Aviat Networks, Inc. (AVNW) on Q4 2022 Results - Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Aviat Networks' Fourth Quarter Fiscal Year 2022 Earnings Results Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host, Andrew Fredrickson. Please go ahead. Andrew Fredrickson: Thank you, and welcome to Aviat Networks' fourth quarter fiscal 2022 results conference call and webcast. You can find our Form 10-K, press release and updated investor presentation in the IR section of our website at www.aviatnetworks.com, along with a replay of today's call in approximately 2 hours. With me today are Pete Smith, Aviat's President and CEO, who will begin with opening remarks on the company's fiscal fourth quarter, followed by David Gray, our CFO, who will review the financial results of our quarter and fiscal 2022. Pete will then provide closing remarks on Aviat's strategy and outlook, followed by Q&A. As a reminder, during today's call and webcast, management may make forward-looking statements regarding Aviat's business, including, but not limited to, statements relating to financial projections, business drivers, new products and expansions, the impact of COVID-19 and the economic activity in different regions. These and other forward-looking statements reflect the company's opinions only as of the date of this call and webcast and involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. Additional information on factors that could cause actual results to differ materially from the statements made on this call can be found in our annual report on Form 10-K filed with the SEC. The company undertakes no obligation to revise or make public any revision of these forward-looking statements in light of new information or future events. Additionally, during today’s call and webcast, management will reference both GAAP and non-GAAP financial measures. Please refer to our press release, which is available in the IR section of our website at www.aviatnetworks.com and financial tables therein, which included GAAP to non-GAAP reconciliation and other supplemental financial information. At this time, I would like to turn the call over to Aviat's President and CEO, Pete Smith. Pete? Pete Smith: Thanks, Andrew, and good afternoon, everyone. Thank you for joining us to review Aviat Networks' results for the fiscal fourth quarter of 2022. The company continued to focus and execute on our key long-term targets of growth, margin expansion and bottom line improvement, despite persistent supply chain headwinds and inflationary challenges. For the fourth quarter fiscal year 2022, the Aviat team's hard work and commitment resulted in revenue of $77.4 million, which represents growth of 8.0% versus Q4 of last year; adjusted EBITDA of $9.1 million, a 31% increase versus the same period prior year; non-GAAP EPS increase of 52%; a strong debt-free balance sheet; continued share buybacks of $0.75 million. For the full year fiscal 2022, Aviat achieved revenue growth of 10.2% to $303.0 million, which also represents our second consecutive fiscal year of double-digit top line growth; adjusted EBITDA of $38.3 million, a 17% increase over last year; non-GAAP EPS growth of 24%; repurchased $5.4 million in Aviat shares. These financial results reflect the continued demand we see for our products in the market. In fiscal year '22, we increased our global share of demand and added 175 new customers. This demonstrates we have the differentiated offering to take accounts from the competition and grow. In North America, in fiscal year '22, we grew market share by 6% and are now #1 overall in the region. On top of this, in North America, Q4 was our best bookings quarter in over a decade. And in the rest of the world, we continue to gain traction and post encouraging results and bookings. We see five main factors for our success in fiscal year 2022, strength in private networks; innovation of our multi-band solutions; further evolution of our software offering; traction and expansion with the Aviat Store; and our ability to navigate supply chain challenges. Let me touch on each of these. Our value proposition for private networks remains unmatched. Our reliable, high-power radios, customer service and support and end-to-end solutions offerings, including application software, managed services, routers and now wireless access solutions via our Redline acquisition on the first day of the current quarter is second to none. We are the leading microwave vendor in private networks in North America and have increased our market share in this segment in fiscal year '22. Please note that for the first time, our private networks share of demand is higher than the next two competitors combined. Revenue in private networks grew 11% this fiscal year, and FY '22 was the highest bookings year in our history in this segment, which included, among other things, six new state-wide network wins involving a mix of not only microwave products and services but also routers, application software and managed services. Our strength in this segment is unrivaled and with our wallet expansion initiatives, our prospects in private networks are exciting. In fiscal year '22, we have seen significant wins and repeat orders for our unique WTM 4800 multi-band solutions. Aviat is the only vendor with a single-box multi-band radio and an extended distance multi-band solution, all delivering ultra-high capacity transport over large -- longer distances with total cost of ownership that is up to 90% lower than fiber. FY '22 has seen significant market successes of our industry-leading multi-band solutions, including an increase in multi-band sales by more than 80% year-over-year; penetration into access networks of two Tier 1 accounts in West Africa; a new Tier 2 mobile operator win in Southeast Asia; a new Tier 1 mobile operator win in China that demonstrates Aviat's competitiveness versus Huawei; a new Tier 2 mobile operator win in East Africa; a large service provider in Germany with a 14,000-kilometer fiber optic network; many new ISP and rolled broadband networks in the U.S.A. and worldwide. Q4 was the highest bookings quarter to date for multi-band with over 60% of these bookings from the EMEA region. Operators in countries with high microwave spectrum fees quickly recognized the benefits of deploying Aviat multi-band as an alternative to traditional microwave-only links. In countries such as the Philippines, Nigeria and Kenya, Aviat multi-band links can provide savings of up to USD 20,000 per link per year in spectrum fees alone. In countries where spectrum fees are moderate, operators have embraced Aviat multi-band systems to achieve the following: one, scale capacity up to 10 gigabits per second via software; two, reduced power consumption; and three, cut tower-related costs and site visits when compared to using multichannel microwave links that are scalable only to a fraction of the capacity. Multi-band is widely recognized to be a key solution for operators building or preparing for 5G networks, network rollouts and Aviat leads the industry in this area. Moving to software. In the fiscal year, we enhanced our Frequency Assurance Software, or FAS, with new algorithms for interference detection and reporting. We introduced new Health Assurance Software or HAS to improve overall network health and reduce downtime. And we evolved our ProVision Plus platform with enhanced IP/MPLS management capabilities. All these investments resulted in an increase in FY '22 management and application software sales by over 50% compared to fiscal year '21. A key win here was with a large state government where we achieved the first sale of our hosted HAS software, which is a software-as-a-service offering and will give us annual recurring software revenue stream. This contributed to the fiscal fourth quarter 2022 being our highest bookings quarter for management software since the company's inception. We are just getting started with recurring software, and we expect much more of this business in fiscal year '23. Another significant factor for Aviat's success in fiscal year '22 was the Aviat Store, initially launched to serve rural broadband ISPs in North America, the store is now expanding globally, and we added 72 new accounts in fiscal year '22. In the North America ISP space, Aviat has the #1 position in radios licensed for operations. Clearly, our value proposition is working. The store represented over 8% of our fiscal year '22 revenues, and we look forward to the opportunity provided by large funding sources coming in the quarters and years ahead. This includes the $20 billion Rural Digital Opportunity Fund, or RDOF, and the $65 billion Bipartisan Infrastructure Fund, which have yet to impact our business. Looking forward, we can provide some intelligence on the RDOF program. Some customers have started limited spending against RDOF this quarter in advance of getting the actual funds authorized. Our customers believe funds will be dispersed later this calendar year or early next calendar year. If the program follows the CAF funding profile, we would estimate the peak of the spending would be three years from now. We continue to expect RDOF to be a positive catalyst for us. However, as with most government appropriations, the plan is subject to change. We thought we should share the color we have with you. To amplify our readiness for this catalyst, we are in the process of rolling out a new e-commerce platform, which will increase our ability to address this demand in the U.S. and for customers with similar buying characteristics across the globe. Moving on to supply chain. Although the supply chain has been a challenge throughout the fiscal year, our team worked tirelessly to address issues and interruptions to ensure we met our customers' expectations. Our diligence and persistence in working with supplier partners to solve problems and shortages along with our inventory approach to buffer supply interruptions allowed us to deliver products and results consistently. In some cases, this has meant incurring expedited costs to alleviate bottlenecks and delays. In the fourth quarter, we again had no revenue impact from supply shortages. This despite semiconductor chips remaining on allocations along with over 100 other components. Our costs were negatively impacted as a result of the COVID lockdowns in Asia. These lockdowns caused significant expedites to be incurred. Supplier pushout and decommits late in the quarter remain a problem, but the team successfully overcame this throughout the year, including six such events in the fourth quarter. Overall, we continue to see some improvement in the supply chain but risks remain. The specific improvements include that lead times are stable. The number of critical shortages is no longer increasing. The number of force majeure events has recently reduced to 0. The overall number of components on allocation remains high, but we see evidence that we've gone through the peak of the allocation environment. The key risks currently include the semiconductor wafer shortage as well as third and fourth-level suppliers subject to COVID lockdowns. Our results for customers and shareholders would not be possible without all of the Aviat employees. This was a solid quarter and excellent fiscal year. We remain focused and continue to execute and those collective efforts are reflected in our financial and operational results. We've continued to demonstrate our ability to grow and to take share of demand. Aviat's core values include customer focus. As part of our focus on the customer, we advanced our voice of the customer process. This effort by our sales and marketing teams resulted in a fiscal year ending backlog of $245 million. This represents an increase of 9% versus the prior year. Our three growth drivers, 5G, private networks and rural broadband, leave us well positioned to capture significant opportunities with our differentiated products, software and services offerings. Lastly, at the beginning of our new fiscal year, we closed the Redline Communications acquisition, which we anticipate to add approximately $20 million of revenue and be accretive to gross margin and earnings in fiscal year '23. We are pleased to have Redline as part of Aviat and are excited about the opportunity to further demonstrate the value of the Aviat's operating system. With that, let me turn the call over to David to review our financials before coming back for some final comments. David? David Gray: Thank you, Pete, and good afternoon, everyone. During my remarks today, I will review some of the key fiscal 2022 fourth quarter and full year financial highlights. Noting our detailed financials can be found in our press release filed this afternoon. As a reminder, all comparisons discussed today are between fourth quarter and fiscal 2022 and the fourth quarter of fiscal 2021, unless noted otherwise. For the fourth quarter, we reported total revenues of $77.4 million as compared to $71.7 million for the same period last year, an increase of $5.7 million or 8.0%, driven by strong growth in Europe, Asia Pacific and Latin America. North America, which comprised 63% of total revenue for the fourth quarter, was $48.8 million, an increase of $2.4 million or 5.1% from the same period last year, driven primarily by our private networks business. International revenue was $28.6 million for the quarter, an increase of $3.6 million or 13.3% from the same period last year. As Pete mentioned, our backlog grew by 9.0% year-over-year to $245 million, continuing our trend of trailing four-quarter book-to-bill ratios above 1, which started in fiscal 2018. Gross margins for the quarter were 35.5% and 35.7% on a GAAP and non-GAAP basis as compared to 36.1% and 36.2% in the prior year. Gross margins remained under pressure from inflationary headwinds and expedite costs related to supply chain disruptions. We also incurred additional costs to overcome the Asian COVID-related lockdowns, which primarily impacted our freight expense. Our mix this quarter was weighted towards our longstanding projects in backlog. As a result, our previous price actions were less impactful. Fourth quarter GAAP operating expenses were $22.2 million, an increase of $0.1 million from the prior year. Fourth quarter non-GAAP operating expenses, which exclude the impact of restructuring charges, share-based compensation and deal costs, were $19.5 million. This is a decrease of $0.9 million from the prior year due to general cost controls and benefits from prior restructuring actions. Fourth quarter GAAP net income was $4.3 million compared to $2.8 million last year. GAAP income before tax was $7.3 million, an increase of $3.6 million or 95% from the prior year, driven by improved operating profit and a $2.6 million gain from -- on marketable securities, partially offset by currency and M&A-related costs. Fourth quarter tax provision was $2.8 million compared to $0.9 million last year. As a reminder, the increase in tax provision year-over-year will not increase our cash taxes paid. The company has over $500 million of NOLs that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future. Fourth quarter non-GAAP net income, which excludes restructuring charges, share-based compensation, M&A-related costs and noncash tax provision, was $7.8 million compared to $5.3 million for the same period last year. The fourth quarter non-GAAP EPS came in at $0.67 per share on a fully diluted basis compared to $0.44 per share for the same period last year, an increase of 52%. Adjusted EBITDA for the fourth quarter was $9.1 million, an increase of $2.2 million or 31% from the prior year. Adjusted EBITDA margins were $11.8 million for the quarter. Moving on to the balance sheet. Our cash and marketable securities at the end of the fourth quarter were $47.8 million, up from $33.8 million the prior quarter. We continue to have no debt. Fourth quarter cash flows from operations were $13.5 million. The strong cash generation resulted from a moderation of supply chain induced working capital increases we experienced earlier in the year. We executed $0.75 million of stock repurchases in the quarter. Our balance sheet remains very solid, leaving us well positioned to execute our long-term plans. With that, I will turn it back to Pete for some final comments. Pete? Pete Smith: Thanks, David. Just a few additional comments before opening up for Q&A. Fiscal year 2022 represented a significant year for Aviat Networks. The company continues to grow. We announced our first acquisition in greater than 10 years and are well on track to realizing the planned synergies. We announced our partnership with MaxLinear to develop the next-generation, System on Chip, which will ensure our differentiation for years to come. This will be a more capable commercial alternative based on a newer generation of technology than competitor chips. The new generation will enable us to deliver ultra-high capacity payloads over longer distances with the lowest possible total cost of ownership. Additionally, this chip will consume less power and create advantages in cost, system design and supply chain. Our strategy from a few years back was to work with MaxLinear as a strategic chip development partner and innovate in systems. This strategy has yielded significant product differentiation, as you can see from our market success and current product offering. With the latest partnership agreement with MaxLinear, we feel confident we have the right strategy for the future as well. Based on the company's outlook, we are establishing our 2023 guidance, inclusive of the Redline Communications business: Revenue for fiscal year 2023 to be in the range of $330 million to $340 million and adjusted EBITDA to be in the range of $43 million to $45 million. With that, operator, let's turn the call back for a few live comments and then open up for questions. Operator: Certainly. Thank you. Pete Smith, your line is now open. Please go ahead. Pete Smith: Yes. We just wanted to give a quick update on the Ceragon Extraordinary Shareholder Meeting. We are disappointed in the results. We remain interested in the transaction. However, for there to be a transaction, there needs to be engagement. And to date, there has been very little. And since this has been a public offer, the information is in the public domain, and we don't believe that there is very much else to say. So with that said, we'd like to turn it back to the operator and start the question-and-answer period. Operator: And our first question comes from the line of Scott Searle from ROTH Capital. Scott Searle : Pete, Dave, nice job on the quarter. Maybe just to dive in on the gross margin front. Certainly, headwinds on that front as it relates to inflationary cost component availability, the lockdowns in China and the freight costs. Could you quantify the impact that you saw in the June quarter? And we've had some, I'll call it, a thawing on that front. What are you seeing in the immediate future as we're looking into the September quarter and into the back half of the calendar year here? Pete Smith : Yes. I want to shy away from specific quantification, but it was a fairly large impact on our margins in the quarter, probably in the tune of 60 basis points, 70 basis points. What we see, looking forward, is actually an absence of those headwinds, and we expect pretty good margin progression as we head into fiscal '23. So it's a little bit of a onetime event that we expect to continue the improving trend that we had seen in previous quarters starting up in 2023. Scott Searle : Great. And maybe looking at the services side of the equation, very good quarter, I think, both from a top line perspective and a gross margin perspective. I wonder if you could give us an idea, was there anything unusual in there in terms of onetime benefits And particularly now going forward, is that a normalized level to be thinking about the gross margin performance, particularly as we start to see contribution from Redline coming in? And Pete, maybe from a high level as well, I know you gave the $20 million guidance for Redline for the current fiscal year. But how are you expecting that to flow into the P&L over the next couple of quarters? How is your early integration on that front going? Pete Smith : Maybe you go first. David Gray: Yes, I'll start off on the services margin question. Yes, we had a very good quarter in services margin. That was driven by North America. We had some very, very good projects. But we've also been very focused on execution and taking cost out of our service offering. So we've made some good headway there. Do we expect to maintain those that level of service margin? Probably not at that level, but we don't see a reversion to where we had been historically. We expect improved service margins overall. Pete Smith : Okay. And then on the Redline part of your question, we've been aggressive in the way we've managed our supply chain. And Redline, we're starting to run that standard operating process on Redline. So we think that if you want to calendarize that $20 million, it will ramp through the year. And we'll also be able to get our operating system in there and start to reduce cost. With respect to how -- in the prepared remarks, we said that we're ahead of our planned synergies and that's really on the SG&A front that we are -- our thesis when we bought it, we thought that we could take cost out. And that thesis has proven out to be true over the first seven weeks or so of ownership. Scott Searle : Got you. And if I could, just two last ones. Just on the guidance you gave, guidance for the year. I'm wondering if you could calibrate sequentially, how you're thinking about things on the front? Sounds like the gross margins start to come back. But if you were to net out Redline, how are you seeing September shape up? And then that macro view for fiscal '23, Pete, what's the thought in terms of the contribution of RDOF in there and any sort of the other government funding initiatives? And lastly, and I apologize in advance, but the obligatory Ceragon question in terms of, are there next steps for you? And that stated, are there other things and opportunities in the pipeline that you're starting to see that are piquing your interest? Pete Smith : Okay. So those are three questions. So in our guidance, we do not have RDOF in our guidance. So we would say that that's a positive catalyst when that materializes. With respect to the progression, we are a project-based business. In our prepared remarks, we said that we had record public safety. So that would mean that we're in the July to June calendar that you'd see the ramp through the year. But I would expect that there will be some project cutoffs and a little bit of lumpiness from quarter to quarter. But the way our backlog is, you would expect the progression to kind of go up as we move through the year. And then with respect to Ceragon next steps, I would submit that there are -- if there is engagement, there's next steps. If there's no engagement, there's no next steps. The positive outcome for us are raised our visibility, and there's more opportunities for us to grow by acquisition than there had been previously. So while we didn't get the results we wanted in the extraordinary shareholder meeting, it's been net-net positive for Aviat. Operator: And our next question comes from the line of Tim Savageaux from Northland Capital Markets. Tim Savageaux: I wanted to talk about the booking strength in the quarter, which you called out in sort of multiyear or nearly decade terms. Maybe let's focus on North America and what the drivers were there for Q4. In particular, you did mention some initial spending activity on the RDOF side. And to what extent was rural broadband in general, a factor in that order strength? Or can we attribute most of that to private networks? And I've a follow up. Pete Smith: Yes. Tim, I would attribute most of it to private networks, and that's why we gave the color of six state networks. Tim Savageaux: Is that in the quarter or for the year? Pete Smith : That was for the year. Tim Savageaux : And also to follow up on some of the carrier wins. Well, I wanted to see if you could maybe toss out a book-to-bill for Q4, either overall or North America, just given the superlatives you put on the numbers in terms of the year. And I was also interested in the Tier 1 win in Huawei's backyard, I guess. And how significant you view that to be? And what that means both from a revenue perspective and also for future potential wins? Pete Smith : Okay. So I think we -- because we have a lumpy project-based business, we don't like the book-to-bill, and that's why on a quarterly basis, and that's why we said our backlog year-over-year is up 9%. The win in China, that's a demonstration of our ability to deliver our multi-band, which is highly differentiated, and we're using that we're in -- where the spectrum costs are highest in China or the cost of linking towers together is the most expensive. And I wouldn't say we want to raise guidance on that. We brought that up because it demonstrates our ability to compete in Tier 1s and in Huawei's backyard. Tim Savageaux : Great. Maybe one more follow-up for me, if I may. You're coming off a couple of years organically of double-digit growth here. And looking at a more conservative start to that year organically this year and mentioned that you don't really have much in the way of government or RDOF supported revenue or nothing actually in your forecast. Can that really by itself, I guess, if that were to come through in some reasonable way, puts you back into double digits for '23? And that's it for me. Pete Smith : Yes. I mean that's fair. I mean, Tim, you're probably doing the math on what it would need to be. And if it comes, it could certainly put the core business into that level of growth, yes. And that would be kicking in of the -- either the RDOF funding or the Building Infrastructure Fund, or BIF, H.R.3684. So just -- so we watch those items pretty closely. And if we get the kick in, then that will be a positive catalyst for us. Operator: And our next question comes from the line of Erik Suppiger from JMP Securities. Erik Suppiger: Can you talk a little bit about kind of some of the demand that you're seeing in Europe? And how much of this is related to the war in Ukraine? Pete Smith : Yes. Our biggest demand is in the UK, and that's a private networks project similar to the bulk of our business in North America. And we previously disclosed that we only had 1 contractor in Russia, and we only had one potential commercial opportunity in Ukraine. So Ukraine-Russian war has had a de minimis impact on us. the bulk of the growth has been driven by private networks in the UK, but we have picked up some Tier 2s in Europe and some ISPs specifically in Germany. Erik Suppiger: Can you discuss -- obviously, you had some pretty robust growth in Europe. Why is -- why are private networks coming a lot so much for you? Pete Smith : So if we roll back the clock about five quarters ago, we refreshed our commercial leadership because we were not doing very well in the EMEA team. And we've upgraded the team, the teams running our voice customer and our sales funnel process. And now I would say, with that leadership, we understand our value proposition. We chase opportunities that we can win, and our conversion rate is better than it was five quarters ago. Erik Suppiger: Okay. And Africa was down year-over-year. Was there anything notable that caused that? Pete Smith: Yes. I think that's -- we think Africa is well positioned for growth, and it's really just a low on the CapEx cycle. And I think watch that space in the coming quarters, and you'll see a bounce up there. Operator: And our next question comes from the line of Theodore O'Neill from Litchfield Hills Research. Theodore O'Neill : Backlog, can you give us any information about the mix between products and services? And whether or not you're seeing stronger growth in either one of those? David Gray : So yes, we definitely had a mix skewed towards services this quarter. It's typically -- it's probably about 6 percentage points or 7 percentage points higher than it normally is from a mix standpoint. And we also had -- we already talked about the strong execution that increased the margins there. We don't think there's a fundamental shift in the mix between product and services. As Pete said, a project-based business that is going to be a little lumpy, and we're going to have this kind of variability quarter-to-quarter, this just happened to be a strong quarter for services, coupled with positive margins on those services that was good for us. Theodore O'Neill : Okay. And in terms of your North America revenue and market share here being so strong. Is that a particular product area that's creating that for you? Or is that across the board? Pete Smith : So I would say our WTM high-capacity radio is a key product. But one of the reasons we win in private networks across the globe and in particularly in North America is our end-to-end offering. So we do the network design, the network plan, provide the hardware, software and services, sometimes do the install. And sometimes we do the ongoing network monitoring. And that core competency along that those elements of value, is what are the components of the winning value proposition. Operator: And our next question comes from the line of Orin Hirschman from AIGH. Orin Hirschman: Congratulations on the result. I just wanted to drill down again on Redline. How much of Redline revenue was in the past fiscal year? David Gray : Past fiscal year is about just over $19 million. Pete Smith : Yes. So yes, so $19 million… Orin Hirschman: … Pete Smith : We are in about $19 million. So we're signing up for nominal growth while we restructure the business and get our voice of the customer and sales funnel process in place. So that's -- we want to make sure we get the cost out, get the business off of the Canadian exchange and get it the resources deployed and run our voice of the customer and sales model process. So we're -- so that's what we're doing with Redline in the first 12 months. Orin Hirschman : Okay. Where I'm going with the question is just to understand the organic growth rate, even without Redline considering how the backlog has risen and the book-to-bills have been positive. It would seem like -- again, I don't know the timing of the orders on the book-to-bill, but it would seem like it gives you running room, especially not counting anything from RDOF or the infrastructure buildout. Pete Smith : Yes. So we want to make sure that we give guidance that can hit. You're right that we have RDOF upside if we can pull in the backlog, we can -- and as we execute that, we'll revisit our guidance as we go through the year. Orin Hirschman : Okay. And my final question is on the software side. I know you mentioned there are additional software offerings coming you alluded to. Can you say anything more about that or even just the timing? Pete Smith : So we launched our about 1.5 years or two years ago, the FAS, Frequency Assurance Software. Then we -- in the last quarter, we launched our Health Assurance Software. And we're contemplating a couple of other assurance softwares to build out our software suite and help network operators run their networks at a lower total cost of ownership. And we would say within the fiscal year, we will launch our next Assurance Software and build our advantage there. Operator: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Pete Smith for any further remarks. Pete Smith : I'd like to thank everyone for your continued interest and your call -- your attendance on the call. We'd like to thank our suppliers, customers, employees and shareholders, and we look forward to speaking with you at the end of Q1 and giving you an update on our progress. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Good day.
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Aviat Networks, Inc. (NASDAQ:AVNW) Quarterly Earnings Preview

  • Aviat Networks is set to announce its quarterly earnings with an expected EPS of $0.66 and projected revenue of $112.92 million.
  • The company has faced a significant stock price drop due to delays in filing its financial statements, prompting legal actions and investor concerns.
  • Despite challenges, Aviat Networks displays a solid financial structure with a low debt-to-equity ratio and strong liquidity indicators.

Aviat Networks, Inc. (NASDAQ:AVNW) is gearing up to unveil its quarterly earnings on Wednesday, October 2, 2024, before the market opens. Analysts on Wall Street are anticipating an earnings per share (EPS) of $0.66, with projected revenue for the quarter rounding up to approximately $112.92 million. This announcement comes at a critical time for Aviat Networks, a key player in the telecommunications equipment sector, as it navigates through recent challenges that have significantly impacted its stock price and investor confidence.

Recently, AVNW experienced a sharp decline in its stock price, dropping by $6.36 or 26% during intraday trading on September 12, 2024. This drop was a direct consequence of the company's announcement regarding its inability to file its financial statements for the fiscal year ending June 28, 2024, on time. This news has raised concerns among investors and prompted legal action from Hagens Berman, a law firm urging investors who have suffered substantial losses to step forward. The firm is also seeking individuals with insider knowledge to assist in their investigation of Aviat Networks, focusing on the accuracy of the company's financial statements and the adequacy of its internal controls over financial reporting.

Despite these challenges, Aviat Networks' financial metrics provide a mixed picture of its valuation and financial health. The company's price-to-earnings (P/E) ratio stands at approximately 20.76, indicating the price investors are willing to pay for a dollar of earnings, which is a critical metric for assessing a company's market valuation. Additionally, the price-to-sales (P/S) ratio of about 0.74 and an enterprise value-to-sales (EV/Sales) ratio close to 0.72 suggest a moderate valuation of the company's sales and overall value. These ratios, along with an enterprise value-to-operating cash flow (EV/OCF) ratio of around 9.38, offer insights into the company's valuation from different financial perspectives.

Moreover, Aviat Networks boasts an earnings yield of approximately 4.82%, reflecting the earnings generated per dollar of investment, which is a positive indicator of its profitability. The company's debt-to-equity (D/E) ratio of around 0.19 signals a low level of debt relative to equity, showcasing a solid financial structure. Furthermore, with a current ratio of over 2.12, Aviat Networks demonstrates a strong ability to cover its short-term liabilities with its short-term assets, highlighting its financial health and liquidity. These financial health indicators are crucial for investors, especially in light of the recent challenges, as they provide a glimpse into the company's ability to navigate through its current issues and maintain its operational stability.