May 13, 2020

Aviat Networks Announces Fiscal 2020 Third Quarter and Nine

Bizclik Editor
17 min
ALT

AUSTIN, Texas, May 12, 2020 /PRNewswire/ -- Aviat Networks, Inc. (NASDAQ: AVNW), ("Aviat Networks," "Aviat," or the "Company"), the leading expert in wireless transport solutions, today reported financial results for its fiscal 2020 third quarter and nine months ended April 3, 2020.

Pete Smith, Aviat Networks' President and Chief Executive Officer stated, "The COVID-19 pandemic has been unlike anything we have experienced before on a global basis. All of us at Aviat want to extend our appreciation to the first responders, healthcare professionals and all who have been on the frontline protecting our safety. I also want to extend my personal appreciation to the Aviat team, our suppliers and customers. As part of the Critical Workforce Infrastructure, it has been essential that we maintain our operations and deliver for customers; and we have."

Smith continued, "Third quarter revenue was up 13.6%, gross margins grew by 570 basis points and Adjusted EBITDA improved by $4 million compared to the fiscal 2019 third quarter. We continue to drive meaningful growth in North America, which was up 30% and while our International revenue declined in the third quarter, the Latin America and APAC regions were up, and the declines in other reported regions lessened. Our balance sheet remains strong and our cash position improved over $1 million sequentially and by $7.3 million since the fiscal year began. Overall, when you look at our progress throughout the full fiscal year, with everything we have faced including contractor/manufacturer issues, management changes and the COVID-19 pandemic, we are pleased with our results and market position. We remain on track to meet our guidance and deliver between $11 and $12 million of Adjusted EBITDA this fiscal year, with our eyes set on both top- and bottom-line growth next fiscal year. There are a lot of changes underway now and more to come that should open up new revenue streams and drive profitability which in turn, should lead to increased shareholder value."

Fiscal 2020 Third Quarter and Nine-Month Comparisons

The Company reported total revenues of $61.4 million for its fiscal 2020 third quarter, compared to $54.0 million in the comparable fiscal 2019 period, an increase of $7.3 million or 13.6%. North America revenue of $37.3 million increased by $8.7 million or 30.3%, compared to $28.6 million in the comparable fiscal 2019 period. International revenue of $24.1 million declined by $1.3 million or 5.2%, compared to $25.5 million in the comparable fiscal 2019 period. The decline in international revenue was anticipated given the current spending environment in Africa, as well as high order volumes in the APAC region in the prior fiscal year period. However, the Company reported a $1.9 million or 17.6% increase in revenue in the Latin America and Asia Pacific regions in the comparable fiscal third quarter period.

For the nine months ended April 3, 2020, the Company reported total revenues of $176.0 million, compared to $179.6 million in the comparable fiscal 2019 period, a decline of $3.6 million or 2.0%. North America revenue of $113.5 million increased by $19.8 million or 21.2%, compared to $93.7 million in the comparable fiscal 2019 period. International revenue of $62.5 million for the fiscal 2020 nine months ended declined by $23.5 million or 27.3%, compared to $86.0 million in the comparable fiscal 2019 period.

In the fiscal 2020 third quarter, the Company reported GAAP gross margin of 35.8% and non-GAAP gross margin of 35.9%. This compares to GAAP gross margin of 30.1% and non-GAAP gross margin of 30.2% in the comparable fiscal 2019 period, an increase of 570 basis points for both, respectively.

For the nine months ended April 3, 2020, the Company reported GAAP gross margin of 35.7% and non-GAAP gross margin of 35.8%. This compares to GAAP gross margin of 31.5% and non-GAAP gross margin of 31.6% in the comparable fiscal 2019 period, an improvement of 420 basis points for both, respectively.

GAAP total operating expenses for the fiscal 2020 third quarter were $20.7 million, compared to $18.8 million in the comparable fiscal 2019 period, an increase of $2.0 million or 10.5%. Non-GAAP total operating expenses, excluding the impact of restructuring charges and share-based compensation, for the fiscal 2020 third quarter were $19.7 million, compared to $17.9 million in the comparable fiscal 2019 period, an increase of $1.8 million or 10.1%. Non-GAAP operating expenses increased primarily related to payroll costs related to an extra calendar week in the third quarter of 2020, higher variable compensation and other legal-related costs, compared to the comparable fiscal 2019 period.

The Company reported GAAP total operating expenses for the fiscal 2020 nine-month period of $61.6 million, compared to $57.8 million in the comparable fiscal 2019 period, an increase of $3.8 million or 6.5%. On a non-GAAP basis, excluding the impact of restructuring charges and share-based compensation, total operating expenses for the fiscal 2020 nine-month period were $58.2 million, compared to $55.3 million in the fiscal 2019 period, an increase of $3.0 million or 5.4%. Non-GAAP operating expenses increased primarily related to payroll costs related to an extra calendar week in the nine months of fiscal 2020, higher variable compensation and other legal-related costs, compared to the comparable fiscal 2019 period.

The Company reported GAAP operating income of $1.2 million for the fiscal 2020 third quarter, compared to a GAAP operating loss of $(2.5) million in the comparable fiscal 2019 period, a $3.7 million year-over-year improvement. On a non-GAAP basis, the Company reported operating income of $2.4 million for the fiscal 2020 third quarter, compared to a non-GAAP operating loss of $(1.6) million in the comparable fiscal 2019 period, a $3.9 million year-over-year improvement.

For the fiscal 2020 nine-month period, the Company reported $1.3 million in GAAP operating income, compared to a GAAP operating loss of $(1.1) million in the comparable fiscal 2019 period, a $2.4 million year-over-year improvement. On a non-GAAP basis, the Company reported operating income of $4.7 million for the fiscal 2020 nine-month period, compared to $1.5 million in the comparable fiscal 2019 period, a $3.3 million year-over-year improvement.

The Company reported GAAP net income of $0.7 million in the fiscal 2020 third quarter or GAAP net income per share of $0.13. This compared to a GAAP net income of $4.3 million or GAAP net income per share of $0.78 in the fiscal 2019 third quarter. On a non-GAAP basis, the Company reported net income of $2.2 million or a non-GAAP net income per share of $0.39, compared to a non-GAAP net loss of $(1.8) million or non-GAAP net loss per share of $(0.33) in the comparable fiscal 2019 period.

The Company reported GAAP net loss of $(0.9) million for the fiscal 2020 nine-month period or a GAAP net loss per share of $(0.16). This compared to GAAP net income of $5.9 million or a GAAP net income per share of $1.05 in the comparable fiscal 2019 period. On a non-GAAP basis, the Company reported net income of $4.1 million or a net income per share of $0.76, compared to non-GAAP net income of $0.6 million or $0.11 per share in the comparable fiscal 2019 period.

Adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") for the fiscal 2020 third quarter was $3.5 million, compared to a loss of $(0.5) million in the comparable fiscal 2019 period, a year-over-year improvement of approximately $4.0 million. For the nine months ended April 3, 2020, the Company reported Adjusted EBITDA of $8.0 million, compared to $4.9 million in the comparable fiscal 2019 period, a year-over-year improvement of approximately $3.1 million.

The Company reported cash and cash equivalents as of April 3, 2020 of $39.2 million, compared to $31.9 million as of June 28, 2019, an increase of $7.3 million. Sequentially, cash and cash equivalents increased by approximately $1.1 million, compared to the fiscal 2020 second quarter ended December 27, 2019.

Conference Call Details
Aviat Networks will host a conference call at 4:30 p.m. Eastern Time (ET) today, May 12, 2020, to discuss its financial results for the fiscal 2020 third quarter. Speaking from management will be Pete Smith, President and Chief Executive Officer and Eric Chang, Chief Financial Officer. Following management's remarks, there will be a question and answer period.

To listen to the live conference call, please dial toll-free (US/CAN) 866-465-7577 or toll-free (INTL) 786-815-8431, conference ID: 8959516. We ask that you dial-in approximately 10 minutes prior to the start time. Additionally, participants are invited to listen via webcast, which will be broadcasted live and via replay approximately two hours after the call is completed at https://investors.aviatnetworks.com/events-and-presentations/events.

About Aviat Networks            
Aviat Networks, Inc. is the leading expert in wireless transport solutions and works to provide dependable products, services and support to its customers. With more than one million systems sold into 170 countries worldwide, communications service providers and private network operators including state/local government, utility, federal government and defense organizations trust Aviat with their critical applications. Coupled with a long history of microwave innovations, Aviat provides a comprehensive suite of localized professional and support services enabling customers to drastically simplify both their networks and their lives. For more than 70 years, the experts at Aviat have delivered high-performance products, simplified operations, and the best overall customer experience. Aviat Networks is headquartered in Austin, Texas. For more information, visit www.aviatnetworks.com or connect with Aviat Networks on TwitterFacebook and LinkedIn.

Forward-Looking Statements
The information contained in this document includes forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933 including Aviat's beliefs and expectations regarding business conditions, new product solutions, customer positioning, revenue, future orders, bookings, new contracts, cost structure, operating income, profitability in fiscal 2020, process improvements, realignment plans and review of strategic alternatives. All statements, trend analyses and other information contained herein regarding the foregoing beliefs and expectations, as well as about the markets for the services and products of Aviat and trends in revenue, and other statements identified by the use of forward-looking terminology, including "anticipate," "believe," "plan," "estimate," "expect," "goal," "will," "see," "continue," "delivering," "view," and "intend," or the negative of these terms or other similar expressions, constitute forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, forward-looking statements are based on estimates reflecting the current beliefs, expectations and assumptions of the senior management of Aviat regarding the future of its business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Such forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should therefore be considered in light of various important factors, including those set forth in this document. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include the following:

  • the impact of COVID-19 on Aviat's business, operations and cash flows;
  • continued price and margin erosion as a result of increased competition in the microwave transmission industry;
  • the impact of the volume, timing and customer, product and geographic mix of our product orders;
  • Aviat's ability to meet financial covenant requirements which could impact, among other things, its liquidity;
  • the timing of Aviat's receipt of payment for products or services from its customers;
  • Aviat's ability to meet projected new product development dates or anticipated cost reductions of new products;
  • Aviat's suppliers' inability to perform and deliver on time as a result of their financial condition, component shortages, or other supply chain constraints;
  • customer acceptance of new products;
  • the ability of Aviat's subcontractors to timely perform;
  • continued weakness in the global economy affecting customer spending;
  • retention of Aviat's key personnel;
  • Aviat's ability to manage and maintain key customer relationships;
  • uncertain economic conditions in the telecommunications sector combined with operator and supplier consolidation;
  • Aviat's failure to protect its intellectual property rights or defend against intellectual property infringement claims by others;
  • the results of restructuring efforts;
  • the ability to preserve and use Aviat's net operating loss carryforwards;
  • the effects of currency and interest rate risks;
  • the effects of current and future government regulations, including the effects of current restrictions on various commercial and economic activities in response to the COVID-19 pandemic;
  • general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States and other countries where we conduct business;
  • the conduct of unethical business practices in developing countries;
  • the impact of political turmoil in countries where Aviat has significant business; and
  • Aviat's ability to implement its stock repurchase program or that it will enhance long-term stockholder value.

For more information regarding the risks and uncertainties for Aviat's business, see "Risk Factors" in Aviat's Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on August 27, 2019 as well as other reports filed by Aviat with the SEC from time to time. Aviat undertakes no obligation to update publicly any forward-looking statement, whether written or oral, for any reason, except as required by law, even as new information becomes available or other events occur in the future.

Investor Relations:
Glenn Wiener / Tel: 212-786-6011 / Email: [email protected]
Keith Fanneron / Tel: 408-841-7128 / Email: [email protected]

 

Table 1

AVIAT NETWORKS, INC.

Fiscal Year 2020 Third Quarter Summary

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



Three Months Ended


Nine Months Ended

(In thousands, except per share amounts)

April 3,
 2020


March 29,
 2019


April 3,
 2020


March 29,
 2019

Revenues:








Revenue from product sales

$

40,930



$

34,615



$

111,676



$

115,696


Revenue from services

20,449



19,422



64,314



63,933


Total revenues

61,379



54,037



175,990



179,629


Cost of revenues:








Cost of product sales

24,676



23,712



68,466



76,670


Cost of services

14,742



14,070



44,688



46,289


Total cost of revenues

39,418



37,782



113,154



122,959


Gross margin

21,961



16,255



62,836



56,670


Operating expenses:








Research and development expenses

4,875



5,350



15,069



15,603


Selling and administrative expenses

15,233



13,408



44,334



41,405


Restructuring charges

617





2,175



796


Total operating expenses

20,725



18,758



61,578



57,804


Operating income (loss)

1,236



(2,503)



1,258



(1,134)


Interest income

112



73



318



167


Interest expense

(19)



(7)



(23)



(88)


Other income, net



(1)





(1)


Income (loss) before income taxes

1,329



(2,438)



1,553



(1,056)


Provision for (benefit from) income taxes

598



(6,777)



2,439



(6,955)


Net income (loss)

$

731



$

4,339



$

(886)



$

5,899










Net income (loss) per share of common stock outstanding:








Basic

$

0.14



$

0.81



$

(0.16)



$

1.10


Diluted

$

0.13



$

0.78



$

(0.16)



$

1.05


Weighted-average shares outstanding:








Basic

5,395



5,381



5,390



5,382


Diluted

5,457



5,577



5,390



5,634



 

 

Table 2

AVIAT NETWORKS, INC.

Fiscal Year 2020 Third Quarter Summary

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands)

April 3,
 2020


June 28,
 2019

ASSETS




Current Assets:




Cash and cash equivalents

$

39,208



$

31,946


Accounts receivable, net

48,148



51,937


Unbilled receivables

23,420



27,780


Inventories

14,190



8,573


Customer service inventories

1,264



936


Other current assets

11,164



4,825


Total current assets

137,394



125,997


Property, plant and equipment, net

17,602



17,255


Deferred income taxes

13,780



13,864


Right of use assets

4,608




Other assets

6,377



12,077


Total long-term assets

42,367



43,196


TOTAL ASSETS

$

179,761



$

169,193


LIABILITIES AND EQUITY




Current Liabilities:




Short-term debt

$

9,000



$

9,000


Accounts payable

38,434



35,605


Accrued expenses

23,170



22,555


Short-term lease liabilities

2,396




Advance payments and unearned revenue

21,485



13,962


Restructuring liabilities

1,538



1,089


Total current liabilities

96,023



82,211


Unearned revenue

8,210



9,662


Long-term lease liabilities

2,493




Other long-term liabilities

620



820


Reserve for uncertain tax positions

4,654



3,606


Deferred income taxes

818



1,378


Total liabilities

112,818



97,677


Commitments and contingencies




Equity:




Preferred stock




Common stock

54



54


Additional paid-in-capital

813,986



815,196


Accumulated deficit

(731,884)



(730,998)


Accumulated other comprehensive loss

(15,213)



(12,736)


Total equity

66,943



71,516


TOTAL LIABILITIES AND EQUITY

$

179,761



$

169,193


 

AVIAT NETWORKS, INC.

Fiscal Year 2020 Third Quarter Summary

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE

To supplement the consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), we provide additional measures of gross margin, research and development expenses, selling and administrative expenses, operating income (loss), provision for or benefit from income taxes, net income, diluted net income per share, and adjusted income before interest, tax, depreciation and amortization (Adjusted EBITDA), adjusted to exclude certain costs, charges, gains and losses, as set forth below. We believe that these non-GAAP financial measures, when considered together with the GAAP financial measures provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionate positive or negative impact on results in any particular period. We also believe these non-GAAP measures enhance the ability of investors to analyze trends in our business and to understand our performance. In addition, we may utilize non-GAAP financial measures as a guide in our forecasting, budgeting and long-term planning process and to measure operating performance for some management compensation purposes. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP follow.

 

 

Table 3

AVIAT NETWORKS, INC.

Fiscal Year 2020 Third Quarter Summary

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1)

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended


Nine Months Ended


April 3,
2020


% of
Revenue


March 29,
2019


% of
Revenue


April 3,
2020


% of
Revenue


March 29,
2019


% of
Revenue


(In thousands, except percentages and per share amounts)

GAAP gross margin

$

21,961



35.8

%


$

16,255



30.1

%


$

62,836



35.7

%


$

56,670



31.5

%

WTM inventory write-down recovery













(90)




Share-based compensation

53





44





149





144




Non-GAAP gross margin

22,014



35.9

%


16,299



30.2

%


62,985



35.8

%


56,724



31.6

%

















GAAP research and development expenses

$

4,875



7.9

%


$

5,350



9.9

%


$

15,069



8.6

%


$

15,603



8.7

%

Share-based compensation

(33)





(42)





(92)





(123)




Non-GAAP research and development
expenses

4,842



7.9

%


5,308



9.8

%


14,977



8.5

%


15,480



8.6

%

















GAAP selling and administrative expenses

$

15,233



24.8

%


$

13,408



24.8

%


$

44,334



25.2

%


$

41,405



23.1

%

Share-based compensation

(421)





(372)





(1,074)





(1,129)




Strategic alternative costs





(491)









(491)




Non-GAAP selling and administrative
expenses

14,812



24.1

%


12,545



23.2

%


43,260



24.6

%


39,785



22.1

%

















GAAP operating income (loss)

$

1,236



2.0

%


$

(2,503)



(4.6)

%


$

1,258



0.7

%


$

(1,134)



(0.6)

%

WTM inventory write-down recovery













(90)




Share-based compensation

507





458





1,315





1,396




Strategic alternative costs





491









491




Restructuring charges

617









2,175





796




Non-GAAP operating income (loss)

2,360



3.8

%


(1,554)



(2.9)

%


4,748



2.7

%


1,459



0.8

%

















GAAP income tax provision (benefit)

$

598



1.0

%


$

(6,777)



(12.5)

%


$

2,439



1.4

%


$

(6,955)



(3.9)

%

Tax receivable from Department of Federal
    Revenue of Brazil













1,646




Release of valuation allowance





7,054









7,054




Adjustment to reflect pro forma tax rate

(298)





23





(1,539)





(845)




Non-GAAP income tax provision

300



0.5

%


300



0.6

%


900



0.5

%


900



0.5

%

















GAAP net income (loss)

$

731



1.2

%


$

4,339



8.0

%


$

(886)



(0.5)

%


$

5,899



3.3

%

Share-based compensation

507





458





1,315





1,396




Strategic alternative costs





491









491




Restructuring charges

617









2,175





796




WTM inventory write-down recovery













(90)




Release of valuation allowance





(7,054)









(7,054)




Tax receivable from Department of Federal
   Revenue of Brazil













(1,646)




Adjustment to reflect pro forma tax rate

298





(23)





1,539





845




Non-GAAP net income (loss)

$

2,153



3.5

%


$

(1,789)



(3.3)

%


$

4,143



2.4

%


$

637



0.4

%

















Diluted net income (loss) per share:

GAAP

$

0.13





$

0.78





$

(0.16)





$

1.05




Non-GAAP

$

0.39





$

(0.33)





$

0.76





$

0.11




















Shares used in computing diluted net income (loss) per share

GAAP

5,457





5,577





5,390





5,634




Non-GAAP

5,457





5,379





5,478





5,634




















Adjusted EBITDA:
















GAAP net income (loss)

$

731



1.2

%


$

4,339



8.0

%


$

(886)



(0.5)

%


$

5,899



3.3

%

Depreciation and amortization of property,
     plant and equipment

1,111





1,024





3,226





3,408




Interest income, net

(93)





(66)





(295)





(79)




Share-based compensation

507





458





1,315





1,396




Strategic alternative costs





491









491




Restructuring charges

617









2,175





796




WTM inventory write-down recovery













(90)




Provision for (benefit from) for income taxes

598





(6,777)





2,439





(6,955)




Adjusted EBITDA

$

3,471



5.7

%


$

(531)



(1.0)

%


$

7,974



4.5

%


$

4,866



2.7

%

 







(1)

The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by us. Our non-GAAP net income (loss) excluded share-based compensation, and other non-recurring charges (recovery). Adjusted EBITDA was determined by excluding depreciation and amortization on property, plant and equipment, interest, provision for or benefit from income taxes, and non-GAAP pre-tax adjustments, as set forth above, from the GAAP net income (loss). We believe that the presentation of these non-GAAP items provides meaningful supplemental information to investors, when viewed in conjunction with, and not in lieu of, our GAAP results. However, the non-GAAP financial measures have not been prepared under a comprehensive set of accounting rules or principles. Non-GAAP information should not be considered in isolation from, or as a substitute for, information prepared in accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAP financial measures.


 

 

Table 4

AVIAT NETWORKS, INC.

Fiscal Year 2020 Third Quarter Summary

SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA

(Unaudited)



Three Months Ended


Nine Months Ended


April 3,
 2020


March 29,
 2019


April 3,
 2020


March 29,
 2019


(In thousands)

North America

$

37,250



$

28,581



$

113,489



$

93,660


International:








Africa and the Middle East

9,230



11,079



28,679



39,058


Europe and Russia

1,903



3,326



7,728



10,271


Latin America and Asia Pacific

12,996



11,051



26,094



36,640



24,129



25,456



62,501



85,969


Total revenue

$

61,379



$

54,037



$

175,990



$

179,629


 

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SOURCE Aviat Networks, Inc.

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