Segment Information

12 Months Ended

Jul. 31, 2020

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.

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 expense, estimated contract settlement costs, settlement of intellectual property litigation, acquisition plan expenses or facility exit costs 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:

	Fiscal Year Ended July 31, 2020
	Commercial Solutions		Government Solutions	Unallocated	Total
Net sales	$	353,730,000	262,985,000	—	$	616,715,000
Operating income (loss)	$	34,820,000	19,988,000	(39,634,000)	$	15,174,000
Net income (loss)	$	34,414,000	20,232,000	(47,626,000)	$	7,020,000
Provision for (benefit from) income taxes	410,000		(100,000)	1,980,000	2,290,000
Interest (income) and other	(31,000)		(169,000)	10,000	(190,000)
Interest expense	27,000		25,000	6,002,000	6,054,000
Amortization of stock-based compensation	—		—	9,275,000	9,275,000
Amortization of intangibles	17,325,000		4,270,000	—	21,595,000
Depreciation	8,347,000		1,446,000	768,000	10,561,000
Estimated contract settlement costs	444,000		—	—	444,000
Acquisition plan expenses	751,000		—	20,003,000	20,754,000
Adjusted EBITDA	$	61,687,000	25,704,000	(9,588,000)	$	77,803,000
Purchases of property, plant and equipment	$	5,281,000	1,617,000	327,000	$	7,225,000
Long-lived assets acquired in connection with acquisitions	$	6,060,000	32,391,000	—	$	38,451,000
Total assets at July 31, 2020	$	647,964,000	232,052,000	49,631,000	$	929,647,000

	Fiscal Year Ended July 31, 2019
	Commercial Solutions		Government Solutions		Unallocated		Total
Net sales	$	357,293,000	314,504,000		—		$	671,797,000
Operating income (loss)	$	36,053,000	28,997,000		(23,643,000)		$	41,407,000
Net income (loss)	$	35,888,000	29,029,000		(39,876,000)		$	25,041,000
Provision for income taxes	19,000		—		3,850,000		3,869,000
Interest (income) and other	75,000		(41,000)		1,000		35,000
Write-off of deferred financing costs	—		—		3,217,000		3,217,000
Interest expense	71,000		9,000		9,165,000		9,245,000
Amortization of stock-based compensation	—		—		11,427,000		11,427,000
Amortization of intangibles	14,944,000		3,376,000		—		18,320,000
Depreciation	9,265,000		1,891,000		771,000		11,927,000
Estimated contract settlement costs	6,351,000		—		—		6,351,000
Settlement of intellectual property litigation	—		—		(3,204,000)		(3,204,000)
Acquisition plan expenses	—		—		5,871,000		5,871,000
Facility exit costs	—		1,373,000		—		1,373,000
Adjusted EBITDA	$	66,613,000	$	35,637,000	$	(8,778,000)	$	93,472,000
Purchases of property, plant and equipment	$	6,293,000	1,902,000		590,000		$	8,785,000
Long-lived assets acquired in connection with acquisitions	$	60,693,000	—		—		$	60,693,000
Total assets at July 31, 2019	$	662,580,000	186,438,000		38,693,000		$	887,711,000

	Fiscal Year Ended July 31, 2018
	Commercial Solutions		Government Solutions	Unallocated	Total
Net sales	$	345,076,000	225,513,000	—	$	570,589,000
Operating income (loss)	$	40,837,000	10,950,000	(16,712,000)	$	35,075,000
Net income (loss)	$	40,297,000	10,835,000	(21,363,000)	$	29,769,000
Provision for (benefit from) income taxes	270,000		—	(5,413,000)	(5,143,000)
Interest (income) and other	151,000		112,000	(9,000)	254,000
Interest expense	119,000		3,000	10,073,000	10,195,000
Amortization of stock-based compensation	—		—	8,569,000	8,569,000
Amortization of intangibles	17,699,000		3,376,000	—	21,075,000
Depreciation	9,479,000		3,088,000	1,088,000	13,655,000
Adjusted EBITDA	$	68,015,000	17,414,000	(7,055,000)	$	78,374,000
Purchases of property, plant and equipment	$	7,151,000	901,000	590,000	$	8,642,000
Total assets at July 31, 2018	$	610,166,000	195,924,000	39,067,000	$	845,157,000

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 fiscal 2020 and 2019, we recorded $20,754,000 and $5,871,000 of acquisition plan expenses, respectively. These expenses were recorded primarily in our unallocated expenses. See Note (2) -"Acquisitions" for further information. In addition, offsetting unallocated expenses in fiscal 2019 is a $3,204,000 benefit as a result of a favorable ruling issued by the U.S. Court of Appeals for the Federal Circuit related to a legacy TCS intellectual property matter.

Interest expense in the tables above relate to our Prior Credit Facility and Credit Facility, and includes the amortization of deferred financing costs. In addition, during fiscal 2019, 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 (8) - "Credit Facility" for further discussion.

Intersegment sales in fiscal 2020, 2019 and 2018 by the Commercial Solutions segment to the Government Solutions segment were $9,837,000, $17,371,000 and $9,630,000, respectively. There were nominal sales by the Government Solutions segment to the Commercial Solutions segment for these fiscal periods. All intersegment sales are eliminated in consolidation and are excluded from the tables above.

Unallocated assets at July 31, 2020 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.