AVNW - Earnings call transcript Q3 2022

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Operator

Good afternoon. Welcome to the Aviat Networks’ Third Quarter Fiscal 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. the to turn host, now will conference your over Mr. I Fanneron. Keith

Andrew Fredrickson

and Thank conference Networks’ third call to quarter Aviat webcast. you welcome fiscal and XXXX results

You approximately David at Vice who www.aviatnetworks.com, and with a Pete press the Form Smith, today’s President section With along can will call me of presentation are in IR website CEO, investor hours. begin in release, our of replay find our two and updated nine XX-Q, today by our Company’s for will fiscal fiscal on third will followed and remarks with the CFO, XXXX. Aviat’s closing opening remarks review outlook, followed who by on the the quarter, quarter months Pete Gray, financial results Q&A. strategy provide and then first of

and during reflect uncertainties forward-looking of from that call call, actual economic may in involve statements. and and financial but today’s business, risks, other this including different projections, management to webcast, differ and assumptions, statements impact COVID-XX, results forward-looking webcast, of opinions regions. products limited new the only Aviat’s expansions, reminder, could to, relating of make not and date statements those These the and business and As statements to the as materially regarding a Company’s cause activity drivers,

new Additional any The XX, events. statements or in revision revise report information on August filed or no to made on FormXX-K public be of on results factors in undertakes forward-looking from that XXXX. annual our of could the obligation statements on materially make can future differ cause actual light found this call Company with these to information SEC

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

Pete Smith

in us quarter. Aviat which XX.X to team Thanks prior. XX% focus everyone. and versus versus challenges. The key period of meaningful Thanks commitment Andrew month margin successful long joining good XX.X% despite growth company year of supply afternoon of growth continued for improvements growth of growth, of chain line continued review represents and of year. to X.X inflationary XX.X% and last another million, resulted same last versus revenue expansion, areas and revenue represents QX bottom execute million on nine EBITDA term our The the of

EBITDA these months team share For and the team, produced during liquidity year prior safely team tireless and nine not operations rock days of partners. engineering have despite increased our Remarkably, XX all These balance and last quarter, solid results a continued our our evacuated supplier increase execution XX.X% team versus results tornado without of XX% impacting members continued period. buybacks. dedication event. the before would the our facility Austin of sheet the been possible EPS Non-GAAP the up position,

to were the a we Supply continues chain We time and event. impacts any able but damaged, to be was the quickly production from lost quarter continuing facility Our prior respond challenge. to not anticipate recover do end.

now Lead Aviat’s but from interruptions. the perspective. improved Let’s experienced still have fewer times address stable. supply environment interruptions, are experienced supply we We but

to lead Many a shipping This times. improved some allocation. on precursor an chips semiconductor is are suppliers ahead of However, now environment. remain

QX Asia. risk de-commits subject downs are in specifically supplier to out We have by and we allocation. late of the on lock supplier overcame than remain XXX played greater de-commits in We quarter components in QX. a push that the six

but risks we approach three our levels supply Overall, in is down remain. impacted see chain. have Fortunately, lockdowns still the improving, inventory interruptions. These supply the buffered the environment

let’s of to the highlights move third Now quarter. the key

We three capabilities services. broadband. mobile need private rural access and XG main our private networks environment like applications to segments; operators XG XG, see and continue new wireless across and enhanced demand to In broadband enable market fixed to upgrade strong a backhaul capacity

on of remains coming funding UK, Communications, here the ahead. solutions by and portfolio in selected and which and outs sources availability applications and innovative value multiband of software provided for per for Internet to which for to software of largest have gigabits with have speeds the reliability. Quickline recently next in including our after assurance This an large win a to market the this HAS. easy proactively customers, based in understand over the Aviat’s reduced has segment. our offering QX. we with seen strong. customer’s of reliability rural of of Aviat of network capacity I’m software and proposition We and occurs. or highly traffic of While we and one opportunity the XX operations highest or XG fund private of the distances. in business announced international and deliveries years market, total In frequency growth wallet ownership. reliable remain continue enable share momentum customers to we our potential on software the service to network expansion health the quarter finally, the cost building continued lion’s required or the us. billion announced From new ISPs our believe lowered in fast forward capacity XG quarters Aviat opportunity to created by billion to expertise Thanks catalyst business. faster assurance store in some our extended of and In look residential communications level we seamless of the Aviat’s and due Quickline experience RDOF in business more $XX add And rule network analyzing share digital the related And and business the will the for is improving in growing new build certain performance the broadband, is microwave map of the our radios gain Aviat still intelligent identifying standpoint, includes to suite our trajectory multiband HAS. designed our was the by before growth about opportunity our yet $XX with software algorithms Quickline interface validates this strategy bipartisan a fund, believe business front problems reliable HAS networks the the deliver the a need committed level positive possible This in intuitive radios share the applications rural HAS to a infrastructure products. to and and software second the impact enable and secure Aviat’s new highest providers and cost operate impact We referring

during QX the continue program Aviat under buyback share of X repurchasing stock announced authorization. previously We the million million $XX

Before let David couple and turning observations the provide additional to insights. me call over of a

of reflected First, to financial We’ve And year. efforts and and quarters those first continued very good our operational grow quarter this execute. fiscal was a our to are results. collective share three demand. We ability to focused of demonstrate to in continue take and and remain our

networks three and differentiated opportunities services we capture significant and significant products, with forward broadband rural software private are to drivers, XG, offerings. believe see our Looking and well-positioned we

is Aviat our review the the progressing review We line line to the the let to further communications in Finally, red back David? comments. as to regulatory turn transaction see some financials With over system. red David an call transaction that, cycle. opportunity the demonstrate operating coming for before me final

David Gray

everyone. afternoon, good and Pete you, Thank

remarks I press will our release, XX-Q the afternoon. my this can and filed both fiscal third months first XXXX found financials in be key highlights, of noting which and nine some today, During quarter of review our financial were detailed

of XXXX As between discussed third a comparisons noted fiscal quarter the fiscal otherwise. of reminder, today ‘XX third unless all and the quarter are

the third reported North of as million revenues strong XX.X%, by America increase year, X.X total million Africa. same growth for compared the in revenue For total or and quarter, of driven America, the last we which XX% to comprise an XX.X XX.X for North period third million, XX.X the International networks increase X.X% or XX.X XX.X% X same period million driven last for last the of the year of quarter, was was million an increase quarter business. for or primarily year. same private period our X.X million, revenue million an from by

quarter year. above points basis as price We compared disruptions, from backlog actions offset trend XX.X% remain that continues are chain book non-GAAP remained the XXX were our under again gain as and quarter the from Gross GAAP and related the basis to and for pressure progressed. on with the prior sequential XX.X% earnings to XXX improvement inflationary costs trailing and where consistent supply has margins commentary as XXXX. by XX.X% expedite QX. XX.X% would headwinds our fiscal it to to in increasing one noted XX XX inflation month million, every above since momentum we Gross and year that pleased but continued prior our QX This basis, is to ratio margins remains a for points bill from to

a I’m realization earlier that expected. In to dollar report pleased inflation price in than offset fact, quarter fully QX in our terms,

XX.X million were fiscal prior the year, non million, restructuring expenses the of of in a operating due GAAP charge quarter million primarily X.X decline from Third recurrence to a XXXX. X.X

is compensation prior exclude which benefits costs charges and non-GAAP restructuring the based XX.X the were from and This X.X controls year operating expenses, a cost decrease restructuring the general of quarter to Third of from million impact actions. prior million. deal share

from company’s on related significantly deferred net income, NOLs, based against Moving a allowance our outlook. included of and tax XX.X release profitability income year’s company’s last the on valuation million a benefit assets improved the onetime to to the

GAAP XX% Third was XX.X an million last the increase before million quarter million was from year. compared of to million, X.X net or X.X X.X tax GAAP prior income year. income

value of future. will that cash reminder, our a foreseeable year-over-year to continue payments shareholder over not XXX tax tax cash paid. provision increase increase the has for million As company via NOLs will minimal the generate The in taxes

income compared charges, was same year. which period non-cash tax compensation the Third provision last to million X.X million share restructuring based excludes for and quarter non-GAAP net X.X

the from margins year. in non-GAAP X.X million, the share per increase quarter. an period at EBITDA increase X.X XX% were same $X.XX was an of for EBITDA compared per quarter the to for XX%. Adjusted EPS quarter third or last of for prior share, the XX.X% Third million came Adjusted $X.XX year

Moving on XX.X quarter stock marketable in sheet, no have million, continue and the the of the X executed we We securities to to debt. and cash end at of balance the million quarter. third were our repurchases

were sheet supply QX international longer by driven payment We our two receivable chain working QX increased challenges, continued investment increased and growth customers. leverage earnings million first, our balance factors; and protect capital in specifically via terms. Accounts to service to X also mitigate Africa by regions, in higher

and Second logistical to loaded chain supply quarter. in invoicing the late issues back

In debt quality. prolong delays years. have see no no transit overall bad deterioration times for Crucially, Historically we material last the with rare customs in times. issues addition, been debt bad Aviat very longer and further the expense credit four collection in

to other X the by current continue capital and grew servicing buffer which driven A our working increase supply environment. support the in to The of increase major was was in growth the inventory contributor by quarter. portion stocks million customers

we As our missed haven’t customers. to past much for a any the the revenue of few opportunities result, delight quarters

we the beginning the eliminate to consigning of contract $X year, since to about stock Additionally, sourcing the our began components risk. directly supply manufacturer million of

maintain balance sheet million the our the vision leverage in was by a vendors. Aviat Lastly, in prioritized key X.X payables reduced quarter. we to supply of executed with This

Finally, for previously payments announced XXX,XXX restructuring programs. in cash made we

Looking and coming effects the over on eventually chain quarters. working and moderate to stabilize forward, normalize expect the we supply capital

normalize then happens, this cash and also mean reversion we the as occurs. As generation expect accelerate to flow

Pete? plans. well-positioned it Our our turn solid, for leaving long balance to I’ll remains Pete sheet final very some comments. back With term that, us to execute

Pete Smith

before additional item. point David, up be recently Hey, the of housekeeping a will contact. Fredrickson and investor just comments Q&A, joined opening for a Andrew relations few us

range partners response. team million The guidance chain adjusted Now, raising test. the Based supply showed operator, third full in XX of for to the the in million today, well Keith our a in XXX Aviat performance while year range that, Fanneron risk our unexpected and let’s will quarter, are was Aviat the of fiscal for we integration considering to up remains an XXX planning. tornado XX positive Austin that IT on be questions. executed FPNA, revenue revenue be our focused XXXX to on million. it EBITDA million the With open to be and

Operator

Thank take you, Instructions] sir. from will the from question [Operator Scott We first Roth Searle Capital.

Please open. is ahead. line Your go

Scott Searle

quarter, environment. great a the afternoon. on job Congratulations tough Hey, good in

Pete Smith

Thanks. Scott. Thanks,

Scott Searle

dive just you kicking trending those you’re directionally the of see how gross still component outlook I’m some see to in, to attempt price in Hey guidance. headwinds. of I Pete maybe in, you’re quickly, get margins on terms fighting of the wondering sequential but raising some increases

about how the of So margins? should we be progression thinking sequential gross

David Gray

David. its Scott Hey

I that likely modest think year he we continued early as head into we’ll close and the ‘XX. improvement is see out fiscal

inflationary as to We’re the on start commodities further still you’ve some well seen based pressures mounting to through. expecting in as run energy markets will what that continue

on planning to well-positioned we’re But those. So more. also think we’re offset

So we gradual range currently the planning into on are continued we back up above progression for are? where the

Scott Searle

ahead. Perfect. And Pete, sorry. Go

David Gray

as then I the a once, margin back inflation. fluctuations, the kind not related or and go be at be no the to margin of we’d after then more so be will as new inflation margin wave long think QX Yes, mix there’s baseline of assuming will

Scott Searle

will Pete of government timeline and to see expect later missed of the comments. that the when some Is thoughts contributing IIJ talked and I ‘XX some RDOF the that which actually Got of about there’s of start current to when to in funding, you about in there that into a lot What feather calendar are is ,’XX. IIJA. terms you And you. was start a RDOF results? that this year of

Pete Smith

Yes.

So beginning year out the early We we the of maybe this showed this. do a of March was thought specifics of customers we kept end back, are as affairs are. know of next release those Actually, the be late FCC the it folks the when as be think of we But we’ve model. are million look could the some could October, calendar of RDOF as We tracking year, don’t new as $XXX our yesterday, RDOF. for what government projects in. our calendar know,

and different of track So we the we on don’t and the acronym so color the the RDOF we bipartisan think the that’s will use that’s fund kind to have, But on approves the us. infrastructure on be maps. the won’t for submit billion XX that broadband. that rural for be states FCC There’s the they until great is the gating item released coverage going and

So and maps those through would department commerce we got last was in summer. that forecast maps go the this of on the that the

say let’s issue gets So the map resolved.

cycle will I XX us think months. appropriation the take

So maybe of the the we lift bid. middle can expect from summer some next

Scott Searle

this follow And if Perfect. I Earlier could week. quick two ups.

of fiscal to out know so in thoughts a if understand as any to on deployed [Indiscernible] existing DISH that I’m talked know metrics much. ‘XX, had networks. any being base be, standpoint. model wonder what to we of line ‘XX. wondering I is, the accretive start And longer other that win geographies immediately as red you’ve got into opportunity. if help if acquisition, and sales you about in built there opportunity I the there, get guys term the any are us think I thoughts private complementary network on is synergies. But you initially in with been might doing a the without how relationship terms the from front. very customer Thanks I you’ve what a couple complementary then relates to a

Pete Smith

All right. Sure, Scott.

Aviat XXXX. we Aviat generalist most for past proved executed So follow is and tier always and on Dish with continue won the finally to the respect supplier competitors. second and technology. apparently like one Dish Dish we strategy, a the operators our network they’ve meaningful, over We’ve delivered on and one supplier plus because specialist the in bake-off the one to Dish to It won versus year, deliver. to to it Dish intended has February

ourselves. about clearly pace along the to we’ve conservatively. And a And bellwether Our rollout. of meaning this modeling respect we’ve modeled with concerned as that customers international been we’ve the distinguished all event see it

be through about competitive not environment and there’s little it’s customers early companies, there’s with our from going what potentially perspective. some So that line synergy into our then and pull be a to it’s think Aviat the portfolio talk say, network well, utilities. private upside. pull can has we red been too to particularly for I base impact line’s to And potential definitely going is is both But a red response customer to on through there And positive. going products, backhaul to to

Operator

take next O’Neill question the go Hills Theodore from ahead. Research. from We Litchfield will Please

open. is line Your

Theodore O’Neill

quarter. Scott’s about I Thanks. comments the echo good. Very

Pete Smith

Neil. Thanks

Theodore O’Neill

and you be QX QX you strong chain on is that I person is if probably for if those guidance so supply number QX. got allocation. COVID would I things Hey, because got guiding Pete seasonally you’re and up partly had, mean, to weren’t for even risks than if with didn’t quarter exist, a Is have come bigger would there, then could it bigger? you’ve for you’ve

Pete Smith

question Neil. fair So very in is you’re

the any And said end whack the a is guidance hedge miss low high our we is is last target. end but So a didn’t two environment on of the David revenue quarters, our like supply mole. as And chain. the still

environment. So case logic that’s hurt our is executing peer than supplier we into be careful to in would and our us. I went is that we question I in de-commit quarter to the and wanted be the wouldn’t chain that late guidance the the really and fair, better had group supply And say given careful want your a

Theodore O’Neill

don’t but the Just there clearly me going so product we of the more a at well. the the makes sales there, sort to see the how side? ask not up product philosophical growth question service is It are even of it’s since about side, looking growth, why though level

Pete Smith

Yes.

one kind the of when is we projects seeing term And it you and third our between about split we the So mix think mix and products think are services to deal. about our think of business, revenue long businesses and two flows. project I based just the and thirds is what ebbs

Theodore O’Neill

Thanks very much. Okay.

Operator

Please is question B. ahead. from next Riley. from Dave The go Kang

open. is line Your

Dave Kang

last test question regarding My is, Thank large state. U.S. you. you afternoon. talked Good with quarter, first a about

Just give wondering on if that? you can update an us

Pete Smith

routing, right. So the

fantastic. software. So routers and availability That went routing that’s the test the high

was networks network build the software. XXX So critical a seven an The impressed. It mission around links we helping about router And to was customer make required routing additional that us do fail. the node be that and broken network. to that’s pipeline

So that for Dave. about asking thanks

Dave Kang

tell have regarding allocation, mean or will you as you be you Dish as CERAGON? do going situation what the allocation think XX/XX, then you, they between be it CERAGON somebody and and And share? will like far have Sure. to the Is a larger I

Pete Smith

Yes.

we’re we had think year, over think a to don’t We in on and out we’re look, competitive our we’ve to XXX% want all proven split the So speculate But to that’s going share we’ve last Dave. hopeful I more environment. technology. how

So it’s a fair question.

on competitive see wins landscape. the Let’s who

Dave Kang

Got margin. it. on And then gross

I heading next of kind you think into talked about year. fiscal

baseline. know You

we Is there So about how XX%? the should baseline? XX%, like think something

Pete Smith

I continuing way I anticipating already we’ve actions the additional Having traction inflation next environment. that mean, and current we still Yes. to that, mentioned are working pricing on taken through based momentum the backlog. as or our said modeling we’re gain the in year our

So just points margin to not a good like involved the back there. continue, we position starting offsetting, in of to claw we’re some feel but

from think plan working baseline, for a then the our I And certainly yes, So is XX% on XX% still ‘XX. to we’re fiscal fair. range

of anticipated much So as our a better think next improvements the year as we’ll good. will a But mix well. is baseline have I XX for drive mid idea how

Dave Kang

from suppliers. Pete your sourcing talked And about it. directly Got you then

talked by for about not improvement, does million. Well fee? directly I what margin, a you’re your of like mentioned going peers to broker’s gross obviously, $X it expect some paying date because like actually, because think mean one you margin

Pete Smith

Right.

factored the plan. of into margin part shared. was that David improvement So perspective And it’s our

certainly did. it So

impacts that so And inventory.

of chain compared does this of that margin. bringing improvement that this to technology satisfy our opposed margin. But of in companies, carry security more lot instead X in supply us And million we customers. the distinguishing of buy-ins help has as look, So results do did helped we’re a our so we ourselves, supply house supplier we for to partners inventory for, did not our

Dave Kang

Thank you. it. Got

Operator

from question Savageaux next Markets. The Northland Capital Tim from

ahead. open. Your line go Please is

Tim Savageaux

the on bailed Good I afternoon. Just name. that. like last

granularity now. a aggregate maybe roll or seen ramp. you’ll get the My of a can it to and talk value winds of shaping see in we and more even what see talked you of that we the though bit the you RDOF on love annually. didn’t and But we’ve to when in about either says you as potential of total So that up? want material question fair it that contribute? kind the right see about there, think on get Or potential disbursement magnitude closer you variability do And timing here, how October of more funds, do I’d that the and little is pipeline if

Pete Smith

Yes.

us, platform, So, amount we think what our rural Aviat so and the, delivered XX% we funding RDOF that we XX%, because funding share is a in of share, market then peak past over we years. is microwave tell, to good and billion, it’s that’s program to wins We in broadband platform, in be of and the that said of XX we we’ve the we years e-commerce out. have radio customers, is the projects. what go the funding WTM And can $XX should our think X% think from and and four have significant for is X% going to our

out. happen know. that in are October, to we December, challenge have to those Is roll how programs going going the We it don’t Now is March?

with XX%, XX% of engaged We’re market. the

ready. We’re

of a significant inventory. have amount We

to demand we’ll the So and out going comes, largely when be of the because when impact around our of flow ready. keep top projects this are And line. guidance the uncertainty we the

that’s Tim. what So we know

Tim Savageaux

there. Was on Shoot. mute

sort growth? to the we yet? Okay, XX% as in of broadband rural but revenue guess. you in approach possibly are follow we term What more I seeing outlook. that you of but customers I Are mark in the did rural there trends in kind advance see rural short broadband, wanted with quarter up the what kind of of on

Pete Smith

So XX% Tim, the we’re level. too below

our think steady. conversations, CAP-X flowing. in a still we is to funding, was XX% our talked lot our funding threshold growth wait that which still we’re think was the is getting RDOF about of And and demand I while this private we tied And network our up. international we business the the for

what’s there. going on really that’s So

Tim Savageaux

And And as it. on nice high headwinds supply seasonally And the Got did have flat. mean, top the into QX you’re impacts. obviously might versus gross are costs. was you a quarter of as there good. you is High up But what the you the a last balls. overall me. margin mean, question of managing mentioned, supply in these cost look the line all guess quantification increased real job you to I the extent curve I pretty end you, supply of I end that I before, normally gather and it you range puts for ex

we So impact continued from standpoint? the supply changing over QX a Or baking some QX? are looking of seasonality carrying at in are additional something is you business from Or kind here? conservatism to there

Pete Smith

Yes.

was right now about of range. so earlier quarter some a the question impact. environment supplier is, The are so we’ve there supply in baking So couple had supplier this we interruptions

do of supply low above in and is factors the top we’re factors can than what and the end So those range will we end if the we the interruptions range. resolve be range the better that targeting of

So two the on begging interruptions years that’s the quarter where allocation. been or really And last the critical truth. has you’re for for working every or shortages more the this

that And I in the talked It’ll we the So it’s similar color quarters. can We would be to say. and previous a different. give that’s pretty week.

And gets it better. sometimes

having Aviat group. weeks. difficult a like happens don’t with as is it’s why I what it this to conversation, Look, to the that’s dodge, And as well because pronounced. of seems more get more respect lot problems a our like but this peer precise the be sometimes eight to next And

David Gray

basis inflationary cost answer the inflation. on to impacts think of about quarter, were it then just the margin up realizations us XXX. the But our XXX we question then price in your And points about

gross basis of little net your of your by got course, better favorable line you’ve been. then, bit from dilution So margin dollars But revenue would bit a a to you increasing points. than just have about XX keep

facing that the all, kind So on inflation the we’re still all are those side. of headwinds in

Tim Savageaux

thanks. talking to Great, things to a And look forward see in week evolved. I have how

Operator

from is question go AIGH Investment ahead. Martin next The Please from Partners. Aaron

Aaron Martin

the issues. thank Hi, supply on the especially with congratulations and chain you progress

radios competition? the that Just two and that differentiation be microwave to wins going run the on quick how is on network, new bundled? technological is And the you software side have, the as questions the from announced you separate SAS you’ve that mentioned the the big or point that a is product technological sold second some question offering versus a helps of

Pete Smith

Okay.

So the on capacity, a operators That’s system gain, I will that and the highest software. where capacity where we optimize differentiation radio win. for differentiation, the we assurance more also have little to and matters highest talk distance or want bit about health

more We release for our It software due The assurance Service. as it service exceptions run is portfolio. a bit in we the security where Software will latest push can this. that a issues. to little like about network be as will And I’d to a say

we couple talked software. add we’ve last more want more As the for and years, to

is avoid predictive you algorithms downtime for network network, has software, the this the costs and analyze frequency that assurance customer’s it that the So if lowers network and downtime. basically the the operational continuously in our microwave will, stool, leg following next reduces on principally and

XX excited. to in really bear. we that Thanks we’re So add months the growth software out more of And the question and hope that further look another we we for can then can Aaron. to leg HAS stool, the bring next where enjoy

Operator

additional at any appears question remarks. or is no conference Pete, back you turn to closing further I to It this time. for there like Mr.

Pete Smith

Yes.

our joining investors, our everyone the particularly thank customers, for to in our this like I’d call; employees, environment, our and So suppliers.

providing fiscal We’re year ‘XX. year looking results Stay forward to updating perspective and you on in on safe our full August everyone.

Operator

for Thank your participation. today’s you concludes This call.

disconnect. now may You

Aviat Networks (AVNW) 4 May 222022 Q3 Earnings call transcript