Aviat Networks Announces Fiscal 2023 Third Quarter and Nine Month Financial Results; Increases Lower-End of Full Year Revenue Guidance

About this update from Aviat Networks, Inc.

Total Revenue of $83.5 million ; Up 12.0% Year-Over-Year Adjusted EBITDA of $10.8 million ; Up 14.7% compared to Prior Year AUSTIN, Texas , May 3, 2023 /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 third quarter ended March 31, 2023 . Third Quarter Highlights Company executed on key long-term strategic objectives resulting in continued year-over-year increase in quarterly revenues and Adjusted EBITDA Aviat maintained private network leadership with first private LTE win in North America and expanding international and enterprise opportunities Company received initial Rural Digital Opportunity Fund related project orders from four recipients Recent product releases, including third-party radio support for Frequency Assurance Software , continue Aviat's innovation for customers Third Quarter Financial Highlights Total Revenues: $83.5 million, +12.0% from same quarter last year GAAP Results: Gross Margin 35.7%; Operating Expenses $22.3 million ; Operating Income $7.5 million ; Net Income before tax $7.1 million ; Net income $4.9 million ; Net income per share $0.41 Non-GAAP Results: Adjusted EBITDA $10.8 million ; Gross Margin 35.9%; Operating Expenses $20.7 million ; Operating Income $9.3 million ; Net Income $8.9 million ; Net Income per share $0.75 Net Cash and Marketable Securities : $22.5 million; loan of $6.2 million outstanding at quarter-end "Our execution this quarter resulted in year-over-year 12.0% revenue growth and 14.7% adjusted EBITDA growth, two key long-term focus areas for the business." said Peter Smith , President and Chief Executive Officer of Aviat. "We continue to see a strong demand environment for Aviat's leading products and services, and we remain well positioned to benefit from the growth drivers of 5G, rural broadband, and private networks." Fiscal 2023 Third Quarter and Nine Months Ended March 31, 2023 Revenues The Company reported total revenues of $83.5 million for its fiscal 2023 third quarter, compared to $74.5 million in the comparable fiscal 2022 period, an increase of $9.0 million or 12.0%. North America revenue of $46.1 million decreased by $(3.0) million or (6.1)%, compared to $49.0 million in the comparable fiscal 2022 period. International revenue was $37.4 million compared to $25.5 million in the comparable fiscal 2022 period, an increase of $11.9 million or 46.9%. For the nine months ended March 31, 2023 , revenue grew by 13.2% to $255.4 million , as compared to $225.5 million in the comparable fiscal 2022 period. North America revenue of $147.0 million decreased by $(4.1) million or (2.7)%, as compared to $151.0 million in the comparable fiscal 2022 period. International revenue of $108.5 million for the fiscal 2023 nine-month period increased by $33.9 million or 45.5%, as compared to $74.5 million in the comparable fiscal 2022 period. Gross Margins In the fiscal 2023 third quarter, the Company reported GAAP gross margin of 35.7% and non-GAAP gross margin of 35.9%. This compares to GAAP gross margin of 37.0% and non-GAAP gross margin of 37.1% in the comparable fiscal 2022 period, a decrease of (130) and (120) basis points respectively. Gross margins were impacted by the regional mix of revenue growth toward lower margin international markets. For the nine months ended March 31, 2023 , the Company reported GAAP gross margin of 35.8% and non-GAAP gross margin of 36.0%. This compares to GAAP gross margin of 36.3% and non-GAAP gross margin of 36.4% in the comparable fiscal 2022 period, a decrease of (50) and (40) basis points, respectively. Operating Expenses GAAP total operating expenses for the fiscal 2023 third quarter were $22.3 million , compared to $20.1 million in the comparable fiscal 2022 period, an increase of $2.3 million or 11.4%. Non-GAAP total operating expenses, excluding the impact of restructuring charges, share-based compensation, and merger and acquisition expenses for the fiscal 2023 third quarter were $20.7 million , as compared to $19.2 million in the comparable fiscal 2022 period, an increase of $1.4 million or 7.5%. The increased spending resulted from the addition of Redline Communications . The Company reported GAAP total operating expenses for the fiscal 2023 nine-month period of $71.4 million , compared to $58.3 million in the comparable fiscal 2022 period, an increase of $13.2 million or 22.6%. On a non-GAAP basis, excluding the impact of restructuring charges, share-based compensation and merger and acquisition expenses, total operating expenses for the fiscal 2023 nine-month period were $62.1 million , as compared to $56.3 million in the fiscal 2022 period, an increase of $5.8 million or 10.3%. Operating Income The Company reported GAAP operating income of $7.5 million for the fiscal 2023 third quarter, compared to $7.5 million in the comparable fiscal 2022 period. On a non-GAAP basis, the Company reported operating income of $9.3 million for the fiscal 2023 third quarter, compared to $8.4 million in the comparable fiscal 2022 period. For the fiscal 2023 nine-month period, the Company reported $20.1 million in GAAP operating income, as compared to $23.5 million in the comparable fiscal 2022 period. On a non-GAAP basis, the Company reported operating income of $29.9 million , compared to $25.8 million in the comparable fiscal 2022 period. Income Taxes The Company reported GAAP income tax expense of $2.2 million in the fiscal 2023 third quarter, compared to $1.3 million in the comparable fiscal 2022 period. For the fiscal 2023 nine-month period, the Company reported GAAP income tax expense of $9.1 million , compared to $6.5 million in the comparable fiscal 2022 period, or an increase of $2.7 million . Net Income / Net Income Per Share The Company reported GAAP net income of $4.9 million in the fiscal 2023 third quarter or GAAP net income per fully diluted share of $0.41 . This compared to GAAP net income of $6.0 million or $0.51 per fully diluted share in the comparable fiscal 2022 period. On a non-GAAP basis, the Company reported net income of $8.9 million or non-GAAP net income per fully diluted share of $0.75 in the fiscal 2023 third quarter, compared to a non-GAAP net income of $7.9 million or $0.67 per share in the comparable fiscal 2022 period. The Company reported GAAP net income of $8.2 million for the fiscal 2023 nine-month period, or GAAP net income per fully diluted share of $0.69 . This compared to GAAP net income of $16.6 million or $1.40 per share in the comparable fiscal 2022 period. On a non-GAAP basis, the Company reported net income of $28.8 million or net income per share of $2.43 for the fiscal 2023, nine-month period as compared to non-GAAP net income of $24.5 million or $2.06 per share in the comparable fiscal 2022 period. Adjusted EBITDA Adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") for the fiscal 2023 third quarter was $10.8 million , compared to $9.5 million in the comparable fiscal 2022 period. For the fiscal 2023 nine-month period, the Company reported Adjusted EBITDA of $34.4 million , as compared to $29.2 million in the comparable fiscal 2022 period a year-over-year increase of $5.3 million , or 18.0%. Balance Sheet Highlights The Company reported cash and marketable securities of $22.5 million as of March 31, 2023 , compared to $21.4 million as of December 30, 2022 . As of March 31, 2023 , the Company had a loan of $6 .2 million outstanding. Fiscal 2023 Full Year Outlook The Company raises the lower-end of fiscal 2023 full year revenue guidance and reaffirms its fiscal 2023 full year earnings guidance as follows: Full year Revenue between $341 and $347 million Full year Adjusted EBITDA between $45.0 and $47.5 million 1 Conference Call Details Aviat Networks, Inc. will host a conference call at 5:00 p.m. Eastern Time (ET) today, May 3, 2023 , to discuss its financial and operational results for the fiscal 2023 third 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'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 is headquartered in Austin, Texas . For more information, visit www.aviatnetworks.com or connect with Aviat on Twitter , Facebook 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 outlook, business conditions, new product solutions, customer positioning, future orders, bookings, new contracts, cost structure, profitability in fiscal 2023, process improvements, plans and objectives of management, realignment plans and review of strategic alternatives and expectations regarding future revenue, Adjusted EBITDA, operating income of 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 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; 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 relationship; 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 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; our ability to implement our stock repurchase program or that it will enhance long-term stockholder value; 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 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. 1.We 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. Investor Relations: Andrew Fredrickson Director, Corporate Development & Investor RelationsPhone: (408) 501-6214Email: [email protected] Table 1 AVIAT NETWORKS, INC. Fiscal Year 2023 Third Quarter Summary CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended (In thousands, except per share amounts) March 31 , 2023 April 1 , 2022 March 31 , 2023 April 1 , 2022 Revenues: Revenue from product sales $ 54,811 $ 52,047 $ 175,473 $ 156,361 Revenue from services 28,669 22,469 79,941 69,177 Total revenues 83,480 74,516 255,414 225,538 Cost of revenues: Cost of product sales 35,745 31,850 111,567 97,789 Cost of services 17,902 15,130 52,340 45,976 Total cost of revenues 53,647 46,980 163,907 143,765 Gross margin 29,833 27,536 91,507 81,773 Operating expenses: Research and development expenses 6,518 5,259 18,652 17,338 Selling and administrative expenses 15,842 14,867 49,913 41,304 Restructuring (recovery) charges (23) (72) 2,855 (373) Total operating expenses 22,337 20,054 71,420 58,269 Operating income 7,496 7,482 20,087 23,504 Other (income)/expense, net 428 175 2,750 387 Income before income taxes 7,068 7,307 17,337 23,117 Provision for income taxes 2,179 1,278 9,148 6,490 Net income $ 4,889 $ 6,029 $ 8,189 $ 16,627 Net income per share of common stock outstanding: Basic $ 0.43 $ 0.54 $ 0.72 $ 1.49 Diluted $ 0.41 $ 0.51 $ 0.69 $ 1.40 Weighted-average shares outstanding: Basic 11,413 11,173 11,319 11,172 Diluted 11,884 11,761 11,829 11,848 Table 2 AVIAT NETWORKS, INC. Fiscal Year 2023 Third Quarter Summary CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) March 31 , 2023 July 1 , 2022 ASSETS Current Assets: Cash and cash equivalents $ 22,456 $ 36,877 Marketable securities — 10,893 Accounts receivable, net 88,458 73,168 Unbilled receivables 63,344 45,857 Inventories 39,083 25,394 Customer service inventories 1,857 1,775 Other current assets 21,306 12,437 Total current assets 236,504 206,401 Property, plant and equipment, net 10,570 8,887 Goodwill 4,950 — Intangible assets, net 6,918 — Deferred income taxes 88,750 95,412 Right of use assets 2,669 2,759 Other assets 14,301 10,445 Total long-term assets 128,158 117,503 TOTAL ASSETS $ 364,662 $ 323,904 LIABILITIES AND EQUITY Current Liabilities: Short-term debt $ 6,200 $ — Accounts payable 61,670 42,394 Accrued expenses 23,397 26,451 Short-term lease liabilities 721 513 Advance payments and unearned revenue 40,348 33,740 Restructuring liabilities 884 1,381 Total current liabilities 133,220 104,479 Unearned revenue 7,628 8,920 Long-term lease liabilities 2,255 2,412 Other long-term liabilities 279 273 Reserve for uncertain tax positions 5,363 5,504 Deferred income taxes 563 563 Total liabilities 149,308 122,151 Commitments and contingencies Equity: Preferred stock — — Common stock 114 112 Treasury stock (6,147) (6,147) Additional paid-in-capital 828,411 823,259 Accumulated deficit (591,253) (599,442) Accumulated other comprehensive loss (15,771) (16,029) Total equity 215,354 201,753 TOTAL LIABILITIES AND EQUITY $ 364,662 $ 323,904 AVIAT NETWORKS, INC. Fiscal Year 2023 Third 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 Third Quarter Summary RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1) Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended March 31 , 2023 % of Revenue April 1 , 2022 % of Revenue March 31 , 2023 % of Revenue April 1 , 2022 % of Revenue (In thousands, except percentages and per share amounts) GAAP gross margin $ 29,833 35.7 % $ 27,536 37.0 % $ 91,507 35.8 % $ 81,773 36.3 % Share-based compensation 125 101 463 271 Merger and acquisition related expenses 6 — 6 — Non-GAAP gross margin 29,964 35.9 % 27,637 37.1 % 91,976 36.0 % 82,044 36.4 % GAAP research and development expenses $ 6,518 7.8 % $ 5,259 7.1 % $ 18,652 7.3 % $ 17,338 7.7 % Share-based compensation (113) (5) (385) (103) Non-GAAP research and development expenses 6,405 7.7 % 5,254 7.1 % 18,267 7.2 % 17,235 7.6 % GAAP selling and administrative expenses $ 15,842 19.0 % $ 14,867 20.0 % $ 49,913 19.5 % $ 41,304 18.3 % Share-based compensation (1,400) (734) (4,287) (2,090) Merger and acquisition related expense (179) (156) (1,799) (156) Non-GAAP selling and administrative expenses 14,263 17.1 % 13,977 18.8 % 43,827 17.2 % 39,058 17.3 % GAAP operating income $ 7,496 9.0 % $ 7,482 10.0 % $ 20,087 7.9 % $ 23,504 10.4 % Share-based compensation 1,638 840 5,135 2,464 Merger and acquisition related expense 185 156 1,805 156 Restructuring (recovery) charges (23) (72) 2,855 (373) Non-GAAP operating income 9,296 11.1 % 8,406 11.3 % 29,882 11.7 % 25,751 11.4 % GAAP income tax provision $ 2,179 2.6 % $ 1,278 1.7 % $ 9,148 3.6 % $ 6,490 2.9 % Adjustment to reflect pro forma tax rate (1,879) (978) (8,248) (5,590) Non-GAAP income tax provision 300 0.4 % 300 0.4 % 900 0.4 % 900 0.4 % GAAP net income $ 4,889 5.9 % $ 6,029 8.1 % $ 8,189 3.2 % $ 16,627 7.4 % Share-based compensation 1,638 840 5,135 2,464 Merger and acquisition related expense 185 156 1,805 156 Restructuring (recovery) charges (23) (72) 2,855 (373) Other (income)/expense 306 — 2,540 — Adjustment to reflect pro forma tax rate 1,879 978 8,248 5,590 Non-GAAP net income $ 8,874 10.6 % $ 7,931 10.6 % $ 28,772 11.3 % $ 24,464 10.8 % Net income per share: GAAP $ 0.41 $ 0.51 $ 0.69 $ 1.40 Non-GAAP $ 0.75 $ 0.67 $ 2.43 $ 2.06 Shares used in computing net income per share GAAP 11,884 11,761 11,829 11,848 Non-GAAP 11,884 11,761 11,829 11,848 Adjusted EBITDA: GAAP net income $ 4,889 5.9 % $ 6,029 8.1 % $ 8,189 3.2 % $ 16,627 7.4 % Depreciation and amortization of intangible assets, property, plant a nd equipment 1,552 1,051 4,565 3,444 Other (income)/expense, net 428 175 2,750 387 Share-based compensation 1,638 840 5,135 2,464 Merger and acquisition related expense 185 156 1,805 156 Restructuring (recovery) charges (23) (72) 2,855 (373) Provision for income taxes 2,179 1,278 9,148 6,490 Adjusted EBITDA $ 10,848 13.0 % $ 9,457 12.7 % $ 34,447 13.5 % $ 29,195 12.9 % _______________________________________________________________________________________________________________ (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 Third Quarter Summary SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA (Unaudited) Three Months Ended Nine Months Ended March 31 , 2023 April 1 , 2022 March 31 , 2023 April 1 , 2022 (In thousands) North America $ 46,064 $ 49,042 $ 146,961 $ 151,025 International: Africa and the Middle East 19,235 13,123 44,354 37,360 Europe 3,871 2,898 13,705 8,509 Latin America and Asia Pacific 14,310 9,453 50,394 28,644 37,416 25,474 108,453 74,513 Total revenue $ 83,480 $ 74,516 $ 255,414 $ 225,538 View original content to download multimedia: https://www.prnewswire.com/news-releases/aviat-networks-announces-fiscal-2023-third-quarter-and-nine-month-financial-results-increases-lower-end-of-full-year-revenue-guidance-301815031.html SOURCE Aviat Networks, Inc.

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