AVNW - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Aviat Networks fiscal 2020 fourth quarter conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. Instructions]. [Operator like conference now Fanneron. to hand to would over the Keith I go Please ahead.

Keith Fanneron

welcome fiscal Aviat and you to Thank and Networks results call full conference XXXX and webcast. year quarter fourth

and our hour. XX-K, IR find of at replay with website aviatnetworks.com, our presentations in of can You today's section press release call in updated Form the along a www. investor roughly one

followed remarks and Aviat's would today, and on CEO, finance XXXX, opening Pete fiscal followed with outlook, quarter fourth Smith, the President strategy Q&A. Eric Aviat's CFO, on for then our company's As begin the review remarks Chang, who by year will by and provide will closing Pete results.

Aviat's opinions to Harbor, As expansion, limited the forward-looking call public not economic only uncertainties statements forward-looking reflect actual revise no make may financial of business, cause to call of this revision to, of These during those statements webcast, could different relating regarding that of other business risks impact and activity and including, today's products events. per in drivers, new of regions. results involves to obligation but date assumptions, statements make Safe future and management materially The and in company and from or statements. information undertakes company's these light COVID-XX new projections, the any statements differ forward the looking the as and or

and I and this financial webcast, like therein management of in refer supplemental include section call financial At reference the over the Additionally, Please to available www.aviatnetworks.com would to call information. time, non-GAAP GAAP non-GAAP Pete? to which website and during Pete. to release measures. at tables our turn reconciliation a GAAP press other today's will both and our financial IR

Pete Smith

and continues Networks global and family customers, our wish employees, Aviat pandemic. partners, everyone. the navigate We their to shareholders health afternoon Good safety.

and focused our to call, last and areas. key earnings on our get One, focused we we I executing From would the increasing expansion investors, the announced are results, Before since like revenue. our wins. have into remind we releases press customer new partnership

materialize We through challenge. as we have Two, that excellent Aviat's capturing COVID-XX differentiation. an the will navigate

multiband received frequency first the of purchase our have order. our viability announced out and costs. software Three, assurance demonstrated wins, driving We

We are announced on year restructuring with million will which previously fiscal $X $X.X track savings million, plan with XXXX. of the approximately annualized benefit of

of Now on let's results. fiscal XXXX. focus $X.X Adjusted was QX million EBITDA our up versus year

strong. sheet Our balance remains

sequentially, over in a the manufacturer QX, but was This issues both what in is was COVID-XX. faced, million this fiscal and to million fiscal cash up $X.X we million considering XXXX with are compared is contract the now bottomline. we adjusted since year quite volatility to drive next positioned the top as year prior to guidance the and Our million. EBITDA $XX of Fiscal up $XX last was our quarter. end exceeded XXXX going $X.X and million Revenue expected profitability better position $X.X into year and $XX.X year down of topline Africa and from million began improved which slightly impressive year

better call seeing be to to We like highlight now to several would from areas initiatives that Eric. past, different I actions growth turning will as customers that should taking we that are are new are the and before four There the there lead are performance.

America. North observations First, in growth on my

sales. well. states, expanded applications. Our to We diligently on into team cities business expanding North perform America America has continues worked and The North new

America team upon In our the differentiation. North has seized addition,

prevent service events which pending. expert before provider identifying the allows in accounts. analysis on and outages links reporting We reliability in Xe, mission patent detection can on FAS to interference but industry's have emergence utility with the operate of initial and won deal FAS critical with software for devices is interference frequency FAS only arms on with interferences. our is public safety, assurance critical USA. and business Wi-Fi microwave software by it system or bands FAS exceed Not the and of for also data unlicensed is real the microwave become with they to regulators the microwave problems customers links, especially only

capacity In operator in new our received USA capabilities addition, application. accounts team customers. Also, the core North customers. XG Internet to the AviatStore, America rural products our in where provide value to leveraged drive QX, XG differentiation our and North we America are to mobile platform, orders we team continues XG-related to delivered In ready e-commerce the to

Second, international markets.

other team implement international X business, strategy, started partnerships partner regions we coverage. Netronics another in have win where reach where accounts, sales expand agreement we Middle telecom new through Expanding lack a agreement value signed grow We addresses X significant which our capture we through Tier defend with to named place presence reach differentiated. And Tier to East. that we commercial Our not and the have partnership. and our are our in extend new

which have highly successes spectrum significantly costs reducing with our differentiated multiband for offer a We is seen solution our customers.

important an our win due in XG with Africa multiband Safaricom, value presence expanded existing proposition as well. have to accounts secured have in our and We

possibilities the offer. this We are excited about with

Third, cost.

additional I restructuring. to Fourth, the concurrently acquisition expenses. an shareholder reducing cost. improve COVID-XX shareholder savings on executing commercialization aggressive We lower QX we announced and sales are generating am to customer drive environment. cost To new focused in value. while We growth, and the response on value, to our due observed need

funnel frequency and internationally, We are stages our software. sales assurance for Tier building the sales customers FAS, in early multiband of funnel our funnel for for X our

quarters, on coming growth. topline translate initiatives over As expect into the we we this execute these to

do his have will on to to over a I after Eric? drive expansion match As but in am to few the going to Eric continued the additional our higher said value. I review ultimately comments higher in to geographies turn markets financials, profitability lead now shareholder where last call remarks. we margin call, and and focus have revenue, us. I opportunities cannot Execution will competitors

Eric Chang

you Thank afternoon everyone. and Pete good

my All XXXX all found and I review line year the through quarter some of press of release. rather During in can that XX-K full XXXX both than be unless I today, full remarks and reading fiscal and fiscal the Form our full QX and fiscal items year highlights would and our financial XXXX between quarter fourth are year comparisons fourth between otherwise. of fiscal noted XXXX, think

$XX.X have the smaller million driven fiscal year. the by million as the primarily fiscal networks decline XXXX North to in private is both what QX business. for our have experienced improvement the an the of growth half fiscal International and prior $XXX.X North from revenue full of has in million, declined revenue second Although our fiscal we America XXXX, significant increased but revenue first declined year half we full the was year, than for revenue the seen in America for which of from $XXX.X XXXX year. year fiscal expected but the

excluding non-GAAP total QX percentage both and XXXX fiscal XXXX, QX Our comprised with on book-to-bill to we as compensation, million. ratio GAAP $XX.X was such represent revenue second and cost GAAP strong, plans, XX.X% basis, continues restructuring backlog. and Both half fiscal to XXXX compared in margins impact XXXX a and mix. $XX.X million, well for charges few gross XX% And exited to cutting and XX.X% fourth A due other GAAP strong were America XX.X% slowdown above to full and improved expenses, our one fiscal remained a during of compared implemented of the fiscal In for operating and non-GAAP of a $XX.X million, of North $XX.X QX XXXX. QX and quarter expenses both higher reduced almost points. of hiring the fiscal operating the compared of million. were operating to non-GAAP initiatives expenses restructuring travel. we a share-based

of earnings million noted we we have we March in recorded restructuring in and and As in fourth plans our a charge QX announced restructuring the call, $X.X quarter. April

non-GAAP We period $X.X have remaining $X.X compared last from million per last period for $X.XX for was same fiscal be Adjusted savings year. and period in result $X.X same beyond. to QX QX EBITDA million, the some per share the of realized to savings share million compared net QX million of last will for year. non-GAAP year. $X.X $X.X XXXX income million approximately the same up was EPS realized $X.XX the during and was

For the from million million million EBITDA income $X.X XXXX improved XXXX. our was $X.XX net fiscal for to fiscal full $X.XX million. EPS $X.X XXXX. year to compared improved share per share $XX.X $X.X to Fiscal from non-GAAP comparisons, non-GAAP per Adjusted for

Our full any prior can result our guidance during the Pete questions adjusted We $XX $XX year mentioned top exceeded to address our end Q&A. earlier, million. of of million to EBITDA, relating as

sheet. balance the to on Moving

end which quarter, $XX.X and cash at $X.X at cash of Our and million of since fourth million up QX sequentially fiscal million end stood the the XXXX. the $X.X equivalents from was

operations cash year flow XXXX, an compared to Our $XX improvement was million. almost from million XXXX, full million the $XX.X $X.X for for of fiscal

cash net was year year a fiscal since XXXX. of highest the is and XXXX million end fiscal $XX.X Our fiscal at level exiting the

million, full credit eligible year-end. was end which our in AR At balance repaid in with which on We the borrowing $X loan our we have facility based quarter, a to XXXX, Bank Valley Silicon subsequent July base. of is fourth the

fiscal facility not XXXX. as strong the and fiscal our to starting in our increase choose year we cash XXXX, may Given first to against net quarter continue the position expect credit of to cash we draw

concludes Although repurchase $X.X common repurchases to quarter, under have million our turn not for stock it in remain million the we spent program. available but back This did we year, I about $X.X fourth the full will in Pete. stock the Pete? remarks. my and

Pete Smith

Eric. Thanks

is before few year the events barring strong timelines the to execute XXXX. concern been unforeseen budgets in principal and a be strong The has field impact our year services. fiscal customers' Just and and North of additional this Q&A. ability any should on comments COVID-XX America

accounts, such We aim contraction strong North Both has network, accounts, the execution America stop rural contracting. differentiation our our defending return winning expanding our and mission-critical processes, with to Our as our sales demand XG have drive, marketing international reach international products by business X and capturing of Tier rollout, and X business multiband. growth been Tier our our broadband. to partners in new and business

the and would cost the year up last our year encountered like provides year fiscal XX profitability, XXXX, our COVID-XX. in We sum higher direction for fiscal and uncertainty improved we structure challenge X.X% fiscal the in of to navigate will We In from the in results favorable make we capturing situation. highly term. are medium the these COVID-XX close long the call, these the demand Further, well-positioned announcements COVID-XX demand that short for years opportunities. trends. perspective through executed history. XXXX, market all annual of the drivers some with we I term, In delivered EBITDA, overall To Expect to as progress amplifies adjusted these XXXX. Aviat's

maintained have revenue. We get mode. a to need growth our We into

a have this. to We achieve outlined plan

multiband In Virginia had Netronics. rollout upgraded software, wins a Police, addition, government, assurance for frequency microwave channel all with subscription deployment product partner our including first Safaricom large our for operating XG North Globe at we key three, solution State platform launched From standpoint, radio and agreement for MUA, enhanced multiband platform and we and the outdoor mission-critical and wins network XG. with our our a County a new agreement, American upgrade

successes, Through Fanneron fiscal expertise. and We am know I accomplishment and million relations his on his we example, We the to fiscal am our Wiener we relations. about accomplish all Glenn future for support still that proud team's these of thank changes, investor XXXX. increased very and Keith our during our contact. increasingly challenges can One I and call excited of leadership year cash point have have will opportunities. him repositioned the insourced $X.X beyond XXXX team year our for investor goal. be

still Growth, Our and compared key environment. execution. reduction grow fiscal investor, the capturing front, to COVID-XX Like value year Based and our XXXX revenue remain focus adjusted same. bottomline expense we EBITDA navigating the results. and we sales and for everyone, are cost on our focus, meaningful margin on XXXX. messages expect execution expansion, to takeaway the goal Aviat's fiscal

as on such and improved expect FAS customers. strategic benefits including reach our from and new We our focus products to adding see focus new

specific a more have will when more guidance we questions. provide are now around ready We certainty COVID-XX. we for Operator,

Operator

Northland with [Operator ahead. Instructions]. Tim Please And our first go Savageaux question is from Capital.

Tim Savageaux

up. in of And the that I on Good XX%. the filed Pardon marry well. left and try where And me. obviously, I maybe But expectations. think had see is your you I which you pickup backlog with guess afternoon. there in results. on to terms to And regard the very a you pretty order I growth Hi. year, congrats significant as Pete, broad for I Q outlook off on increase want XXXX of the

revenues commentary backlog can be sort one, to I also down. if last bookings are, you relate I Now, increased much given you maybe think, QX, and than wonder that feel But we terms that. in should which might of But above free revenue QX on fair, more to in some stronger this farther perspective growth, commentary, expect? on be your that we should saw were out what on regard slightly year seems what backlog you provide of year, digit understanding like based expect to of backlog. double with It

Pete Smith

are me don't was we I am into growth revenue million the about confident $XX really I value, up and X.X think but coming more with sign pretty that to backlog. are double we revenue we think we Yes. in are a on Eric, of year going wrong, we correct growth. year, the excited dollar digit if book-to-bill the to are When

will growth. and mission e-commerce of driven And AviatStore wins as into in that's well solve lot space think a critical by So that we broadband our XG rural that platform as translate opportunities. to the

we plan. and feel the be to are specific America can topline be I because business. track Tim, to to wouldn't and that costs our we have of COVID we grow that on COVID far a we squeeze more. certain we want good. on out is So don't North guide, see to the as bottomline are so we our we on the to learned timing the not and to And how deals. are plays with going we international able go then going in want the little so I But XX% really good What feel restructuring

we get credit we year. So maybe But pipeline. now, the put we bit overall, want more the if wouldn't specific. to I more and a I Give everything feel specific a full me were I under think, And will to before more guidance time really out. we out in put about guidance mileage our be little good little for belts have right

Eric Chang

if And I can add.

with very right. fiscal a strong we exited XXXX backlog, So

you If about XX-K, million. see $XXX in the it's

If fiscal to million. last the that year, was you of $XXX compare it end

a right, $XXX private full the of So the exiting year, backlog And $XX in million it's coming the North bulk network America fiscal increase. it increase million, from actually is then business.

Tim Savageaux

question, sounds to that was down of return my growth expect backlog that sounds nature like factor. I Okay. later. No, of you interesting that's headed international faster, will which it where I is the profile, while it in following I of network is to with guess I that to guess into write America like gross kind to there kind private U.S. that regard am mix Obviously, and profile, And a next to you might North strength, comment margin that's right. is, so the expect given a there about grow continue a with right?

upward pressure So America, some it you strength and that gross given on still North like in see, sounds mix could margin.

Pete Smith

to is, to on the model think Eric, we this have what I and I prepared Eric, And long were our don't we be. been you in you term long should model. what think, give should asked our So past term why comment talk

Eric Chang

exited a think X% do standpoint, this XX% and EBITDA an year from it increase When term is model, percentage. that see, a But continued the XX% margin so think year, growth. I continuous to our comes in to do the long we model to term our want bottomline And adjusted we is do Yes. long overall, X.X% see we on see basis. was Maybe year. that on about we I basis, this between gross for bottomline

Tim Savageaux

seen that on mean the this sort we sustainable. But pretty expenses. have across last Got the decline it. board travel expected, saw and piece maybe lower promotional goes in like it than and sounds is much quarter of reductions that. Well, OpEx of I that beyond covering some you type the more

of low restructuring about year QX do relative million XXXX. to benefit the look for I I $X that So previous comment a put, is at point. want that I of into kind fiscal Or XXXX? a accruing guess OpEx we imagine to full How

come expense normalize a You expect it start standpoint. some to bit things to an from as back up

Pete Smith

we what of adjusted QX. you script will for And will benefits you go But in EBITDA, unadjusted think quite the million see restructuring was be run would know, our announced $X back fiscal have think and So year our million in know, savings track to fiscal And think at we to we then profit, we that simply, restructuring. we have our I restructuring by $X.X are cost the in all adding our of on rate you that travel, did time we COVID-related repeating XXXX said in in QX go along them we we due that comes which some know, that XXXX, in further up. EBITDA. through, I year if of we

on purposes, if modeling we XXXX, and track going that are for declared can for save we XXXX, that's fiscal So the we we on, on you we track that $X.X count are the in in XXXX $X materialize. year confident would to million for are million that

Tim Savageaux

Got it.

Sorry.

Pete Smith

Well, to I if to Go was the was question. helpful. going it ask next

Sorry.

Tim Savageaux

Okay.

for more one Just me.

demand about drivers. that And go is really of Sorry. kind forward

extent strength I material some -- You be more it guess I of those well, in growth or XXXX, weigh extent drivers most you guess in or about? drive given results in America, excited several order my what products maybe to in what new of can like, expect you is, it broadband, talked than to North question And look product guess to drivers terms in your forward going did extent, mentioned rural kind you are of the rank of what if terms some networks meaningful in sounds terms those sounds those I contributors you you about And like critical private XG, platforms. that or order forward strong particular? for network to the then the of growth new QX of mission

Pete Smith

trying most. Well, fantastic say, they which to really I love us. all one for that's of Look, are like children my of

did and the that demand the network topline Globe some know software performing demand that seen we I good the well have where we the would but rural growing get outside that high Safaricom. can spectrum can for up U.S. total expansion, margin lowers What see we through the but mission XG internationally our talked for do think small see about, we space. expansion we frequency are is part you costs, QX private have think a the that And So we I multiband to as the operators. the also margin Where critical historically there assurance spectrum ownership and with some the of multiband e-commerce significantly there we the we but have network. where microwave the playing we And international with network, high North see private providers, that only And with also a do U.S. in are platform costs that add, we cost that that starting saw the multiband, drivers The we at deliver broadband America of software. good of rollout, and demand that, position we is we internationally. in have the we ramp growth, business see

XX of deliver can in kind standard So days. products we our

kind were we work needed to from to off where that's And North COVID, the we in able going took and that. overnight, in America. deliver are more like starting capacity home of see well So WISPs

we getting store profile push see of that starting to are internationally. are We up the demand set out to and internationally kind

there. And in we for mission platform are would think we be say, driver this XG I the doing the grow So the them. well critical right should Internet. to Growth have as we space rural am products with goes, e-commerce confident I

critical, about the I and at our bring. biggest really the and in our business that XG core, So we would store say, confident excited growth is mission are part going of that are is to we

Tim Savageaux

much. very Thanks it. Got

Pete Smith

Tim. Thanks Good.

Operator

Thank you.

from is O'Neill Hills question next Our Research. Litchfield Theodore with

Theodore O'Neill

you that growth, to are the larger guidance can larger? year. just Thank the the The seeing exceeding XG attribute growth that on Congratulations in you. it? overall pie are you Or your XG, a EBITDA for taking you piece getting of

Pete Smith

indicated estimate, is and the be in share growing can some to the two sometimes was market. a There down compared market the we to recent last that quarters difficult right. research microwave were over So market up

part a little we I share. in some qualitative hard doing think to Yes, are of really how our is that we But then Where XG is to hard would are the that wins. broadband perhaps incrementally the occurring network how recent and operators, really us with respect growing And I gaining rural that to a bit would that's be are that's to hard So we share. It's estimate the large they XG, incremental think with is of mobile estimate. statement. say estimate. for

pin qualitatively, would I with but to would be it agree suggestion, a to So us down your that, hard number.

Theodore O'Neill

Okay. again. I asked How's this and last the up COVID? question chain I supply is your ask relative will call it doing? in to holding How

Pete Smith

team executed QX. chain supply our our and nearly perfectly So in

So holding performing. peers. that some well. would And we up outperforming it's our think It's of it's

look, that that So really resilient. from good short we thing becoming issues And But pleased. that quarter. have and about overcame learning term is, more say, are were issues we I we within we did the it will are then the

chain. our you now know, near perfection expect So a week-after-week will supply year we from from

pleased and over So we gives us are the our a months. new chain. play And to to think next out also that platform supply with we will really, our share XX six dependability really win

Theodore O'Neill

makes you any That of seeing opportunities? looking sort at M&A is, question activity sense. last My in are uptick

Pete Smith

So we at. with that hold. bolt-ons COVID, are we on of put of QX that pipeline looking got a lot have a

deals line that be to competency our growth. core and be accretive opportunistic with to look We will to are going continue for in

on pull something growth going are to able drive to to synergies. are but we unless the and we So we fits it realize looking be not and are going trigger those

Theodore O'Neill

much. very Thanks Okay.

Pete Smith

Thank you.

Operator

Thank you.

from is Stanphyl Please go Spiegel Mark question ahead. next with Our Capital.

Mark Spiegel

tells offer potential X that so, guys? interfered GHz alternative? thing you enthusiasm. And that the your your this you I them is you Hi you an being have Are quick Obviously, that but can interference questions. spectrum? with. How are software, Pete. love only avoiding about affecting seen I Two if

Pete Smith

So we X not the pattern spectrum. for any have GHz in demand seen change the

concerned X do seen GHz helpful? out. range someone we was So a that I in. haven't play away and put that to would Is have spectrum, wanted If say, go of full the we we from could them that really products

Mark Spiegel

Yes. Very second forgot I helpful. And my question.

that in will So I it, you the think back thank for I If get Thank one. you. line. of I

Pete Smith

great. Well, Thank you Mark.

Operator

Thank you.

Our next question is from Steve go Busch with ahead. Everglades Resources, Please

Steve Busch

Hi. Good guys. great job, afternoon Great quarter.

Pete Smith

Thank you.

Steve Busch

questions So side? been how most revenue answered. of does MTN's to much prior my growth, smaller? compare it Safaricom But your have revenue customer, Is

Pete Smith

Yes.

So operator. they are a smaller

taking of customers specifically economic a our this are all but going of as have Safaricom me is color That in maybe proof that looking that our high presentations I win. when costs are out costs well a Safaricom you the we think the that asking we on ongoing. notice where is and MTN multiband that analysis as of about or got of lot And concept high And design of for tests microwave, what because variety asking for are it advertise they say and for. wouldn't proves what's the spectrum MTN, I economics we microwave. spectrum have Let give important with the you win operates

think we particularly Africa the the what created do the that's into growth region. as going funnel did it and So was to a in translate funnel that the us revenue big opportunities, we for Safaricom on convert

Steve Busch

that. you color. good really for Thank That's

is that they get with their we supplier Huawei someone. switched saying? you maybe back, MTN, can happened? And to what what that Was some of or So are

Pete Smith

think have a we did want But I we right. more customer. differentiated make I would Huawei highly don't versus that's specific that on to comment us share. that And take reasonable others, one a Huawei hypothesis. that what and think offering competitive I

Steve Busch

That's Thank you. perfect. Great.

it that that So if pending? pending. owns you the about you you And versus add Or any to more the of you a MTI who in Wireless? that patent Wireless Is release don't and talking the patents are I the also line? had there. same with a with mentioned other patent was can color press there mentioned have you how bunch that's MTI is know

Pete Smith

the goes supplier that MTI that provides antenna along, solution for multiband. the Wireless, antenna that's So an

So separate out. patent that

So is that do assurance on the pending. have right. around we patent software, patent a our frequency And algorithm,

for So ultimately the to interference detecting resolution. leads which algorithm

the I think, first about the basically we and and that So matter did that's for we doesn't it really guys would that. problem that that it. it. patent have we What that needs script and think it's have unique customers. And say sort the a we we difficult thinking was in could what the our our some proof out And we the ultimate say buy is to orders were office received if solve we able filed customer going office to noise time patent get that with in hopeful review to really are granted signal we patent smart the the how we

on enough have press hope that patents Aviat. the been color I So in that's the around

Steve Busch

that fine. on are like leave I to with moving bottomline what's that would is it just say, you well And together. next the I stock the appreciate I the color. mode I have and you topline in that execution And think you and fact That's I that I said for that's driver Right. focused our into get to because comment. endeavor. a wish need you growth getting

Pete Smith

you. Thank

Operator

is with next our Thank ahead. Stanphyl Spiegel Please question you. Mark go from And Capital.

Mark Spiegel

Pete. Yes. Hi

the I quick decent And in an say near this super enterprise that that market, really follow-up. selling hope X.X that a And on you acquisitions. super, be it EV, value, to times at hard do is, to reason basis, will find one what around I revenue. you at I on selling think I I guys would around cautious selling only are anywhere are be Just say. you wanted cheaply. business remembered

accretive, won't may it it is maybe accretive thing about be although be company. which the that the multiple growth most attractive So or earnings somewhat on

So are cents on you. obviously, you throw that. two to you know there what just in doing. Thank wanted I my

Pete Smith

input, that for you Thank Mark.

Operator

the in remarks. queue. ahead sir, And Thank final your you you. go There more no can is

Pete Smith

health. Well, the like thank everybody, close everyone to to I call, wish would

We are really, business. excited about the really

is track. on restructuring Our

the We we to have talk you as about everyone. QX. Thank funnel and wrap excited great to are a a couple you in months up we progress

Operator

ladies concludes This you, today's Thank and participating. thank And gentlemen. you conference call. for

You disconnect. may now

Aviat Networks (AVNW) 27 Aug 202020 Q4 Earnings call transcript