Aviat Networks, Inc. (AVNW) on Q1 2023 Results - Earnings Call Transcript
Operator: Good afternoon. Welcome to the Aviat Networks' First Quarter Fiscal 2023 Earnings Call. At this time, all participants are in a listen-only mode. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Andrew Fredrickson, Director of Investor Relations. Thank you. You may begin. Andrew Fredrickson: Thank you, and welcome to Aviat Networks' first quarter fiscal 2023 results conference call and webcast. You can find our Form 10-Q, 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 two hours. With me today are Pete Smith, Aviat's President and CEO, who will begin with opening remarks on the company's fiscal first quarter, followed by David Gray, our CFO, who will review the financial results of our quarter. 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 on September 14, 2022. 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 todayâs 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 first quarter of fiscal year 2023. This quarter was significant for the company in two meaningful ways. One, we closed our first acquisition in over a decade in Redline Communications. We are encouraged by the integration and cost synergy realization that has taken place so far and look forward to demonstrating the value of the Aviat operating system. Secondly, we announced our 5G win with Bharti Airtel in India, a brand new customer for Aviat. This represents another demonstration of Aviat's differentiation of products and services for 5G, our supply chain and our operating system. This agreement shows that Aviat delivers meaningful value to customers around the world through our leading products and services. Now, turning to our results for the quarter. In the first quarter fiscal year 2023, Aviat delivered revenue of $81.3 million, which represents growth of 11.1% versus Q1 of last year. Gross margin expansion of 80 basis points versus Q1 of last year; adjusted EBITDA of $10.9 million, a 13% increase versus the same period prior year; non-GAAP EPS increase of 12%; strong debt free balance sheet. As part of our assets, we maintain greater than $90 million of deferred tax assets that will minimize cash tax payments for years to come. These results reflect to continued execution the Aviat team has realized despite ongoing inflationary and supply chain challenges. We continue to see benefits from the three trends of 5G, rural broadband, and private networks. In terms of 5G, our business with Tier 1 mobile network operators both internationally and in the U.S., continues to grow as we head into calendar year 2023. We believe we are still in the early days of growth related to 5G microwave networks and expect this business to pick up over the next 12 months. On rural broadband, Aviat added more than 10 customers in the quarter. The wireless ISP segment continues to put capital to use with a tailwind of government funding. While we believe that RDOF funding will not meaningfully impact the company until calendar year 2023, there are indications of fund recipients beginning to spend against the anticipation of fund distributions. Lastly, in private networks, we remain a market leader and secured a large multimillion dollar win in the quarter with a very large county government. In addition to our microwave offering, this deal includes routers and hosted software, which reflects our strategy to grow share of wallet in the private network space. In the quarter, we announced two new products. First and most recently, our vendor agnostic multi-band solution, which enables operators to easily upgrade the capacity of an existing installed licensed microwave link up to 10 gigabits per second. This allows operators with legacy microwave equipment from any vendor to cost effectively deploy additional network capacity. This, when coupled with the industries only single box, multi-band and extended distance multi-band solutions provides Aviat with the most complete and compelling multi-band portfolio, which will be particularly beneficial in 5G network buildouts. Secondly, the company announced the availability of new software that enables integrated IP/MPLS, and segment routing to be deployed to the network edge using Aviat's all outdoor platforms. Aviat is the only vendor with a full routing stack running on our radio portfolio, eliminating the need for external routers, thus lowering total cost of ownership. This is another step in our goal to expand our software solutions to customers. At the beginning of the quarter, we close the Redline Communications acquisition. The integration has gone according to plan. In fact, we are ahead of schedule from a cost takeout perspective, and we have the business close to breakeven profitability in just one quarter. We remain confident in hitting our previously provided guidance on revenue and adjusted EBITDA contribution from Redline this fiscal year. On the supply chain front, we continue to face challenges, but there are specific areas of improvement. Allocations of key components are now half of the peak crisis level. Decommit have continued to decline and are now rare events. Lead times are shortening. We still see opportunities for improvement in programmable logic, analog, batteries, antennas, and cables. In the quarter, logistics and supply constraints impacted our revenue by approximately $3 million. A significant portion of the supply issue came from Redline's access products. As we implement the Aviat operating system, we will improve there. As a result of the Redline supply issues, we are accelerating our plan to move Redline products over to the Aviat manufacturing base and expect that this will begin to show results in the back half of this year. In summary, this quarter was solid from an operational perspective, even in the face of ongoing challenges. Our backlog continues to grow and our three growth drivers, 5G, private networks and rural broadband leaves Aviat well-positioned to capture significant opportunities with our differentiated products, software and services offering. 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 2023 first quarter financial highlights, noting our detailed financials can be found in our press release and 10-Q filed this afternoon. As a reminder, all comparisons discussed today are between the first quarter of fiscal 2023 and the first quarter of fiscal 2022 unless noted otherwise. For the first quarter, we reported total revenues $81.3 million as compared to $73.2 million for the same period last year, an increase of $8.1 million or 11.1%, driven by strong growth in Asia-Pacific and Latin America, as well as the contribution from Redline acquisition. North American revenue, which comprised 60% of total revenue for the first quarter was $48.8 million, and international revenue was $32.4 million. We continued our trend of trailing four quarter book-to-bill ratio above one, which started in fiscal 2018. Gross margins for the quarter were 36.3% and 36.5% on a GAAP and non-GAAP basis as compared to 35.7% for both GAAP and non-GAAP in the prior year. The improvement in gross margin resulted from inflation being fully offset by pricing actions as well as the accretive contribution of the Redline business. First quarter GAAP operating expenses were $23.7 million, an increase of $6.2 million from the prior year, driven by the acquisition of Redline operating expenses, including a one-time restructuring charge of $2 million as well as M&A related costs. First quarter non-GAAP operating expenses, which exclude the impact from restructuring charges, share-based compensation and deal costs, were $20.5 million. This is an increase of $2.7 million from the prior year due primarily to the Redline acquisition. On a like for like basis, we continue to manage costs aggressively. First quarter tax provision was $3.9 million compared to $2.2 million last year. The increase is due to recording a $2 million deferred tax liability related to Canadian entities legal restructuring. 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. We recorded first quarter GAAP net loss of $2.7 million compared to GAAP net income of $4.7 million last year. The decline resulted from M&A and restructuring related expenses of $3.5 million to $2 million deferred tax liability, an FX loss of $0.9 million, and a $1.7 million decline in the value of marketable securities as opposed to the $2.6 million gain on those securities recorded last quarter. First quarter non-GAAP net income, which excludes restructuring charges, share-based compensation M&A related cost and non-cash tax provision was $8.8 million compared to $8.1 million for the same period last year. First quarter non-GAAP EPS came in at $0.75 per share on a fully diluted basis compared to $0.67 per share for the same period last year, an increase of 12%. The Redline acquisition was mildly dilutive to EPS in Q1 by approximately one half cent. Adjusted EBITDA for the quarter was $10.7 million, an increase of $1.1 million or 11% from the prior year. The Redline acquisition was slightly accretive to Q1 EBITDA ahead of our plan. Adjusted margins were 13.2% for the quarter. Moving onto the balance sheet. Our cash and marketable securities at the end of the first quarter were $22.9 million from $47.8 million the prior quarter, primarily due to the Redline acquisition, related restructuring spending and continued strategic investment in inventory to derisk the supply chain. Additionally, customer cash collections were impacted by ForEx availability in certain emerging markets, which has since started to reverse. We continue to have no debt and our balance sheet remains very solid leaving us well-positioned to execute on 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 it up for Q&A. We anticipate that our 5G Tier 1 business will grow as a portion of mix route the fiscal year 2023. This is a result of both North American and international mobile network operators investing in their 5G network buildouts. The Airtel win is a good example of this, where we expect to start seeing revenue in fiscal Q2. At the outset, these opportunities will be lower than our average gross margins. Rest assured, as we assess these key growth wins, we have revved up the Aviat operating system to secure margin improvements. The volume that these opportunities present, advanced Aviat's long-term EBITDA margin goal. I also want to emphasize how our strong balance sheet has given us the strategic flexibility to strengthen Aviat's position as a market leader. This helped us to navigate the supply chain challenges over the last two years, which in turn has allowed us to meet customer commitments and take share. It has enabled us to acquire Redline and rapidly execute our restructuring plans. We have made investments in next-generation technology such as our MaxLinear system on chip partnership, and then a $2.5 million investment to purchase and take control over our routing stack software from our partner Metaswitch that will benefit Aviat for years to come. We plan to continue to leverage our healthy balance sheet to make further investments in both organic and inorganic growth opportunities that will benefit shareholders. We are encouraged by our results, the hard work and dedication of the Aviat team and the outlook for Aviat in its markets. Based on the strong demand environment, including an uptake in Tier 1 and 5G demand, we are raising the top end of our revenue and profit guidance. We now see revenue for fiscal year 2023 to be in the range of three $330 million to $345 million, and adjusted EBITDA for fiscal year 2023 to be in the range of $43 million to $46 million. With that operator, let's open the call for questions. Operator: Thank you. The first question that I have is coming from Scott Searle with Ross Capital Markets. I'm sorry, ROTH Capital Partners. Your line is open. Scott Searle: Hey, good afternoon. Thanks for taking the questions. Hey, maybe Pete, just to dive in real quick on gross margins, I think I heard $3 million impact related to incremental costs and logistics in the quarter. Want to confirm that that 350 basis point impact in the quarter and kind of how you're seeing that trend as we go into the December quarter. And as part of that, India starting to come into the mix, lower gross margins, how should we be thinking about what blended gross margins overall are going to look like? Pete Smith: All right. So, the remark in the -- that we made around the 3.1 that was mixed revenue, so that was a margin, but David can comment more deeply on the gross margin progression. David Gray: Yeah. So in the quarter, I mean, we were able to offset all the inflationary costs by our pricing actions on a dollar basis. Still with the increase in the sales number that, that is slightly diluted. But then, that was made up -- more than made up by the contribution of having Redline in our results. And looking forward, I think, we have kind of one more quarter of, that'll be a little bit pressured, given the Airtel announcement before we have some chance to take some cost out of that and get the margins so they're not dilutive, but we expect them to kind of be in line with what you saw this quarter and then, show some improvement in the balance of the year. Scott Searle: Gotcha. Helpful. And Pete, maybe just directionally, you're raising the top end of your fiscal year guidance. We're only heading into the second fiscal quarter, but how are you seeing things sequentially progress, particularly with Redline? I'm wondering if you could calibrate us what Redline or where Redline was in the first quarter, kind of how that looks sequentially. It sounds like Airtel starts to contribute in the December quarter. And then there are some other items going on there. Dish has been in the news a lot lately in terms of meeting their buildout requirements for their 5G network. They're playing a little bit of catch up. You guys have been participating there. I imagine that starts to play as well. So how should we be thinking about with all those factors, kind of the progression of revenue as we go into December and March? Pete Smith: Yeah. So, I think, the overall progression is we're going to ramp through the year. And the principle reason -- and I might be wrong about that, and if it is, if I am wrong about it, it means that the supply chain eased up and we were able to make shipments earlier. So, I think, we're going to progress. We're on the July to June cycle, so Q1, Q2, Q3, Q4, a build. And if that is not the profile that we have, it'll be because supply chain improves or the -- what I call the allocation environment. If that eases, then we'll have more ability to ship and we'll ship sooner. So, the way to model this is a progression over the four quarters. And then, on -- I think the peak quarter for Redline's revenue is going to be our Q3, the January to March quarter. And Dish, Dish is really focused on fiber right now. We've -- if you go back to the beginning of our announcement, we said that Dish was a bellwether announcement and we said to model it over the life of the program $20 million to $25 million. And we would stick by that. We would say Dish will probably -- will not contribute in the October to December quarter. Is that color helpful, Scott? Scott Searle: Very helpful. And lastly, if I could, and then I'll get back in the queue, but could you frame for us the magnitude and size of Airtel? I think historically if we look at, for example, what Ceragon was doing, they're doing roughly $20 million a quarter, but that's spread across two operators as opposed to just Airtel. But there's a big buildout cycle coming here. So, I'm wondering if you give a framework of what we could expect as it starts to ramp up on an annual basis. And then maybe as well, just kind of the currency impact that's going on and kind of the impact that you're seeing on that front. Thanks. Pete Smith: So, look, we're not allowed -- if we could have -- we would've put in the press release the specific numbers, but you can model this over the life of it as eight figures. Yeah. David Gray: Yeah. Pete Smith: So that would be reasonable. David Gray: And then, Scott, you also asked a question regarding currency. Anything in specific that you're you'd like to know? Scott Searle: Yeah. If you could just kind of give us an idea about how most of your contracts are denominated. Do you have exposure outside the U.S. dollar and then kind of, how we should be thinking about that going forward with the strength of the dollar? Is that problematic to your expense structure or top line, or putting additional pressure on your gross margins? Thanks. David Gray: Yeah. Gotcha. So, over 90% of our revenue is invoiced in USD. And for the most part, the revenue that's invoiced in local currency is for services. Where in countries where we're also incurring our cost of services are COGS in local currency as well. So, there's a matching there. So, we don't lose out our margin. However, obviously, with that amount we are having, some receivables get devalued as the U.S. dollars gotten stronger. And that's where you see the charge down in the non-GAAP reconciliation. But for the most part, I think we are well protected on our margins. And we did -- obviously the U.S. dollar strength has been exceptional on a constant currency basis. If you used -- if we were to have used a Q1 of FY 2022 rates this quarter, our revenue would've been about $1.2 million higher, and about $500,000 higher quarter-over-quarter. So, there has been an impact, but margin-wise we're protected and from a balance sheet, exposure-wise, we're taking certain steps to create the natural hedges to protect ourselves to the extent possible. Scott Searle: Thanks. Operator: Thank you. David Gray: Sorry, I have one other comment to add on currency. As opposed to all the bad, we do have a fair portion of our R&D spend is denominated in euro, so we do get some benefit on the expense side from a weak -- a stronger U.S. dollar as well. So, it does kind of both ways. Operator: Thank you. Our next question will be coming from Eric Suppiger of JMP Security. One moment. Erik Suppiger: Thanks for taking the question. First off, any comments around economic impact, any slowing. Presumably 5G probably holding up or not changing too much, but what have you seen in the rural broadband and in the private network markets in terms of any economic changes? Pete Smith: We -- our background in North America is never been higher, which is dominated by private networks. On the 5G side, I'm sure a lot of investors are reading the CapEx spends from the Tier 1 players. We -- microwave is a little bit decoupled from that. So, we feel -- like we said in the script that the 5G is in front of us. And on rural broadband, we're -- it's steady, right? So, we haven't seen the positive catalyst for that would come from the RDOF funding, but we see that demand environment to be steady. So, when RDOF kicks in, we expect to be bolstered there. Private networks, city and state government spending, still looks robust. We did a deeper dive on that. And then, 5G, we see both in the U.S. and -- the U.S. and international growing demand. So we see things are good. If you want a concern, the demand that is reliant on foreign exchange as U.S. interest rates go up, that could be hurt. So -- and we're trying -- that's a pretty dynamic problem that we're trying to figure out. Erik Suppiger: Very good. Thank you. Operator: Thank you. One moment for our next question. Our next question is coming from Tim Savageaux from Northland Capital Markets. Tim Savageaux: Hey, good afternoon. Take another swing at this, Bharti situation here and also maybe in the context of the broader kind of Tier 1 5G themes you've been hitting here, Pete. So, I guess, just specific question, is there a lot of fair bit of wiggle rum in eight figures? I mean, is that sort of an annual comment or a deal in total? And is there any utility in taking the same sort of metrics that you've provided to us in the past about trying to size this potential RDOF contributions at that sort of a low single digit percentage of the total build cost? There's some pretty decent estimates out there about what Bharti is going to spend on their 5G network that would get you to some pretty big numbers, although always assume there's a fair bit of fiber in there as well. So maybe two ways to go to think about that kind of your little clarification on your specific comment and then tops down, thinking about the total opportunity and then adjusting for fiber versus microwave or market share versus other suppliers or what have you. And I just want to follow-up on that in a second. Pete Smith: Yeah. So, overall, I think, we view -- with some rounding that microwave is 60% versus 40% fiber. I mean, that chart is in our investor deck. And in the bottom of that is the satellites and the remnant copper. So, on Airtel, I would say that our number is basically the visibility that we have, right? Meaning let say, over the next 12 to 15 months. And what really is critical, they're in a domestic competition. What's really critical is how much our supply chain -- how well our supply chain performance versus the competition. I think we've distinguished ourselves. But the problem is, we still have a variety of components on allocation and we're growing past the forecast we gave them. So, if we can work with our suppliers deliver on time, then the number can be bigger. So, we're happy with the win. And there's a lot of work inside of Aviat focused on how can we win more. Is that helpful or? Tim Savageaux: It is. Well -- and since you just mentioned that I was, my original question was going to be, can you -- you talked also about some ramp in North America with your kind of traditional customer there on the 5G side as well. And I guess my question was going to be how would you size that opportunity relative to what you're seeing in India? And then, I will extend it to say, if you had to take a guess or look at your pipeline, how many more Airtels are out there that you might be pursuing? Pete Smith: So, India is bigger and there are -- what's -- Airtel is a top five -- it's a top five tele -- global telecom player, so there's not many of those out there. But in kind of in the next year, I would say we have two that we're in active pursuit. So. Tim Savageaux: Okay. Great. And if I could follow-p on a Redline, it sounds like that was, at least the primary source of the supply issues. Can you specifically call out the revenue contribution there? I know that you expected kind of a flat $0 million annual run rate applies about $ million bucks. I mean, if we were supply impacted, should we think the revenue contribution is about half of what you might have expected? David Gray: A little more than that, right? I mean, the -- it was just under 5% of our total revenue. It could have been about $900,000 higher in the quarter, had the supply issue not happened. But that's not a loss sale. It's just going to push to Q2, right? So, we're feeling perfectly comfortable with the $20 million we previously guided, and we think there's potentially upside to that, but we'll certainly provide more detail as the integration continues. Tim Savageaux: Great. Thanks very much. Operator: Thank you. One moment while we prepare for the next question. Next question is coming from Ethan Widell of B. Riley Securities. Your line is open. Unidentified Analyst: Hi, this is Ethan Widell calling in for Dave Kang. Thanks for taking my question. I was wondering if you could provide me additional color on where you think we are in the 5G cycle. You mentioned that you think the spend is in front of us. I was wondering when you anticipate the CapEx spend peaking for 5G deployment? Thanks. David Gray: Peaking. So, we see an acceleration through calendar year 2023. We see that in North America. We see that in Africa, and we see -- like we see that in Asia-Pac. So, the operators are notorious. We are not rolling out according to everyone else's plans. So, I expect some of that to hangover into 2024. So if you want me to call peak, I would speculate that it would be calendar year 2025. But look, you guys are better answering questions like that than I am. But that's my on the fly answer. Unidentified Analyst: Thanks. That's really helpful. And do you anticipate seeing kind of a longer tail on the private network side? Or is -- do you think the timing is somewhat similar? Pete Smith: No. The private networks has a long tail. It drives the bulk of our backlog, because those projects typically go from six months to two-plus-years. So, that's a pretty steady long cycle business. And we're particularly excited, because our -- the demand for private networks in North America has never been better. Unidentified Analyst: That's great to hear. Thank you. Operator: Thank you. One moment while we prepare for our next question. And our next question is coming from Paul Essay of William Woodrow. Please go ahead. Unidentified Analyst: Thank you for taking my call. First of all, I want to talk a little bit about the router business. Where are you with the field trials, with the utilities, with reconfiguring it for Europe? And how would Metaswitch play into this? Pete Smith: So, I'm not aware, Paul, that we've disclosed any field trials for utilities in Europe. But what -- here's what I could say. We are CTR 8740. We -- a while back we had a significant win with that platform, and our funnel for the CTR 8740 is building. And that's good. The routing software from Metaswitch will help us bring IP/MPLS to the edge, and that's principally in emerging economy mobile network operators. And we are engaged with a variety of customers on that. So, that's what I could say. I think, IP/MPLS software gives us an ability to tailor a stack for a specific customers need and their network infrastructure. Unidentified Analyst: Okay. And the reconfiguring, the router for Europe, when will that be ready? Pete Smith: Well, the -- as we -- over the next 12 months, we will release our IP/MPLS on our router platform, and that would be appropriate for Europe. Unidentified Analyst: Okay. Okay. And then on Europe, I know you made some changes in leadership there. Maybe you can address the sales funnel there. I know you've got the AirWave and you've identified $60 million in Huawei replacement business. Business is kind of picking up, but it's still very small. Can you talk about what that pipeline looks like and what we might expect over the next 12 months in Europe? Pete Smith: Well, I think you remembered precisely what we've disclosed that we have anchor customer in AirWave. And we've nearly doubled the size of that over the last year -- on a year-over-year basis from $8.8 million to -- sorry -- $2.7 million to $4.5 million. We do have a significant Huawei share gain funnel. And it's hard to predict how the network operators are going to convert that. But it's certainly part of our overall growth plans. And what we don't do is give guidance on a region-by-region basis, and that's largely because of the project nature of all of our business. Unidentified Analyst: Okay. Last question. Your service margins were up fairly significant in the quarter. Is that an abnormal, or is that something we can count on going forward and continuing to expand those margins? David Gray: Yeah. I think, they were certainly healthy this quarter. They were even healthier in Q4 when kind of the stars align. But obviously, as Pete was just talking about the project based nature of it makes it a little bit choppy. But I think, with the improvements and focus on field service costs that we've had, that -- we should typically be around the mid thirties, and I would hope mid to upper thirties going forward in the future. Unidentified Analyst: Okay. Thank you very much. David Gray: I would -- it should be fairly consistent. Unidentified Analyst: Okay. That's all I had. Operator: Thank you. Our next question -- one moment, I'm sorry, for our next question. And our next question will be coming from Theodore O'Neill of Litchfield Hills. Your line is open. Theodore O'Neill: Thank you very much. So, Pete, just clarification. The Airtel contract, is that just for Airtel in India, or is that Airtel opportunity in all 17 countries they're in? Pete Smith: No. Just India. Theodore O'Neill: Okay. And the chip collaboration with MaxLinear, is the goal to combine multiple functions in a single chip, or is there some other performance that you're trying to get out of it? And how is it -- how is the -- is it being funded? Pete Smith: It's being funded via our balance sheet over time. So that's the easy -- so the innovations that we're bringing are on the frequency bands, the channel sizes, the capacity, and the number of course. So, to kind of lay out, the deep semiconductor categories that we're driving innovation, we think that we'll have will be set up on the 14, 16 nanometer node, and that's going to give us significant power consumption advantages. And when we first started looking at this, we -- maybe we didn't realize this, but you know as you start to put microwave towers up in increasingly remote areas, power consumption is a compelling differentiator. Theodore O'Neill: Yeah. Okay. And my last question is, only because we're finding -- we're using Starlink here now and better performance than Comcast, I was wondering if you've had -- if you have any back haul opportunity with Starlink? Pete Smith: None to my knowledge. Theodore O'Neill: Okay. Thanks very much. Pete Smith: Thanks. Operator: Thank you. And our final question will be coming from Orin Hirschman of AIGH Partners. Orin Hirschman: Hey, Orin Hirschman. Congratulations on the progress. Just in terms of your overall private radio network business, in terms of people wanting to move off stream on the private networks, use the, the capacity that's higher end capacity that they've bought on the private airways with video in particular, any comments on that trend? Whether it's beginning to accelerate more as Redline fit into that, or people noticing the difference in terms of what you're capable doing on the video side? Pete Smith: So, I think, the way video translates to us is capacity, right? So, that's -- when we get an upgrade project, it's largely video driven, and we perform well in those app with those use cases, and that works out. You also asked about Redline and I think, we need another quarter or two to look at what the technical synergy might be in an offering. But we certainly have that as a hypothesis. So -- and if you could be patient for another quarter or two, we will be more forthcoming as we understand it well enough to describe to investors. Orin Hirschman: Okay. Is the state government contract that you mentioned on the software side, is that for a SaaS recurring type of deal? Pete Smith: I believe that that, that drives both hardware and software. And the software portion contains some SaaS. Yes. Orin Hirschman: Okay. And in terms of the rural buildout and self-serve customers, et cetera, if I look just at the rural buildout portion of your revenues, how did that look, let's say, in the last two or three quarters in terms of progression? Did it hit some kind of plateau area, or it's still growing and we're just waiting for the real -- the next inflection, so to speak, from the RDOF funding? Pete Smith: We're -- so, at the end of -- we break these things out because we're project based business. At the end of the year, we said -- at the end of last fiscal year, we said that it was rural broadband was about 9% of revenue. And I would say it remains about 9% of revenue. And we are waiting for a deposited catalyst of RDOF funding. Orin Hirschman: Okay. And in terms of -- so if we're getting to the point where you're going to break it out, we still have a long way to go or is in insight? Pete Smith: Yeah. So the software question, we look -- we sell a lot of embedded software. We look for peer companies that talked about embedded software, and no one breaks out the embedded software. On the standalone software, we have a long way to go. So, as much as we'd like to break out the embedded software, we don't have any peers that would suggest that that's the right way to report, because about hardware. Orin Hirschman: Okay. Thanks very much. Pete Smith: Thank you. Operator: That concludes our Q&A session for today. I would like to turn the call back over to Pete. End of Q&A: Pete Smith: Thanks everyone for joining the call and your interest in Aviat. We look forward to updating you on our progress in approximately 90 days. Thanks everyone. Operator: Thank you. That concludes today's conference call. You may all connect and everyone have a great evening.AVNW Ratings Summary
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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.
