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Aviat Networks Announces Fiscal 2023 First Quarter Financial Results
[November 02, 2022]

Aviat Networks Announces Fiscal 2023 First Quarter Financial Results


Total Revenue of $81.3 million; Up 11.1% Year-Over-Year

GAAP Gross Margin of 36.3%; Compared to 35.7% in Prior Year;

Adjusted EBITDA of $10.7 million; Up 11.3% Compared to Prior Year

AUSTIN, Texas, Nov. 2, 2022 /PRNewswire/ -- Aviat Networks, Inc. ("Aviat Networks," "Aviat," or the "Company"), (Nasdaq: AVNW), the leading expert in wireless transport solutions, today reported financial results for its fiscal 2023 first quarter ended September 30, 2022.

First Quarter Highlights

  • Company executed on key long-term strategic objectives resulting in continued year-over-year increase in quarterly revenues, gross margins, and Adjusted EBITDA.

  • Closed first acquisition in over a decade (Redline Communications) and integration has progressed as planned.

  • Bharti Airtel win proves the Company's differentiation in products and services for 5G, supply chain, and operating system.

  • Company launched its Vendor Agnostic Multi-Band solution which allows customers to cost-effectively add significant capacity to their network.

  • Released new software that enables integrated IP/MPLS and Segment Routing to be deployed out to the network edge using Aviat's WTM 4000 all-outdoor microwave, millimeter-wave and multi-band radio platform for lower total cost of ownership for 5G and private LTE deployments.

First Quarter Financial Highlights

  • Total Revenues: $81.3 million, +11.1% from same quarter last year

  • GAAP Results: Gross Margin 36.3%; Operating Expenses $25.5 million; Operating Income $3.9 million; Net Income before tax $1.1 million

  • Non-GAAP Results: Adjusted EBITDA $10.7 million; Gross Margin 36.5%; Operating Expenses $20.4 million; Operating Income $9.2 million; Net Income $8.8 million; Net Income per share $0.75

  • Net Cash and Marketable Securities: $22.9 million; no loans outstanding at quarter-end

Fiscal 2023 First Quarter

Revenues

The Company reported total revenues of $81.3 million for its fiscal 2023 first quarter, compared to $73.2 million in the comparable fiscal 2022 period, an increase of $8.1 million or 11.1%. North America revenue of $48.8 million decreased by $(2.1) million or (4.1)%, compared to $50.9 million in the comparable fiscal 2022 period. International revenue was $32.4 million compared to $22.2 million in the comparable fiscal 2022 period, an increase of $10.2 million or 45.8%.

Gross Margins

In the fiscal 2023 first quarter, the Company reported GAAP gross margin of 36.3% and non-GAAP gross margin of 36.5%. This compares to GAAP gross margin of 35.7% and non-GAAP gross margin of 35.7% in the comparable fiscal 2022 period, an increase of 60 and 80 basis points respectively. The improvement resulted from pricing actions to offset inflationary pressures, and  the accretive contribution of the Redline business, partially offset by mix.

Operating Expenses

GAAP total operating expenses for the fiscal 2023 first quarter were $25.5 million, compared to $19.3 million in the comparable fiscal 2022 period, an increase of $6.3 million or 32.6%. The increase was primarily due to the addition of Redline Operating Expenses and related restructuring charge as well as merger and acquisition related costs.  Non-GAAP total operating expenses, excluding the impact of restructuring charges, share-based compensation, and merger and acquisition expenses for the fiscal 2023 first quarter were $20.4 million, as compared to $17.8 million in the comparable fiscal 2022 period, an increase of $2.6 million or 14.6%. The increase primarily resulted from the consolidation of Redline Operating Expenses. 

Operating Income

The Company reported GAAP operating income of $3.9 million for the fiscal 2023 first quarter, compared to $6.8 million in the comparable fiscal 2022 period. On a non-GAAP basis, the Company reported operating income of $9.2 million for the fiscal 2023 first quarter, compared to $8.3 million in the comparable fiscal 2022 period.

Income Taxes

The Company reported GAAP income tax expense of $3.9 million in the fiscal 2023 first quarter, compared to $2.2 million in the comparable fiscal 2022 period, or an increase of $1.7 million.

Net Income (Loss) / Net Income (Loss) Per Share

The Company reported GAAP net loss of $(2.7) million in the fiscal 2023 first quarter or GAAP net loss per fully diluted share of $(0.25). This compared to GAAP net income of $4.7 million or $0.39 per fully diluted share in the comparable fiscal 2022 period. On a non-GAAP basis, the Company reported net income of $8.8 million or non-GAAP net income per fully diluted share of $0.75 in the fiscal 2023 first quarter, compared to a non-GAAP net income of $8.1 million or $0.67 per share in the comparable fiscal 2022 period.

Adjusted EBITDA

Adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") for the fiscal 2023 first quarter was $10.7 million, compared to $9.6 million in the comparable fiscal 2022 period.

Balance Sheet Highlights

The Company reported cash and marketable securities of $22.9 million as of September 30, 2022, compared to $47.8 million as of July 1, 2022. As of September 30, 2022, the Company has no loans outstanding. The decline in cash balance was primarily attributable to the closure of the Redline acquisition and related expenses.

Conference Call Details

Aviat Networks will host a conference call at 5:00 p.m. Eastern Time (ET) today, November 2, 2022, to discuss its financial and operational results for the fiscal 2023 first quarter. Participating on the call will be Peter Smith, President and Chief Executive Officer; David M. Gray, Sr. Vice President and Chief Financial Officer; and Andrew Fredrickson, Director of Corporate Development and Investor Relations. Following management's remarks, there will be a question and answer period.

Interested parties may access the conference call live via the webcast through Aviat Network's Investor Relations website at https://investors.aviatnetworks.com/events-and-presentations/events, or may participate via telephone by registering using this online form. Once registered, telephone participants will receive the dial-in number along with a unique PIN number that must be used to access the call. A replay of the conference call webcast will be available after the call on the Company's investor relations website.

About Aviat Networks      

Aviat Networks, Inc. is the leading expert in wireless transport solutions and works to provide dependable products, services and support to its customers. With more than one million systems sold in 170 countries worldwide, communications service providers and private network operators including state/local government, utility, federal government and defense organizations trust Aviat with their critical applications. Coupled with a long history of microwave innovations, Aviat provides a comprehensive suite of localized professional and support services enabling customers to simplify both their networks and their lives. For more than 70 years, the experts at Aviat have delivered high-performance products, simplified operations, and the best overall customer experience. Aviat Networks is headquartered in Austin, Texas. For more information, visit www.aviatnetworks.com or connect with Aviat Networks on TwitterFacebook and LinkedIn.

Forward-Looking Statements

The information contained in this document includes forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including Aviat's beliefs and expectations regarding business conditions, new product solutions, customer positioning, revenue, future orders, bookings, new contracts, cost structure, operating income, profitability in fiscal 2023, process improvements, realignment plans and review of strategic alternatives. All statements, trend analyses and other information contained herein regarding the foregoing beliefs and expectations, as well as about the markets for the services and products of Aviat and trends in revenue, and other statements identified by the use of forward-looking terminology, including "anticipate," "believe," "plan," "estimate," "expect," "goal," "will," "see," "continue," "delivering," "view," and "intend," or the negative of these terms or other similar expressions, constitute forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, forward-looking statements are based on estimates reflecting the current beliefs, expectations and assumptions of the senior management of Aviat regarding the future of its business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Such forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should therefore be considered in light of various important factors, including those set forth in this document. Therefore, you should not rely on any of these forward-looking statements.

Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include the following: the impact of COVID-19; disruptions relating to the ongoing conflict between Russia and Ukraine; continued price and margin erosion in the microwave transmission industry; the impact of the volume, timing, and customer, product, and geographic mix of our product orders; the timing of our receipt of payment; our ability to meet product development dates or cost reductions of products; our suppliers' inability to perform and deliver on time, component shortages, or other supply chain constraints; the effects of inflation; the ability of our subcontractors to timely perform; weakness in the global economy affecting customer spending; retention of our key personnel; our failure to protect our intellectual property rights or defend against intellectual property infringement claims; the results of our restructuring efforts; the ability to preserve and use our net operating loss carryforwards; the effects of currency and interest rate risks; the effects of current and future government regulations; general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States and other countries where we conduct business; the conduct of unethical business practices in developing countries; the impact of political turmoil in countries where we have significant business; our ability to realize the anticipated benefits of any proposed or recent acquisitions; the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships.

For more information regarding the risks and uncertainties for Aviat's business, see "Risk Factors" in Aviat's Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on September 14, 2022, as well as other reports filed by Aviat with the SEC from time to time. Aviat undertakes no obligation to update publicly any forward-looking statement, whether written or oral, for any reason, except as required by law, even as new information becomes available or other events occur in the future.

Investor Relations:
Andrew Fredrickson
Director, Corporate Development & Investor Relations
Phone: (408) 501-6214
Email: [email protected]

 






Table 1

AVIAT NETWORKS, INC.

Fiscal Year 2023 First Quarter Summary

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



Three Months Ended

(In thousands, except per share amounts)

September 30,
2022


October 1,
2021

Revenues:




Revenue from product sales

$                    55,101


$                    50,847

Revenue from services

26,150


22,311

Total revenues

81,251


73,158

Cost of revenues:




Cost of product sales

35,253


31,925

Cost of services

16,544


15,152

Total cost of revenues

51,797


47,077

Gross margin

29,454


26,081

Operating expenses:




Research and development expenses

6,087


5,910

Selling and administrative expenses

17,504


12,698

Restructuring charges

1,950


659

Total operating expenses

25,541


19,267

Operating income

3,913


6,814

Other expense/(income), net

2,782


(28)

Income before income taxes

1,131


6,842

Provision for income taxes

3,877


2,160

Net (loss) income

$                     (2,746)


$                      4,682





Net (loss) income per share of common stock outstanding:




Basic

$                       (0.25)


$                        0.42

Diluted

$                       (0.25)


$                        0.39

Weighted-average shares outstanding:




Basic

11,200


11,159

Diluted

11,200


11,954


 


Table 2

AVIAT NETWORKS, INC.

Fiscal Year 2023 First Quarter Summary

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands)

September 30,
2022


July 1,
2022

ASSETS




Current Assets:




Cash and cash equivalents

$                    21,607


$                    36,877

Marketable securities

1,252


10,893

Accounts receivable, net

72,471


73,168

Unbilled receivables

50,389


45,857

Inventories

32,888


25,394

Customer service inventories

2,069


1,775

Other current assets

16,279


12,437

Total current assets

196,955


206,401

Property, plant and equipment, net

11,923


8,887

Goodwill

4,950


Intangible assets, net

7,166


Deferred income taxes

92,310


95,412

Right of use assets

2,987


2,759

Other assets

10,437


10,445

Total long-term assets

129,773


117,503

TOTAL ASSETS

$                  326,728


$                  323,904

LIABILITIES AND EQUITY




Current Liabilities:




Accounts payable

$                    48,236


$                    42,394

Accrued expenses

24,806


26,451

Short-term lease liabilities

833


513

Advance payments and unearned revenue

35,483


33,740

Restructuring liabilities

1,522


1,381

Total current liabilities

110,880


104,479

Unearned revenue

7,844


8,920

Long-term lease liabilities

2,407


2,412

Other long-term liabilities

246


273

Reserve for uncertain tax positions

5,366


5,504

Deferred income taxes

563


563

Total liabilities

127,306


122,151

Commitments and contingencies




Equity:




Preferred stock


Common stock

113


112

Treasury stock

(6,147)


(6,147)

Additional paid-in-capital

824,786


823,259

Accumulated deficit

(602,188)


(599,442)

Accumulated other comprehensive loss

(17,142)


(16,029)

Total equity

199,422


201,753

TOTAL LIABILITIES AND EQUITY

$                  326,728


$                  323,904

 

AVIAT NETWORKS, INC.

Fiscal Year 2023 First Quarter Summary

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE

To supplement the consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), we provide additional measures of gross margin, research and development expenses, selling and administrative expenses, operating income, provision for or benefit from income taxes, net income, net income per share, and adjusted income before interest, tax, depreciation and amortization (Adjusted EBITDA), in each case, adjusted to exclude certain costs, charges, gains and losses, as set forth below. We believe that these non-GAAP financial measures, when considered together with the GAAP financial measures provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionate positive or negative impact on results in any particular period. We also believe these non-GAAP measures enhance the ability of investors to analyze trends in our business and to understand our performance. In addition, we may utilize non-GAAP financial measures as a guide in our forecasting, budgeting and long-term planning process and to measure operating performance for some management compensation purposes. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP follow.

 


Table 3

AVIAT NETWORKS, INC.

Fiscal Year 2023 First Quarter Summary

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1)

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended


September 30,
2022


% of

Revenue


October 1, 2021


% of

Revenue


(In thousands, except percentages and per share amounts)

GAAP gross margin

$            29,454


36.3 %


$            26,081


35.7 %

Share-based compensation

172




68



Non-GAAP gross margin

29,626


36.5 %


26,149


35.7 %









GAAP research and development expenses

$              6,087


7.5 %


$              5,910


8.1 %

Share-based compensation

(135)




(76)



Non-GAAP research and development expenses

5,952


7.3 %


5,834


8.0 %









GAAP selling and administrative expenses

$            17,504


21.5 %


$            12,698


17.4 %

Share-based compensation

(1,531)




(719)



Merger and acquisition related expense

(1,516)






Non-GAAP selling and administrative expenses

14,457


17.8 %


11,979


16.4 %









GAAP operating income

$              3,913


4.8 %


$              6,814


9.3 %

Share-based compensation

1,838




863



Merger and acquisition related expense

1,516






Restructuring charges

1,950




659



Non-GAAP operating income

9,217


11.3 %


8,336


11.4 %









GAAP income tax provision

$              3,877


4.8 %


$              2,160


3.0 %

Adjustment to reflect pro forma tax rate

(3,577)




(1,860)



Non-GAAP income tax provision

300


0.4 %


300


0.4 %









GAAP net (loss) income

$            (2,746)


(3.4) %


$              4,682


6.4 %

Share-based compensation

1,838




863



Merger and acquisition related expense

1,516






Restructuring charges

1,950




659



Other expense

2,659






Adjustment to reflect pro forma tax rate

3,577




1,860



Non-GAAP net income

$              8,794


10.8 %


$              8,064


11.0 %

















Net income per share:

GAAP

$              (0.25)




$                0.39



Non-GAAP

$                0.75




$                0.67











Shares used in computing net income per share








GAAP

11,200




11,954



Non-GAAP

11,777




11,954











Adjusted EBITDA:








GAAP net (loss) income

$            (2,746)


(3.4) %


$              4,682


6.4 %

Depreciation and amortization of property, plant and equipment

1,468




1,264



Other expense/(income), net

2,782




(28)



Share-based compensation

1,838




863



Merger and acquisition related expense

1,516






Restructuring charges

1,950




659



Provision for income taxes

3,877




2,160



Adjusted EBITDA

$            10,685


13.2 %


$              9,600


13.1 %









(1)

The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by us. Our non-GAAP net income excluded share-based compensation, and other non-recurring charges (recovery). Adjusted EBITDA was determined by excluding depreciation and amortization on property, plant and equipment, interest, provision for or benefit from income taxes, and non-GAAP pre-tax adjustments, as set forth above, from GAAP net income. We believe that the presentation of these non-GAAP items provides meaningful supplemental information to investors, when viewed in conjunction with, and not in lieu of, our GAAP results. However, the non-GAAP financial measures have not been prepared under a comprehensive set of accounting rules or principles. Non-GAAP information should not be considered in isolation from, or as a substitute for, information prepared in accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAP financial measures.

 


Table 4

AVIAT NETWORKS, INC.

Fiscal Year 2023 First Quarter Summary

SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA

(Unaudited)



Three Months Ended


September 30,
2022


October 1,
2021


(In thousands)

North America

$                    48,848


$                    50,937

International:




Africa and the Middle East

10,984


10,702

Europe

4,500


2,703

Latin America and Asia Pacific

16,919


8,816


32,403


22,221

Total revenue

$                    81,251


$                    73,158

 

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SOURCE Aviat Networks, Inc.


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