AVNW - Earnings call transcript Q1 2025

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Operator

Good afternoon. Welcome to Aviat Networks' First Quarter Fiscal 2025 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. you. Thank

begin. may You

Andrew Fredrickson

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

You can at find presentation a in our of press release IR replay of and section our call. website today's www.aviatnetworks.com with the along updated investor

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

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

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

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

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

Peter Smith

Andrew, good and afternoon. Thanks,

year fiscal discuss of Networks' quarter first Let's XXXX. Aviat

minus million. of $X.XX. $XX.X non-GAAP adjusted EPS with The $X.X loss Non-GAAP revenue EBITDA XX%. margin million gross of of of Total

QX expected our and U.S. X timing to quarter, the Tier projects. call, the results our in CapEx be we with well the network team ongoing earnings fiscal In as previewed our from last private dealt international as in both weakness we As difficult. impact from challenges revenue

the the SEC distracted execution. faced which of the from completing throughout filings management priority yearend closing our quarter, and our audit Additionally, out

provide for the an X% principally declines. CapEx softness microwave contraction revenue microwave market driven the To on market research recent has global from been some of the quarter perspective This fourth [ quarter network ]. additional investors, The most DollarUp saw industry year-over-year mobile in consecutive based is declines. by overall

the thanks our market been funnel. of has private able gain network until broader avoid impact decline the recently, and to Aviat to our share business

share years. most its were in grown space in share seen of several to grow microwave quarter, X Aviat the weakness. offset in has in the recent of the we over in Aviat and North America that continued demand globally However, demand quarters unable we and outperform to Nonetheless, FCC past the have the filings Tier coordination market. the recent has

that all-outdoor are We the portfolio and solutions unmatched. radios e-band a have including believe on of we multiband best market, the

private lead solutions customers. and also new our indoor a We have is all split international offering state network in by for evidenced down as competitive win

and are segments serve. highly in the we penetrated strong Our solutions certain access

lower and operating and volume mix international business. profitability, to on our significantly managed expenses we from towards America were margins possible. North where revenue our away and by do Gross continue so impacted and Based by aggressively shift our

operating will We lower expect be QX. that our QX expenses than

year anticipate see Aviat. leverage higher half with the operating expenses some XXXX for for of operating back that X more reminder, stoppage will transition a associated we our currently of fiscal the next preparation over We services with As have NEC quarters. favorable the

management Pasolink software, to million radios $XX our million discussed customers Moving provide a that Last Aviat's installed Pasolink network be customers. updates. more today. will the There color upgrade customer product growing over investors, over believe of and ProVision this to across on we X we Plus XXX-plus quarter, opportunity product selling next to are years. To opportunity X

customers a usability significant over terms to. to they upgrade software represents prior of these Plus for Moving in had ProVision the features them access NMS and

For of and Aviat, and as an grow to the transaction. our to further services this Pasolink acquired value-add focus offering attractive our demonstrate part customers is opportunity software revenues on those products

its is the the American XRF an also Our realizing cross-selling an XRF purchase Aprisa router line, business. from we the of that which Aprisa the revenues acquisition. Southwest. company development in Aviat's was product This XG exciting notched for are private growth order first transaction, in will to mention acquired recently utility XG in I already

our As customers private XX% overlapping. network of approximately are a reminder, combined not

events with criticality America's such and recent as cyber attack having the private water networks trustworthy Additionally, largest hardware-free highlight secure the against of infrastructure providers. utility dependable

cycle networks, investment Just significant grid utility we expect there modernization. be as we a safety see will infrastructure public cycle upgrade long and in a in

this products As Midwestern are totaled shipping proof, our of by contracts already than million to $X more have in year. upgrades projects are Aprisa we selected These part their products X utilities expected X and as access that end network calendar begin with engaged the electric and of modernization.

has XRF the have report ahead. to We more tuck-in and are the quarters to in progressed date pleased to good with news how expect acquisition

lower plans of result margins. Lastly, to this to inventory Aviat orders and transfer efficiently that and we're gross will and transfer believe products overall manage manufacturing Japan Pasolink in from NEC's in-house manufacturer. products cost over quickly Pasolink more contract enable the relating to to We better time, beginning Aviat's in manufacturing and,

service of move our result an and Pasolink XX already to to building stock on we manufacturing million. to of anticipate have inventory continued of begun order this ensure million and customers, a As the products XX

next inventory be the subsequently months. We will expect down worked this that over XX

quarter. some back the additional of I Michael outlook, the turn coming on financial over our to Before for comment results will review to it

Michael Connaway

quarter good our detailed quarter found XXXX, the Pete, that discussed note be of results. I'll can the first and first and much, unless very year otherwise afternoon, of quarter fiscal fiscal some in and our you Please year comparisons all of first XXXX review XXXX are the fiscal financials press noted. release everyone. Thank between key

first year, total period For reported for the increase million, comprised same of $X.X America, revenues an XX% last million compared quarter, or $XX.X year-over-year. $XX.X of we which of softness as was with the period North large of the our Tier million total networks $XX a projects timing due quarter certain from in and to business. our last the revenue for of decrease XX% same X X.X% million, private year

the was the driven of This acquisition. the revenues addition from last growth primarily year. million increase the period International for $XX of XX% from $XX by revenue quarter, an was million same Pasolink or

X XX-month was trailing Our over book-to-bill the quarter. in

and decline GAAP gross principally a was compares Gross the quarter margins in year. items. to basis. GAAP margins XX.X% and prior This were XX.X% non-GAAP driven XX.X% by a our on the for The non-GAAP XX.X% on basis X in

First, away worked a in secondly, higher-margin quarter. lower And period from mix projects we efficiency a from in overall against volumes regions operating shift us had cost and standpoint. the

We begin expect to some ahead. of quarters these normalizing the factors in

expenses $X.X XRF share-based increase million, by of impact by exclude expenses, and Fourth prior and operating million, deal OpEx quarter increased Pasolink Non-GAAP Pasolink-related million, which as an charges, NEC. were R&D prepare we addition year with $X.X driven the costs. end million services increase restructuring the of increased from XRF-related to Pasolink, an operating of GAAP driven the and and compensation costs, of transition expenses R&D $XX were $XX.X

on still There and In the is out progresses. the first cost reviewed count current the head to we environment. earnings progress with year analyzed are aligned ensure improved demand and and expect here, results to work quarter, expenses we that continued and we show as ongoing

minus $X.X on non-GAAP million a on basis. Fourth basis quarter operating and income was minus a $XX.X million GAAP

was tax quarter benefit $X.X first provision million. The

As payments million of NOLs $XXX operating the that generate minimal company for the will cash future. value reminder, a to foreseeable losses has net tax or shareholder via continue approximately

for margins quarter was non-GAAP the excludes $XX.X diluted in was was first This impacted elevated noncash provision Fourth basis. other related came expenses Adjusted minus and lower in share non-GAAP EBITDA share-based and million. per on minus $X.XX quarter. restructuring $X.X net a was charges, at the $XX.X First by the quarter net quarter minus nonrecurring tax gross fully OpEx M&A the earnings income minus income, and which million million. compensation, GAAP and

to on balance the sheet. Moving

cash the and our quarter. the loan first pulled our down the earnings bringing marketable XRF were end The we of purchase GAAP was pretax quarter, end primarily the at of the by outstanding securities driven revolving In Our debt of quarter. and quarter consumption our million $XX cash facility, in at million. of negative the $XX to

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

Peter Smith

Michael. Thanks,

results of below combined based our Tier QX The market X first and XXXX. and fiscal create we'll see our that back quarter stronger remain weakness, half view challenging. to current We year optimistic the expectations. results of execution project on was timing

on most believing year network $XX XG recent see in Aviat's the million. million $XXX guidance range $XX to to as to million Based million range in and of company's in to $XXX the Revenue XXXX We global fiscal we're EBITDA our business adjusted results, follows. be to adjusting the reasons of opportunity. continue be and private the

customers the are and and our having conversations Our remain with encouraging. backlog funnel we're attractive,

change. to Our this a no bookings we over growing demand Aviat gained down last despite and and has in are market, several reason quarter. exceeded the quarters first of that revenues the share will see believe

operator, for up that, With open questions. let's

Operator

to going [Operator the Street. come of Instructions] question from line Schmidt Lake is with Our first Jaeson

Jaeson Schmidt

want the you but snapback so, us start help think quarter? Obviously, in First about of guess, December how soft And can more the big margin. it in have a to with September, can I gross trajectory?

Michael Connaway

Yes, sure.

QX about talk first. Let's

solid in So forward. the would going basis our non-GAAP the out to moving But gross were in margins XX.X%. first Pasolink margins We're that break Pasolink say on we a not quarter. were separately

So margins for really was mix-related. the the there in erosion and of core it, business, in X were the mostly majority reasons

revenues from us perspective. the which profit by at lower business, Americas our on year-over-year were typically trades a And profitability a rate, most gross basis, revenue those was mixes That a and augmented First, had APAC, quarter. gross down one. of which replaced highest

in with some expect to customers, dealing attenuate also we we're U.S. through and Second, the that we APAC first back which the half. year this XQ our hardware X quarter, on margin And principally revenues, we effects also in and will in had in effect outcome, a large the weaker the of then in move think software normalize lastly, XXXX. We as timing

So in we the year, improving. certainly terms see rest the things those of X of

versus margins, a the we'll and QX, then gross and So profit QX QX on of margin. bit in will ramp, a leverage of cost revenues period QX little component inside as the terms profit of gross be nice step-up get

rate a So QX, in back margins QX, we to see more getting normalized QX.

Jaeson Schmidt

year full I And follow-up. just I driver the primary seems know Okay. just December through whole I the outlook. a starts ramp September given had mean mean, like then, expected then as pretty it's I sizable adjustment That's September And a really you be June. the that downward going the really it is helpful. mean, sequentially previously. for to to

Just you for tracking And the color kind provide curious if additional orders quarter? how the what on kind gives been of plus could then December relatedly, month this confidence. have first of you some

Michael Connaway

give a I'll of couple Yes. data points.

maybe just guidance first. So the

by little the So midpoint primarily revenue spending of bit guidance XX Tier really in earnings driven by rerate is half a is a XX. expectations, From about market we half the softness. standpoint, just the by other QX, a about revenue X the reduction driven by -- lowered of and of then

kind of guidance So the that's piece.

down guidance of taking retrogression the is of volumes. On all was And the driven then kind side, the XQ. by earnings remainder most half the of

and relates to orders, up shaping X the a a in greater be And even first had book-to-bill of nice we QX, first QX we've then than stronger had to month. quarter. As than is it the

So better. the trajectory order is

Peter Smith

on Jaeson, hold If the December record things quarter. bookings the just have Yes. we comment order to were trajectory. would in together,

and to back, XX-K that the encouraged. up see in disappointment and So on that had quarter impact are demand that we the we and own to have September. bouncing we in ended us look, want the the we late But

Operator

is ROTH from come the going with question of next Capital Searle Partners. Our line to Scott

Scott Searle

on follow-up a question. Pete, Mike, just Jaeson's maybe

guidance, to kind on it back. $XXX X Could over million it you If are the little the orders us in bit, at you of like talk year. sounds look coming million through quarters fiscal average remaining $XXX your a implies

as like It Maybe private APAC there's how India weak within maybe was by pipeline some that. the in building sounds was geography, networks well. again,

a Just or hands confidence recovery back. sustaining there around Why strong that June? December March such in how snapback in that quarter trying get really and in the to comes of level is and the

Peter Smith

was in owners our has see Look, over building than bookings, full on Pasolink the sequentially. of the higher we just business our X.XX. startup. X, we this quarter And let's past but concluded, And say, X look will we basis, it at be a book-to-bill that. demand the the had we quarters year we been, When

-- that persisting few we the more out chute, mean, we a run but So increases quarter-over-quarter. of didn't I steady see we see seen we we've up, hit at started quarters. least a And home

So helping us. that is

On private funnels our side, good, East the network eastern the U.S. in are

West improving. in are the funnels Our

So we're given on disappointed why -- are that's September, we bullish We're kind of the we for Scott. in demand. in basis where ended bullish

Scott Searle

you. maybe Got anticipated starting there sounds kind we're are build. No, to point originally this gross like visibility business where margins, see Is going a to range? helpful. continues you levels Are Pasolink, nicely of starting you your should when It there enter, getting to accretive that you that comments acquired you break very enough to to of And on start be that, follow-up original line this that activity Pete. that on in million -- with now with expectations? your guess, better to hit on the I $XX-plus type

Peter Smith

Yes.

going could get will it we be we more accretive to $XXX we this we think was So bought forward. it quarter, it, million. accretive thought When and it

a So 'XX the that by $XX that confident a FY would at rate. getting X, be, increasingly that run will we quarter rate. exit We're divided million

quarters, the we've in But where fiscal investment. the has and to I Michael safety quarters and come utility what little understand been we get out with underperformed right? this discuss public maybe And that the Andrew, more But we'll core. We on Tier X. which encouraged, we in we'll -- had we And are talking timing us. go the see forward So now, we from the business, reversing U.S. we behind highway are year. will project with -- we bit X as a think want returns and X issues

Scott Searle

in the X industry, Great. if wondering India, think, Very thoughts follow-ups. demand last front. helpful. within I'm MDU thoughts you there, then terms some that updated opportunities. been what And if comments you're Any of there's or had I could, the just seeing And on maybe profile? chatter I the any of about

Peter Smith

Okay.

is so conference, ROTH we give before to my India growth -- traction. area. So And update. we still continued is to go e-band India a India the the lumpy. ROTH And go see having as plan It's an shows, when solution can our the to we

to India is But demand good. indeed where from respect is quarter-to-quarter. things still are varies environment with It

Our e-band and multiband solutions are good.

X the and going the management And X at about of to incumbent chance then Pasolink in what prepared -- biggest talked India, operators that probably I is months our we that's would network X we Plus in software also Pasolink the ProVision the X be say, for And the a us. to from remarks, platform. think

we new earnings there, in that. -- to significant. may certainly are that be position but not we may X, will have And serve with been that to we because on up in rolling MDUs. then a be call, trial will chosen, will you And MDU, we said broadcast -- to U.S. out get Tier opportunity a X is be I new, And some is be should an respect it pole their It but out bring solution MDU this the this of a the we something widely. the business reason that's certain don't

Operator

Theodore with question to is next O'Neill line going Research. come the from of Hills Our Litchfield

Theodore O'Neill

in whether got lot band go it's about fixed suburban, about it in sort that if what opportunity products a Okay. that, and serve what access. lay in of I thing? mean that, where sort wireless industry wondering urban, the of could in Pete, it over you've markets a that talk was you I of bit is, the chatter there's the

Peter Smith

Okay.

needs. growth So sense There's there made, fixed When access you're is connections. backhaul XG right, that connections wireless a access is of a wireless for growing favorable driver networks. are those increasing significant it's fixed in

connections expected data. about The annually And of emerging user a in data The access per gigabits month. The consumption really consumption actually economies. wireless XXX grow by And data data wireless important is to it's month. here's consumption. fixed gigabits access the driven and that's bit average are XX%, little fixed average XX per mobile more is

And way environments, and certainly attractive kind rural in do just the density suburban it's to the to the an consumption. of make

It link X Scott's in used this connectivity acronym. We solutions. a that's it and X-letter Tier more then with not backhaul, there, to is, -- wireless more unit. back something stands win But be and Aviat get access used And to at And what is bandwidth what or MDU, MDU creates in to about happens question multi-dwelling not right? the the whether to putting it or us. It's called may it's apartments. And MDU may operators side, projects. wireless looking MDU fixed are the good the for creates wins for

Theodore O'Neill

financial and expect you? my for in the to do be merger And of don't the anything Okay. that you other the upcoming in like million, here, quarter $X.X expense question acquisition on quarter,

Michael Connaway

will No, well we normalized less be will levels. an to those and But as QX. attenuate -- we the down point, year. QX should And something more unless move incremental That be than from then through QX will QX do M&A significantly at as absolutely this standpoint.

Operator

Capital going Our to line is come the next Northland question Markets. of from Savageaux Tim with

Timothy Savageaux

A couple of questions.

anymore, to in June if think was the I wonder First, QX said you you you I break versus it I out could guess -- up weren't directly if quarter. Pasolink but going say fiscal

Michael Connaway

up sequentially and revenues about gross same were little profitability was From a and bit. revenue profitability the standpoint, a gross

Timothy Savageaux

were Revenues what? I of sorry going answer miss I'm to I but am, think I'm there. that -- end the

Michael Connaway

same, bit. up little a about bit. Up a is Gross little is the revenue profit

Timothy Savageaux

weakness, QX, in similar if whether the or if look last or you X Tier categorize a at at parts we sense primary via, state performance that quarter that moving around. million so, and last pushouts, it's X year. fiscal you U.S. mentioned, wonder can of in a pretty up of $XX look think, I those of factors But how give are us Great. the Okay, you kind the kind And I little. and

Michael Connaway

you're of I QX U.S. then sequential versus X effect bit and sequentially. a little roughly leg the the confidence margins right, and better back stool pushouts profit in the in backlog the Tier into terms getting about Yes. mix comes in half as visibility of and more pushouts, half another is mean gross

Timothy Savageaux

that's which is, revenue, was looking Okay. there of know the -- don't factors to I Pete, record the any a headed or U.S. kind extent, I are I factors. Tier bookings the that? but either state in booking quarter, land in the back a you in where of the projects you next, Great. it mentioned bit? pushes little couple coming you're principally But is X for And -- if Or or -- internationally that's a state driving other think

Peter Smith

the private already I from would in design, frequencies internationally perspective. our that's network favorable a or finalizing Tier The looks finalizing X say bookings. quarter-over-quarter not any pushout or

to incrementally wouldn't that So our bookings. add

America So North we still with environment X. projects we I do in our are we see Tier a And U.S. Xs lull, and bookings as strong after say a see would growing. Tier international between

Timothy Savageaux

the extent high the which now. But going kind to wonder can at what which level, which station base be where is, data your of points, is And of regard recently that's sort if just in I of good. that discuss I'm way appears densification, most Okay, you is a business of ways tracks -- might relative of certain even on in starting installation. the been the know operators. I maybe spending sure the case now, we've are to to cycle expect not that seeing whether which network big not higher for that's that's to I Aviat? business among haven't certainly wireless And down your And to bad. lag trends wireless turn that actually with the I up kind side, impact finish, guess, line would you level to an on the I most wanted

Peter Smith

Yes.

we're how this through by the of cycle. think the right? is before the come So private was networks. part we've, late of part come, So this I impacted like half how CapEx -- quarter, And cycle, second cycle, not we this other is it are you're

taken now And So go we didn't have we contraction. our down.

exposure think And up the I bouncing for we to there us. not having Pasolink growing back and slowly are the back have advantage is transaction, customers we move in the that have

maybe Pasolink back. V-shaped driving we a couple a but So absent of let's those to rapid of transaction, the have it, and exposure or use call see a rather of quarters as word, Xs economist down, that an Tier favorable recovery, we'd the bounce being about,

would the private have Xs is networks and internationally, say So favorable. Pasolink Tier U.S. issue. I is by we steady, driven And

Operator

Pete would I like conference now Smith remarks. to you. to the back closing hand Thank for

Peter Smith

in. Thanks listening to our investors for

and We respect see XX Thanks, first the days. challenging updating are bookings. looking working late on to put behind positive with forward in We're us. quarter the We everyone. to you signs XX-K to progress

Operator

This concludes today's conference call. Thank you for participating.

may You disconnect. now

Aviat Networks (AVNW) 5 Nov 242025 Q1 Earnings call transcript