Aviat Networks Announces Fiscal 2020 Second Quarter and Six Months Financial Results

February 6, 2020 at 4:01 PM EST

AUSTIN, Texas, Feb. 6, 2020 /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 2020 second quarter and six months ended December 27, 2019.

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

Pete Smith, Aviat Networks' President and Chief Executive Officer stated, "As we announced on January 22nd, our fiscal 2020 second quarter results were adversely impacted by a cyberattack at one of our contract manufacturing vendors, which constrained capacity by approximately three weeks and led to lower than expected results. However, the issue has been fully remediated, our competitive position continues to improve, and our outlook remains largely intact."

Mr. Smith continued, "Through the first half of fiscal 2020, North America revenue is up over 17% and orders even more so given the momentum we have and continue to build. We are laser-focused on supporting our customers, creating new opportunities across multiple vertical segments and we believe market dynamics are becoming more favorable for our solutions. Internationally, we knew revenue would be impacted by the spending environment in Africa, which was the case, though we are anticipating an increase in orders in the second half of the year based on conversations with customers and a strong start to the fiscal 2020 third quarter. The APAC region is what really drove international revenue down year-over-year, though it's important to note the strength we had in fiscal 2019, and the new 5G-related business that we have been awarded. This should favorably impact our results towards the end of fiscal 2020 and in the years that follow. For the full fiscal year, we still anticipate a modest decline in revenue, stronger gross margins, an increase in profitability, and ongoing improvements in our cash position and balance sheet. Even with the cyber attack's impact on our first-half results, we believe we are in position to deliver $11 million to $12 million of Adjusted EBITDA."

Fiscal 2020 Second Quarter and Six-Month Comparisons
The Company reported total revenues of $56.0 million for its fiscal 2020 second quarter, as compared to $65.1 million in the comparable fiscal 2019 period, a decrease of $9.1 million or 14%. North America revenue of $36.5 million declined by $0.8 million or 2.3%, as compared to $37.3 million in the fiscal 2019 second quarter, though North America bookings increased in the comparable second quarters. International revenue of $19.5 million declined by $8.2 million or 29.7%, as compared to $27.8 million in the comparable year-ago period. The decline in international revenue was anticipated given the current spending environment in Africa, as well as higher order volumes in the APAC region in the prior fiscal year period. The Company anticipates an improvement in both revenue and orders in these regions in the second half of fiscal 2020.

For the six months ended December 27, 2019, the Company reported total revenues of $114.6 million, as compared to $125.6 million in the comparable fiscal 2019 period. North America revenue of $76.2 million increased by $11.2 million or 17.1%, as compared to $65.1 million in the comparable fiscal 2019 period. International revenue of $38.4 million for the fiscal 2020 six-month period declined by $22.1 million or 36.6%, as compared to $60.5 million in the comparable fiscal 2019 period. Similar to the Company's quarterly results comparisons, the primary drivers for the decline were higher sales in Africa and APAC in the fiscal 2019 period.

In the fiscal 2020 second quarter, the Company reported GAAP gross margin of 32.7% and non-GAAP gross margin of 32.8%. This compares to GAAP and non-GAAP gross margin of 34.6% in the comparable fiscal 2019 period, a decline of 190 basis points and 180 basis points, respectively.

For the six months ended December 27, 2019, the Company reported GAAP and non-GAAP gross margin of 35.7%. This compares to GAAP and non-GAAP gross margin of 32.2% in the comparable fiscal 2019 period, an improvement of 350 basis points.

GAAP total operating expenses for the fiscal 2020 second quarter were $19.8 million, as compared to $19.6 million in the comparable fiscal 2019 period, an increase of $0.2 million or 1.1%. Non-GAAP total operating expenses, excluding the impact of restructuring charges and share-based compensation, for the fiscal 2020 second quarter were $19.1 million, as compared to $19.2 million in the comparable fiscal 2019 period, a decrease of $0.1 million or 0.4%. Non-GAAP operating expenses decreased primarily due to a decline in research and development expenses, partially offset by higher selling and administrative expenses. 

The Company reported GAAP total operating expenses for the fiscal 2020 six-month period of $40.9 million, as compared to $39.0 million in the comparable fiscal 2019 period, an increase of $1.8 million or 4.6%. On a non-GAAP basis, excluding the impact of restructuring charges and share-based compensation, total operating expenses for the fiscal 2020 six-month period were $38.6 million, as compared to $37.4 million in the fiscal 2019 period, an increase of $1.2 million or 3.1%. Non-GAAP operating expenses increased primarily due to employee-related expenses.   

The Company reported a GAAP operating loss of $(1.5) million for the fiscal 2020 second quarter, as compared to GAAP operating income of $2.9 million in the comparable period in fiscal 2019. On a non-GAAP basis, the Company reported an operating loss of $(0.7) million, as compared to non-GAAP operating income of $3.4 million for the fiscal 2020 and fiscal 2019 second quarters, respectively.

For the fiscal 2020 six-month period, the Company reported break-even in GAAP operating income, as compared to $1.4 million in the comparable fiscal 2019 period. On a non-GAAP basis, the Company reported operating income of $2.4 million and $3.0 million for the six-month periods in fiscal 2020 and fiscal 2019, respectively.

The Company reported a GAAP net loss of $(1.7) million in the fiscal 2020 second quarter or a GAAP net loss per share of $(0.31). This compared to GAAP net income of $2.3 million or GAAP net income per share of $0.41 in the fiscal 2019 second quarter. On a non-GAAP basis, the Company reported a net loss of $(0.9) million or a non-GAAP net loss per share of $(0.17), as compared to non-GAAP net income of $3.1 million or non-GAAP net income per share of $0.54 in the comparable fiscal 2019 period.

The Company reported a GAAP net loss of $(1.6) million for the fiscal 2020 six-month period, or a GAAP net loss per share of $(0.30). This compared to GAAP net income of $1.6 million or GAAP net income per share of $0.28 in the comparable fiscal 2019 period. On a non-GAAP basis, the Company reported net income of $2.0 million or net income per share of $0.36, as compared to non-GAAP net income of $2.4 million or $0.43 per share in the comparable fiscal 2019 period.

Adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") for the fiscal 2020 second quarter was $0.4 million, as compared to Adjusted EBITDA of $4.5 million in the comparable fiscal 2019 period. For the six months ended December 27, 2019, the Company reported Adjusted EBITDA of $4.5 million, as compared to $5.4 million in the comparable fiscal 2019 period.

As discussed in the Company's January 22, 2020 press release and in its Form 8-K on file with the Securities and Exchange Commission, capacity constraints caused by a cyberattack at one of the Company's contract manufacturers, and higher sales commissions based on stronger than anticipated bookings, among other factors, had the most direct impact on non-GAAP operating income and Adjusted EBITDA in the fiscal 2020 second quarter.

The Company reported cash and cash equivalents as of December 27, 2019 of $38.1 million, as compared to $31.9 million as of June 28, 2019, an increase of $6.1 million. Sequentially, cash and cash equivalents increased by approximately $3.6 million, as compared to the fiscal 2020 first quarter ended September 27, 2019. The Company anticipates further increases in its cash position throughout fiscal 2020.

Conference Call Details
Aviat Networks will host a conference call at 4:30 p.m. Eastern Time (ET) today, February 6, 2020, to discuss its financial results for the fiscal 2020 second quarter. Speaking from management will be Pete Smith, President and Chief Executive Officer; Stan Gallagher, Chief Operating Officer and Principal Financial Officer; 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: 5856665. 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 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, Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933 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 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 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:

  • 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; 
  • Aviat's ability to meet financial covenant requirements which could impact, among other things, its liquidity; 
  • the timing of Aviat's receipt of payment for products or services from its customers; 
  • Aviat's ability to meet projected new product development dates or anticipated cost reductions of new products; 
  • Aviat's 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 Aviat's subcontractors to timely perform; 
  • continued weakness in the global economy affecting customer spending; 
  • retention of Aviat's key personnel; 
  • Aviat's ability to manage and maintain key customer relationships; 
  • uncertain economic conditions in the telecommunications sector combined with operator and supplier consolidation; 
  • Aviat's failure to protect its intellectual property rights or defend against intellectual property infringement claims by others; 
  • the results of restructuring efforts; 
  • the ability to preserve and use Aviat's 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 Aviat has significant business; and 
  • Aviat's ability to implement its stock repurchase program or that it will enhance long-term stockholder value.

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 27, 2019 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:
Glenn Wiener / Tel: 212-786-6011 / Email: gwiener@GWCco.com

 

Table 1

AVIAT NETWORKS, INC.

Fiscal Year 2020 Second Quarter Summary

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)






Three Months Ended


Six Months Ended

(In thousands, except per share amounts)

December 27,
 2019


December 28,
 2018


December 27,
 2019


December 28,
 2018

Revenues:








Revenue from product sales

$

34,152



$

41,956



$

70,746



$

81,081


Revenue from services

21,845



23,132



43,865



44,511


Total revenues

55,997



65,088



114,611



125,592


Cost of revenues:








Cost of product sales

22,968



26,159



43,790



52,958


Cost of services

14,710



16,439



29,946



32,219


Total cost of revenues

37,678



42,598



73,736



85,177


Gross margin

18,319



22,490



40,875



40,415


Operating expenses:








Research and development expenses

4,978



5,316



10,194



10,253


Selling and administrative expenses

14,457



14,291



29,101



27,997


Restructuring charges

381





1,558



796


Total operating expenses

19,816



19,607



40,853



39,046


Operating (loss) income

(1,497)



2,883



22



1,369


Interest income

120



43



206



94


Interest expense

(1)



(76)



(4)



(81)


(Loss) income before income taxes

(1,378)



2,850



224



1,382


Provision for (benefit from) income taxes

293



540



1,841



(178)


Net (loss) income

$

(1,671)



$

2,310



$

(1,617)



$

1,560










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








Basic

$

(0.31)



$

0.43



$

(0.30)



$

0.29


Diluted

$

(0.31)



$

0.41



$

(0.30)



$

0.28


Weighted-average shares outstanding:








Basic

5,427



5,397



5,387



5,382


Diluted

5,427



5,627



5,387



5,663



 

 

Table 2

AVIAT NETWORKS, INC.

Fiscal Year 2020 Second Quarter Summary

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands)

December 27,
 2019


June 28,
 2019

ASSETS




Current Assets:




Cash and cash equivalents

$

38,067



$

31,946


Accounts receivable, net

44,387



51,937


Unbilled receivables

27,343



27,780


Inventories

13,300



8,573


Customer service inventories

1,174



936


Other current assets

6,055



4,825


Total current assets

130,326



125,997


Property, plant and equipment, net

17,800



17,255


Deferred income taxes

13,818



13,864


Right of use assets

5,592




Other assets

12,283



12,077


Total long-term assets

49,493



43,196


TOTAL ASSETS

$

179,819



$

169,193


LIABILITIES AND EQUITY




Current Liabilities:




Short-term debt

$

9,000



$

9,000


Accounts payable

38,344



35,605


Accrued expenses

22,071



22,555


Short-term lease liabilities

3,310




Advance payments and unearned revenue

19,137



13,962


Restructuring liabilities

1,688



1,089


Total current liabilities

93,550



82,211


Unearned revenue

8,726



9,662


Long-term lease liabilities

2,590




Other long-term liabilities

610



820


Reserve for uncertain tax positions

5,062



3,606


Deferred income taxes

814



1,378


Total liabilities

111,352



97,677


Equity:




Preferred stock




Common stock

54



54


Additional paid-in-capital

813,867



815,196


Accumulated deficit

(732,615)



(730,998)


Accumulated other comprehensive loss

(12,839)



(12,736)


Total equity

68,467



71,516


TOTAL LIABILITIES AND EQUITY

$

179,819



$

169,193


 

AVIAT NETWORKS, INC.

Fiscal Year 2020 Second 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 Second Quarter Summary

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (1)

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended


Six Months Ended



December 27,
2019


% of
Revenue


December 28,
2018


% of
Revenue


December 27,
2019


% of
Revenue


December 28,
2018


% of
Revenue


(In thousands, except percentages and per share amounts)


GAAP gross margin

$

18,319



32.7

%


$

22,490



34.6

%


$

40,875



35.7

%


$

40,415



32.2

%

WTM inventory write-down recovery





(2)









(90)




Share-based compensation

52





52





96





100




Non-GAAP gross margin

18,371



32.8

%


22,540



34.6

%


40,971



35.7

%


40,425



32.2

%

















GAAP research and development expenses

$

4,978



8.9

%


$

5,316



8.2

%


$

10,194



8.9

%


$

10,253



8.2

%

Share-based compensation

(32)





(45)





(59)





(81)




Non-GAAP research and development expenses

4,946



8.8

%


5,271



8.1

%


10,135



8.8

%


10,172



8.1

%

















GAAP selling and administrative expenses

$

14,457



25.8

%


$

14,291



22.0

%


$

29,101



25.4

%


$

27,997



22.3

%

Share-based compensation

(317)





(405)





(653)





(757)




Non-GAAP selling and administrative
expenses

14,140



25.3

%


13,886



21.3

%


28,448



24.8

%


27,240



21.7

%

















GAAP operating (loss) income

$

(1,497)



(2.7)

%


$

2,883



4.4

%


$

22



%


$

1,369



1.1

%

WTM inventory write-down recovery





(2)









(90)




Share-based compensation

401





502





808





938




Restructuring charges

381









1,558





796




Non-GAAP operating (loss) income

(715)



(1.3)

%


3,383



5.2

%


2,388



2.1

%


3,013



2.4

%

















GAAP income tax provision (benefit)

$

293



0.5

%


$

540



0.8

%


$

1,841



1.6

%


$

(178)



(0.1)

%

Tax receivable from Department of Federal Revenue of Brazil













1,646




Adjustment to reflect pro forma tax rate

7





(240)





(1,241)





(868)




Non-GAAP income tax provision

300



0.5

%


300



0.5

%


600



0.5

%


600



0.5

%

















GAAP net (loss) income

$

(1,671)



(3.0)

%


$

2,310



3.5

%


$

(1,617)



(1.4)

%


$

1,560



1.2

%

Share-based compensation

401





502





808





938




Restructuring charges

381









1,558





796




WTM inventory write-down recovery





(2)









(90)




Tax receivable from Department of Federal Revenue of Brazil













(1,646)




Adjustment to reflect pro forma tax rate

(7)





240





1,241





868




Non-GAAP net (loss) income

$

(896)



(1.6)

%


$

3,050



4.7

%


$

1,990



1.7

%


$

2,426



1.9

%

















Diluted net (loss) income per share:


GAAP

$

(0.31)





$

0.41





$

(0.30)





$

0.28




Non-GAAP

$

(0.17)





$

0.54





$

0.36





$

0.43




















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


GAAP

5,427





5,627





5,387





5,663




Non-GAAP

5,427





5,627





5,488





5,663




















Adjusted EBITDA:
















GAAP net (loss) income

$

(1,671)



(3.0)

%


$

2,310



3.5

%


$

(1,617)



(1.4)

%


$

1,560



1.2

%

Depreciation and amortization of property, plant and equipment

1,077





1,096





2,115





2,384




Interest (income) expense

(119)





33





(202)





(13)




Share-based compensation

401





502





808





938




Restructuring charges

381









1,558





796




WTM inventory write-down recovery





(2)









(90)




Provision for (benefit from) for income taxes

293





540





1,841





(178)




Adjusted EBITDA

$

362



0.6

%


$

4,479



6.9

%


$

4,503



3.9

%


$

5,397



4.3

%





























































(1)

The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by us. Our non-GAAP net (loss) income 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 (loss) 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 2020 Second Quarter Summary

SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA

(Unaudited)



Three Months Ended


Six Months Ended


December 27,
 2019


December 28,
 2018


December 27,
 2019


December 28,
 2018


(In thousands)

North America

$

36,472



$

37,316



$

76,239



$

65,079


International:








Africa and the Middle East

8,856



13,832



19,449



27,979


Europe and Russia

2,418



3,233



5,825



6,945


Latin America and Asia Pacific

8,251



10,707



13,098



25,589



19,525



27,772



38,372



60,513


Total revenue

$

55,997



$

65,088



$

114,611



$

125,592


 

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SOURCE Aviat Networks, Inc.

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