Aviat Networks Announces Fiscal 2022 Fourth Quarter and Twelve Months Financial Results

Total Q4 Revenue of $77.4 million; Up 8.0% Year-over-Year
Q4 GAAP Operating Income of $5.2 million; Up 40.4% Year-over-Year
Q4 Adjusted EBITDA of $9.1 million; Up 31.1% compared to Prior Year

AUSTIN, Texas, Aug. 23, 2022 /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 2022 fourth quarter and twelve months ended July 1, 2022. These results do not include the financial results of Redline Communications Group Inc., whose acquisition by Aviat was completed on July 5, 2022, in Aviat’s fiscal 2023 first quarter.

Aviat Networks Announces Fiscal 2022 Fourth Quarter and Twelve Months Financial Results
Aviat Networks, Inc. Logo (PRNewsfoto/Aviat Networks, Inc.)(PRNewswire)

Fourth Quarter Highlights

  • Company executed on key long-term strategic objectives resulting in continued year-over-year increase in quarterly revenues and Adjusted EBITDA
  • Highest bookings quarter in seven years, and the highest in North America in over a decade
  • Highest bookings quarter for multi-band to date, with 60% coming from the EMEA region
  • Highest bookings quarter for management software since the Company’s inception, including the first SaaS-based Health Assurance Software sale with a large U.S. state government
  • Announced collaboration with MaxLinear on next generation System on Chip:

Fourth Quarter Financial Highlights

  • Total Revenues: $77.4 million, +8.0% from the same quarter last year
  • GAAP Results: Gross Margin 35.5%; Operating Expenses $22.2 million; Operating Income $5.2 million; Net Income $4.5 million; Net Income per diluted share (‘Net Income per share”) $0.39
  • Non-GAAP Results: Adjusted EBITDA $9.1 million; Gross Margin 35.7%; Operating Expenses $19.5 million; Operating Income $8.1 million; Net Income $7.8 million; Net Income per share $0.67
  • Net Cash and Marketable securities: $47.8 million; no loans outstanding at quarter-end
  • Buy Back: Repurchased $0.75 million of stock in the quarter

Full Year Financial Highlights

  • Total Revenues: $303.0 million, +10.2% from the prior year
  • GAAP Results: Gross Margin 36.1%; Operating Expenses $80.5 million; Operating Income $28.7 million; Net Income $21.2 million; Net Income per diluted share (‘Net Income per share”) $1.79
  • Non-GAAP Results: Adjusted EBITDA $38.3 million; Gross Margin 36.2%; Operating Expenses $75.8 million; Operating Income $33.9 million; Net Income $32.7 million; Net Income per share $2.76
  • Buy Back: Repurchased $5.4 million of stock in the current year

Fiscal 2022 Fourth Quarter and Twelve-Month Comparisons

Revenues
The Company reported total revenues of $77.4 million for its fiscal 2022 fourth quarter, compared to $71.7 million in the comparable fiscal 2021 period, an increase of $5.7 million or 8.0%.  North America revenue of $48.8 million increased by $2.4 million or 5.1%, compared to $46.4 million in the comparable fiscal 2021 period. International revenue of $28.6 million increased by $3.4 million or 13.3%, compared to $25.3 million in the comparable fiscal 2021 period. The increase in international revenue was high order volumes in the APAC and Europe regions offset by lower spending environment in Africa.

For the twelve months ended July 1, 2022, the Company reported total revenues of $303.0 million, compared to $274.9 million in the comparable fiscal 2021 period, an increase of $28.0 million or 10.2%. North America revenue of $199.8 million increased by $16.7 million or 9.1%, compared to $183.1 million in the comparable fiscal 2021 period. International revenue of $103.2 million increased by $11.3 million or 12.3%, compared to $91.8 million in the comparable fiscal 2021 period.

Gross Margins
In the fiscal 2022 fourth quarter, the Company reported GAAP and non-GAAP gross margin of 35.5% and 35.7%, respectively. This compares to GAAP gross margin of 36.1% and non-GAAP gross margin of 36.2% in the comparable fiscal 2021 period.

For the twelve months ended July 1, 2022, the Company reported GAAP gross margin of 36.1% and non-GAAP gross margin of 36.2%. This compares to GAAP gross margin of 37.3% and non-GAAP gross margin of 37.5% in the comparable fiscal 2021 period, a decline of -120 and -130 basis points, respectively.

Operating Expenses
GAAP total operating expenses for the fiscal 2022 fourth quarter were $22.2 million, compared to $22.1 million in the comparable fiscal 2021 period, an increase of $0.1 million or 0.3%. Non-GAAP total operating expenses, excluding the impact of restructuring charges and share-based compensation, for the fiscal 2022 fourth quarter were $19.5 million, compared to $20.4 million in the comparable fiscal 2021 period, an increase of $(0.9) million or (4.2)%.

For the twelve months ended July 1, 2022, the Company reported GAAP total operating expenses of $80.5 million, compared to $80.4 million in the comparable fiscal 2021 period, an increase of $0.1 million or 0.1%.  On a non-GAAP basis, excluding the impact of restructuring charges and share-based compensation, total operating expenses for the twelve months ended July 1, 2022 were $75.8 million, compared to $75.6 million in the fiscal 2021 period, an increase of $0.2 million or 0.3%.

Operating Income
The Company reported GAAP operating income of $5.2 million for the fiscal 2022 fourth quarter, compared to a GAAP operating income of $3.7 million in the comparable fiscal 2021 period, a $1.5 million year-over-year increase. On a non-GAAP basis, the Company reported operating income of $8.1 million for the fiscal 2022 fourth quarter, compared to a non-GAAP operating income of $5.6 million in the comparable fiscal 2021 period, a $2.5 million year-over-year increase.

For the twelve months ended July 1, 2022, the Company reported $28.7 million in GAAP operating income, compared to a GAAP operating income of $22.2 million in the comparable fiscal 2021 period, a $6.5 million year-over-year improvement. On a non-GAAP basis, the Company reported operating income of $33.9 million for the twelve months ended July 1, 2022, compared to $27.4 million in the comparable fiscal 2021 period, a $6.5 million year-over-year improvement.

Net Income / Net Income Per Share
The Company reported GAAP net income of $4.5 million in the fiscal 2022 fourth quarter or GAAP net income per share of $0.39.  This compared to a GAAP net income of $2.8 million or GAAP net income per share of $0.24 in the fiscal 2021 fourth quarter. On a non-GAAP basis, the Company reported net income of $7.8 million or a non-GAAP net income per share of $0.67, compared to a non-GAAP net income of $5.3 million or non-GAAP net income per share of $0.44 in the comparable fiscal 2021 period.

For the twelve months ended July 1, 2022, the Company reported GAAP net income of $21.2 million or a GAAP net income per share of $1.79.  This compared to GAAP net income of $110.1 million or a GAAP net income per share of $9.42 in the comparable fiscal 2021 period. On a non-GAAP basis, for the twelve months ended July 1, 2022, the Company reported net income of $32.7 million or a net income per share of $2.76, compared to non-GAAP net income of $26.0 million or $2.23 per share in the comparable fiscal 2021 period.

Adjusted EBITDA
Adjusted earnings before interest, tax, depreciation and amortization (“Adjusted EBITDA”) for the fiscal 2022 fourth quarter was $9.1 million, compared to $7.0 million in the comparable fiscal 2021 period, a year-over-year increase of approximately $2.2 million. For the twelve months ended July 1, 2022, the Company reported Adjusted EBITDA of $38.3 million, compared to $32.8 million in the comparable fiscal 2021 period, a year-over-year increase of approximately $5.6 million.

Balance Sheet Highlights
The Company reported cash and marketable securities of $47.8 million as of July 1, 2022, compared to $33.8 million as of April 1, 2022.  As of July 1, 2022, the Company has no loans outstanding. During our fiscal 2022 fourth quarter, as part of our stock repurchase program approved by our board of directors in November 2021, we purchased approximately 26,000 shares of our common stock for $0.75 million and classified them as treasury shares, taking total repurchases for fiscal 2022 to 175,000 shares or $5.4 million

Conference Call Details
Aviat Networks will host a conference call at 5:00 p.m. Eastern Time (ET) today, August 23, 2022, to discuss its financial and operational results for the fiscal 2022 fourth quarter. Participating on the call will be Peter Smith, President and Chief Executive Officer; David M. Gray, Sr. Vice President and Chief Financial Officer; and Andrew Fredrickson, Director of Corporate Development and Investor Relations. Following management’s remarks, there will be a question and answer period.

Interested parties may access the conference call live via the webcast through Aviat Network’s Investor Relations website at https://investors.aviatnetworks.com/events-and-presentations/events, or may participate via telephone by registering using this online form. Once registered, telephone participants will receive the dial-in number along with a unique PIN number that must be used to access the call. A replay of the conference call webcast will be available after the call on the Company’s investor relations website.

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, 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 2023, 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; disruptions relating to the ongoing conflict between Russia and Ukraine; continued price and margin erosion in the microwave transmission industry; the impact of the volume, timing, and customer, product, and geographic mix of our product orders; the timing of our receipt of payment; our ability to meet product development dates or cost reductions of products; our suppliers’ inability to perform and deliver on time, component shortages, or other supply chain constraints; the effects of inflation; the ability of our subcontractors to timely perform; weakness in the global economy affecting customer spending; retention of our key personnel; our failure to protect our intellectual property rights or defend against intellectual property infringement claims; the results of our restructuring efforts; the ability to preserve and use our net operating loss carryforwards; the effects of currency and interest rate risks; the effects of current and future government regulations; 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 we have significant business; our ability to realize the anticipated benefits of any proposed or recent acquisitions; the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships.

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 25, 2021, 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:

Andrew Fredrickson
Director, Corporate Development & Investor Relations
Phone: (408) 501-6214
Email: [email protected]

Table 1

AVIAT NETWORKS, INC.

Fiscal Year 2022 Fourth Quarter Summary

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Twelve Months Ended

(In thousands, except per share amounts)

July 1,
2022

July 2,
2021

July 1,
2022

July 2,
2021

Revenues:

Revenue from product sales

$         51,739

$         49,386

$       208,100

$       185,787

Revenue from services

25,682

22,300

94,859

89,124

Total revenues

77,421

71,686

302,959

274,911

Cost of revenues:

Cost of product sales

34,615

31,232

132,404

113,055

Cost of services

15,344

14,575

61,320

59,241

Total cost of revenues

49,959

45,807

193,724

172,296

Gross margin

27,462

25,879

109,235

102,615

Operating expenses:

Research and development expenses

5,258

6,269

22,596

21,810

Selling and administrative expenses

16,352

14,769

57,656

56,324

Restructuring charges

611

1,109

238

2,271

Total operating expenses

22,221

22,147

80,490

80,405

Operating income

5,241

3,732

28,745

22,210

Other income, net

2,077

29

1,690

230

Income before income taxes

7,318

3,761

30,435

22,440

Provision for (benefit from) income taxes

2,785

930

9,275

(87,699)

Net income

$           4,533

$           2,831

$         21,160

$       110,139

Net income per share:

Basic

$              0.41

$              0.25

$              1.89

$              9.98

Diluted

$              0.39

$              0.24

$              1.79

$              9.42

Weighted average shares outstanding:

Basic

11,151

11,158

11,167

11,036

Diluted

11,726

11,950

11,820

11,688

Table 2

AVIAT NETWORKS, INC.

Fiscal Year 2022 Fourth Quarter Summary

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

July 1,
2022

July 2,
2021

ASSETS

Current Assets:

Cash and cash equivalents

$         36,877

$         47,942

 Marketable securities

10,893

Accounts receivable, net

73,168

48,135

Unbilled receivables

45,857

37,521

Inventories

25,394

23,436

Customer service inventories

1,775

1,431

Asset held for sale

2,218

Other current assets

12,437

9,556

Total current assets

206,401

170,239

Property, plant and equipment, net

8,887

11,701

Deferred income taxes

95,412

103,467

Right of use assets

2,759

3,816

Other assets

10,445

8,430

TOTAL ASSETS

$       323,904

$       297,653

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable

$         42,394

$         32,405

Accrued expenses

26,451

28,154

Short-term lease liabilities

513

769

Advance payments and unearned revenue

33,740

32,304

Restructuring liabilities

1,381

2,737

Total current liabilities

104,479

96,369

Unearned revenue

8,920

8,592

Long-term lease liabilities

2,412

3,223

Other long-term liabilities

273

356

Reserve for uncertain tax positions

5,504

5,164

Deferred income taxes

563

614

Total liabilities

122,151

114,318

Commitments and contingencies

Equity:

Preferred stock

Common stock

112

112

Treasury stock

(6,147)

(787)

Additional paid-in-capital

823,259

818,939

Accumulated deficit

(599,442)

(620,602)

Accumulated other comprehensive loss

(16,029)

(14,327)

Total equity

201,753

183,335

TOTAL LIABILITIES AND EQUITY

$       323,904

$       297,653

AVIAT NETWORKS, INC.
Fiscal Year 2022 Fourth 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, 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 2022 Fourth Quarter Summary

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1)

Consolidated Statements of Operations

(Unaudited)

Three Months Ended

Twelve Months Ended

July 1, 2022

% of

Revenue

July 2, 2021

% of

Revenue

July 1, 2022

% of

Revenue

July 2, 2021

% of

Revenue

(In thousands, except percentages and per share amounts)

GAAP gross margin

$        27,462

35.5 %

$        25,879

36.1 %

$      109,235

36.1 %

$      102,615

37.3 %

Share-based compensation

169

93

440

372

Non-GAAP gross margin

27,631

35.7 %

25,972

36.2 %

109,675

36.2 %

102,987

37.5 %

GAAP research and development expenses

$          5,258

6.8 %

$          6,269

8.7 %

$        22,596

7.5 %

$        21,810

7.9 %

Share-based compensation

(143)

(71)

(246)

(250)

Non-GAAP research and development
expenses

5,115

6.6 %

6,198

8.6 %

22,350

7.4 %

21,560

7.8 %

GAAP selling and administrative expenses

$        16,352

21.1 %

$        14,769

20.6 %

$        57,656

19.0 %

$        56,324

20.5 %

Share-based compensation

(1,058)

(603)

(3,148)

(2,299)

Merger and acquisition related expense

(905)

(1,061)

Non-GAAP selling and administrative
expenses

14,389

18.6 %

14,166

19.8 %

53,447

17.6 %

54,025

19.7 %

GAAP operating income

$          5,241

6.8 %

$          3,732

5.2 %

$        28,745

9.5 %

$        22,210

8.1 %

Share-based compensation

1,370

767

3,834

2,921

Merger and acquisition related expense

905

1,061

Restructuring charges

611

1,109

238

2,271

Non-GAAP operating income

8,127

10.5 %

5,608

7.8 %

33,878

11.2 %

27,402

10.0 %

GAAP income tax provision (benefit)

$          2,785

3.6 %

$            930

1.3 %

$          9,275

3.1 %

$       (87,699)

(31.9) %

Tax receivable from Department of Federal
     Revenue of Brazil

1,646

Release of valuation allowance

432

7,486

Adjustment to reflect pro forma tax rate

(2,485)

(1,062)

(8,075)

79,767

Non-GAAP income tax provision

300

0.4 %

300

0.4 %

1,200

0.4 %

1,200

0.4 %

GAAP net income

$          4,533

5.9 %

$          2,831

3.9 %

$        21,160

7.0 %

$      110,139

40.1 %

Share-based compensation

1,370

767

3,834

2,921

Merger and acquisition related expense

905

1,061

Restructuring charges

611

1,109

238

2,271

Other income, net

(2,077)

(29)

(1,690)

(230)

Release of valuation allowance

(432)

(7,486)

Tax receivable from Department of Federal
     Revenue of Brazil

(1,646)

Adjustment to reflect pro forma tax rate

2,485

1,062

8,075

(79,767)

Non-GAAP net income

$          7,827

10.1 %

$          5,308

7.4 %

$        32,678

10.8 %

$        26,202

9.5 %

Diluted net income per share:

GAAP

$           0.39

$           0.24

$           1.79

$           9.42

Non-GAAP

$           0.67

$           0.44

$           2.76

$           2.23

Shares used in computing diluted net income per share

GAAP/Non-GAAP

11,726

11,950

11,820

11,688

Adjusted EBITDA:

GAAP net income

$          4,533

5.9 %

$          2,831

3.9 %

$        21,160

7.0 %

$      110,139

40.1 %

Depreciation and amortization of property, plant,
     and equipment

1,019

1,367

4,463

5,383

Other income, net

(2,077)

(29)

(1,690)

(230)

Share-based compensation

1,370

767

3,834

2,921

Merger and acquisition related expense

905

1,061

Restructuring charges

611

1,109

238

2,271

Provision for (benefit from) income taxes

2,785

930

9,275

(87,699)

Adjusted EBITDA

$          9,146

11.8 %

$          6,975

9.7 %

$        38,341

12.7 %

$        32,785

11.9 %

_______________________________________________________

(1)

The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by Aviat Networks.  Aviat monitors the non-GAAP financial measures included above, and our management believes they are helpful to investors because they provide an additional tool to use in evaluating Aviat’s financial and business trends and operating results. In addition, Aviat’s management uses these non-GAAP measures to compare Aviat’s performance to that of prior periods for trend analysis and for budgeting and planning purposes. Our non-GAAP net income excludes share-based compensation, and other non-recurring charges (recovery) and Adjusted EBITDA is 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. 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 2022 Fourth Quarter Summary

SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA

(Unaudited)

Three Months Ended

Twelve Months Ended

July 1,
2022

July 2,
2021

July 1,
2022

July 2,
2021

(In thousands)

North America

$       48,776

$       46,393

$       199,801

$       183,071

International:

Africa and the Middle East

10,167

12,885

47,527

44,023

Europe and Russia

4,464

1,773

12,973

8,826

Latin America and Asia Pacific

14,014

10,635

42,658

38,991

28,645

25,293

103,158

91,840

Total revenue

$       77,421

$       71,686

$       302,959

$       274,911

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SOURCE Aviat Networks, Inc.