incurred. Pro forma financial information is not disclosed, as the acquisition is not material.

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed in connection with the acquisition of the GD NG-911 business:

	Purchase Price Allocation (1)			Measurement Period Adjustments		Purchase Price Allocation (as adjusted)
Aggregate purchase price at fair value	$	10,000,000		—		$	10,000,000
Allocation of aggregate purchase price:
Current assets	$	4,460,000		180,000		$	4,640,000
Property, plant and equipment	646,000			—		646,000
Deferred tax assets	3,426,000			(50,000	)	3,376,000
Accrued warranty obligations	(5,000,000		)	—		(5,000,000		)
Current liabilities	(3,162,000		)	68,000		(3,094,000		)
Net tangible assets at preliminary fair value	$	370,000		198,000		$	568,000
Identifiable intangibles, deferred taxes and goodwill:									Estimated Useful Lives
Customer relationships	$	20,300,000		—		$	20,300,000		10 years
Technology	3,500,000			—		3,500,000			15 years
Other liabilities	(21,700,000		)	—		(21,700,000		)
Deferred tax liabilities	(518,000		)	—		(518,000		)
Goodwill	8,048,000			(198,000	)	7,850,000			Indefinite
Allocation of aggregate purchase price	$	10,000,000		—		$	10,000,000

⁽¹⁾ As reported in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2019.

The acquired identifiable intangible assets are being amortized on a straight-line basis, which we believe approximates the pattern in which the assets are utilized over their estimated useful lives. The fair value of customer relationships was estimated based on the value of the discounted cash flows that the related intangible asset could be expected to generate in the future. The fair value of technology was estimated based on the discounted capitalization of royalty expense saved because we now own the assets. The preliminary fair value of other liabilities was based on the difference in discounted cash flows related to remaining performance obligations under a certain acquired contract as compared to current market terms for similar arrangements that a market participant would expect. Other liabilities will be credited against cost of sales over the remaining performance of the contract, which was 5.25 years as of the acquisition date.

Among the factors contributing to the recognition of goodwill, as a component of the purchase price allocation, were synergies in solution offerings and the addition of a skilled, assembled workforce. We currently estimate that approximately $7,100,000 of goodwill resulting from the acquisition will be tax deductible. This goodwill has been assigned to our Commercial Solutions segment based on specific identification.

We are currently finalizing a net working capital adjustment, pursuant to the terms of the purchase agreement. In August 2019, the seller proposed and requested an approximate $2,900,000 upward adjustment to the preliminary purchase price. We do not agree with their proposed adjustment and believe that we are entitled to a reduction of approximately $1,000,000 to the preliminary purchase price. As the parties could not reach an agreement during the stipulated period of time, the matter is now in arbitration.

The allocation of the preliminary purchase price shown in the above table was based on a valuation and estimates and assumptions that are subject to change within the purchase price allocation period (generally one year from the acquisition date). The primary areas of the purchase price allocation not yet finalized include the purchase price (due to a pending closing date balance sheet adjustment process under the purchase agreement) and residual goodwill.

Subsequent Event

On November 14, 2019, we entered into an agreement to acquire UHP Networks Inc. and its sister company (together, "UHP"), a leading provider of innovative and disruptive satellite ground station solutions, for a purchase price of approximately $40,000,000, of which we anticipate $5,000,000 to be paid in Comtech common stock with the remaining balance payable in cash. The purchase agreement also provides an earn-out up to an additional $10,000,000 payable, at our election, in cash and or shares of Comtech common stock, if certain agreed upon sales milestones are reached in the twelve-month period following completion of the acquisition. We believe that our acquisition of UHP will be a significant step in enhancing our solutions offerings for the satellite ground station market. The transaction is subject to customary closing conditions and is expected to occur late in the second half of our fiscal 2020.

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Leases - Operating and Finance Lease Liabilities (Details)	Oct. 31, 2019 USD ($)
Leases [Abstract]
Lessee, Operating Lease, Liability, Payments, Remainder of Fiscal Year	$ 8,192,000
Lessee, Operating Lease, Liability, Payments, Due Year Two	8,619,000
Lessee, Operating Lease, Liability, Payments, Due Year Three	7,387,000
Lessee, Operating Lease, Liability, Payments, Due Year Four	5,877,000
Lessee, Operating Lease, Liability, Payments, Due Year Five	4,170,000
Lessee, Operating Lease, Liability, Payments, Due after Year Five	6,555,000
Lessee, Operating Lease, Liability, Payments, Due	40,800,000
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	3,827,000
Operating Lease, Liability	$ 36,973,000
Operating Lease, Weighted Average Remaining Lease Term	4 years 7 months 2 days
Operating Lease, Weighted Average Discount Rate, Percent	4.05%
Finance Lease, Liability, Payments, Remainder of Fiscal Year	$ 109,000
Finance Lease, Liability, Payments, Due Year Two	0
Finance Lease, Liability, Payments, Due Year Three	0
Finance Lease, Liability, Payments, Due Year Four	0
Finance Lease, Liability, Payments, Due Year Five	0
Finance Lease, Liability, Payments, Due after Year Five	0
Finance Lease, Liability, Payments, Due	109,000
Finance Lease, Liability, Undiscounted Excess Amount	2,000
Finance Lease, Liability	$ 107,000
Finance Lease, Weighted Average Remaining Lease Term	2 months 19 days
Finance Lease, Weighted Average Discount Rate, Percent	4.21%
Operating Lease And Finance Lease, Liability, Payments, Remainder Of Fiscal Year	$ 8,301,000
Operating Lease And Finance Lease, Liability, Payments, Year Two	8,619,000
Operating Lease And Finance Lease, Liability, Payments, Year Three	7,387,000
Operating Lease And Finance Lease, Liability, Payments, Year Four	5,877,000
Operating Lease And Finance Lease, Liability, Payments, Year Five	4,170,000
Operating Lease And Finance Lease, Liability, Payments, Due After Year Five	6,555,000
Operating Lease And Finance Lease, Liability, Payments Due	40,909,000
Operating Lease And Finance Lease, Liability, Undiscounted Excess Amount	3,829,000
Operating Lease And Finance Lease, Liability	$ 37,080,000

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Acquisition-Related Restructuring Plan - Narrative (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Aug. 01, 2019
Restructuring Cost and Reserve [Line Items]
Facility exit costs		$ 1,373,000
Estimated facility exit costs			$ 568,000
Estimated contract settlement costs	$ 230,000	0
Government Solutions Segment | Operating Segments
Restructuring Cost and Reserve [Line Items]
Facility exit costs		1,373,000
Estimated contract settlement costs	0
Commercial Solutions Segment | Operating Segments
Restructuring Cost and Reserve [Line Items]
Facility exit costs		$ 0
Estimated contract settlement costs	$ 230,000

XML

Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Oct. 31, 2019

Accrued Liabilities, Current [Abstract]

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following at:

	October 31, 2019		July 31, 2019
Accrued wages and benefits	$	21,261,000	23,295,000
Accrued contract costs	13,725,000		15,007,000
Accrued warranty obligations	16,068,000		15,968,000
Accrued legal costs	2,781,000		2,835,000
Accrued commissions and royalties	4,587,000		5,114,000
Other	14,385,000		16,365,000
Accrued expenses and other current liabilities	$	72,807,000	78,584,000

Schedule of changes in current accrued warranty obligations

Changes in our accrued warranty obligations during the three months ended October 31, 2019 and 2018 were as follows:

	Three months ended October 31,
	2019			2018
Balance at beginning of period	$	15,968,000		11,738,000
Reclass to contract liabilities (see below)	—			(1,679,000	)
Provision for warranty obligations	989,000			1,020,000
Charges incurred	(1,191,000		)	(1,515,000	)
Warranty settlement and reclass (see below)	302,000			418,000
Balance at end of period	$	16,068,000		9,982,000

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Goodwill (Tables)

3 Months Ended

Oct. 31, 2019

Goodwill [Abstract]

Schedule of goodwill by segment

The following table represents goodwill by reportable operating segment, including the changes in the net carrying value of goodwill during the three months ended October 31, 2019:

	Commercial Solutions			Government Solutions	Total
Balance as of July 31, 2019	$	251,296,000		59,193,000	$	310,489,000
Change resulting from Solacom acquisition	(420,000		)	—	(420,000		)
Change resulting from the GD NG-911 acquisition	(198,000		)	—	(198,000		)
Balance as of October 31, 2019	$	250,678,000		59,193,000	$	309,871,000

XML

Credit Facility

3 Months Ended

Oct. 31, 2019

Line of Credit Facility [Abstract]

Credit Facility

Credit Facility

On October 31, 2018, we entered into a First Amended and Restated Credit Agreement (the "Credit Facility") with a syndicate of lenders, replacing our prior Credit Agreement dated as of February 23, 2016 (as amended by that certain First Amendment, dated as of June 6, 2017 (the "Prior Credit Facility")). In connection with the establishment of our new Credit Facility, during the three months ended October 31, 2018, we wrote-off $3,217,000 of deferred financing costs primarily related to the Term Loan Facility portion of our Prior Credit Facility and capitalized deferred financing costs of $1,813,000 related to the new Credit Facility.

The Credit Facility provides a senior secured loan facility of up to $550,000,000 consisting of: (i) a revolving loan facility ("Revolving Loan Facility") with a borrowing limit of $300,000,000; (ii) an accordion feature allowing us to borrow up to an additional $250,000,000; (iii) a $35,000,000 letter of credit sublimit; and (iv) a swingline loan credit sublimit of $25,000,000.

The Credit Facility matures on October 31, 2023 (the "Revolving Maturity Date"). If we issue new unsecured debt in excess of $5,000,000 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.

The proceeds of the Credit Facility were used, in part, to repay in full the outstanding borrowings under the Prior Credit Facility, and additional proceeds of the Credit Facility are expected to be used by us for working capital and other general corporate purposes. As of October 31, 2019, the amount outstanding under our Credit Facility was $169,000,000, which is reflected in the non-current portion of long-term debt on our Condensed Consolidated Balance Sheet. At October 31, 2019, we had $2,632,000 of standby letters of credit outstanding under our Credit Facility related to guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit. During the three months ended October 31, 2019, we had outstanding balances under the Credit Facility ranging from $142,000,000 to $169,000,000.

As of October 31, 2019, total net deferred financing costs related to the Credit Facility were $2,943,000 and are being amortized over the term of our Credit Facility through October 31, 2023.

Interest expense related to our credit facilities, including amortization of deferred financing costs, recorded during the three months ended October 31, 2019 and 2018, was $1,753,000 and $2,542,000, respectively. The amount for the three months ended October 31, 2019 relates to our new Credit Facility; whereas, the amount for the three months ended October 31, 2018 relates to our Prior Credit Facility. During the three months ended October 31, 2019 and 2018, our blended interest rate approximated 4.70% and 6.00%, respectively.

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 October 31, 2019, our Secured Leverage Ratio was 1.75x TTM Adjusted EBITDA compared to the maximum allowable Secured Leverage Ratio of 3.75x TTM Adjusted EBITDA. Our Interest Expense Coverage Ratio as of October 31, 2019 was 13.07x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA. Given our expected future business performance, we anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future.

The obligations under the Credit Facility are guaranteed by certain of our domestic 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.

On December 6, 2018, we entered into the first amendment to the Credit Facility. The purpose of the amendment is to provide for a mechanism to replace the LIBO Rate for Eurodollar borrowings with an alternative benchmark interest rate, should the LIBO Rate generally become unavailable in the future on an other-than-temporary basis.

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.

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Accounts Receivable

3 Months Ended

Oct. 31, 2019

Accounts Receivable Additional Disclosures [Abstract]

Accounts Receivable

Accounts Receivable

Accounts receivable consist of the following at:

	October 31, 2019		July 31, 2019
Receivables from commercial and international customers	$	82,140,000	85,556,000
Unbilled receivables from commercial and international customers	22,824,000		20,469,000
Receivables from the U.S. government and its agencies	55,590,000		38,856,000
Unbilled receivables from the U.S. government and its agencies	1,955,000		2,018,000
Total accounts receivable	162,509,000		146,899,000
Less allowance for doubtful accounts	1,465,000		1,867,000
Accounts receivable, net	$	161,044,000	145,032,000

Unbilled receivables as of October 31, 2019 relate to contracts-in-progress for which revenue has been recognized, but for which we have not yet earned the right to bill the customer for work performed to date. Under ASC 606, unbilled receivables constitute contract assets. Management estimates that substantially all amounts not yet billed at October 31, 2019 will be billed and collected within one year.

As of October 31, 2019 and July 31, 2019, except for the U.S. government (and its agencies), which represented 35.4% and 27.8%, respectively, of total accounts receivable, there were no other customers which accounted for greater than 10.0% of total accounts receivable.

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Adoption of Accounting Standards and Updates

3 Months Ended

Oct. 31, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Adoption of Accounting Standards and Updates

Adoption of Accounting Standards and Updates

We are required to prepare our condensed 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"). During the three months ended October 31, 2019, we adopted:

• FASB ASU No. 2016-02 Leases (Topic 842). See Note (12) - "Leases" for further information.

• FASB ASU No. 2017-11, which provides guidance on the accounting for certain financial instruments with embedded features that result in the strike price of the instrument or embedded conversion option being reduced on the basis of the pricing of future equity offerings (commonly referred to as "down round" features). On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we did not have any financial instruments with such "down round" features.

• FASB ASU No. 2017-12, which expands and refines hedge accounting for both non-financial and financial risk components and simplifies and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we are not a party to any such hedging transactions.

• FASB ASU No. 2018-07, which expands the scope of Topic 718 to include certain share-based payment transactions for acquiring goods and services from nonemployees. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we did not have any outstanding share-based awards with nonemployees that required remeasurement.

• FASB ASU No. 2018-16, which expands the list of eligible U.S. benchmark interest rates permitted in the application of hedge accounting due to broad concerns about the long-term sustainability of the LIBO Rate. This ASU adds the Overnight Index Swap ("OIS") rate, based on the Secured Overnight Financing Rate ("SOFR"), as an eligible U.S. benchmark interest rate. On August 1, 2019, we adopted this ASU. Our adoption did not have any impact on our condensed consolidated financial statements and disclosures, as we are not a party to any such hedging transactions.

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Intangible Assets

3 Months Ended

Oct. 31, 2019

Finite-Lived Intangible Assets, Net [Abstract]

Intangible Assets

Intangible Assets

Intangible assets with finite lives are as follows:

	As of October 31, 2019
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization	Net Carrying Amount
Customer relationships	20.5	$	276,834,000	69,694,000	$	207,140,000
Technologies	12.7	92,649,000		60,948,000	31,701,000
Trademarks and other	16.7	31,026,000		13,183,000	17,843,000
Total		$	400,509,000	143,825,000	$	256,684,000

	As of July 31, 2019
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization	Net Carrying Amount
Customer relationships	20.5	$	276,834,000	66,484,000	$	210,350,000
Technologies	12.7	92,649,000		59,522,000	33,127,000
Trademarks and other	16.7	31,026,000		12,613,000	18,413,000
Total		$	400,509,000	138,619,000	$	261,890,000

The weighted average amortization period in the above table excludes fully amortized intangible assets.

Amortization expense for the three months ended October 31, 2019 and 2018 was $5,206,000 and $4,289,000, respectively.

The estimated amortization expense consists of the following for the fiscal years ending July 31:

2020	$	20,700,000
2021	19,563,000
2022	18,322,000
2023	18,322,000
2024	17,631,000

We review net intangible assets with finite lives for impairment when an event occurs indicating the potential for impairment. No such event has occurred during the three months ended October 31, 2019. We believe that the carrying values of our net intangible assets were recoverable as of October 31, 2019. Any impairment charges that we may record in the future could be material to our results of operations and financial condition.

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Income Taxes

3 Months Ended

Oct. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

At October 31, 2019 and July 31, 2019, total unrecognized tax benefits were $7,839,000 and $7,215,000, respectively, including interest of $31,000 and $12,000, respectively. At October 31, 2019 and July 31, 2019, $2,298,000 and $325,000, respectively, of our unrecognized tax benefits were recorded as non-current income taxes payable on our Condensed Consolidated Balance Sheets. The remaining unrecognized tax benefits of $5,541,000 and $6,890,000 at October 31, 2019 and July 31, 2019, respectively, were presented as an offset to the associated non-current deferred tax assets on our Condensed Consolidated Balance Sheets. Of the total unrecognized tax benefits, $7,259,000 and $6,670,000, at October 31, 2019 and July 31, 2019, respectively, net of the reversal of the federal benefit recognized as a deferred tax asset relating to state reserves, would favorably impact our effective tax rate, if recognized. Unrecognized tax benefits result from income tax positions taken or expected to be taken on our income tax returns for which a tax benefit has not been recorded in our condensed consolidated financial statements. We do not expect that there will be any significant changes to our total unrecognized tax benefits within the next twelve months.

Our federal income tax returns for fiscal 2017 and 2018 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state income tax returns prior to fiscal 2015 are subject to audit. TCS's federal income tax return for the tax period from January 1, 2016 to February 23, 2016, the date we acquired TCS, is subject to potential future IRS audit. None of TCS's state income tax returns prior to calendar year 2015 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

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Acquisitions (Tables)

3 Months Ended

Oct. 31, 2019

Solacom

Business Acquisition [Line Items]

Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the fair value of the assets acquired and liabilities assumed in connection with the Solacom acquisition:

	Purchase Price Allocation (1)			Measurement Period Adjustments		Purchase Price Allocation (as adjusted)
Settled in cash	$	27,328,000		—		$	27,328,000
Settled in common stock issued by Comtech	5,606,000			—		5,606,000
Aggregate purchase price at fair value	$	32,934,000		—		$	32,934,000
Allocation of aggregate purchase price:
Cash and cash equivalents	$	1,445,000		—		$	1,445,000
Current assets	9,896,000			1,000		9,897,000
Property, plant and equipment	777,000			—		777,000
Deferred tax assets	5,059,000			419,000		5,478,000
Accrued warranty obligations	(1,431,000		)	—		(1,431,000		)
Current liabilities	(4,477,000		)	—		(4,477,000		)
Contract liabilities, non-current	(1,604,000		)	—		(1,604,000		)
Net tangible assets at fair value	$	9,665,000		420,000		$	10,085,000
Identifiable intangibles, deferred taxes and goodwill:									Estimated Useful Lives
Technology	$	6,779,000		—		$	6,779,000		10 years
Customer relationships	7,007,000			—		7,007,000			20 years
Trade name	1,828,000			—		1,828,000			20 years
Deferred tax liabilities	(4,153,000		)	—		(4,153,000		)
Goodwill	11,808,000			(420,000	)	11,388,000			Indefinite
Allocation of aggregate purchase price	$	32,934,000		—		$	32,934,000

⁽¹⁾ As reported in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2019.

GD NG-911 business

Business Acquisition [Line Items]

Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed in connection with the acquisition of the GD NG-911 business:

	Purchase Price Allocation (1)			Measurement Period Adjustments		Purchase Price Allocation (as adjusted)
Aggregate purchase price at fair value	$	10,000,000		—		$	10,000,000
Allocation of aggregate purchase price:
Current assets	$	4,460,000		180,000		$	4,640,000
Property, plant and equipment	646,000			—		646,000
Deferred tax assets	3,426,000			(50,000	)	3,376,000
Accrued warranty obligations	(5,000,000		)	—		(5,000,000		)
Current liabilities	(3,162,000		)	68,000		(3,094,000		)
Net tangible assets at preliminary fair value	$	370,000		198,000		$	568,000
Identifiable intangibles, deferred taxes and goodwill:									Estimated Useful Lives
Customer relationships	$	20,300,000		—		$	20,300,000		10 years
Technology	3,500,000			—		3,500,000			15 years
Other liabilities	(21,700,000		)	—		(21,700,000		)
Deferred tax liabilities	(518,000		)	—		(518,000		)
Goodwill	8,048,000			(198,000	)	7,850,000			Indefinite
Allocation of aggregate purchase price	$	10,000,000		—		$	10,000,000

⁽¹⁾ As reported in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2019.

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 31, 2019	Jul. 31, 2019
Stockholders’ equity:
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	39,402,226	39,276,161
Treasury stock, shares (in shares)	15,033,317	15,033,317

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Accrued Expenses and Other Current Liabilities - Schedule (Details) - USD ($)	Oct. 31, 2019	Jul. 31, 2019	Oct. 31, 2017	Jul. 31, 2017
Accrued Liabilities, Current [Abstract]
Accrued wages and benefits	$ 21,261,000	$ 23,295,000
Accrued contract costs	13,725,000	15,007,000
Accrued warranty obligations	16,068,000	15,968,000	$ 9,982,000	$ 11,738,000
Accrued legal costs	2,781,000	2,835,000
Accrued commissions and royalties	4,587,000	5,114,000
Other	14,385,000	16,365,000
Accrued expenses and other current liabilities	$ 72,807,000	$ 78,584,000

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Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Cash flows from operating activities:
Net income	$ 6,388,000	$ 3,468,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property, plant and equipment	2,651,000	2,851,000
Amortization of intangible assets with finite lives	5,206,000	4,289,000
Amortization of stock-based compensation	879,000	1,046,000
Amortization of deferred financing costs	185,000	548,000
Estimated contract settlement costs	230,000	0
Write-off of deferred financing costs	0	3,217,000
Changes in other liabilities	(1,033,000)	0
(Gain) loss on disposal of property, plant and equipment	(3,000)	32,000
Benefit from allowance for doubtful accounts	(343,000)	(7,000)
Provision for excess and obsolete inventory	373,000	747,000
Deferred income tax expense	2,286,000	2,273,000
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable	(15,947,000)	(12,267,000)
Inventories	2,656,000	(15,240,000)
Prepaid expenses and other current assets	930,000	3,054,000
Other assets	(44,000)	64,000
Accounts payable	4,299,000	(9,180,000)
Accrued expenses and other current liabilities	(1,095,000)	8,526,000
Contract liabilities	(822,000)	(2,947,000)
Other liabilities, non-current	3,000	275,000
Interest payable	(133,000)	(455,000)
Income taxes payable	(1,221,000)	(4,424,000)
Net cash provided by (used in) operating activities	5,445,000	(14,130,000)
Cash flows from investing activities:
Purchases of property, plant and equipment	(1,250,000)	(1,645,000)
Net cash used in investing activities	(1,250,000)	(1,645,000)
Cash flows from financing activities:
Net borrowings of long-term debt under Credit Facility	4,000,000	193,400,000
Net payments under Revolving Loan portion of Prior Credit Facility	0	(48,603,000)
Repayment of debt under Term Loan portion of Prior Credit Facility	0	(120,121,000)
Remittance of employees' statutory tax withholdings for stock awards	(4,560,000)	(5,017,000)
Cash dividends paid	(2,692,000)	(2,615,000)
Payment of deferred financing costs	0	(1,771,000)
Repayment of principal amounts under finance lease and other obligations	(198,000)	(454,000)
Proceeds from issuance of employee stock purchase plan shares	246,000	241,000
Proceeds from exercises of stock options	306,000	174,000
Net cash (used in) provided by financing activities	(2,898,000)	15,234,000
Net increase (decrease) in cash and cash equivalents	1,297,000	(541,000)
Cash and cash equivalents at beginning of period	45,576,000	43,484,000
Cash and cash equivalents at end of period	46,873,000	42,943,000
Cash paid during the period for:
Interest	1,701,000	2,470,000
Income taxes, net	79,000	25,000
Non-cash investing and financing activities:
Reclass of finance lease right-of-use assets to property, plant and equipment	295,000	0
Cash dividends declared but unpaid (including dividend equivalents)	2,484,000	2,463,000
Accrued additions to property, plant and equipment	692,000	795,000
Accrued deferred financing costs	$ 0	$ 41,000

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Acquisitions (Fair Value of Assets Acquired and Liabilities Assumed) (Details) - USD ($)				3 Months Ended			8 Months Ended
	Oct. 31, 2019	Apr. 29, 2019	Feb. 28, 2019	Oct. 31, 2019	Jul. 31, 2019	Oct. 31, 2018	Oct. 31, 2019
Business Acquisition [Line Items]
Goodwill	$ 309,871,000			$ 309,871,000	$ 310,489,000		$ 309,871,000
Customer relationships
Measurement Period Adjustments
Estimated Useful Lives				20 years 6 months		20 years 6 months
Solacom
Business Acquisition [Line Items]
Settled in cash	27,328,000		$ 27,328,000
Settled in common stock issued by Comtech	5,606,000		5,606,000
Aggregate purchase price at fair value	32,934,000		32,934,000
Cash and cash equivalents	1,445,000		1,445,000	$ 1,445,000			1,445,000
Current assets	9,897,000		9,896,000	9,897,000			9,897,000
Property, plant and equipment	777,000		777,000	777,000			777,000
Deferred tax assets, non-current	5,478,000		5,059,000	5,478,000			5,478,000
Accrued warranty obligations	(1,431,000)		(1,431,000)	(1,431,000)			(1,431,000)
Current liabilities	(4,477,000)		(4,477,000)	(4,477,000)			(4,477,000)
Contract liabilities, non-current	(1,604,000)		(1,604,000)	(1,604,000)			(1,604,000)
Net tangible assets at preliminary fair value	10,085,000		9,665,000	10,085,000			10,085,000
Deferred tax liabilities	(4,153,000)		(4,153,000)	(4,153,000)			(4,153,000)
Goodwill	11,388,000		11,808,000	11,388,000			11,388,000
Allocation of aggregate purchase price	32,934,000		32,934,000	32,934,000			32,934,000
Measurement Period Adjustments
Current assets							1,000
Deferred tax assets, non-current							419,000
Net tangible assets at preliminary fair value							420,000
Goodwill				(420,000)			(420,000)
Solacom | Technology
Business Acquisition [Line Items]
Identifiable intangible assets	6,779,000		$ 6,779,000	6,779,000			6,779,000
Measurement Period Adjustments
Estimated Useful Lives			10 years
Solacom | Customer relationships
Business Acquisition [Line Items]
Identifiable intangible assets	7,007,000		$ 7,007,000	7,007,000			7,007,000
Measurement Period Adjustments
Estimated Useful Lives			20 years
Solacom | Trade name
Business Acquisition [Line Items]
Identifiable intangible assets	1,828,000		$ 1,828,000	1,828,000			1,828,000
Measurement Period Adjustments
Estimated Useful Lives			20 years
GD NG-911 business
Business Acquisition [Line Items]
Aggregate purchase price at fair value	10,000,000	$ 10,000,000
Current assets	4,640,000	4,460,000		4,640,000			4,640,000
Property, plant and equipment	646,000	646,000		646,000			646,000
Deferred tax assets, non-current	3,376,000	3,426,000		3,376,000			3,376,000
Accrued warranty obligations	(5,000,000)	(5,000,000)		(5,000,000)			(5,000,000)
Current liabilities	(3,094,000)	(3,162,000)		(3,094,000)			(3,094,000)
Net tangible assets at preliminary fair value	568,000	370,000		568,000			568,000
Other liabilities	(21,700,000)	(21,700,000)		(21,700,000)			(21,700,000)
Deferred tax liabilities	(518,000)	(518,000)		(518,000)			(518,000)
Goodwill	7,850,000	8,048,000		7,850,000			7,850,000
Allocation of aggregate purchase price	10,000,000	10,000,000		10,000,000			10,000,000
Measurement Period Adjustments
Current assets					180,000
Deferred tax assets, non-current					(50,000)
Current liabilities					68,000
Net tangible assets at preliminary fair value					198,000
Goodwill				(198,000)	$ (198,000)
GD NG-911 business | Technology
Business Acquisition [Line Items]
Identifiable intangible assets	3,500,000	$ 3,500,000		3,500,000			3,500,000
Measurement Period Adjustments
Estimated Useful Lives		15 years
GD NG-911 business | Customer relationships
Business Acquisition [Line Items]
Identifiable intangible assets	$ 20,300,000	$ 20,300,000		$ 20,300,000			$ 20,300,000
Measurement Period Adjustments
Estimated Useful Lives		10 years

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Fair Value Measurements and Financial Instruments (Details)	Oct. 31, 2019
Fair Value Disclosures [Abstract]
Operating Lease, Weighted Average Discount Rate, Percent	4.05%
Finance Lease, Weighted Average Discount Rate, Percent	4.21%

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Intangible Assets (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Jul. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	$ 400,509,000		$ 400,509,000
Accumulated amortization	143,825,000		138,619,000
Net carrying amount	256,684,000		261,890,000
Amortization of intangibles	5,206,000	$ 4,289,000
Amortization expense - year one	20,700,000
Amortization expense - year two	19,563,000
Amortization expense - year three	18,322,000
Amortization expense - year four	18,322,000
Amortization expense - year five	$ 17,631,000
Customer Relationships
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	20 years 6 months	20 years 6 months
Gross carrying amount	$ 276,834,000		276,834,000
Accumulated amortization	69,694,000		66,484,000
Net carrying amount	$ 207,140,000		210,350,000
Technologies
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	12 years 8 months 12 days	12 years 8 months 12 days
Gross carrying amount	$ 92,649,000		92,649,000
Accumulated amortization	60,948,000		59,522,000
Net carrying amount	$ 31,701,000		33,127,000
Trademarks and other
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	16 years 8 months 12 days	16 years 8 months 12 days
Gross carrying amount	$ 31,026,000		31,026,000
Accumulated amortization	13,183,000		12,613,000
Net carrying amount	$ 17,843,000		$ 18,413,000

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Stock-Based Compensation - Performance Shares, RSUs, Restricted Stock and Share Unit Awards (Details)		3 Months Ended
	Oct. 31, 2019 USD ($) $ / shares shares	Oct. 31, 2019 USD ($) $ / shares shares	Oct. 31, 2018 USD ($)	Jul. 31, 2019 USD ($)
Additional Disclosures
Accrual of dividend equivalents, net of reversal | $		$ 56,000	$ 82,000
Carrying value at period end | $	$ 393,378,000	$ 393,378,000		$ 352,629,000
Performance Shares, RSUs, Restricted Stock and Share Units
Awards (in Shares)
Outstanding, Beginning Balance (in shares)		954,676
Granted (in shares)		219,425
Settled (in shares)		(199,466)
Forfeited (in shares)		(41,080)
Outstanding, Ending Balance (in shares)	933,555	933,555
Vested, Ending Balance (in shares)	328,791	328,791
Vested and Expected to Vest, Ending Balance (in shares)	890,374	890,374
Weighted Average Grant Date Fair Value
Outstanding, Beginning Balance (in dollars per share) | $ / shares		$ 22.40
Granted (in dollars per share) | $ / shares		27.69
Settled (in dollars per share) | $ / shares		16.80
Forfeited (in dollars per share) | $ / shares		21.00
Outstanding, Ending Balance (in dollars per share) | $ / shares	$ 24.91	24.91
Vested, Ending Balance (in dollars per share) | $ / shares	24.92	24.92
Vested and Expected to Vest, Ending Balance (in dollars per share) | $ / shares	$ 25.06	$ 25.06
Aggregate Intrinsic Value
Outstanding, Ending Balance | $	$ 32,628,000	$ 32,628,000
Vested, Ending Balance | $	11,491,000
Vested and Expected to Vest, Ending Balance | $	$ 31,119,000	31,119,000
Additional Disclosures
Total intrinsic value of stock-based awards settled | $		$ 5,806,000	4,210,000
Performance Shares | Employees | Granted since fiscal 2014
Additional Disclosures
Performance period (in years)		3 years
RSUs and restricted stock | Non-Employee Director
Additional Disclosures
Common Stock conversion ratio	1	1
RSUs and restricted stock | Non-Employee Director | Granted Prior to July 31, 2019 [Member]
Additional Disclosures
Vesting period (in years)		3 years
RSUs and restricted stock | Non-Employee Director | Granted After July 31, 2019 [Member]
Additional Disclosures
Vesting period (in years)		5 years
RSUs and restricted stock | Employees
Additional Disclosures
Vesting period (in years)		5 years
Common Stock conversion ratio	1	1
Share units
Additional Disclosures
Common Stock conversion ratio	1	1
Cumulative number of units settled as of the date (in shares)	431,142	431,142
Share units | Granted on or after July 31, 2017
Additional Disclosures
Conversion period of fully-vested share units into Common Stock from grant date (in years)		1 year
Stock Options
Additional Disclosures
Total intrinsic value of stock-based awards settled | $		$ 305,000	$ 561,000
Dividend Equivalents
Additional Disclosures
Accrual of dividend equivalents, net of reversal | $		56,000
Dividend equivalents paid | $		285,000
Carrying value at period end | $	$ 548,000	$ 548,000		$ 777,000
2000 Stock Incentive Plan | Performance Shares
Awards (in Shares)
Outstanding, Ending Balance (in shares)	217,839	217,839
2000 Stock Incentive Plan | RSUs and restricted stock
Awards (in Shares)
Outstanding, Ending Balance (in shares)	476,036	476,036
2000 Stock Incentive Plan | Share units
Awards (in Shares)
Outstanding, Ending Balance (in shares)	239,680	239,680

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Leases - Narrative (Details) - USD ($)		3 Months Ended
	Oct. 31, 2019	Oct. 31, 2019	Aug. 01, 2019	Jul. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Lease, Right-of-Use Asset	$ 34,148,000	$ 34,148,000		$ 0
Deferred Rent Liability			$ 3,023,000
Operating Lease, Liability	36,973,000	36,973,000
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Lease, Right-of-Use Asset			35,825,000
Operating Lease, Liability			$ 38,848,000
Executive Chairman [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Related Party Transaction, Amounts of Transaction		$ 160,000
Additional Term Of Related Party Lease Agreement As An Option To Exercise		10 years
Rent Amount In Next Calendar Year For Related Party Lease Agreement	$ 657,000

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Accrued Expenses and Other Current Liabilities - Product Warranty Rollforward (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Changes in Product Warranty Liability
Balance at beginning of period	$ 15,968,000
Provision for warranty obligations	989,000	$ 1,020,000
Charges incurred	(1,191,000)	(1,515,000)
Warranty settlement and reclass	302,000	$ 418,000
Balance at end of period	$ 16,068,000

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Income Taxes (Details) - USD ($)	Oct. 31, 2019	Jul. 31, 2019
Income Tax Contingency [Line Items]
Unrecognized tax benefits	$ 7,839,000	$ 7,215,000
Interest accrued relating to income taxes	31,000	12,000
Unrecognized tax benefits that would positively impact our effective tax rate, if recognized	7,259,000	6,670,000
Non-current income taxes payable
Income Tax Contingency [Line Items]
Unrecognized tax benefits	2,298,000	325,000
Included in the non-current deferred tax liabilities (as an offset to the associated deferred tax asset)
Income Tax Contingency [Line Items]
Unrecognized tax benefits	$ 5,541,000	$ 6,890,000

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Accrued Expenses and Other Current Liabilities

3 Months Ended

Oct. 31, 2019

Accrued Liabilities, Current [Abstract]

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at:

	October 31, 2019		July 31, 2019
Accrued wages and benefits	$	21,261,000	23,295,000
Accrued contract costs	13,725,000		15,007,000
Accrued warranty obligations	16,068,000		15,968,000
Accrued legal costs	2,781,000		2,835,000
Accrued commissions and royalties	4,587,000		5,114,000
Other	14,385,000		16,365,000
Accrued expenses and other current liabilities	$	72,807,000	78,584,000

As discussed further in Note (12) - "Leases," on August 1, 2019, we adopted Topic 842 and, as required by the new standard, reclassified $2,934,000 of accrued expenses and other current liabilities as follows: (i) $2,366,000 of short-term deferred rent liabilities related to operating leases were offset against the respective operating lease right-of-use assets; and (ii) the remaining $568,000 of estimated facility exit costs were reclassified to the current portion of operating lease liabilities.

Accrued contract costs represent direct and indirect costs on contracts as well as estimates of amounts owed for invoices not yet received from vendors or reflected in accounts payable.

Accrued warranty obligations as of October 31, 2019 relate to estimated liabilities for assurance-type warranty coverage that we provide to our customers. We generally provide warranty coverage for some of our products for a period of at least one year from the date of delivery. We record a liability for estimated warranty expense based on historical claims, product failure rates, consideration of contractual obligations, future costs to resolve software issues and other factors. Some of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates of total contract costs.

Changes in our accrued warranty obligations during the three months ended October 31, 2019 and 2018 were as follows:

	Three months ended October 31,
	2019			2018
Balance at beginning of period	$	15,968,000		11,738,000
Reclass to contract liabilities (see below)	—			(1,679,000	)
Provision for warranty obligations	989,000			1,020,000
Charges incurred	(1,191,000		)	(1,515,000	)
Warranty settlement and reclass (see below)	302,000			418,000
Balance at end of period	$	16,068,000		9,982,000

On August 1, 2018, in connection with our adoption of ASC 606, $1,679,000 of accrued warranty obligations presented in the above table were reclassified to contract liabilities, as they represented deferred revenue related to service-type warranty performance obligations.

Our current accrued warranty obligations at October 31, 2019 and July 31, 2019 include $3,781,000 and $3,999,000, respectively, of warranty obligations for a small product line that we refer to as the TCS 911 call handling software solution. This solution was licensed to customers prior to our acquisition of TeleCommunication Systems, Inc. ("TCS"). During the fiscal year ended July 31, 2018, we entered into a full and final warranty settlement with AT&T, the largest customer/distributor of this product line, pursuant to which we issued thirty-six credits to AT&T of $153,000 which AT&T can apply on a monthly basis to purchases of solutions from us, beginning October 2017 through September 2020. As of October 31, 2019, the total present value of these monthly credits is $1,611,000, all of which is included in our current accrued warranty obligations on our Condensed Consolidated Balance Sheet.

In connection with our acquisition of Solacom and the GD NG-911 business during the fiscal year ended July 31, 2019, we assumed warranty obligations related to certain contracts acquired. See Note (2) - "Acquisitions" for further information pertaining to these acquisitions.

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Fair Value Measurements and Financial Instruments

3 Months Ended

Oct. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements and Financial Instruments

Fair Value Measurements and Financial Instruments

Using the fair value hierarchy described in FASB ASC 820 "Fair Value Measurements and Disclosures," we valued our cash and cash equivalents using Level 1 inputs that were based on quoted market prices.

We believe that the carrying amounts of our other current financial assets (such as accounts receivable) and other current liabilities (including accounts payable, accrued expenses and the current portion of our favorable AT&T warranty settlement) approximate their fair values due to their short-term maturities. See Note (9) - "Accrued Expenses and Other Current Liabilities" for further discussion of the favorable AT&T warranty settlement.

We believe the fair values of our operating lease liabilities and our finance lease and other obligations, which currently reflect weighted-average discount rates of approximately 4.05% and 4.21%, respectively, would not be materially different than their carrying values as of October 31, 2019. See Note (12) - "Leases" for further information.

The fair value of our Credit Facility that we entered into on October 31, 2018 approximates its carrying amount due to its variable interest rate and pricing grid that is dependent upon our leverage ratio as of the end of each fiscal quarter.

As of October 31, 2019 and July 31, 2019, other than the financial instruments discussed above, we had no other significant assets or liabilities included in our Condensed Consolidated Balance Sheets recorded at fair value, as such term is defined by FASB ASC 820.

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General Narrative (Details)	3 Months Ended
	Oct. 31, 2019 operating_segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments	2

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Accounts Receivable (Tables)

3 Months Ended

Oct. 31, 2019

Accounts Receivable Additional Disclosures [Abstract]

Accounts receivable

Accounts receivable consist of the following at:

	October 31, 2019		July 31, 2019
Receivables from commercial and international customers	$	82,140,000	85,556,000
Unbilled receivables from commercial and international customers	22,824,000		20,469,000
Receivables from the U.S. government and its agencies	55,590,000		38,856,000
Unbilled receivables from the U.S. government and its agencies	1,955,000		2,018,000
Total accounts receivable	162,509,000		146,899,000
Less allowance for doubtful accounts	1,465,000		1,867,000
Accounts receivable, net	$	161,044,000	145,032,000

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Stock-Based Compensation (Tables)

3 Months Ended

Oct. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock-based Awards Outstanding by Award Type

As of October 31, 2019, the following stock-based awards, by award type, were outstanding:

	October 31, 2019
Stock options	1,503,295
Performance shares	217,839
RSUs and restricted stock	476,036
Share units	239,680
Total	2,436,850

Stock-based compensation for awards detailing where recorded in Condensed Consolidated Statement of Operations

Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations:

	Three months ended October 31,
	2019			2018
Cost of sales	$	59,000		58,000
Selling, general and administrative expenses	743,000			905,000
Research and development expenses	77,000			83,000
Stock-based compensation expense before income tax benefit	879,000			1,046,000
Estimated income tax benefit	(189,000		)	(228,000	)
Net stock-based compensation expense	$	690,000		818,000

Summary of net stock-based compensation expense by award type

Stock-based compensation expense (benefit), by award type, is summarized as follows:

	Three months ended October 31,
	2019			2018
Stock options	$	82,000		171,000
Performance shares	352,000			406,000
RSUs and restricted stock	698,000			547,000
ESPP	57,000			52,000
Share units	(310,000		)	(130,000	)
Stock-based compensation expense before income tax benefit	879,000			1,046,000
Estimated income tax benefit	(189,000		)	(228,000	)
Net stock-based compensation expense	$	690,000		818,000

Summary of the Plan's activity relating to stock options

The following table summarizes the Plan's activity during the three months ended October 31, 2019:

	Awards (in Shares)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2019	1,555,555		$	28.72
Exercised	(51,460	)	28.45
Expired/canceled	(800	)	27.35
Outstanding at October 31, 2019	1,503,295		$	28.73	3.27	$	9,346,000
Exercisable at October 31, 2019	1,431,765		$	28.83	3.14	$	8,761,000
Vested and expected to vest at October 31, 2019	1,477,967		$	28.76	3.23	$	9,148,000

Summary of the Plan's activity relating to performance shares, RSUs, restricted stock and share units

The following table summarizes the Plan's activity relating to performance shares, RSUs, restricted stock and share units:

	Awards (in Shares)		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at July 31, 2019	954,676		$	22.40
Granted	219,425		27.69
Settled	(199,466	)	16.80
Forfeited	(41,080	)	21.00
Outstanding at October 31, 2019	933,555		$	24.91	$	32,628,000
Vested at October 31, 2019	328,791		$	24.92	$	11,491,000
Vested and expected to vest at October 31, 2019	890,374		$	25.06	$	31,119,000

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Stock-Based Compensation - Overview (Details) - shares		3 Months Ended
	Dec. 03, 2019	Oct. 31, 2019	Jul. 31, 2019
Stock options
Stock-Based Awards Outstanding By Award Type
Number of stock-based option awards outstanding at period end (in shares)		1,503,295	1,555,555
2000 Stock Incentive Plan
2000 Stock Incentive Plan
Aggregate maximum number of shares of common stock which may be issued under stock option plan (in shares)		10,362,500
Aggregate net number of stock-based awards granted (in shares)		8,723,732
Aggregate number of stock based awards expired and canceled (in shares)		4,031,305
Aggregate number of stock-based awards exercised or settled (in shares)		6,286,882
Stock-Based Awards Outstanding By Award Type
Number of total stock-based awards outstanding (in shares)		2,436,850
2000 Stock Incentive Plan | Stock options
2000 Stock Incentive Plan
Maximum term for grants of incentive and non-qualified stock-based awards, excluding incentive stock-based awards granted to stockholders who own more than 10% of the voting power		10 years
Percentage of a stockholder's voting power that limits the contractual term of an incentive stock-based award		10.00%
Maximum term for incentive stock-based awards granted to stockholders who own more than 10% of the voting power		5 years
Stock-Based Awards Outstanding By Award Type
Number of stock-based option awards outstanding at period end (in shares)		1,503,295
2000 Stock Incentive Plan | Performance shares
Stock-Based Awards Outstanding By Award Type
Number of stock-based non-option awards outstanding at period end (in shares)		217,839
2000 Stock Incentive Plan | RSUs and restricted stock
Stock-Based Awards Outstanding By Award Type
Number of stock-based non-option awards outstanding at period end (in shares)		476,036
2000 Stock Incentive Plan | Share units
Stock-Based Awards Outstanding By Award Type
Number of stock-based non-option awards outstanding at period end (in shares)		239,680
2001 Employee Stock Purchase Plan | Employee Stock Purchase Plan - ESPP
2000 Stock Incentive Plan
Aggregate maximum number of shares of common stock which may be issued under stock option plan (in shares)		1,050,000
2001 Employee Stock Purchase Plan
Discount rate from market value, on purchase date, offered to employees participating in the Employee Stock Purchase Plan (ESPP)		85.00%
Total number of shares of common stock issued to employees under employee stock purchase plan and through the end of the reporting period (in shares)		797,186
Subsequent Event | 2000 Stock Incentive Plan
2000 Stock Incentive Plan
Aggregate maximum number of shares of common stock which may be issued under stock option plan (in shares)	10,962,500
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized	600,000

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Leases - Lease Cost and Additional Information (Details)	3 Months Ended
	Oct. 31, 2019 USD ($)
Leases [Abstract]
Amortization of ROU assets	$ 108,000
Interest on lease liabilities	2,000
Operating lease expense	2,637,000
Short-term lease expense	863,000
Variable lease expense	993,000
Sublease income	0
Total lease expense	4,603,000
Operating leases - Operating cash outflows	2,843,000
Finance leases - Operating cash outflows	2,000
Finance leases - Financing cash outflows	198,000
ROU assets obtained in the exchange for lease liabilities - operating leases	$ 598,000

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Accrued Expenses and Other Current Liabilities - Narrative (Details)	3 Months Ended
	Oct. 31, 2019 USD ($)	Oct. 31, 2018 credit	Aug. 01, 2019 USD ($)	Jul. 31, 2019 USD ($)	Aug. 01, 2018 USD ($)	Oct. 31, 2017 USD ($)	Jul. 31, 2017 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets, net	$ 34,148,000			$ 0
Operating lease liabilities, current	$ 9,248,000			0
Minimum coverage period of product warranty from the date of shipment	1 year
Accrued warranty obligations	$ 16,068,000			15,968,000		$ 9,982,000	$ 11,738,000
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accrued expenses and other current liabilities			$ 2,934,000
Deferred Rent Credit, Current			2,366,000
Operating lease right-of-use assets, net			35,825,000
Restructuring Reserve, Current			568,000
Operating lease liabilities, current			601,000
Accounting Standards Update 2016-02, Deferred Rent Liability Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets, net			$ 2,366,000
Difference between Revenue Guidance in Effect before and after Topic 606 | ASU 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accrued warranty obligations					$ (1,679,000)
TeleCommunication Systems Inc. | TCS 911 call handling software solution
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accrued warranty obligations	3,781,000			$ 3,999,000
Full and final warranty settlement with AT&T | TeleCommunication Systems Inc. | TCS 911 call handling software solution
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of monthly credits issued | credit		36
Amount of monthly credit						$ 153,000
Present value of monthly credits	$ 1,611,000
Warranty Obligations | Difference between Revenue Guidance in Effect before and after Topic 606 | ASU 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Contract liabilities					$ 1,679,000

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Cost Reduction Actions

3 Months Ended

Oct. 31, 2019

Restructuring and Related Activities [Abstract]

Cost Reduction Actions

Cost Reduction Actions

During the three months ended October 31, 2018, we took steps to improve our future operating results and successfully consolidated our Government Solutions segment’s manufacturing facility located in Tampa, Florida with another facility that we maintain in Orlando, Florida. In doing so, during the three months ended October 31, 2018, we recorded $1,373,000 of facility exit costs in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations. As discussed further in Note (12) - "Leases," on August 1, 2019, we adopted Topic 842 and, as required by the new standard, reclassified $568,000 of estimated facility exit costs to the current portion of operating lease liabilities.

During the second quarter of fiscal 2019, we began an evaluation and repositioning of our public safety and location technologies solutions in order to focus on providing higher margin solution offerings. To date, we have ceased offering certain solutions, have worked with customers to wind-down certain legacy contracts and have not renewed certain contracts. In connection with this ongoing evaluation and repositioning, during the three months ended October 31, 2019, we recorded $230,000 of estimated contract settlement costs in our Commercial Solutions segment.

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Earnings Per Share

3 Months Ended

Oct. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Our basic earnings per share ("EPS") is computed based on the weighted average number of common shares (including vested but unissued stock units, share units, performance shares and restricted stock units ("RSUs")), outstanding during each respective period. Our diluted EPS reflects the dilution from potential common stock issuable pursuant to the exercise of equity-classified stock-based awards, if dilutive, outstanding during each respective period. Pursuant to FASB ASC 260 "Earnings Per Share," equity-classified stock-based awards that are subject to performance conditions are not considered in our diluted EPS calculations until the respective performance conditions have been satisfied. When calculating our diluted earnings per share, we consider the amount an employee must pay upon assumed exercise of stock-based awards and the amount of stock-based compensation cost attributed to future services and not yet recognized.

There were no repurchases of our common stock during the three months ended October 31, 2019 or 2018. See Note (18) - "Stockholders’ Equity" for more information.

Weighted average stock options, RSUs and restricted stock outstanding of 382,000 and 279,000 for the three months ended October 31, 2019 and 2018, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive.

Our EPS calculations exclude 197,000 and 236,000 weighted average performance shares outstanding for the three months ended October 31, 2019 and 2018, respectively, as the performance conditions have not yet been satisfied. However, net income (the numerator) for EPS calculations for each respective period, is reduced by the compensation expense related to these awards.

The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations:

	Three months ended October 31,
	2019		2018
Numerator:
Net income for basic calculation	$	6,388,000	3,468,000
Numerator for diluted calculation	$	6,388,000	3,468,000
Denominator:
Denominator for basic calculation	24,555,000		23,999,000
Effect of dilutive securities:
Stock-based awards	182,000		376,000
Denominator for diluted calculation	24,737,000		24,375,000

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Earnings Per Share (Tables)

3 Months Ended

Oct. 31, 2019

Earnings Per Share [Abstract]

Schedule of numerators and denominators used in basic and diluted EPS calculations

The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations:

	Three months ended October 31,
	2019		2018
Numerator:
Net income for basic calculation	$	6,388,000	3,468,000
Numerator for diluted calculation	$	6,388,000	3,468,000
Denominator:
Denominator for basic calculation	24,555,000		23,999,000
Effect of dilutive securities:
Stock-based awards	182,000		376,000
Denominator for diluted calculation	24,737,000		24,375,000

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Leases (Tables)

3 Months Ended

Oct. 31, 2019

Leases [Abstract]

Lease, Cost [Table Text Block]

The components of lease expense are as follows:

	Three months ended October 31, 2019
Finance lease expense:
Amortization of ROU assets	$	108,000
Interest on lease liabilities	2,000
Operating lease expense	2,637,000
Short-term lease expense	863,000
Variable lease expense	993,000
Sublease income	—
Total lease expense	$	4,603,000

Additional information related to leases is as follows:

	Three months ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases - Operating cash outflows	$	2,843,000
Finance leases - Operating cash outflows	2,000
Finance leases - Financing cash outflows	198,000
ROU assets obtained in the exchange for lease liabilities:
Operating leases	$	598,000

Finance Lease, Liability, Maturity [Table Text Block]

The following table is a reconciliation of future cash flows relating to operating and finance lease liabilities presented on our Condensed Consolidated Balance Sheet as of October 31, 2019:

	Operating			Finance		Total
Remaining portion of fiscal 2020	$	8,192,000		109,000		$	8,301,000
Fiscal 2021	8,619,000			—		8,619,000
Fiscal 2022	7,387,000			—		7,387,000
Fiscal 2023	5,877,000			—		5,877,000
Fiscal 2024	4,170,000			—		4,170,000
Thereafter	6,555,000			—		6,555,000
Total future undiscounted cash flows	40,800,000			109,000		40,909,000
Less: Present value discount	3,827,000			2,000		3,829,000
Lease liabilities	$	36,973,000		107,000		$	37,080,000
Weighted-average remaining lease terms (in years)	4.59			0.22
Weighted-average discount rate	4.05		%	4.21	%

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

The following table is a reconciliation of future cash flows relating to operating and finance lease liabilities presented on our Condensed Consolidated Balance Sheet as of October 31, 2019:

	Operating			Finance		Total
Remaining portion of fiscal 2020	$	8,192,000		109,000		$	8,301,000
Fiscal 2021	8,619,000			—		8,619,000
Fiscal 2022	7,387,000			—		7,387,000
Fiscal 2023	5,877,000			—		5,877,000
Fiscal 2024	4,170,000			—		4,170,000
Thereafter	6,555,000			—		6,555,000
Total future undiscounted cash flows	40,800,000			109,000		40,909,000
Less: Present value discount	3,827,000			2,000		3,829,000
Lease liabilities	$	36,973,000		107,000		$	37,080,000
Weighted-average remaining lease terms (in years)	4.59			0.22
Weighted-average discount rate	4.05		%	4.21	%

Schedule of Future Minimum Lease Payments for Capital Leases

Leases

On August 1, 2019, we adopted ASU No. 2016-02 - Leases (Topic 842), which requires the recognition of lease rights and obligations as assets and liabilities on the balance sheet. Previously, operating leases were not recognized on the balance sheet. As we elected the modified retrospective adoption method, prior-period information was not restated. We also elected the transition package of practical expedients available in the standard, which permits us to not reassess under the new standard our prior conclusions about lease identification, classification and initial direct costs. As part of our adoption, however, we did not elect to use the hindsight or land easements practical expedients.

On August 1, 2019, in connection with our adoption of Topic 842, we recognized $35,825,000 of operating lease right-of-use ("ROU") assets (net of a $3,023,000 deferred rent liability that existed as of August 1, 2019 under prior applicable GAAP) and $38,848,000 of related liabilities. Except for the recording of the ROU assets and lease liabilities on our Condensed Consolidated Balance Sheet, and the expanded disclosures about our leasing activities, our adoption did not have a material impact on our condensed consolidated financial statements. Our adoption also did not result in any cumulative-effect adjustment to opening retained earnings.

Our leases historically relate to the leasing of facilities and equipment. We determine at inception whether an arrangement is, or contains, a lease and whether the lease should be classified as an operating or a financing lease. At lease commencement, we recognize an ROU asset and lease liability based on the present value of the future lease payments over the estimated lease term. We have elected to not recognize an ROU asset or lease liability for any leases with terms of twelve months or less. Instead, for such short-term leases, we recognize lease expense on a straight-line basis over the lease term. Certain of our leases include options to extend the term of the lease or to terminate the lease early. When it is reasonably certain that we will exercise a renewal option or will not exercise a termination option, we include the impact of exercising or not exercising such option, respectively, in the estimate of the lease term. As our lease agreements do not explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate ("IBR") on the commencement date to calculate the present value of future lease payments. Such IBR represents our estimated rate of interest to borrow on a collateralized basis over a term commensurate with the expected lease term.

Some of our leases include payments that are based on the Consumer Price Index ("CPI") or other similar indices. These variable lease payments are included in the calculation of the ROU asset and lease liability using the index as of the lease commencement date. Other variable lease payments, such as common area maintenance, property taxes, and usage-based amounts, are required by Topic 842 to be excluded from the ROU asset and lease liability and expensed as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset would also consider, to the extent applicable, any deferred rent upon adoption, lease pre-payments or initial direct costs of obtaining the lease (e.g., such as commissions).

For all classes of leased assets, we elected the practical expedient to not separate lease components (i.e., the actual item being leased, such as the facility or piece of equipment) from non-lease components (i.e., the distinct elements of a contract not related to securing the use of the leased asset, such as common area maintenance and consumable supplies).

Certain of our facility lease agreements (which are classified as operating leases) contain rent holidays or rent escalation clauses. For rent holidays and rent escalation clauses during the lease term, we record rental expense on a straight-line basis over the term of the lease. As of October 31, 2019, none of our leases contained a residual value guarantee and covenants included in our lease agreements are customary for the types of facilities and equipment being leased.

The components of lease expense are as follows:

	Three months ended October 31, 2019
Finance lease expense:
Amortization of ROU assets	$	108,000
Interest on lease liabilities	2,000
Operating lease expense	2,637,000
Short-term lease expense	863,000
Variable lease expense	993,000
Sublease income	—
Total lease expense	$	4,603,000

Additional information related to leases is as follows:

	Three months ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases - Operating cash outflows	$	2,843,000
Finance leases - Operating cash outflows	2,000
Finance leases - Financing cash outflows	198,000
ROU assets obtained in the exchange for lease liabilities:
Operating leases	$	598,000

The following table is a reconciliation of future cash flows relating to operating and finance lease liabilities presented on our Condensed Consolidated Balance Sheet as of October 31, 2019:

	Operating			Finance		Total
Remaining portion of fiscal 2020	$	8,192,000		109,000		$	8,301,000
Fiscal 2021	8,619,000			—		8,619,000
Fiscal 2022	7,387,000			—		7,387,000
Fiscal 2023	5,877,000			—		5,877,000
Fiscal 2024	4,170,000			—		4,170,000
Thereafter	6,555,000			—		6,555,000
Total future undiscounted cash flows	40,800,000			109,000		40,909,000
Less: Present value discount	3,827,000			2,000		3,829,000
Lease liabilities	$	36,973,000		107,000		$	37,080,000
Weighted-average remaining lease terms (in years)	4.59			0.22
Weighted-average discount rate	4.05		%	4.21	%

We lease our Melville, New York production facility from a partnership controlled by our President, CEO and Chairman. Lease payments made during the three months ended October 31, 2019 were $160,000. The current lease provides for our use of the premises as they exist through December 2021 with an option for an additional ten years. The annual rent of the facility for calendar year 2020 is $657,000 and is subject to customary adjustments. We have a right of first refusal in the event of a sale of the facility.

As of October 31, 2019, we do not have any rental commitments that have not commenced.

As we have not restated prior year information given our method of adopting the new standard, the following represents our future minimum lease payments for operating leases and capital leases as of July 31, 2019 under ASC Topic 840 and as reported in our Form 10-K filed with the SEC on September 24, 2019:

	Operating		Capital		Total
Fiscal 2020	$	11,812,000	789,000		$	12,601,000
Fiscal 2021	8,723,000		—		8,723,000
Fiscal 2022	7,343,000		—		7,343,000
Fiscal 2023	5,776,000		—		5,776,000
Fiscal 2024	3,430,000		—		3,430,000
Thereafter	7,130,000		—		7,130,000
Total	$	44,214,000	789,000		$	45,003,000
Less amount representing interest	*		32,000		32,000
Present value of net minimum lease payments	*		$	757,000	$	44,971,000

*Not applicable for operating leases

Schedule of Future Minimum Rental Payments for Operating Leases

As we have not restated prior year information given our method of adopting the new standard, the following represents our future minimum lease payments for operating leases and capital leases as of July 31, 2019 under ASC Topic 840 and as reported in our Form 10-K filed with the SEC on September 24, 2019:

	Operating		Capital		Total
Fiscal 2020	$	11,812,000	789,000		$	12,601,000
Fiscal 2021	8,723,000		—		8,723,000
Fiscal 2022	7,343,000		—		7,343,000
Fiscal 2023	5,776,000		—		5,776,000
Fiscal 2024	3,430,000		—		3,430,000
Thereafter	7,130,000		—		7,130,000
Total	$	44,214,000	789,000		$	45,003,000
Less amount representing interest	*		32,000		32,000
Present value of net minimum lease payments	*		$	757,000	$	44,971,000

*Not applicable for operating leases

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Intangible Assets (Tables)

3 Months Ended

Oct. 31, 2019

Finite-Lived Intangible Assets, Net [Abstract]

Intangible assets with finite lives

Intangible assets with finite lives are as follows:

	As of October 31, 2019
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization	Net Carrying Amount
Customer relationships	20.5	$	276,834,000	69,694,000	$	207,140,000
Technologies	12.7	92,649,000		60,948,000	31,701,000
Trademarks and other	16.7	31,026,000		13,183,000	17,843,000
Total		$	400,509,000	143,825,000	$	256,684,000

	As of July 31, 2019
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization	Net Carrying Amount
Customer relationships	20.5	$	276,834,000	66,484,000	$	210,350,000
Technologies	12.7	92,649,000		59,522,000	33,127,000
Trademarks and other	16.7	31,026,000		12,613,000	18,413,000
Total		$	400,509,000	138,619,000	$	261,890,000

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The estimated amortization expense consists of the following for the fiscal years ending July 31:

2020	$	20,700,000
2021	19,563,000
2022	18,322,000
2023	18,322,000
2024	17,631,000

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Revenue (Tables)

3 Months Ended

Oct. 31, 2019

Revenue from Contract with Customer [Abstract]

Schedules of concentration of risk

Sales by geography and customer type, as a percentage of consolidated net sales, are as follows:

	Three months ended October 31,
	2019		2018
United States
U.S. government	40.8	%	44.2	%
Domestic	36.1	%	31.4	%
Total United States	76.9	%	75.6	%
International	23.1	%	24.4	%
Total	100.0	%	100.0	%

Schedule of disaggregation of revenue

	Three months ended October 31, 2019
	Commercial Solutions		Government Solutions	Total
Geographical region and customer type
U.S. government	$	16,748,000	52,773,000	$	69,521,000
Domestic	53,354,000		8,041,000	61,395,000
Total United States	70,102,000		60,814,000	130,916,000
International	24,212,000		15,139,000	39,351,000
Total	$	94,314,000	75,953,000	$	170,267,000
Contract type
Firm fixed price	$	92,548,000	50,724,000	$	143,272,000
Cost reimbursable	1,766,000		25,229,000	26,995,000
Total	$	94,314,000	75,953,000	$	170,267,000
Transfer of control
Point in time	$	37,723,000	37,786,000	$	75,509,000
Over time	56,591,000		38,167,000	94,758,000
Total	$	94,314,000	75,953,000	$	170,267,000

	Three months ended October 31, 2018
	Commercial Solutions		Government Solutions	Total
Geographical region and customer type
U.S. government	$	14,220,000	56,824,000	$	71,044,000
Domestic	42,237,000		8,274,000	50,511,000
Total United States	56,457,000		65,098,000	121,555,000
International	21,516,000		17,773,000	39,289,000
Total	$	77,973,000	82,871,000	$	160,844,000
Contract type
Firm fixed price	$	76,290,000	63,611,000	$	139,901,000
Cost reimbursable	1,683,000		19,260,000	20,943,000
Total	$	77,973,000	82,871,000	$	160,844,000
Transfer of control
Point in time	$	37,945,000	52,623,000	$	90,568,000
Over time	40,028,000		30,248,000	70,276,000
Total	$	77,973,000	82,871,000	$	160,844,000

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Stockholders' Equity

3 Months Ended

Oct. 31, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

Sale of Common Stock

In December 2018, we filed a $400,000,000 shelf registration statement with the SEC for the sale of various types of securities, including debt. The shelf registration was declared effective by the SEC as of December 14, 2018. To date, we have not issued any securities pursuant to our $400,000,000 shelf registration statement.

Stock Repurchase Program

As of October 31, 2019 and December 4, 2019, we were authorized to repurchase up to an additional $8,664,000 of our common stock, pursuant to our current $100,000,000 stock repurchase program. Our stock repurchase program has no time restrictions and repurchases may be made in open-market or privately negotiated transactions and may be made pursuant to SEC Rule 10b5-1 trading plans. There were no repurchases made during the three months ended October 31, 2019 or 2018.

Dividends

Since September 2010, we have paid quarterly dividends pursuant to an annual targeted dividend amount that was established by our Board of Directors. On September 24, 2019, our Board of Directors declared a dividend of $0.10 per common share, which was paid on November 15, 2019. On December 4, 2019, our Board of Directors declared a dividend of $0.10 per common share, payable on February 14, 2020 to stockholders of record at the close of business on January 15, 2020.

Future dividends remain subject to compliance with financial covenants under our Credit Facility as well as Board approval.

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Stock-Based Compensation

3 Months Ended

Oct. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Overview

We issue stock-based awards to certain of our employees and our Board of Directors pursuant to our 2000 Stock Incentive Plan, as amended, (the "Plan") and our 2001 Employee Stock Purchase Plan (the "ESPP"), and recognize related stock-based compensation in our condensed consolidated financial statements. The Plan provides for the granting to employees and consultants of Comtech (including prospective employees and consultants): (i) incentive and non-qualified stock options, (ii) restricted stock units ("RSUs"), (iii) RSUs with performance measures (which we refer to as "performance shares"), (iv) restricted stock, (v) stock units (reserved for issuance to non-employee directors) and share units (reserved for issuance to employees) (collectively, "share units") and (vi) stock appreciation rights ("SARs"), among other types of awards. Our non-employee directors are eligible to receive non-discretionary grants of stock-based awards, subject to certain limitations.

As of October 31, 2019, the aggregate number of shares of common stock which may be issued, pursuant to the Plan, may not exceed 10,362,500. At the Fiscal 2019 Annual Meeting of Stockholders held on December 3, 2019, stockholders approved an amendment to our Plan to increase the share reserve under the Plan by 600,000 shares, to a total 10,962,500 shares. Stock options granted may not have a term exceeding ten years or, in the case of an incentive stock award granted to a stockholder who owns stock representing more than 10.0% of the voting power, no more than five years. We expect to settle all outstanding awards under the Plan and employee purchases under the ESPP with the issuance of new shares of our common stock.

As of October 31, 2019, we had granted stock-based awards pursuant to the Plan representing the right to purchase and/or acquire an aggregate of 8,723,732 shares (net of 4,031,305 expired and canceled awards), of which an aggregate of 6,286,882 have been exercised or settled.

As of October 31, 2019, the following stock-based awards, by award type, were outstanding:

	October 31, 2019
Stock options	1,503,295
Performance shares	217,839
RSUs and restricted stock	476,036
Share units	239,680
Total	2,436,850

Our ESPP provides for the issuance of up to 1,050,000 shares of our common stock. Our ESPP is intended to provide our eligible employees the opportunity to acquire our common stock at 85% of fair market value at the date of issuance. Through October 31, 2019, we have cumulatively issued 797,186 shares of our common stock to participating employees in connection with our ESPP.

Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations:

	Three months ended October 31,
	2019			2018
Cost of sales	$	59,000		58,000
Selling, general and administrative expenses	743,000			905,000
Research and development expenses	77,000			83,000
Stock-based compensation expense before income tax benefit	879,000			1,046,000
Estimated income tax benefit	(189,000		)	(228,000	)
Net stock-based compensation expense	$	690,000		818,000

Stock-based compensation for equity-classified awards is measured at the date of grant, based on an estimate of the fair value of the award and is generally expensed over the vesting period of the award. At October 31, 2019, unrecognized stock-based compensation of $11,885,000, net of estimated forfeitures of $1,085,000, is expected to be recognized over a weighted average period of 3.3 years. Total stock-based compensation capitalized and included in ending inventory at both October 31, 2019 and July 31, 2019 was $48,000. There are no liability-classified stock-based awards outstanding as of October 31, 2019 or July 31, 2019.

Stock-based compensation expense (benefit), by award type, is summarized as follows:

	Three months ended October 31,
	2019			2018
Stock options	$	82,000		171,000
Performance shares	352,000			406,000
RSUs and restricted stock	698,000			547,000
ESPP	57,000			52,000
Share units	(310,000		)	(130,000	)
Stock-based compensation expense before income tax benefit	879,000			1,046,000
Estimated income tax benefit	(189,000		)	(228,000	)
Net stock-based compensation expense	$	690,000		818,000

ESPP stock-based compensation expense primarily relates to the 15% discount offered to participants in the ESPP. During the three months ended October 31, 2019 and 2018, we recorded benefits of $310,000 and $130,000, respectively, which primarily represents the recoupment of certain share units.

The estimated income tax benefit as shown in the above table was computed using income tax rates expected to apply when the awards are settled. Such deferred tax asset was recorded net as part of our non-current deferred tax liability on our Condensed Consolidated Balance Sheet as of October 31, 2019 and July 31, 2019. The actual income tax benefit recognized for tax reporting is based on the fair market value of our common stock at the time of settlement and can significantly differ from the estimated income tax benefit recorded for financial reporting.

Stock Options

The following table summarizes the Plan's activity during the three months ended October 31, 2019:

	Awards (in Shares)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2019	1,555,555		$	28.72
Exercised	(51,460	)	28.45
Expired/canceled	(800	)	27.35
Outstanding at October 31, 2019	1,503,295		$	28.73	3.27	$	9,346,000
Exercisable at October 31, 2019	1,431,765		$	28.83	3.14	$	8,761,000
Vested and expected to vest at October 31, 2019	1,477,967		$	28.76	3.23	$	9,148,000

Stock options outstanding as of October 31, 2019 have exercise prices ranging from $20.90 - $33.94, representing the fair market value of our common stock on the date of grant, a contractual term of five or ten years and a vesting period of three or five years. The total intrinsic value relating to stock options exercised during the three months ended October 31, 2019 and 2018 was $305,000 and $561,000, respectively.

During the three months ended October 31, 2019 and 2018, at the election of certain holders of vested stock options, 40,860 and 72,830, respectively, of stock options were net settled upon exercise. As a result, 4,764 and 9,345 shares of our common stock were issued during the three months ended October 31, 2019 and 2018, respectively, net of shares retained to satisfy the exercise price and minimum statutory tax withholding requirements.

Performance Shares, RSUs, Restricted Stock and Share Unit Awards

The following table summarizes the Plan's activity relating to performance shares, RSUs, restricted stock and share units:

	Awards (in Shares)		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at July 31, 2019	954,676		$	22.40
Granted	219,425		27.69
Settled	(199,466	)	16.80
Forfeited	(41,080	)	21.00
Outstanding at October 31, 2019	933,555		$	24.91	$	32,628,000
Vested at October 31, 2019	328,791		$	24.92	$	11,491,000
Vested and expected to vest at October 31, 2019	890,374		$	25.06	$	31,119,000

The total intrinsic value relating to fully-vested awards settled during the three months ended October 31, 2019 and 2018 was $5,806,000 and $4,210,000, respectively.

The performance shares granted to employees since fiscal 2014 principally vest over a three-year performance period, if pre-established performance goals are attained or as specified pursuant to the Plan and related agreements. As of October 31, 2019, the number of outstanding performance shares included in the above table, and the related compensation expense prior to consideration of estimated pre-vesting forfeitures, assume achievement of the pre-established goals at a target level.

RSUs and restricted stock granted to non-employee directors prior to July 31, 2019 have a vesting period of three years and are convertible into shares of our common stock generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. RSUs and restricted stock granted to non-employee directors after July 31, 2019 have a vesting period of five years. RSUs granted to employees have a vesting period of five years and are convertible into shares of our common stock, generally at the time of vesting, on a one-for-one basis for no cash consideration.

Share units granted prior to July 31, 2017 were vested when issued and are convertible into shares of our common stock, generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. Share units granted on or after July 31, 2017 were granted to certain employees in lieu of non-equity incentive compensation and are convertible into shares of our common stock on the one-year anniversary of the respective grant date. Cumulatively through October 31, 2019, 431,142 share units granted have been settled.

The fair value of performance shares, RSUs, restricted stock and share units is determined using the closing market price of our common stock on the date of grant, less the present value of any estimated future dividend equivalents such awards are not entitled to receive and an applicable estimated discount for any post vesting transfer restrictions. RSUs, performance shares and restricted stock granted since fiscal 2013 are entitled to dividend equivalents unless forfeited before vesting occurs. Share units granted since fiscal 2014 are entitled to dividend equivalents while the underlying shares are unissued.

Dividend equivalents are subject to forfeiture, similar to the terms of the underlying stock-based awards, and are payable in cash generally at the time of settlement of the underlying award. During the three months ended October 31, 2019, we accrued $56,000 of dividend equivalents (net of forfeitures) and paid out $285,000. Accrued dividend equivalents were recorded as a reduction to retained earnings. As of October 31, 2019 and July 31, 2019, accrued dividend equivalents were $548,000 and $777,000, respectively.

With respect to the actual settlement of stock-based awards for income tax reporting, during the three months ended October 31, 2019 and 2018, we recorded income tax benefits of $612,000 and $457,000, respectively, which primarily represent the net excess income tax benefits upon settlement of stock-based awards during each of the respective periods.

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Acquisitions (Narrative) (Details)	Nov. 14, 2019 USD ($)	Oct. 31, 2019 USD ($)	Aug. 01, 2019 USD ($)	Apr. 29, 2019 USD ($) employee	Feb. 28, 2019 USD ($) $ / shares shares
Solacom
Business Acquisition [Line Items]
Aggregate purchase price		$ 32,934,000			$ 32,934,000
Aggregate purchase price - settled in cash		27,328,000			27,328,000
Aggregate purchase price - settled with issuance of common stock		5,606,000			$ 5,606,000
Aggregate purchase price - settled with issuance of common stock (in shares) | shares					208,669
Weighted average stock price (in dollars per share) | $ / shares					$ 26.86
Consideration transferred, net of cash acquired					$ 31,489,000
Cash acquired from acquisition					$ 1,445,000
GD NG-911 business
Business Acquisition [Line Items]
Aggregate purchase price		$ 10,000,000		$ 10,000,000
Number of employees hired | employee				60
Amortization period of other liabilities				5 years 3 months
Goodwill amount estimated to be tax deductible				$ 7,100,000
Proposed upward adjustment			$ 2,900,000
Proposed reduction to the purchase price			$ 1,000,000
GD 911 Business [Member]
Business Acquisition [Line Items]
Business Acquisition, Development Contract Term				5 years
Subsequent Event | UHP Networks
Business Acquisition [Line Items]
Aggregate purchase price	$ 40,000,000
Aggregate purchase price - settled with issuance of common stock	5,000,000
Earn out additional payable	$ 10,000,000
Earn out additional payable, term	12 months

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Revenue - Narrative (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue recognized	$ 18,609,000	$ 23,127,000
Remaining performance obligation, amount	$ 648,343,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-11-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Estimated period to satisfy a substantial portion of remaining performance obligations	24 months

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Condensed Consolidated Balance Sheets - USD ($)	Oct. 31, 2019	Jul. 31, 2019
Current assets:
Cash and cash equivalents	$ 46,873,000	$ 45,576,000
Accounts receivable, net	161,044,000	145,032,000
Inventories, net	71,810,000	74,839,000
Prepaid expenses and other current assets	15,995,000	14,867,000
Total current assets	295,722,000	280,314,000
Property, plant and equipment, net	26,873,000	28,026,000
Operating lease right-of-use assets, net	34,148,000	0
Finance lease right-of-use assets, net	447,000	0
Goodwill	309,871,000	310,489,000
Intangibles with finite lives, net	256,684,000	261,890,000
Deferred financing costs, net	2,943,000	3,128,000
Other assets, net	4,334,000	3,864,000
Total assets	931,022,000	887,711,000
Current liabilities:
Accounts payable	29,380,000	24,330,000
Accrued expenses and other current liabilities	72,807,000	78,584,000
Operating lease liabilities, current	9,248,000	0
Finance lease and other obligations, current	567,000	757,000
Dividends payable	2,428,000	2,406,000
Contract liabilities	36,989,000	38,682,000
Interest payable	447,000	588,000
Total current liabilities	151,866,000	145,347,000
Non-current portion of long-term debt	169,000,000	165,000,000
Operating lease liabilities, non-current	27,725,000	0
Income taxes payable	2,298,000	325,000
Deferred tax liability, net	13,768,000	12,481,000
Long-term contract liabilities	11,457,000	10,654,000
Other liabilities	17,264,000	18,822,000
Total liabilities	393,378,000	352,629,000
Commitments and contingencies (See Note 19)
Stockholders’ equity:
Preferred stock, par value $0.10 per share; shares authorized and unissued 2,000,000	0	0
Common stock, par value $0.10 per share; authorized 100,000,000 shares; issued 39,402,226 shares and 39,276,161 shares at October 31, 2019 and July 31, 2019, respectively	3,940,000	3,928,000
Additional paid-in capital	551,316,000	552,670,000
Retained earnings	424,237,000	420,333,000
Stockholders' equity before treasury stock	979,493,000	976,931,000
Treasury stock, at cost (15,033,317 shares at October 31, 2019 and July 31, 2019)	(441,849,000)	(441,849,000)
Total stockholders’ equity	537,644,000	535,082,000
Total liabilities and stockholders’ equity	$ 931,022,000	$ 887,711,000

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Inventories (Details) - USD ($)	Oct. 31, 2019	Jul. 31, 2019
Inventory Disclosure [Abstract]
Raw materials and components	$ 52,423,000	$ 53,959,000
Work-in-process and finished goods	38,867,000	40,576,000
Total inventories	91,290,000	94,535,000
Less reserve for excess and obsolete inventories	19,480,000	19,696,000
Inventories, net	71,810,000	74,839,000
Inventory directly related to long-term contracts	4,661,000	4,053,000
Inventory related to contracts from third party commercial customers who outsource their manufacturing to us	$ 1,395,000	$ 1,513,000

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Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Statement of Stockholders' Equity [Abstract]
Dividends declared (in dollars per share)	$ 0.10	$ 0.10
Accrual of dividend equivalents (in dollars per share)	$ 0.10	$ 0.10

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Stockholders' Equity (Details) - USD ($)					3 Months Ended
	Feb. 14, 2020	Dec. 04, 2019	Nov. 15, 2019	Sep. 24, 2019	Oct. 31, 2019	Oct. 31, 2018	Dec. 06, 2018
Class of Stock [Line Items]
Amount under shelf registration							$ 400,000,000
Treasury Stock Transactions, Excluding Value of Shares Reissued [Abstract]
Stock repurchase program, remaining authorized repurchase amount					$ 8,664,000
Maximum amount authorized by the Board of Directors for repurchases of the Company's common stock					$ 100,000,000
Dividends [Abstract]
Dividends declared (in dollars per share)				$ 0.1	$ 0.10	$ 0.10
Treasury Stock, Shares, Acquired					0	0
Subsequent Event
Treasury Stock Transactions, Excluding Value of Shares Reissued [Abstract]
Stock repurchase program, remaining authorized repurchase amount		$ 8,664,000
Dividends [Abstract]
Dividends declared (in dollars per share)		$ 0.1
Dividends, cash paid (in dollars per share)			$ 0.10
Scenario, Forecast [Member]
Dividends [Abstract]
Dividends, cash paid (in dollars per share)	$ 0.10

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Stock-Based Compensation - Income Tax Benefit From Stock-based Awards (Details) - USD ($)	3 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Income Tax Expense | Impact of Accounting Standards Update 2016-09
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net income tax shortfalls and reversal of deferred tax assets	$ 612,000
Reduction to Additional Paid-In Capital
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net income tax shortfalls and reversal of deferred tax assets		$ (457,000)