AVNW - Earnings call transcript Q3 2024

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Operator

Good afternoon. Welcome to Aviat Networks' Third Quarter Fiscal 2024 Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Andrew Fredrickson, Director of Investor Relations.

begin. may You

Andrew Fredrickson

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

You quarter. can expansions review followed statements company future of forward-looking and cause who fiscal this the statements any differ new webcast, of then events. no actual factors www.aviatnetworks.com Annual by financial find regions. public webcast in in The projections, statements those and could reminder, date call our Pete our CFO, from our with obligation different Aviat's of not the drivers, or to Report filed make With the Aviat's made press most release to and outlook, forward-looking involve economic call in company's or Pete are the will make regarding revision with new section on closing materially replay results for today's undertakes results Gray, and actual Smith, from our can during in differ David SEC. information the could the cause on who but recent as opening that the this me a statements.Additional materially financial only including, revise by business risks on on be limited on found these remarks today Form forward-looking light the assumptions, reflect and updated will that products opinions business, management and followed statements information and of activity of website other uncertainties and and to begin These may with third company's at and CEO, quarter, provide along statements President of results to, call. to a will Aviat's IR Investor today's strategy call Q&A.As Presentation relating remarks XX-K

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

Peter Smith

Thanks, and everyone. good afternoon, Andrew,

Let's third review for Aviat Networks' the of quarter year results fiscal XXXX.

driven the million. and the growth QX to pleased made and are further throughout of and Aviat's period the thanks XX% quarter of Aviat generation These Aviat million, Aviat the last model results We XX% cash with of same acquisition. operating effort the implementation team strong EPS growth that on total $XXX.X versus of million Non-GAAP marketable our represents from execution Aviat's year-ago $XX of cash quarter. X% sheet margin XX% strategy of higher and $XX of growth the include: to operational of its financial XX%.Adjusted year. progress year. than organic last continued the on third Non-GAAP cash possible securities margins versus its execution the gross million, continued core which of are made partners revenue report of of Highlights quarter in and $X.XX, Core EBITDA a Pasolink the balance by revenue net balance and $XX.X of period. above with and

key highlights third quarter. of review Let's the

to accretive free ownership, EBITDA quarter to the generation. two optimization from next moves of was and accelerate the basis We the cash breakeven Pasolink quarters provided of nearly NEC. of business by cost our services near-term profitability was Aviat accelerated the our The transition an as away Pasolink on first approached efforts business.In and in will full we quarter goals. flow continue continue over These execution to progress the integration structure our

have in we ongoing, a slower will customers, at result As to undertaken we this ramp annual is sustainable and work profitability have still that margins onboarded review a $XXX levels.While expect customer rate contribution. Pasolink are to our ensure we target run million the

should attractive shareholders. business translate Aviat's more to this for However,

Pasolink cross-selling introducing opportunities build the existing base, and we to teams sales continue Aviat versa. products the Pasolink vice Beyond to are historical customers when

to and perspective, converted bookings of inventory our savings Aviat's cost some tracking will We wins outage and of the Overall, upgrades the tracking and the capital.Moving is rationalization. U.S. average continued have in X.Xx inventory on reduce this already excess the in nationwide X cost business; infrastructure networks, beginning an core plan ahead.From the some transaction expect significant and this XXXX. business. Pasolink investments quarter, networks, some primarily in the fiscal optimization of continue a materialize Aviat in to inventory and goods to excess in quarter in into from weighted critical to cost underscores IRR segment. private year quarters Further, and safety anticipate of to of importance realize to growth internal networks. these will and U.S. in the to from internationally both private-public grow Tier had are cost savings current to The sold recent We we the more support in fiscal fourth

that FCC exciting Coordination lead companies the Frequency by to band. of is offering access operation governments of utilities for end and fixed turn equipment will the even to enables when begin degree the and communicating wireless Aviat usage. public continue private authorization investment are customers a and spectrum February Automated to Our at likely gigahertz networks to or for Aviat's is with AFC in redundancy X for networks networks compromised.Driving more in that of high engineered systems reliability. an further recent responders, first development the design are This

to the or microwave patented correcting interference the and customers' suggest proactive remediation many possibility confidence protect potential entirely, X that comprehensive have communication radios persists move networks Working to is by to without Aviat of among reliability and developed private network offers concern new to their performance wish and However, Assurance Frequency have creating who software network interference of the having analyzes detect actions. networks' to utilize is been competitor, issues.Our interference in detected or a of Software suite the in interference. customers of networks as solutions. band. avoid the interference their our face for gigahertz on for possibility leading band, and even a We've operator FAS a the backhaul radios customers Aviat Once and preparing these solutions detecting allows largely FAS the to two

gigahertz the to to U.S. ultra-high-power XX% XX,XXX of with XX estimate this band.We can links and First XX to product. a radio or an microwave gigahertz enable in new move to of upwards the move X customers is gigahertz more

these public to Radio products. gigahertz we radio Second is with to our a multi-band competitor updates platform. better third and protect as segments problem all-outdoor specifically the solution operating with several safety, our for to is our at to address distances. Protection we released in gigahertz ahead for to are designed our growing UHP several a closest important mission-critical link believe made longer This quarter, customers. radio open market Aviat private on the new WTM These products In and X X+X gigahertz customers.We opportunity offerings customers, utility our we federal such Hardware solve network the innovative and XX represent new large utilizing XX of a and quarters

LTE hardware the it to XXXX. we access been and our manage solutions. will that we new customers. Aviat.With our network of better also radio released a portfolio our the on first that, expand many had India, David capacity our the private our $XXX radios. beginning needs order in router some address Networks, we to sustain and major X microwave interface further and These I help out application, for our networks middle Mobile Pasolink had which selling QX Previously, segment Indian segment.Additionally, only support variant as router coming we leadership the fiscal are to our by still in based year is will software, unaddressed over growing The customers platform David? first a build international roll our military turn In to comments. will review our their global serve won first Redline upgrades been the financials to Management for market our in and in for improve microwave who, an Aviat's We received of market previously addressable ProVision of deal sale on CTR back backhaul microwave million we backhaul into EBAND is to exciting Pasolink our Tier operators acquisition. multiband before represents or adjacency to in cases, it enable networks.To in just to orders an microwave out XG for execute final continue their X to exciting In Tier network

David M. Gray

Pete, afternoon, and good you, Thank everyone.

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

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

completion a revenue quarter, to to or period XX% was year constant of large our million, period $XX.X the million. quarter from X the $X.X revenue million our million basis, would reported decrease $XXX.X North compared For a which same of million total due the comprised a XX.X%.On America, $XX.X same currency of the we for as $XX.X increase third last project. been of revenues total $XXX.X have for last million an Tier year, near of the

X% of X XX.X%. the organic the business For year.The from of Latin was $X.X strong or African Pasolink contributed continent. and period America $XX.X backlog driven grew regions, year, 'XX, the and International an while of for weakness of last on remains core by up million months was quarter, versus America increase North that offsetting growth, and Aviat strong. the by fiscal Asia-Pacific or business is million revenue bookings growth prior $XX.X the The addition $XX.X same million the first the million XX.X%

the XX.X% as in and as would margins book-to-bill amortization and Pasolink the that the on the non-GAAP prior XX.X%, year. were mix margins adjustment.Non-GAAP GAAP impact basis of has were Our inventory of X XX.X% as million it in productivity. for impacted were Pasolink driven trailing products very Gross by Aviat $X.X and be expected XX-month XX.X% remained quarter of replaced as Aviat purchase step-up fiscal $X the well margins a margins for quarter write-down diluted at business. basis operational by were above million strong non-GAAP the GAAP a GAAP to by since non-GAAP the inventory Core in as ratio XX.X% product accounting compared on market by XXXX.

exclude of which million, year, in on million R&D.Third XX.X% an core Pasolink $X.X operating decrease basis $X.X impact Third an related $X.X restructuring non-GAAP the were compensation and quarter expenses. increase of deal XX.X%, $X.X prior $X.X a by M&A or Non-GAAP million on GAAP were operating million basis increase R&D driven quarter of an expenses, and and $XX.X from by expenses costs of million approximately operating of million $XX.X OpEx, Pasolink GAAP million addition million a increased of the increased million, respectively. $X.X $XX.X of GAAP non-GAAP expenses to of and increase year share-based prior charges, a and and compared was driven income the

Third quarter Starting acquisition. quarter was $X.X $X.X cash have a million from the of $X.X $X.X year. compared tax we million QX, non-GAAP to per in provision million Pasolink tax to increased result as estimate last our million

cash generate reminder, $X.X the mentioned $XXX from last year shareholder company has future.Third to million, payments continue million the for net down tax NOLs million expenses. the income previously M&A-related GAAP that minimal was nearly a As value foreseeable $X.X to via of quarter due will

growth expansion, result and a $X.X per issued diluted EBITDA an tax income, $X.X the last a or $X.XX net share costs investment or increase year. the decrease Pasolink million $X.X which the of the came X.X% noncash in driven the EPS a $X.X quarter by partially from in for XX.X% restructuring offset share additional $X.XX on share-based of compared Adjusted modest fully the same to million to Pasolink and acquisition. same charges, was basis dilution at XX.X% million million from million period margin of of or core for non-GAAP excludes this last revenue shares quarter prior connection by year, quarter was the of revenue, with X.X%, provision business.Third compensation, Third $XX.X period for compared R&D year, as per increase M&A-related and non-GAAP an

our million sheet; balance $XX.X a and a quarter DSOs assets, quarter.As $XX.X by last contribution million by million $X.X of the position added to the our DSO the for from to capital continue third at From quarter. QX generation increased quarters Pasolink, cash by days of ] reduced from standpoint, on impacted and million operating Moving ramps was working turns net excluding capital by strong as position activities securities result, cash and ], to operating working inventory positive to to business Pasolink driven coming turns be [ strong the from driven results to marketable which and business. expect levels debt a million, of net [ these and moved a cash from in as $XX.X core the This end X.X to we a of reported.We the moderate Pasolink roughly normalize. over $XX.X impacts the the addition inventory the X.X of Pasolink XX cash

million revenue guidance softened slower guidance cautious $XXX Tier be to million our African to by remain to attributable primarily guidance; CapEx network is on guidance in the Pasolink the EBITDA revenue, previously our fiscal of announced our we range. within the $XXX XXXX X Moving mobile are and business. year This to range to and in customers spend updating ramp full XXXX

our that, some I'll Pete comments. it estimate.With expect turn the to EBITDA final year current the XXXX for fiscal to consensus We approximate for back

Peter Smith

Thanks, David.

it of would to EBITDA accretive to briefly XXXX cash plan perspective, ahead acquisition expect continue our by free September I we Pasolink to and Q&A, discuss like outlook. EPS The be Before flow from quarter. is and an

for and ahead get in margin in operator, that, ahead level The growth the is our perspective, we expectations, from are Pasolink $XXX line we acquisition IRR discussed questions. goals of achieving open run still an our the EBITDA a Additionally, tracking plan for and rate sustained Aviat the well business market up of are previously million core executed business believe with will growth to sight. overall rate.With let's and

Operator

of from Lake Our Schmidt [Operator first Instructions] Jaeson question comes Street.

Jaeson Schmidt

let's kind know kind rank want impact? if think fiscal you in the I we the three 'XX can drivers delta $XX million start call to those laid of you of sort of two updated the on the three between Just about, guidance. But at out of terms issues midpoint it, Dave, that. from rages, order

Peter Smith

two would rank let say the Tier then I them, ramp. would order Jason. would is And three Africa the Pasolink So X me be be One environment. and

Jaeson Schmidt

perspective. Pasolink think Pete on you Okay. helpful. last thought really Is of mentioned are this that from fiscal a And Curious your you know if at That's $XXX I sort business you quarter, changes are achievable? the looking guys looking I sort you thoughts, million margin over million. 'XX? how of to $XXX still

Peter Smith

revenue And high I say the And empty ready will would August. some got probably to a I of Look, bit session. want overly August we we will we're -- We with in think for we I to enthusiastic Pasolink. typically but put range, end that the that in think in number little million the our do respect 'XX. $XXX And not that to that. guidance beat number we be FY discovered look,

So we're on generation, of be really if by what about cash to we're excited ahead not we accretive, our going to sooner. plan September really, expect take is we're and not that. EPS And

Jaeson Schmidt

and the Okay. for makes back one to initiatives funding previously you timetable said you impact these the on thoughts P&L? have I big about calendar sense. thinking never jump the an last That expected And update 'XX curious your know I'll BEAD to could just and on queue. a then government you're how to some that of in sort me, if of just but what impact you

Peter Smith

Yeah.

been 'XX. we've consistent calendar that year a BEAD So is

XXXX, needs And have Opportunity and that, Rescue orders we'll are are we we of American we incremental ARPA, all. but Digital the that the then And are surprise. spent from end forecasting to positive be We we Act, December by well-positioned anything, that, a not update Fund. to seeing some know Rural get the when you

Operator

from comes Partners. Capital question of next Our ROTH Searle Scott

Scott Searle

Pete, maybe to in on Pasolink. dive

XX% if was up able current back think think range. in it, is with I'm to? Pasolink. or margins finding number in Pasolink hollow magnitude about the get in the I bring How being the $XX [indiscernible] more getting were target empty wondering Aviat. are that revenue address $XX you there? line gross million gross in can the that $XX the I with where million, you so the could margins or top you big to think call core the on thoughts line What million and of, quarter,

Peter Smith

Yeah.

that So Scott, drags gross the it's we get that to reducing And that a getting our $XXX goods each positive sold. view will so margins remains service then as one is now gross impact. the on we intact. to right well margin will and matter services a the working of the time field -- XX% and have on and that million cost less on as of transition less costs progressed quarter, impact are getting of and of And the on

good we about feel So that.

Scott Searle

Got front? you lot like from Is seems it you. an And follow-up in to that on time. done of more there at go this maybe a point rationalization OpEx guys have a standpoint,

Peter Smith

Yes.

look, line. enthusiasm we're our disappointed the So with on top

need more even to -- deal, net-net, engagements. of to and happy this with very, better some the with we we very operating -- respect months about still we that IRR of little about hint cost just We're the in remove both returns and Pasolink But because ramp ramp. X.Xx We do are happy way. the margin gross lag. the ability the I we be some give that's our -- we're And We we're and the circumspect on customer look, the the and color returns being can to issues X the we we're think enthusiastic the squeeze more -- out faster really our line. we'll be return, the the really, if would why about projecting. expense gave really get a our would pleased And about we

Scott Searle

Got two you. Last items.

bit I think Historically, Aviat tended margin of XX%. an gross that's be a anomaly. core at to

going or products areas wondering you that just expect bit that does in to the of opportunities, a then range come of contribute. XX give quarter? And of June I when specifically is and India timeline sustained forward could if router the the that and new So lastly, gigahertz. was a us little in some in you

David M. Gray

question Yeah. Hey margin the take I'll Scott, first.

year which yeah, around the So is hundred strong of than in we our are couple organic better at margins were initial XX.X%. very XX%, a And our year-to-date, gross quarter basis points right probably a We we'll for guidance modest 'XX. QX, well full do full in what ahead of pullback be on FY basis. were expect of a year but still the projecting we

So I resets of think going things And are be think should that standpoint. what I kind good the looking it forward. expectation from

Peter Smith

Okay.

So Scott in -- I with should jump let product question. the me

Hardware WTM, us X+X right, radio. about We the by the So Protection that market outdoor high on million. a gives that, high-capacity think $XX reliability, that increases addressable the

assurance our received opportunity think and right XX up network backhaul market, we the the is plus the gigahertz is good that reason And say, frequency opportunity, previously in have We more is We the private which announced our the $XXX of [indiscernible] million toolbox size leading distance is $XX for see the gigahertz. long will that's there that's We million. band all on unlicensed XX smaller initial the folks. X because market. orders Energy fixed also the stuff gigahertz available radio.We've now. protection wireless gigahertz bring our drive mentioned we with X now, it's multi-band in think a And That's we and and then margin. the competitor high link and

Operator

Litchfield Hills Theodore next comes O'Neill Research. of our And from question

Theodore O'Neill

seeing that Pasolink seeing Pete, the was expecting? and weren't any are -- you you are surprises products prepared that remarks mentioned and I there your are there between you cross-selling wondering, your you in

Peter Smith

business services to provide making So services kind of separated. take And where have footprint -- to the Aviat it we that's didn't in actually versa. keep see opportunity vice difficult and to

Pasolink some we're but I the pleasant slower-than-expected engagement of out show And but for radio. the put really it and I a what would FAS work us up that's bring -- network the software So financials, things by excited that. Aviat software of months HAS masked would we're to management and this customer enthused X our able [ our from say surprise on top and doesn't we're being ramp, to the about like Pasolink the in ] radios. about on And make the that's desire and

Theodore O'Neill

] you? India up diverse backhaul opened [ unique for the microwave India in that happen this did on And order, something Okay. opportunity

Peter Smith

simplicity proved think we've delivery. I we multiband to our vendor-agnostic features. did and they software was well And pieces, opportunity the we opportunity of incumbents the and when product, our performance with like ourselves We design microwave go received, was that and what technical as the feedback on feedback some do right? getting after and and the our the of now small E-band our got we're of the as some the the key an that the well of

seems going -- pave to we future it's we're toehold like the executed growth. So it on and way for the

Theodore O'Neill

current Okay. expense, And should the wondering quarter. M&A how I'm wondering if million selling I'm here. and for There's continues. in $X.X admin And trend it that on from of David,

David M. Gray

reduction go the here our no, transition have be that go as That forward. is also in -- we I out. wouldn't helped there'd services like certain costs help that tackle margins OpEx Pete the they're But on should some the straggling expect mentioned, would things. as of significantly some quarter-over-quarter from we costs down

more expect out costs to be getting going those forward. So we of

So that in working should favor. our be

Theodore O'Neill

they question. that But get. filings my place for money think company can And however wondering in was I S-X on Pete, Okay. if of every thoughts share you shelf your much putting filing last I could Aviat. should be

Peter Smith

Yeah.

we're -- years May investors capital. have we expires -- deployer ago I prudent been from three shelf So we've a X. that concerned that on know existing And of I about get think some an

present since to wanted would active position of just were in have we're just couple M&A But And EBITDA good some place trailing no shelf, corporate we were flexibility.And want our deal that to a currently out came is firepower. itself, questions the housekeeping the on in And shelf to pipeline some we investors capitalize up forma but opportunity XX-month filing that necessitate a comfortable put debt putting the pro in combined then I Xx EBITDA. us our clear, so be pulling about Xx to if using in it. down our a the or we

additional So was that you in have we SOFR what an significant be if basis to we then plus -- think use debt, the points. think question we basis some plus XXX be would firepower. the would And rate points and SOFR XXX it

Operator

And Tim our Savageaux Northland of Capital question from Markets. next comes

Timothy Savageaux

growth something to sort fiscal You mentioned I or X% for of right, organic you persist that maybe a Is similar -- rate similar not it and you into for growth that of now, bring to in for expect estimate, rate typical for the expect you little at somewhere you Aviat? think bit you for but I you in, your implying rate, mid- but same organic can Aviat organic would 'XX -- that that historic of look wonder in in around of number, high-single maybe QX. a likely brings more here if year. would the X% fiscal below growth digits estimate QX us a give least as type you're kind at growth terms

David M. Gray

Yeah.

the high to this I into point. this that in would would where we digits estimate 'XX. year not digits in We're at going carry think single mid-single end forward

Peter Smith

I'd and try We Look, really that's And it Africa. talked two -- other think X Tier that higher largely mid-single issue, revenue at down and and interest headwinds look, didn't X%.It the digits, to do another market put than our about for that. a going we better modeling had rates. and about basis, the we're on and data point bottom million at been of have we is currency $X.X Africa purposes, we add like course, if would was EBITDA. to emerging a have that And constant have X% is more currency would we

the on that. line we So despite beat consensus bottom the

the of number Pasolink our is would that's X currency that control when focus And we -- to issue the Aviat, African say but drive beyond we're So dam quicker. up I breaks. revenue the well-positioned

Timothy Savageaux

a Okay. takes And that of discussion to growth some organic and the follow rate. I with maybe up hopefully was that going with around puts on

And stronger tough X this mentioned bottoming, a drivers compare. be a could You it's imagine you mentioned sounds growth next get project, up a I broadband impacting like Africa, it's tailwind. if and finishing year. the year. maybe rural Tier although Then maybe again, to that that's that

through Pete, you mid-single-digit around just I those go wonder and of growth So that and puts it could some might if either rate what takes way. drive

Peter Smith

Yeah.

then to of Tier trials the the offset compare. very, in those.And to We get to way, if were significant the to And currency reversal we'd a us, across come about if think with This be a back RDOF the line, X that to disclose can't the customer, be rural some acknowledge that goal that's gotten a project in quiet the uplift of period share unit me we we've kicks multi-dwelling would respect about is that U.S. positive Tier X. meaningful is is project. in have XX% completion a to the that the question but the So is And broadband. tough we be good. so very going -- for Africa let a going

So is our rather future with reverse, we moderate, us. rates it be X to Pasolink we to that's Tier that for need Tier and our happy the -- ramped customer should bullish we as for up so the think going to new of the We see -- and we're is with the U.S. completion where that pretty the funnel lift the major X. the us projects and Africa need a put takes get puts We and U.S. and bottom see interest at currency could be.

Timothy Savageaux

my for good that's to 'XX? hope you that up end rate the last by for a And me. end to to would that's which target have place of fiscal And question, run the it is

Peter Smith

that's time answers a so think My not for hard crystal yes. answer give direct Yes, and clear being perspective. we -- that a in my I is you Yes. Yes. on usually rightfully from your

Timothy Savageaux

fashion. a crystal-clear in Received

Operator

back conference At Pete I'd showing [Operator closing no to further for Instructions] questions. I'm remarks. like this the time, turn actually to Smith

Peter Smith

Thanks, the XX certainly on reduction enthusiastic forward days. our everyone, We're track, we're business. We and remain products, are at us. you about looking and programs for about updating We our cost about think bullish to everyone. joining Thanks, future. customers the

Operator

This may concludes Thank now conference disconnect. for participating, and call. you today's you

Aviat Networks (AVNW) 1 May 242024 Q3 Earnings call transcript