Earnings call transcript Q2 2023

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Operator

Good afternoon, and welcome to Aviat Networks' Second Quarter Fiscal 2023 Earnings Conference 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.

And now, I'd like to turn the conference over to your host, Mr. Investor of Director Fredrickson, Relations. Andrew

You may begin.

Andrew Fredrickson

and XXXX results you, welcome to fiscal quarter second Networks' conference Aviat Thank call webcast. and

in find a with can call updated of our XX-Q, website the presentation our press section Investor hours. www.aviatnetworks.com replay approximately of You at Relations X release, Form in investor along an today's

will results With me remarks Aviat's David the Q&A. the fiscal company's Smith, our on closing will followed Gray, will then by financial followed who strategy remarks today CEO, are review CFO, Pete quarter. on who by second for and Pete opening begin the quarter, provide with outlook, Aviat's

a As different business regions. products the and including, today's business, but in management webcast, not of economic expansions, limited activity the drivers, may new impact relating and COVID-XX projections, make reminder, to, and statements financial Aviat's during forward-looking regarding statements call to

risks this cause from date forward-looking webcast and These of as and those the assumptions the uncertainties only other company's differ call materially and results opinions to and statements that of statements. reflect involve actual could

SEC Form XXXX. differ filed factors in on to actual our results be made from report call the cause statements annual on the information that on the found XX, could with this Additional on materially September can XX-K

company events. forward-looking any to statements The undertakes information revise these future obligations public revision in new of no or make or light of

to will and both of press include and supplemental www.aviatnetworks.com GAAP section non-GAAP GAAP reference management financial at non-GAAP Please webcast, Investor and information. is which other therein, release, our and call available refer website reconciliation which financial measures. today's to during in a Additionally, our tables Relations financial the

over to CEO, like would Smith. Aviat's I to Pete time, turn the Pete? this call At

Pete Smith

broadband Aviat world results continue to from well for against growth the plan XXXX. afternoon, in quarter, and around well rural ourselves Andrew, Aviat quarter improvement. this private second bottom its to to as networks drive fiscal of and Networks' as the everyone. good Thanks, year position XG, and meaningful benefit joining for we executed you line us Thank review

versus year which XX.X% delivered non-GAAP fiscal last EBITDA of quarter of million, year. XXXX, second period growth would XX% have without EPS of the of the million, margin income been $XX.X $XX.X our supplier increase These a Adjusted dedication of team revenue same year. XX%. prior Aviat the XX.X%. of the and operating Non-GAAP In of not tireless increase and versus QX . execution partners. results Record Aviat of represents possible

outlook. driver key the XG The business Aviat's discuss and highlights cycle of from quarter. second global be to upgrade Let's a some continues

underway in win Our Bharti Airtel products as recent XG is delivering India in with second officially we the began quarter.

and are products an India entirely this and our demonstrates win deliver the geography value to in can Aviat customers represents it through about as for and excited we customer new that We services.

XG to the execution around $X gain XXXX, from million from opportunities against million and globe, come Elsewhere $XX of have in fiscal this is has $XX continue customer our increased business on we year opportunities In over share competitor. Globally, over through focus. revenue. largest growth our have Part approximately such we this funnel gain recognized in million. year-to-date year-to-date booked replacement competitor

these We demand. take of continue to execute opportunities to will share on

better seamlessly best-in-class E-band capturing recently migrate Aviat's multi-band the leverage opportunities, XG allows new with works vendor creates agnostic announced for The large release solution. to to solution our Aviat it incremental presentation. upgrade with switching of multi-band terms investments. microwave Aviat networks to a XG their our This radios and as investor third-party detailed In This to existing we of multi-band existing customers high overcome is lower helps in costs. and opportunity agnostic solutions

the to Aviat we refreshed Our offerings. the versus With for rural business, well a to of recently regards remains broadband continue competitive alternatives capacity store our and higher store point We extended solution provides the or to like distance differentiation Line access and and from expand company. execute as our radios microwave as software acquisition. include integrating Frequency beyond products Software FAS Assurance Red offered our products the well or the Health products our to accessories HAS Assurance and Software,

Some additional commentary on funding follows. the government programs

revenue flowing We funding. of RDOF encouraging, more continue RDOF second the authorization moving is long for RDOF Opportunity deployments anticipate Aviat wireless to an a Fund Rural providers to access use fixed Digital RDOF, calendar half and to first The we year for their industry using recent anticipate RDPF to year. calendar in the technologies see anticipate begin ramp of leader half wireless the forward. and XXXX the and related deployments we that in Note

America Aviat spend Connect Fund customer programs. and from from Fortunately, is ARMA (ph) still CAF, the benefiting

of the XX horizon The optimistic to program this is the program, which to in speed the which of program, Equity, the are Broadband but On implementation Internet Deployment, well allocation we U.S. beneficiary BEAD Access BEAD much large a should $XX.X states. and high bodes for about Aviat. is access There allocated expand has be and about. BEAD, all be still seen billion

we maintaining opportunities. see in networks, leadership are international private our increasing In and North America

the APAC, multi-year in we now high as national Redline to Communications access to go margin win example, a for secured continues with safety anticipated. The public than ECLIPSE network. platform we refer business better integration a For our products of which

beginning from backhaul progress we And see our accounts to vice a for Redline cost into improving are versa. takeout opportunities perspective. cross-selling and are Aviat We

the chain to on supply environment. Moving

allocation. remaining node it to derisking X,XXX XX-nanometer long approximately XX% are but we the We've returned XXX%. problematic. Note components of last, our to XX of way, components improvements the have remains on see the system. not chips approximately continue come We Currently, that remain supply, takes have we we Of allocation, to chain. done a semiconductor need pre-crisis performance, for our to components in supply deliver microwave

elevated outset through and the inventory persisted China levels has the supply crisis COVID-XX held chain These inventory an chain through at Throughout has been reopening. avoid increased levels. period. the to recent significant Fortunately, Aviat Aviat have supply able interruptions the started crisis, elevated of

We risk. have the to supply to of is built the the subject chain, third derivative resiliency which reopening

declare of at Aviat years and inventories, building our improvements and we the to levels will Based past over next location execution times lead inventory on continue few as and anticipate moderate. peak quarters several the

opportunity secondary to chain we missed saw remains shortages. identifying resiliency supply chain supply at quarter, committed no proactively due revenue and by our Aviat This to risk building components suppliers. in

of good will stronger Our Aviat’s base improved we supply work in demonstration to believe a driving opportunity we over where Redline's results manufacturing reliability through see chain. a an

now before I call the comments. for financials some to our back review turn coming will David? final to over David

David Gray

Thank you, Pete, and good afternoon, everyone.

financial key can financials second our filed review our quarter and I'll found detailed my XX-Q the this highlights, During noting fiscal remarks XXXX today, of be in release some afternoon. press

XXXX quarter second noted As comparisons discussed a XXXX, otherwise. reminder, unless and are fiscal quarter today second all between fiscal

For for $XX.X driven the quarter, or the Latin of increase revenues $XX.X Asia-Pacific, the second the reported by period well growth XX.X%, we as and million Red last an year, $XX.X contribution as from compared strong total America of as same to million million Line Europe in acquisition.

$XX.X $XX.X for XX% and North was American comprised revenue revenue, revenue was international the the million, second quarter which million. of total

of one started We trailing above four in ratio book-to-bill XXXX. fiscal back continued quarter trend our

quarter as were year quarter basis Asian subsequent margins improve the for margins were compared of equipment on weighed non-GAAP to of XX.X% initial GAAP Gross margins higher for non-GAAP. XG margins in and XX.X% XX.X% GAAP a prior and Current large on substantially down for revenue we and and XX.X% as project. These project will margin software. a by quarters services shipment and recognize

and million of were GAAP inclusion million operating expenses $X.X million increase $X.X in Second $XX.X from operating charge an driven expenses the the by Redline restructuring quarter prior year, the quarter. of

continue non-GAAP increase were million. prior of operating expenses, compensation year, $X.X quarter is an due a manage aggressively. to basis, costs the exclude like-for-like Line the restructuring impact share-based acquisition. Second million from charges, deal which primarily This to and costs On Red $XX.X of the we

$X.X essentially tax quarter to year. flat was last Second million, provision

We generate almost tax of non-GAAP quarter $XX company of future. tax a continue that estimate for $X.X report we million based asset foreseeable per minimal cash expect to shareholder deferred will value on over expense reasonable taxes our $XXX to incur. balance continue payments NOLs tax to manifested via has million cash on sheet The as the the our of million

quarter to $X.X of million income GAAP net compared last year. second $X.X recorded million We

Second excludes quarter FX compared impacts, provision $XX.X was $X.X net compensation tax non-cash restructuring and which charges, for income, million costs non-GAAP the share-based million last M&A to year. related period same

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

sheet. balance the on Moving to

prior end million securities ForEx the continue marketable markets, collection certain the from Accounts cycle. $XX.X availability million extending on and emerging cash Our limitations quarter at quarter. the second be the to of receivable in $XX.X were impacted by in

We via continue sheet to supplier mitigate stock supply our risks to buffer chain balance leverage deposits. and

Given chain, begin to unwind supply will however, these in we future in the recent improvements our investments quarters.

strong a balance sheet, leaving have well execute to to positioned our plans. debt-free continue We us long-term

final I comments. will for Pete that, turn back With to Pete? some it

Pete Smith

Thanks, David.

share continue and to world, long-term for of up our add and rural networks. we product, of to through executed broadband America differentiated our and capture comments have XG performance. I'd North and private Year-to-date, wallet services opening like additional software a drivers Q&A, Before grow offerings. few the growth summarize on we In our and around

value remain focused term. generating profitability on shareholder and over increasing meaningful We long also the

for work and XXXX. profit and for anticipate million. the in end $XXX on on the for our of XXXX guidance the hard raising higher our results, to both $XX range the both figures. is environment, year adjusted revenue and to million demand Based range This team fiscal fiscal Aviat and are to of lower guidance $XXX million we million the EBITDA to the of be $XX.X of revenue end We XXXX the in and now an for dedication year be the fiscal increase year

for let's operator, With that, call questions. the open

Operator

comes Scott Certainly. our the from first from [Operator line of And Searle ROTH. Instructions] question

Your question, please.

Scott Searle

Hey to for initial you were could in down be Product Nice margin. in Thanks tends product the give taking afternoon. jump gross bit on gross questions. wondering a color on quarter. that from particularly None you more -- Good to lower Hey. sequentially given margins. I'm up. were that, revenue, if maybe some right my quarter. Pete, gross little us on of job which you've got contribution margins the

to onetime down, start should on items be service can the side the or thinking you And that of go expect going And side? gross couple ledger, the over quarters business seems of the they were next normalization about margin we on segment of where any in that the to then, other more component see forward? as something we the that

David Gray

that. take Hey, Scott. I'll This is David.

the on reverse in start service margins. I'll actually, So

a subject So service be to with, of begin revenue recognition some kind of margins to but tend of they're volatile bit standard. secrecies to the

impacts repricing have We to it ended which revenue a equipment. equipment. and through quarter, up we services of services every go call had of from across let's in the allocation And a, carve-out process that this a quarter,

to bucket of kind was bucket. It

our that margin positively as about into of that, and be mixing services So that we that again, quarter Tier should did temporary improve that impact of the that impact large service this impacted masked to equipment and software sequentially a talked also X this kind and quarter project higher dilutive in impact start project. margins and we

a fundamentally, forward. shape, good positive in and I are looking more fit things it's idiosyncratic, on think but going we're So

Pete Smith

said the won reduction we get we we're our when Bharti takes Airtel while, add, benefits. just were a and we little going that up business, cost the to to going to volume machine Scott, crank And

we time we right and it side, see coming the taking was on improving thing over -- thought margins Bharti the do. improvements and right the business over the to time So

Scott Searle

though, about And bit Got it? about to you. how Dave. front the to as to starting Is tick in thinking then aggregate, helpful. of should component way the should mean, by and follow quarters expedite that to a on offset start up and margins, little next be some alleviated we the see best up India. we cost couple be over maybe Very thinking pressure I on they be that, just gross

David Gray

Yeah.

were think this it. It I way think definitely a should be that's moving -- good north where we to quarter. about from

back think strong. looks I half relatively the

end basis for give Of least were we'll had But quarter. probably this always certainly, than what XXX course, still full what the currently up than there. there's think for higher full I year some at And take -- the 'XX. we higher in year, probably fiscal points or we

Scott Searle

Great. follow And could if lastly up. I just

where kind line In the first with terms like very strong quarter. in half of is. the December Looks you're guidance, guiding of

little a second RDOF in like 'XX. And the kick half be conservative have that to calendar of guys sounds You to bit it tended on front in, historically. starts

term, do over the And we So bit the little get of expecting I'm year? 'XX? some key as your of in are we're you of of looking of given back near kind early, basically And should and have half been a what up first the wondering we be the running that factors in as into swing what book-to-bill kind but been one? very half Thanks. has visibility elements pick calendar

David Gray

Yeah.

So mean, is I XX% of coming far quarters our as are coming backlog. concerned, of as revenues visibility roughly out

as dynamic. However, some with of because big there sounds it the it's be are revenue projects not projects recognition and associated simple the there as quite as can somewhat those in timing

rest reflected the the and always a that's But there. in give adjustment. I about there's our I So we good and year, think think guidance take of feel

Scott Searle

Thank Great. you.

Operator

our question. next from for And our Securities. line moment comes of One Suppiger question you. next Erik the JMP Thank from

please. question, Your

Erik Suppiger

taking little of quarter? Yeah. talk of with competitive about on your good some strong international Thanks Huawei? why particularly of Congrats you a dynamics was part the for questions. Can the quarter. the Was factor this bit that a

Pete Smith

share like Monday the we contributed script Department Huawei and -- to competitor Huawei came from and the the to XX, together that we alluded would competitors, gain I say, would then all we In but of Commerce. we specific that's the Well, put script the to. on India, And that. in in the on our out story the restrictions name large part,

digested. fully haven't we So

but us, going of to $XX for said and execute million favorable to I starting -- we think we're more have we've we be on It's funnel, that.

the time if If to it trend be we'll that's figure figure to positive, January that's new neutral. were a and going it's some out favorable to XXX worst, announced XX. it's that -- think we XX So to restrictions next the it's over give able out either on days. We'll be us

Erik Suppiger

Very Okay. helpful.

talk updates between and of fiber trends, play little kind Just the of any a the adoption general bit other? of terms about in microwave, versus kind one there

Pete Smith

Yeah.

the and fiber that's say Aviat think I our more at have a that allows share the with steady versus innovations point point and respect vendor explicitly competitive multiband us to in about us to to work make the I -- extended of is wouldn't vendor-agnostic fiber terms overall, us I front our in what making And share with time. allow fiber. competition more designed the to multiband third-party there's is distance, and agnostic But microwave our distance, would presentation, we robust fiber shift the competitive any between microwave. in and investor and this chart between microwave at extended

Erik Suppiger

are economic seeing I question. much playing Are couple the of North impact Last Okay. from factor from North business grew, think, percent. that American there a Is of you a how thinking of America or an you macro-economic? perspective?

Pete Smith

Yeah.

that But so is increasing. So project America's [indiscernible] And we muted think last business the a quarter. backlog our little we see almost this double-digits versus time in right, America same year. based, point a backlog was the well, period have that's growth North we North right? of

We projects. have, longer I say, would

networks, Our business North has any America we seen private dominated slowdown. which by haven't

So the we else. like read headlines everybody

the pressed impact hard we're something macro. in And that to the in to timing the macroeconomic rather business. is a say really impact a is North overall there project QX Aviat than America the So growth or

Erik Suppiger

Very good. Thank you very much.

Operator

our comes One Thank from Tim our question. the Capital. moment question from you. And for of next Northland line Savageaux next

question, Your please.

Tim Savageaux

I and making feature which quarter list, think results. I with I XX% another the think the is and indicative? America, of happened free the know stay me Hi. congrats was, -- both and is that Good afternoon When question Verizon North this time let that to North I on I asked perspective. And but a is customer from global last the American guess feel when

Verizon? or of here. Obviously, in Bharti the the your Bharti driving know follow-up. balance I a greater mean, got we strength the than And the role that at have year growth then term short deal ramping and a do is you drivers of taking see backhaul win? replacement company's I XG What's throughout a the growth Huawei other terms you've driving

Pete Smith

Yes.

So And LTE, the a be been $X.XX about long-term typically Advanced of been up bit we and customer And threshold. at a it's we overall see Verizon. Aviat, LTE looked Verizon. under They've XG. combination driving connectivity a they've little right of

So drives that the for mobile to need backhaul access more fixed transport. wireless

see our we all all broadband. trends, like drivers, So of we and then those XG private of networks all growth

I an going running RDOF think of when recent think growth next And couple have have is And the back to in be kind about of by the developments with point calendar we to quarters, -- half impact, is of but dialogue driven XXXX. for XG. the our the year the we going and right

we for of quarters. more start couple of guidance to. perhaps about we So think to our XG is and fiscal funding, factors which broadband impact than in will the 'XX, have rural next And definitive over as probably think I we the see the would guide a year

Tim Savageaux

big went million, versus that, you of a you're globally? sense and noted. you bookings that through, they're get recognized I because of respectively. some the interesting. the time? of is opportunity love numbers Duly and think estimate to the mentioned to go want pretty I then $X think certain I for competitor I India gain a probably mentioned piece you think, a significant $XX what revenues regard I'd with Was million through period million, $XX And the how of your is a just bunch seeing over there of business share and back to that

Pete Smith

business. India say So to to really I it the good out back way that's us for a would get

revenue half. would the that India over is the say I So of business

accounts. over the say, is XX% funnel. over funnel that mosaic of it's opportunities restrictions taking these getting have. I reason are it looks we're a broader kind from So just helpful? that We on see is not it's having make its not And share maybe that at the of half. ballpark, or two of that But we that where the historically dependent Is we're in put a to customers one the let's and statement impact,

Tim Savageaux

Got it.

correct? was funnel the $XX the So million,

Pete Smith

Yes. The the $XX million. funnel is

Tim Savageaux

Great. me. question And last then for

as you XX.X%. in some obviously, you upside those some it's record But nice where quarter. non-GAAP longer have to can term, of where well a margins over to margins the this margins, you did that guys gross some operating now given sense as growth. obviously, mentioned go you've And there time revenue do as consideration degree on have dependent some operating But milestone? for recent achieved revenue You -- have kind

David Gray

Well, I this, would here. that We're not you XX%. reach quite but our into to strategic for our we're margins is in distance, season planning stated yet. say milestone I'll spending heading we -- tell EBITDA we're there

have And off of want So kind where we'll well to your the to playbook standpoint. probably to pay specific operating we'll respond from be figure and margins. dust we that to attention question as to there out our

Tim Savageaux

Got very it. much. Thanks

Pete Smith

Thanks, Tim.

Operator

question Theodore of Hill's Research. Thank you. from line the next [Operator O'Neil And comes Instructions] our from

please. Your question,

Theodore O'Neill

Thanks side, I quarter. good not you appreciate anything turns talk inflation inventory you and you're remarks. wondering in if either I the if improving could the discussing or the very the improving? congratulations was much on about on and seeing prepared DSOs the

David Gray

other mean But the incurred the general concerned, push they've stable, as and some been -- fees. to way year, of instances at increases and expedite point over X.X back we're been still this years. that realizing some having some And price trying past the on select far components some as right? we're few we've tide start pay actually, that far between. clawing where I to are we'll It's Yeah. have fairly

right more now, is seen situation be stable. see we on that. So the for to But

Theodore O'Neill

update us the give on And chip you're And to with MaxLinear, you timing that? some some building the chip an new got? semiconductor if of with you've is allocation going that can on help issues

Pete Smith

that we give respect with our We is -- investment out, -- the think start us given access progressing definitive of nicely. project to to bottom lines. I think the when right? impact a our we it And in prioritized expect the has from and time still the now, line modem we're get So ship on top will to when helped we'll but haven't chain, still quarters supply couple

Theodore O'Neill

a those go they both? will product chips or will new existing line be of And or products part into

Pete Smith

Both.

Theodore O'Neill

All Thanks Okay. very much. right.

Pete Smith

Thank you.

Operator

have comes follow-up Searle ROTH. a just Thank you. The from moment. follow-up Scott line we And from question, one the of

Your question, please.

Scott Searle

but how Redline, if in of starting from that's over how Maybe think quarters front, a wondering opportunity sales It wondering a a backhaul from in you're that what going you is standpoint? terms some sounds could to like on private perspective cross the bit next synergies we give of Pete. follow-up get that XX-plus on you're now. little forward a I'm an of Hey, just us about line capabilities, looking networks about couple revenue should of a like months? tracking I'm update the

Peter Smith

Yeah.

the network private is funnel grow. So to starting

for haven't wanted call, the that said a We we the in more, we that kind we and before win about to thought about have win. had a earnings put prep we of to When we started deck. got -- talking

quarters So yes, -- when channels to of thought not we to the the the away yet, we made going but we it's Redline, to our we're we our private two think was is proven. and saying, working work. from acquisition portfolio and one product investment see And networks but that access we thesis

was call. revenue, it EBITDA our increased was With And our of mentioned contributed guidance year. X% said we gross margins, are On it X.X%, into factored accretive it of the the we we that less recorded XX%. end the that Redline, guidance we to to and we at ahead and respect to than for the EBITDA gave

Scott Searle

Great. Thanks.

Operator

to Smith any back remarks. today's like you. hand And further the session Pete for the does I'd Thank this conclude question-and-answer of to program. program

Pete Smith

for your and call thanks, support. the Well, attending everyone,

Fortunately, Storm. the opened during Austin state Ice the line

and Thanks, stay progress We XX everyone. touch. our let's in in are looking forward to days, updating

Operator

does for and conclude Thank conference. in today's you, gentlemen, This ladies participation program. the your

You may now disconnect. Good day.

Aviat Networks (AVNW) 1 Feb 232023 Q2 Earnings call transcript