Earnings release
Page 1
Aviat Networks Announces Fiscal 2025 Second Quarter and Six Month Financial Results February 4, 2025 Total Revenue of $118.2 million; Up 26.2% Year-Over-Year Operating Income of $8.0 million; Non-GAAP Operating income of $12.6 million Adjusted EBITDA of $14.8 million Non-GAAP Diluted Earnings per Share of $0.82 AUSTIN, Texas, Feb. 4, 2025 /PRNewswire/ -- Aviat Networks, Inc. ("Aviat Networks," "Aviat," or the "Company"), (Nasdaq: AVNW), the leading expert in wireless transport and access solutions, today reported financial results for its fiscal 2025 second quarter ended December 27, 2024. Second Quarter Highlights Completed 18th consecutive quarter of trailing twelve month revenue growth Achieved record quarterly adjusted EBITDA driven by healthy sales, margins, and disciplined cost management Received orders for Pasolink above $35 million in the quarter, continuing trend to $140 million in annual run-rate contribution from Pasolink acquisition Reduced net debt position by $10 million and repurchased 34,600 shares in the quarter Second Quarter Financial Highlights Total Revenues: $118.2 million, up 26.2% from the same quarter last year GAAP Results: Gross Margin 34.6%; Operating Expenses $32.9 million; Operating Income $8.0 million; Net Income $4.5 million; Net Income per diluted share ("Net Income per share") $0.35 Non-GAAP Results: Adjusted EBITDA $14.8 million; Gross Margin 35.3%; Operating Expenses $29.1 million; Operating Income $12.6 million; Net Income $10.5 million; Net Income per share $0.82 Cash and cash equivalents: $52.6 million Net debt: $22.3 million
Page 2
Fiscal 2025 Second Quarter and Six Months Ended December 27, 2024 Revenues The Company reported total revenues of $118.2 million for its fiscal 2025 second quarter, compared to $93.7 million in the fiscal 2024 second quarter, an increase of $24.5 million or 26.2%. North America revenue of $58.0 million increased by $7.3 million or 14.5%, compared to $50.6 million in the prior year due strength in our private networks business. International revenue of $60.2 million increased by $17.2 million or 39.8%, compared to $43.1 million in the prior year. This growth was due to the addition from the Pasolink acquisition. For the six months ended December 27, 2024, revenue increased 14.4% to $206.6 million, compared to $180.6 million in the same period of fiscal 2024. Gross Margins In the fiscal 2025 second quarter, the Company reported GAAP gross margin of 34.6% and non-GAAP gross margin of 35.3%. This compares to GAAP gross margin of 38.8% and non-GAAP gross margin of 38.8% in the fiscal 2024 second quarter, a decrease of (420) and (350) basis points, respectively. The decrease was driven by the addition of Pasolink and product mix in the quarter. For the six months ended December 27, 2024, the Company reported GAAP gross margin of 29.4% and non-GAAP gross margin of 30.1%. This compares to GAAP gross margin of 37.4% and non-GAAP gross margin of 37.5% in the same period of fiscal 2024, a decrease of (800) and (740) basis points, respectively. Operating Expenses The Company reported GAAP total operating expenses of $32.9 million for the fiscal 2025 second quarter, compared to $32.9 million in the fiscal 2024 second quarter. Non-GAAP total operating expenses, excluding the impact of restructuring charges, share-based compensation, and merger and acquisition expenses for the fiscal 2025 second quarter were $29.1 million, compared to $25.4 million in the prior year, an increase of $3.7 million or 14.7%. For the six months ended December 27, 2024, the Company reported total operating expenses of $68.3 million, compared to $59.2 million in the same period of fiscal 2024, an increase of $9.0 million or 15.2%. Non-GAAP total operating expenses, excluding the impact of restructuring charges, share-based compensation, and merger and acquisition expenses for the six months ended December 27, 2024 were $59.1 million, compared to $46.7 million in the same period of fiscal 2024, an increase of $12.4 million or 26.6%. Operating Income The Company reported GAAP operating income of $8.0 million for the fiscal 2025 second quarter, compared to GAAP operating income of $3.4 million in the fiscal 2024 second quarter, an increase of $4.6 million. Operating income increased primarily due to higher gross margin dollars and flat operating expenses. On a non-GAAP basis, the Company reported operating income of $12.6 million for the fiscal 2025 second quarter, compared to a non-GAAP operating income of $11.0 million in the prior year, an increase of $1.6 million. For the six months ended December 27, 2024, the Company reported a GAAP operating loss of $(7.6) million, compared to operating income of $8.3 million in the same period of fiscal 2024, a decrease of $(15.9) million. On a non-GAAP basis, the Company reported operating income of $3.1 million, compared to $21.1 million in the same period of fiscal 2024, a decrease of $(18.0) million. Income Taxes The Company reported GAAP income tax expense of $1.6 million in the fiscal 2025 second quarter, compared to a GAAP income tax expense of $1.8 million in the fiscal 2024 second quarter. For the six months ended December 27, 2024, the Company reported a GAAP income tax benefit of $(3.9) million compared to income tax expense of $2.3 million in the same period of fiscal 2024, a decrease of $(6.2) million. Net Income / Net Income Per Share The Company reported GAAP net income of $4.5 million in the fiscal 2025 second quarter or GAAP net income per share of $0.35. This compared to GAAP net income of $1.8 million or GAAP net income per share of $0.15 in the fiscal 2024 second quarter. On a non-GAAP basis, the Company reported non-GAAP net income of $10.5 million or non-GAAP net income per share of $0.82, compared to non-GAAP net income of $10.3 million or $0.84 per share in the prior year. The Company reported GAAP net loss of $(7.4) million for the six months ended December 27, 2024, or GAAP net loss per diluted share of $(0.58). This compared to GAAP net income of $5.3 million or $0.44 per share in the comparable fiscal 2024 period. On a non-GAAP basis, the Company reported net loss of $(0.6) million or net loss per share of $(0.05) for the six months ended December 27, 2024, as compared to non-GAAP net income of $20.0 million or $1.65 per share in the comparable fiscal 2024 period. Adjusted EBITDA Adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") for the fiscal 2025 second quarter was $14.8 million, compared to $12.1 million in the fiscal 2024 second quarter, an increase of $2.7 million. Balance Sheet Highlights The Company reported $52.6 million in cash and cash equivalents as of December 27, 2024, compared to $64.6 million as of June 28, 2024. As of December 27, 2024, total debt was $74.9 million, an increase of $26.5 million from June 28, 2024. Fiscal 2025 Full Year Outlook The Company is leaving its fiscal 2025 full year guidance as previously stated: Full year Revenue between $430 and $470 million Full year Adjusted EBITDA between $30.0 and $40.0 million Conference Call Details Aviat Networks will host a conference call at 5:00 p.m. Eastern Time (ET) today, February 4, 2025, to discuss its financial and operational results for
Page 3
the fiscal 2025 second quarter ended December 27, 2024. Participating on the call will be Peter Smith, President and Chief Executive Officer; Michael Connaway, 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 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 and access solutions and works to provide dependable products, services and support to its customers. With more than one million systems sold into 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 drastically 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 is headquartered in Austin, Texas. For more information, visit www.aviatnetworks.com or connect with Aviat Networks on Facebook and LinkedIn. Forward-Looking Statements The information contained in this Current Report on Form 8-K 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 outlook, business conditions, new product solutions, customer positioning, future orders, bookings, new contracts, cost structure, profitability in fiscal 2025, its recent acquisitions and acquisition strategy, process improvements, measures designed to improve internal controls, its ability to maintain effective internal control over financial reporting and management systems and remediate material weaknesses, plans and objectives of management, realignment plans and review of strategic alternatives and expectations regarding future revenue, gross margin, Adjusted EBITDA, operating income or earnings or loss per share. 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 disruption the 4RF and NEC transactions may cause to customers, vendors, business partners and our ongoing business; our ability to integrate the operations of the acquired 4RF and NEC businesses with our existing operations and fully realize the expected synergies of the 4RF and NEC transactions on the expected timeline; disruptions relating to the ongoing conflict between Russia and Ukraine and the conflict in Israel and surrounding areas; 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; our ability to meet financial covenant requirements; the timing of our receipt of payment; our ability to meet product development dates or anticipated cost reductions of products; our suppliers' inability to perform and deliver on time, component shortages, or other supply chain constraints; the effects of inflation; customer acceptance of new products; the ability of our subcontractors to timely perform; weakness in the global economy affecting customer spending; retention of our key personnel; our ability to manage and maintain key customer relationships; uncertain economic conditions in the telecommunications sector combined with operator and supplier consolidation; our failure to protect our intellectual property rights or defend against intellectual property infringement claims; the results of our restructuring efforts; the effects of currency and interest rate risks; the ability to preserve and use our net operating loss carryforwards; 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; our ability to implement our stock repurchase program or that it will enhance long-term stockholder value; and the impact of adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions. For more information regarding the risks and uncertainties for Aviat's business, see "Risk Factors" in Aviat's Form 10-K for the fiscal year ended June 28, 2024 filed with the U.S. Securities and Exchange Commission ("SEC") on October 4, 2024, 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: (512) 582-4626 Email: andrew.fredrickson@aviatnet.com Table 1 AVIAT NETWORKS, INC. Fiscal Year 2025 Second Quarter Summary CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended (In thousands, except per share amounts) December 27, 2024 December 29, 2023 December 27, 2024 December 29, 2023 Revenues: Product sales $ 82,312$ 65,021$ 143,428$ 124,566
Page 4
Services 35,885 28,671 63,198 56,035 Total revenues 118,197 93,692 206,626 180,601 Cost of revenues: Product sales 54,969 36,893 107,170 73,206 Services 22,342 20,472 38,782 39,873 Total cost of revenues 77,311 57,365 145,952 113,079 Gross margin 40,886 36,327 60,674 67,522 Operating expenses: Research and development 10,222 8,394 20,630 14,818 Selling and administrative 21,279 22,544 46,227 41,781 Restructuring charges 1,415 2,000 1,415 2,644 Total operating expenses 32,916 32,938 68,272 59,243 Operating income (loss) 7,970 3,389 (7,598) 8,279 Interest expense, net 1,580 394 2,695 493 Other expense (income), net 269 (637) 979 165 Income (loss) before income taxes 6,121 3,632 (11,272) 7,621 Provision for (benefit from) income taxes 1,626 1,848 (3,888) 2,280 Net income (loss) $ 4,495$ 1,784$ (7,384)$ 5,341 Net income (loss) per share of common stock outstanding: Basic $ 0.35$ 0.15$ (0.58)$ 0.45 Diluted $ 0.35$ 0.15$ (0.58)$ 0.44 Weighted-average shares outstanding: Basic 12,689 12,001 12,667 11,788 Diluted 12,784 12,229 12,667 12,093 Table 2 AVIAT NETWORKS, INC. Fiscal Year 2025 Second Quarter Summary CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) December 27, 2024 June 28, 2024 ASSETS Current Assets: Cash and cash equivalents $ 52,583$ 64,622 Accounts receivable, net 166,689 158,013 Unbilled receivables 93,855 90,525 Inventories 76,497 62,267 Assets held for sale — 2,720 Other current assets 33,283 27,076 Total current assets 422,907 405,223 Property, plant and equipment, net 14,057 9,480 Goodwill 18,329 8,217 Intangible assets, net 28,177 13,644 Deferred income taxes 93,848 83,112 Right-of-use assets 3,633 3,710 Other assets 13,160 11,837 Total long-term assets 171,204 130,000 Total assets $ 594,111$ 535,223 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 124,142$ 92,854 Accrued expenses 38,163 42,148 Short-term lease liabilities 1,275 1,006 Advance payments and unearned revenue 71,128 58,839 Other current liabilities 13,863 21,614 Current portion of long-term debt 3,719 2,396 Total current liabilities 252,290 218,857 Long-term debt 71,134 45,954 Unearned revenue 8,272 7,413 Long-term operating lease liabilities 2,511 2,823
Page 5
Other long-term liabilities 417 394 Reserve for uncertain tax positions 3,363 3,485 Deferred income taxes 6,537 412 Total liabilities 344,524 279,338 Commitments and contingencies Stockholder's equity: Preferred stock — — Common stock 127 126 Treasury stock (6,978) (6,479) Additional paid-in-capital 862,918 860,071 Accumulated deficit (585,897) (578,513) Accumulated other comprehensive loss (20,583) (19,320) Total stockholders' equity 249,587 255,885 Total liabilities and stockholders' equity $ 594,111$ 535,223 AVIAT NETWORKS, INC. Fiscal Year 2025 Second 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. 1We have not reconciled Adjusted EBITDA guidance to its corresponding GAAP measure due to the high variability and difficulty in making accurate forecasts and projections, particularly with respect to merger and acquisition costs and share-based compensation. In particular, share-based compensation expense is affected by future hiring, turnover, and retention needs, as well as the future fair market value of our common stock, all of which are difficult to predict and subject to change. Accordingly, reconciliations of forward-looking Adjusted EBITDA are not available without unreasonable effort. Table 3 AVIAT NETWORKS, INC. Fiscal Year 2025 Second Quarter Summary RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1) Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Six Months Ended December 27, 2024 % of Revenue December 29, 2023 % of Revenue December 27, 2024 % of Revenue December 29, 2023 % of Revenue (In thousands, except percentages and per share amounts) GAAP gross margin $ 40,886 34.6 % $ 36,327 38.8 % $ 60,674 29.4 % $ 67,522 37.4 % Share-based compensation 111 1 215 184 Merger and acquisition and other expenses 693 66 1,300 109 Non-GAAP gross margin 41,690 35.3 % 36,394 38.8 % 62,189 30.1 % 67,815 37.5 % GAAP research and development expenses $ 10,222 8.6 % $ 8,394 9.0 % $ 20,630 10.0 % $ 14,818 8.2 % Share-based compensation (164) (151) (307) (297) Non-GAAP research and development expenses 10,058 8.5 % 8,243 8.8 % 20,323 9.8 % 14,521 8.0 % GAAP selling and administrative expenses $ 21,279 18.0 % $ 22,544 24.1 % $ 46,227 22.4 % $ 41,781 23.1 % Share-based compensation (1,699) (1,673) (3,116) (3,178) Merger and acquisition and other expenses (514) (3,723) (4,295) (6,394) Non-GAAP selling and administrative expenses 19,066 16.1 % 17,148 18.3 % 38,816 18.8 % 32,209 17.8 %
Page 6
GAAP operating income (loss) $ 7,970 6.7 % $ 3,389 3.6 % $ (7,598) (3.7) % $ 8,279 4.6 % Share-based compensation 1,974 1,825 3,638 3,659 Merger and acquisition and other expenses 1,207 3,789 5,595 6,503 Restructuring charges 1,415 2,000 1,415 2,644 Non-GAAP operating income 12,566 10.6 % 11,003 11.7 % 3,050 1.5 % 21,085 11.7 % GAAP income tax provision (benefit) $ 1,626 1.4 % $ 1,848 2.0 % $ (3,888) (1.9) % $ 2,280 1.3 % Adjustment to reflect pro forma tax rate (1,126) (1,548) 4,888 (1,680) Non-GAAP income tax provision 500 0.4 % 300 0.3 % 1,000 0.5 % 600 0.3 % GAAP net income (loss) $ 4,495 3.8 % $ 1,784 1.9 % $ (7,384) (3.6) % $ 5,341 3.0 % Share-based compensation 1,974 1,825 3,638 3,659 Merger and acquisition and other expenses 1,207 3,789 5,595 6,503 Restructuring charges 1,415 2,000 1,415 2,644 Other expense (income), net 269 (637) 979 165 Adjustment to reflect pro forma tax rate 1,126 1,548 (4,888) 1,680 Non-GAAP net income (loss) $ 10,486 8.9 % $ 10,309 11.0 % $ (645) (0.3) % $ 19,992 11.1 % Diluted net income (loss) per share: GAAP $ 0.35 $ 0.15 $ (0.58) $ 0.44 Non-GAAP $ 0.82 $ 0.84 $ (0.05) $ 1.65 Shares used in computing diluted net income (loss) per share GAAP 12,784 12,229 12,667 12,093 Non-GAAP 12,784 12,229 12,802 12,093 Adjusted EBITDA: GAAP net income (loss) $ 4,495 3.8 % $ 1,784 1.9 % $ (7,384) (3.6) % $ 5,341 3.0 % Depreciation and amortization of property, plant and equipment and intangible assets 2,275 1,140 4,105 2,484 Interest expense, net 1,580 394 2,695 493 Other expense (income), net 269 (637) 979 165 Share-based compensation 1,974 1,825 3,638 3,659 Merger and acquisition and other expenses 1,207 3,789 5,595 6,503 Restructuring charges 1,415 2,000 1,415 2,644 Provision for (benefit from) for income taxes 1,626 1,848 (3,888) 2,280 Adjusted EBITDA $ 14,841 12.6 % $ 12,143 13.0 % $ 7,155 3.5 % $ 23,569 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 2025 Second Quarter Summary SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA (Unaudited) Three Months Ended Six Months Ended December 27, 2024 December 29, 2023 December 27, 2024 December 29, 2023
Page 7
(In thousands) North America $ 57,962$ 50,615$ 100,187$ 105,468 International: Africa and the Middle East 12,674 14,493 23,124 24,447 Europe 8,347 5,577 13,947 10,829 Latin America and Asia Pacific 39,214 23,007 69,368 39,857 Total international 60,235 43,077 106,439 75,133 Total revenue $ 118,197$ 93,692$ 206,626$ 180,601 View original content to download multimedia:https://www.prnewswire.com/news-releases/aviat-networks-announces-fiscal-2025-second-quarter- and-six-month-financial-results-302367949.html SOURCE Aviat Networks, Inc.