May 10, 2017

Aviat Networks Announces Third Quarter of Fiscal 2017 Financial Results

MILPITAS, Calif., May 10, 2017 /PRNewswire/ --

  • GAAP operating income of $0.1 million represents a $7.7 million improvement year-over-year, Non-GAAP operating income of $0.7 million represents a $7.0 million improvement year-over-year
  • GAAP net loss of $0.4 million represents a $7.5 million improvement year-over-year
  • Adjusted EBITDA of $2.0 million represents a $6.8 million improvement year-over-year
  • Revenue of $58.7 million declined year-over-year by 2.9% as some projects were pushed into fiscal 2018
  • Balance sheet continues to strengthen; cash and cash equivalents grew by $4.9 million in the quarter and $9.4 million since the end of fiscal year 2016
  • Aviat Networks anticipates positive Adjusted EBITDA in its fiscal 2017 fourth quarter, expects a slight loss on a GAAP basis and positive non-GAAP operating income for the full fiscal year

Aviat Networks, Inc. Logo

Aviat Networks, Inc. (NASDAQ: AVNW), ("Aviat Networks" or "the Company"), the leading expert in microwave networking solutions, today reported financial results for its fiscal 2017 third quarter ended March 31, 2017.

Commenting on the Company's fiscal 2017 third quarter results, Michael Pangia, President and Chief Executive Officer of Aviat Networks stated, "Generating consistent profitability, and building our cash position remain top priorities, and during the quarter, we accomplished both. We reported positive operating income and Adjusted EBITDA. We also increased our net cash position by $4.9 million, while generating $5.1 million in cash from operations. Gross margins remain above 30% and we took steps to further optimize our business and lower our fixed costs. While revenue and bookings were lower than initially expected, much of this was due to timing. In fiscal 2018, we anticipate the Company will return to top-line growth while further improving profitability."

Fiscal 2017 Third Quarter Results Comparisons

The Company reported total revenues of $58.7 million for its fiscal 2017 third quarter as compared to $60.5 million in the comparable fiscal 2016 period, a decline of $1.8 million or 2.9%.  The year-over-year decline in revenue is primarily related to a decline in international revenue offset in part by an increase in North America revenue.

GAAP gross margins for the fiscal 2017 third quarter were 30.2% as compared to 23.8% in the fiscal 2016 third quarter, an improvement of approximately 640 basis points. Non-GAAP gross margins for the fiscal 2017 third quarter were 30.2% as compared to 23.9% in the fiscal 2016 third quarter, an increase of 630 basis points. Both GAAP and Non-GAAP gross margin percentage improvements were primarily driven by better efficiencies within the Company's services business combined with process enhancements within supply chain operations.

GAAP total operating expenses for the fiscal 2017 third quarter were $17.7 million as compared to $22.0 million reported in the fiscal 2016 third quarter, a reduction of $4.3 million or 19.8%. Non-GAAP total operating expenses for the fiscal 2017 third quarter, excluding the impact of share-based compensation, were $17.0 million as compared to $20.8 million reported in the fiscal 2016 third quarter, a reduction of $3.8 million or 18.1%. The improvements in both GAAP and Non-GAAP operating expenses were driven by recoveries of bad debt expenses, and continued reductions in overhead expenses.

GAAP operating income was $0.1 million for the fiscal 2017 third quarter as compared to a GAAP operating loss of $7.6 million for the comparable fiscal 2016 period, an improvement of $7.7 million. Non-GAAP operating income was $0.7 million for the fiscal 2017 third quarter as compared to a Non-GAAP operating loss of $6.3 million for the comparable fiscal 2016 period, an improvement of $7.0 million. The Company reported a GAAP net loss from continuing operations of $0.4 million, or a loss of $0.08 per basic and diluted share and Non-GAAP income from continuing operations of $0.4 million or income of $0.07 per basic and diluted share. This compares to a GAAP loss from continuing operations of $8.0 million or a loss of $1.52 per basic and diluted share for the comparable year-ago period, and a Non-GAAP loss from continuing operations attributable to Aviat Networks of $6.6 million or a loss of $1.26 per diluted share for the comparable fiscal 2016 period.

Adjusted EBITDA for the fiscal 2017 third quarter was $2.0 million, compared with an Adjusted EBITDA loss of $4.7 million in the comparable fiscal 2016 period, an improvement of $6.8 million.

Cash and cash equivalents were $39.9 million as of March 31, 2017 as compared to $30.5 million as of July 1, 2016, an improvement of $9.4 million. Additionally, cash and cash equivalents increased $4.9 million during the quarter as compared to $35.0 million reported at the end of the fscal 2017 second quarter.

Fiscal 2017 Fourth Quarter Outlook

The Company today provided updates on its outlook for the fiscal 2017 fourth quarter.  Revenue is expected to be in the range of $57.0 - $62.0 million.  The Company's revised outlook is based primarily on the timing of certain projects which were pushed back to early fiscal 2018.  Non-GAAP gross margins are still anticipated to be approximately 30.0%, and non-GAAP operating expenses are now expected to be in the range of $18.0 - $18.5 million in the fiscal 2017 fourth quarter.  As such, the Company anticipates it will operate near break-even on a non-GAAP operating basis while posting positive Adjusted EBITDA in the fiscal 2017 fourth quarter.

For the full fiscal year ended June 30, 2017, the Company expects revenue to be between $242.0 and $247.0 million.  With the significant improvements in both gross margins and operating expenses as compared to fiscal 2016, the Company anticipates it will generate positive non-GAAP operating income in fiscal 2017 compared to a non-GAAP operating loss of $18.1 million in fiscal 2016.  Furthermore, the Company expects to post positive Adjusted EBITDA in fiscal 2017, compared to an Adjusted EBITDA loss of $11.5 million in fiscal 2016.

A reconciliation of GAAP to Non-GAAP financial measures for the third quarter of fiscal 2017 along with the accompanying notes is provided in Table 3 below.

Conference Call Details

Aviat Networks will host a conference call at 4:30 p.m. Eastern Time (ET) on May 10, 2017 to discuss its financial results for the fiscal 2017 third quarter. To listen to the live conference call, please dial toll free (US/CAN) (866) 562-9910, (INTL) (661) 378-9805, conference ID: 15018986. Investors are invited to listen via webcast, which will be broadcasted live and via replay approximately two hours after the call at http://investors.aviatnetworks.com/events.cfm.

Non-GAAP Measures and Comparative Financial Information

Aviat Networks, Inc. reports information in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Management of Aviat Networks monitors gross margin, research and development expenses, selling and administrative expenses, operating income (loss), income tax provision, (loss)  income from continuing operations attributable to Aviat Networks, basic and diluted net (loss) income per share from continuing operations attributable to Aviat Networks, adjusted income (loss) before interest, tax, depreciation and amortization ("Adjusted EBITDA") attributable to Aviat Networks adjusted to exclude certain costs, charges, gains and losses, on a non-GAAP basis for planning and forecasting results in future periods, and may use these measures for some management compensation purposes. These measures exclude certain costs, expenses, gains and losses as shown on the attached Reconciliation of Non-GAAP Financial Measures table (Table 3). As a result, management is presenting these non-GAAP measures in addition to results reported in accordance with GAAP to better communicate underlying operational and financial performance in each period. Management believes these non-GAAP 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 given period. Management also believes that these non-GAAP measures enhance the ability of an investor to analyze trends in Aviat Networks' business and to better understand our performance. Aviat Networks' management does not, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Aviat Networks presents these non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate its financial performance. Reconciliations of these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP are included in the tables below.

About Aviat Networks

Aviat Networks, Inc. works to provide dependable products, services and support to our 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 50 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 Twitter, Facebook 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 2017, 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; and
  • the impact of political turmoil in countries where we have significant business.

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 September 9, 2016 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, GW Communications for Aviat Networks, Inc.
Tel: 212-786-6011 / Investorinfo@aviatnet.com or GWiener@GWCco.com

 

Table 1
AVIAT NETWORKS, INC.
Fiscal Year 2017 Third Quarter Summary
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)






Three Months Ended


Nine Months Ended

(In thousands, except per share amounts)

March 31,

 2017


April 1,

 2016


March 31,

 2017


April 1,

 2016

Revenues:








Revenue from product sales

$

39,099



$

36,241



$

119,781



$

134,602


Revenue from services

19,601



24,226



65,662



75,836


Total revenues

58,700



60,467



185,443



210,438


Cost of revenues:








Cost of product sales

26,911



28,454



82,774



98,962


Cost of services

14,057



17,600



46,456



59,628


Total cost of revenues

40,968



46,054



129,230



158,590


Gross margin

17,732



14,413



56,213



51,848


Operating expenses:








Research and development expenses

4,264



5,063



13,682



15,749


Selling and administrative expenses

13,284



16,140



42,527



49,430


Restructuring charges

111



804



343



859


Total operating expenses

17,659



22,007



56,552



66,038


Operating income (loss)

73



(7,594)



(339)



(14,190)


Interest income

42



58



168



195


Interest expense

(7)



(5)



(28)



(98)


Other income

341





164




Income (loss) from continuing operations before income taxes

449



(7,541)



(35)



(14,093)


Provision for (benefit from) income taxes

779



361



(826)



856


(Loss) income from continuing operations

(330)



(7,902)



791



(14,949)


Income from discontinued operations, net of tax



94





453


Net (loss) income

(330)



(7,808)



791



(14,496)


Net income attributable to noncontrolling interests, net of tax

69



66



141



260


Net (loss) income attributable to Aviat Networks

$

(399)



$

(7,874)



$

650



$

(14,756)










Amount attributable to Aviat Networks:








Net (loss) income from continuing operations, net of tax

$

(399)



$

(7,968)



$

650



$

(15,209)


Net income from discontinued operations, net of tax

$



$

94



$



$

453










Basic (loss) income per share attributable to Aviat Networks' common stockholders:

Continuing operations

$

(0.08)



$

(1.52)



$

0.12



$

(2.91)


Discontinued operations

$



$

0.02



$



$

0.09


Net (loss) income

$

(0.08)



$

(1.50)



$

0.12



$

(2.82)


Weighted average shares outstanding, basic

5,310



5,255



5,286



5,230










Diluted (loss) income per share attributable to Aviat Networks' common stockholders:

Continuing operations

$

(0.08)



$

(1.52)



$

0.12



$

(2.91)


Discontinued operations

$



$

0.02



$



$

0.09


Net (loss) income

$

(0.08)



$

(1.50)



$

0.12



$

(2.82)


Weighted average shares outstanding, diluted

5,310



5,255



5,392



5,230


 

Table 2
AVIAT NETWORKS, INC.
Fiscal Year 2017 Third Quarter Summary
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)





(In thousands)

March 31,

 2017


July 1,

 2016

ASSETS




Current Assets:




Cash and cash equivalents

$

39,910



$

30,479


Short-term investments

240



222


Accounts receivable, net

45,177



63,449


Unbilled costs

9,777



5,117


Inventories

20,338



27,293


Customer service inventories

2,178



3,064


Other current assets

11,147



10,790


Total current assets

128,767



140,414


Property, plant and equipment, net

15,713



18,162


Deferred income taxes

5,748



6,068


Other assets

1,296



1,467


Total long-term assets

22,757



25,697


TOTAL ASSETS

$

151,524



$

166,111


LIABILITIES AND EQUITY




Current Liabilities:




Short-term debt

$

8,000



$

9,000


Accounts payable

29,816



33,217


Accrued expenses

22,435



23,205


Advance payments and unearned income

23,218



30,615


Restructuring liabilities

1,691



3,910


Total current liabilities

85,160



99,947


Unearned income

7,561



8,387


Other long-term liabilities

1,047



1,409


Reserve for uncertain tax positions

1,411



1,414


Deferred income taxes

1,497



1,497


Total liabilities

96,676



112,654


Equity:




Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding




Common stock, $0.01 par value, 300,000,000 shares authorized, 5,314,860 shares issued and outstanding at March
31, 2017; 5,261,041 shares issued and outstanding at July 1, 2016

53



53


Additional paid-in-capital

813,120



811,601


Accumulated deficit

(746,731)



(747,381)


Accumulated other comprehensive loss

(12,076)



(11,157)


Total Aviat Networks stockholders' equity

54,366



53,116


Noncontrolling interests

482



341


Total equity

54,848



53,457


TOTAL LIABILITIES AND EQUITY

$

151,524



$

166,111


 

AVIAT NETWORKS, INC.
Fiscal Year 2017 Third Quarter Summary 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE

To supplement the consolidated financial statements presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we provide additional measures of gross margin, research and development expenses, selling and administrative expenses, operating income (loss), income tax provision, (loss) income from continuing operations attributable to Aviat Networks, diluted net (loss) income per share from continuing operations attributable to Aviat Networks, and adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") attributable to Aviat Networks, 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 2017 Third Quarter Summary
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1)
Condensed Consolidated Statements of Operations
(Unaudited)





Three Months Ended


Nine Months Ended


March 31,
2017


% of
Revenue


April 1,
2016


% of
Revenue  


March 31,
2017


% of
Revenue


April 1,
2016


% of
Revenue



(In thousands, except percentages and per share amounts)

GAAP gross margin

$

17,732


30.2

%


$

14,413



23.8

%


$

56,213


30.3

%


$

51,848


24.6

%

WTM inventory write-down recovery

(48)








(131)






Performance bond expense








365






Share-based compensation

48




44





151




125



Non-GAAP gross margin

17,732


30.2

%


14,457



23.9

%


56,598


30.5

%


51,973


24.7

%

















GAAP research and development expenses

$

4,264


7.3

%


$

5,063



8.4

%


$

13,682


7.4

%


$

15,749


7.5

%

Share-based compensation

(38)




(28)





(100)




(92)



Non-GAAP research and development expenses

4,226


7.2

%


5,035



8.3

%


13,582


7.3

%


15,657


7.4

%

















GAAP selling and administrative expenses

$

13,284


22.6

%


$

16,140



26.7

%


$

42,527


22.9

%


$

49,430


23.5

%

Share-based compensation

(479)




(388)





(1,260)




(1,165)



Non-GAAP selling and administrative expenses

12,805


21.8

%


15,752



26.1

%


41,267


22.3

%


48,265


22.9

%

















GAAP operating income (loss)

$

73


0.1

%


$

(7,594)



(12.6)%



$

(339)


(0.2)%



$

(14,190)


(6.7)%


WTM inventory write-down recovery

(48)








(131)






Performance bond expense








365






Share-based compensation

565




460





1,511




1,382



Restructuring charges

111




804





343




859



Non-GAAP operating income (loss)

701


1.2

%


(6,330)



(10.5)%



1,749


0.9

%


(11,949)


(5.7)%


















GAAP income tax provision

$

779


1.3

%


$

361



0.6

%


$

(826)


(0.4)%



$

856


0.4

%

Tax refund from Inland Revenue Authority of Singapore








3,741






Adjustment to reflect pro forma tax rate

(479)




(61)





(2,015)




44



Non-GAAP income tax provision

300


0.5

%


300



0.5

%


900


0.5

%


900


0.4

%

















GAAP (loss) income from continuing operations 
     attributable to Aviat Networks

$

(399)


(0.7)%



$

(7,968)



(13.2)%



$

650


0.4

%


$

(15,209)


(7.2)%


Share-based compensation

565




460





1,511




1,382



Restructuring charges

111




804





343




859



Nigeria FX (income) loss on dividend receivable

10








218






WTM inventory write-down recovery

(48)








(131)






Performance bond expense








365






Gain on liquidation of subsidiary

(349)








(349)






Tax refund from Inland Revenue Authority of 
     Singapore








(3,741)






Adjustment to reflect pro forma tax rate

479




61





2,015




(44)



Non-GAAP income (loss) from continuing 
     operations attributable to Aviat Networks

$

369


0.6

%


$

(6,643)



(11.0)%



$

881


0.5

%


$

(13,012)


(6.2)%


















Diluted (loss) income per share from continuing operations attributable to Aviat Networks stockholders


GAAP

$

(0.08)




$

(1.52)





$

0.12




$

(2.91)



Non-GAAP

$

0.07




$

(1.26)





$

0.16




$

(2.49)



















Shares used in computing diluted (loss) income per share from continuing operations


GAAP

5,310




5,255





5,392




5,230



Non-GAAP

5,511




5,255





5,392




5,230



















ADJUSTED EBITDA:
















GAAP (loss) income from continuing operations 
     attributable to Aviat Networks

$

(399)


(0.7)%



$

(7,968)



(13.2)%



$

650


0.4

%


$

(15,209)


(7.2)%


Depreciation and amortization of property, plant 
     and equipment

1,404




1,668





4,540




5,044



Interest

(35)




(53)





(140)




(97)



Share-based compensation

565




460





1,511




1,382



Restructuring charges

111




804





343




859



Nigeria FX (income) loss on dividend receivable

10








218






WTM inventory write-down recovery

(48)








(131)






Performance bond expense








365






Gain on liquidation of subsidiary

(349)








(349)






Provision for income taxes

779




361





(826)




856



Adjusted EBITDA attributable to Aviat 
     Networks

$

2,038


3.5

%


$

(4,728)



(7.8)%



$

6,181


3.3

%


$

(7,165)


(3.4)%



























_____________________________________________________















(1)       The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by us. Our non-GAAP income (loss) from continuing operations attributable to Aviat Networks 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 (loss) income from continuing operations attributable to Aviat Networks. 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 2017 Third Quarter Summary
SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA
(Unaudited)






Three Months Ended


Nine Months Ended


March 31,

 2017


April 1,

 2016


March 31,

 2017


April 1,

 2016


(In thousands)

North America

$

29,188



$

27,151



$

97,125



$

94,215


International:








Africa and Middle East

17,335



18,178



48,454



69,169


Europe and Russia

4,012



4,383



11,329



16,442


Latin America and Asia Pacific

8,165



10,755



28,535



30,612



29,512



33,316



$

88,318



$

116,223


Total Revenue

$

58,700



$

60,467



$

185,443



$

210,438


 

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SOURCE Aviat Networks

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