Aviat Networks Announces Fiscal 2020 First Quarter Financial Results

Nov 7, 2019
Company Reiterates its Prior Guidance for the First Half of Fiscal 2020 and Remains on Track for Significant Year-over-Year Bottom-Line Improvements for the Full Fiscal Year

MILPITAS, Calif., Nov. 7, 2019 /PRNewswire/ -- Aviat Networks, Inc. (NASDAQ: AVNW), ("Aviat Networks" or the "Company"), the leading expert in wireless transport solutions, today reported financial results for its fiscal 2020 first quarter ended September 27, 2019.

Aviat Networks, Inc. Logo (PRNewsfoto/Aviat Networks, Inc.)

Stan Gallagher, Interim Chief Executive Officer and Chief Operating Officer stated, "As expected, we had a strong start to the fiscal year, delivering exceptionally strong gross margins and year-over-year bottom-line improvements. Non-GAAP gross margins increased by 900 basis points, non-GAAP operating income improved by $3.5 million, and Adjusted EBITDA improved by $3.2 million when comparing the fiscal 2020 and fiscal 2019 first quarters. We are confident that based on our backlog and the projects underway, we remain on track to meet our previous guidance for the first half of fiscal 2020 and that the full fiscal year will show significant bottom-line improvements."

Mr. Gallagher continued, "Our North America business grew in excess of 40% year-over-year when comparing the fiscal first quarters, while International revenue declined due to a very strong fiscal 2019 in the APAC region and as a result of the current environment in Africa. However, we continue to win new business in all markets and geographies, which gives us confidence in our ability to improve profitability this fiscal year with the top-line coming in roughly in line with fiscal 2019. We continue to invest with the future in mind as market trends for 5G and mission-critical networks are improving. Our focus of course is on delivering improved results this fiscal year, but equally if not more important, is ensuring that Aviat is positioned to drive results and shareholder value for years to come."

Fiscal 2020 First Quarter Comparisons
The Company reported total revenues of $58.6 million for its fiscal 2020 first quarter, as compared to $60.5 million in the comparable fiscal 2019 period, a decrease of $1.9 million or 3.1%. North America revenue of $39.8 million increased by $12.0 million or 43.2%, as compared to $27.8 million in the fiscal 2019 first quarter. International revenue of $18.8 million declined by $13.9 million or 42.4%, as compared to $32.7 million in the comparable year-ago period, with the majority of the decline attributable to lower year-over-year revenue in the APAC region, based on strong revenue in the prior fiscal year period and lower revenue in Africa, as anticipated.

GAAP gross margin for the fiscal 2020 first quarter was 38.5%, as compared to 29.6% in the comparable fiscal 2019 period, an increase of 890 basis points. Non-GAAP gross margin for the fiscal 2020 first quarter was 38.6%, as compared to 29.6% in the comparable fiscal 2019 period, an increase of 900 basis points. The year-over-year improvements in both GAAP and non-GAAP gross margins were primarily attributable to higher revenue in North America and higher margin projects associated with select international projects.

GAAP total operating expenses for the fiscal 2020 first quarter were $21.0 million, as compared to $19.4 million in the comparable fiscal 2019 period, an increase of $1.6 million or 8.2%. Non-GAAP total operating expenses for the fiscal 2020 first quarter were $19.5 million, as compared to $18.3 million in the comparable fiscal 2019 period, an increase of $1.2 million or 6.8%. The year-over-year increase in non-GAAP operating expenses was due to a modest increase in research and development expenses to support customers and future innovation, as well as higher selling and administrative expenses. The increase in selling and administrative expenses reflects investments in selling activities and in productivity tools that are anticipated to substantially improve organizational efficiencies and data utilization, which will in turn, lead to future savings.

GAAP operating income was $1.5 million for the fiscal 2020 first quarter, as compared to a GAAP operating loss of $(1.5) million in the comparable period in fiscal 2019, an improvement of $3.0 million. Non-GAAP operating income was $3.1 million for the fiscal 2020 first quarter, as compared to a non-GAAP operating loss of $(0.4) million for the comparable fiscal 2019 period, an improvement of $3.5 million.

The Company reported GAAP net income of $0.1 million in the fiscal 2020 first quarter or an income of $0.01 per share. This compares to a GAAP net loss of $(0.8) million or a loss of $(0.14) per share in the fiscal 2019 first quarter. Non-GAAP net income for the fiscal 2020 first quarter was $2.9 million or an income of $0.52 per share. This compares to a non-GAAP net loss of $(0.6) million or a loss of $(0.12) per share in the comparable fiscal 2019 period.

Adjusted EBITDA for the fiscal 2020 first quarter was $4.1 million, compared to Adjusted EBITDA of $0.9 million in the comparable fiscal 2019 period, an increase of $3.2 million year-over-year.

The Company also reported cash and cash equivalents as of September 27, 2019 of $34.5 million, as compared to $31.9 million as of June 28, 2019, an increase of $2.5 million. The Company anticipates its cash position will improve throughout the remainder of the fiscal year, subject to customer timing delays, which may occur from time to time based on historical trends. On a full-year basis, the Company is confident that its cash position will improve year-over-year.

Conference Call Details
Aviat Networks will host a conference call at 4:30 p.m. Eastern Time (ET) today, November 7, 2019 to discuss its financial results for the fiscal 2020 first quarter. Speaking from management will be Stan Gallagher, Interim Chief Executive Officer and Chief Operating Officer; Shaun McFall, Senior Vice President of Corporate Development; and Eric Chang, Senior Vice President and Principal Accounting Officer. Following management's remarks, there will be a question and answer period. 

To listen to the live conference call, please dial toll-free (US/CAN) 866-465-7577 or toll-free (INTL) 786-815-8431, conference ID: 8480198. We ask that you dial-in approximately 10 minutes prior to the start time. Additionally, participants are invited to listen via webcast, which will be broadcasted live and via replay approximately two hours after the call is completed at http://investors.aviatnetworks.com/events-and-presentations/events.

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

Forward-Looking Statements

The information contained in this document includes forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933 including Aviat Networks' beliefs and expectations regarding business conditions, new product solutions, customer positioning, revenue, future orders, bookings, new contracts, cost structure, operating income, profitability in fiscal 2020, process improvements, realignment plans and review of strategic alternatives. All statements, trend analyses and other information contained herein regarding the foregoing beliefs and expectations, as well as about the markets for the services and products of Aviat Networks 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 Networks regarding the future of our 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:

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

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

Investor Relations:
Glenn Wiener / Tel: 212-786-6011 / Email: gwiener@GWCco.com

 

Table 1

AVIAT NETWORKS, INC.

Fiscal Year 2020 First Quarter Summary

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



Three Months Ended

(In thousands, except per share amounts)

September 27,
 2019


June 28, 2019


September 28,
 2018

Revenues:






Revenue from product sales

$

36,594



41,028



$

39,125


Revenue from services

22,020



23,201



21,379


Total revenues

58,614



64,229



60,504


Cost of revenues:






Cost of product sales

20,822



26,847



26,799


Cost of services

15,236



14,782



15,780


Total cost of revenues

36,058



41,629



42,579


Gross margin

22,556



22,600



17,925


Operating expenses:






Research and development expenses

5,216



5,508



4,937


Selling and administrative expenses

14,644



14,650



13,706


Restructuring charges (recovery)

1,177



(60)



796


Total operating expenses

21,037



20,098



19,439


Operating income (loss)

1,519



2,502



(1,514)


Interest income

86



100



51


Interest expense

(3)



(14)



(5)


Other income, net



18




Income (loss) before income taxes

1,602



2,606



(1,468)


Provision for (benefit from) income taxes

1,548



(1,233)



(718)


Net income (loss)

$

54



$

3,839



$

(750)








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






Basic

$

0.01



0.71



$

(0.14)


Diluted

$

0.01



0.69



$

(0.14)


Weighted-average shares outstanding:






Basic

5,347



5,370



5,366


Diluted

5,530



5,578



5,366















 

 

Table 2

AVIAT NETWORKS, INC.

Fiscal Year 2020 First Quarter Summary

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands)

September 27,
 2019


June 28,
 2019

ASSETS




Current Assets:




Cash and cash equivalents

$

34,485



$

31,946


Accounts receivable, net

43,198



51,937


Unbilled receivables

30,378



27,780


Inventories

11,111



8,573


Customer service inventories

1,077



936


Other current assets

5,718



4,825


Total current assets

125,967



125,997


Property, plant and equipment, net

17,478



17,255


Deferred income taxes

13,930



13,864


Right of use assets

6,696




Other assets

12,262



12,077


Total long-term assets

50,366



43,196


TOTAL ASSETS

$

176,333



$

169,193


LIABILITIES AND EQUITY




Current Liabilities:




Short-term debt

$

9,000



$

9,000


Accounts payable

31,834



35,605


Accrued expenses

23,284



22,555


Short-term lease liabilities

4,194




Advance payments and unearned revenue

18,030



13,962


Restructuring liabilities

1,975



1,089


Total current liabilities

88,317



82,211


Unearned revenue

8,859



9,662


Long-term lease liabilities

2,806




Other long-term liabilities

610



820


Reserve for uncertain tax positions

4,957



3,606


Deferred income taxes

810



1,378


Total liabilities

106,359



97,677


Equity:




Preferred stock




Common stock

54



54


Additional paid-in-capital

814,113



815,196


Accumulated deficit

(730,944)



(730,998)


Accumulated other comprehensive loss

(13,249)



(12,736)


Total equity

69,974



71,516


TOTAL LIABILITIES AND EQUITY

$

176,333



$

169,193


 

AVIAT NETWORKS, INC.
Fiscal Year 2020 First 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 (loss) 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 2020 First Quarter Summary

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1)

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended


September 27,
2019


% of
Revenue


June 28, 2019


% of
Revenue


September 28,
2018


% of
Revenue


(In thousands, except percentages and per share amounts)

GAAP gross margin

$

22,556



38.5

%


$

22,600



35.2

%


$

17,925



29.6

%

WTM inventory write-down recovery





(65)





(88)




Share-based compensation

44





26





48




Non-GAAP gross margin

22,600



38.6

%


22,561



35.1

%


17,885



29.6

%













GAAP research and development expenses

$

5,216



8.9

%


$

5,508



8.6

%


$

4,937



8.2

%

Share-based compensation

(27)





(27)





(36)




Non-GAAP research and development expenses

5,189



8.9

%


5,481



8.5

%


4,901



8.1

%













GAAP selling and administrative expenses

$

14,644



25.0

%


$

14,650



22.8

%


$

13,706



22.7

%

Share-based compensation

(336)





(274)





(352)




Strategic alternative costs





(102)








Non-GAAP selling and administrative expenses

14,308



24.4

%


14,274



22.2

%


13,354



22.1

%













GAAP operating income (loss)

$

1,519



2.6

%


$

2,502



3.9

%


$

(1,514)



(2.5)

%

WTM inventory write-down recovery





(65)





(88)




Share-based compensation

407





327





436




Strategic alternative costs





102








Restructuring charges (recovery)

1,177





(60)





796




Non-GAAP operating income (loss)

3,103



5.3

%


2,806



4.4

%


(370)



(0.6)

%













GAAP income tax provision (benefit)

$

1,548



2.6

%


$

(1,233)



(1.9)

%


$

(718)



(1.2)

%

Tax receivable from Department of Federal Revenue of Brazil









1,646




Release of valuation allowance





432








Adjustment to reflect pro forma tax rate

(1,248)





1,101





(628)




Non-GAAP income tax provision

300



0.5

%


300



0.5

%


300



0.5

%













GAAP net income (loss)

$

54



0.1

%


$

3,839



6.0

%


$

(750)



(1.2)

%

Share-based compensation

407





327





436




Strategic alternative costs





102








Restructuring charges (recovery)

1,177





(60)





796




WTM inventory write-down recovery





(65)





(88)




Release of valuation allowance





(432)








Tax receivable from Department of Federal Revenue of Brazil









(1,646)




Adjustment to reflect pro forma tax rate

1,248





(1,101)





628




Non-GAAP net income (loss)

$

2,886



4.9

%


$

2,610



4.1

%


$

(624)



(1.0)

%













Diluted net income (loss) per share:

GAAP

$

0.01





$

0.69





$

(0.14)




Non-GAAP

$

0.52





$

0.47





$

(0.12)
















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

GAAP

5,530





5,578





5,366




Non-GAAP

5,530





5,578





5,366
















Adjusted EBITDA:












GAAP net income (loss)

$

54



0.1

%


$

3,839



6.0

%


$

(750)



(1.2)

%

Depreciation and amortization of property, plant and equipment

1,038





1,060





1,288




Interest income, net

(83)





(86)





(46)




Share-based compensation

407





327





436




Strategic alternative costs





102








Restructuring charges (recovery)

1,177





(60)





796




WTM inventory write-down recovery





(65)





(88)




Provision (benefit from) for income taxes

1,548





(1,233)





(718)




Adjusted EBITDA

$

4,141



7.1

%


$

3,884



6.0

%


$

918



1.5

%




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

 

 

Table 4

AVIAT NETWORKS, INC.

Fiscal Year 2020 First Quarter Summary

SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA

(Unaudited)



Three Months Ended


September 27,
 2019


June 28, 2019


September 28,
 2018


(In thousands)

North America

$

39,767



$

39,224



$

27,763


International:






Africa and the Middle East

10,593



9,247



14,147


Europe and Russia

3,407



6,662



3,712


Latin America and Asia Pacific

4,847



9,096



14,882



18,847



25,005



32,741


Total revenue

$

58,614



$

64,229



$

60,504


 

 

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