v3.26.3
Long-lived Assets, including Goodwill
12 Months Ended
Jul. 31, 2026
Goodwill [Abstract]  
Long-lived Assets, including Goodwill Long-lived Assets, including Goodwill
Allerium's goodwill as of July 31, 2026 and July 31, 2025 was $176,126,000. In accordance with FASB ASC 350, we perform a goodwill impairment analysis at least annually (on the first day of the first quarter of each fiscal year, or August 1st), 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. At July 31, 2026 and July 31, 2025, accumulated goodwill impairment losses related to our Allerium reporting unit were $8,565,000.

Fiscal 2026

On June 14, 2026, we determined that the Disposal Group met the criteria to be classified as "held for sale." Because the Disposal Group represented the disposal of a portion of the Satellite and Space Communications reporting unit, we allocated $28,499,000 of such reporting unit's historical goodwill to the Disposal Group based on the relative fair value of the Disposal Group to the fair value of the Satellite and Space Communications reporting unit. We then tested goodwill allocated to the Disposal Group and retained businesses of the Satellite and Space Communications reporting unit and concluded that no impairment existed as of June 14, 2026. In addition to the quantitative goodwill impairment test, we assessed the recoverability of the Disposal Group's carrying value and determined that the fair value of the Disposal Group, less costs to sell, exceeded its carrying value as of July 31, 2026. See Note (2) - Business Divestiture for additional information related to the Strategic Transaction.
In connection with the Strategic Transaction and change during the fourth quarter of fiscal 2026 in our reporting structure to one operating segment, Allerium, we aggregated Allerium's components, based on their similar economic characteristics, to form one reporting unit. As a result, the $2,036,000 of goodwill allocated to the retained businesses of the Satellite and Space Communications reporting unit was combined with the goodwill of the Allerium reporting unit, which was $174,090,000 just prior to the change.

Fiscal 2027

On August 1, 2026 (the first day of fiscal 2027), we performed our annual quantitative assessment using market participant assumptions to determine if the fair value of Allerium 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 value of Allerium. We also considered overall business conditions.

In performing the quantitative assessment, we estimated the fair value of Allerium 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. Allerium's future cash flows 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 rate 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 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 estimate of fair value to our total public market capitalization and assessed implied control premiums based on our common stock price of $1.68 as of the date of testing.

Ultimately, based on our quantitative assessment, we determined that our Allerium reporting unit had an estimated fair value in excess of its carrying value of at least 7.9%, and concluded that our goodwill was not impaired and that Allerium was not at risk of failing the quantitative assessment.

It is possible that, during the remainder of fiscal 2027 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 further fluctuate. 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 2027 or beyond. If assumed net sales and cash flow projections are not achieved in future periods, our common stock price significantly declines from current levels, and or we complete certain actions related to our transformation plan, Allerium could be at risk of failing the quantitative assessment and goodwill and intangibles assigned to the reporting unit could be impaired.

In any event, we are required to perform our next annual goodwill impairment analysis on August 1, 2027 (the start of our fiscal 2028). 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.