Aviat Networks(AVNW) - 2022 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended October 1, 2021, detailing balance sheets, income, cash flows, and equity with explanatory notes Condensed Consolidated Balance Sheets | Balance Sheet Items (In thousands) | October 1, 2021 | July 2, 2021 | | :--- | :--- | :--- | | Total current assets | $183,686 | $170,239 | | TOTAL ASSETS | $308,919 | $297,653 | | Total current liabilities | $103,240 | $96,369 | | Total liabilities | $121,007 | $114,318 | | Total equity | $187,912 | $183,335 | Condensed Consolidated Statements of Operations | Income Statement (In thousands, except per share) | Three Months Ended Oct 1, 2021 | Three Months Ended Oct 2, 2020 | | :--- | :--- | :--- | | Total revenues | $73,158 | $66,290 | | Gross margin | $26,081 | $24,249 | | Operating income | $6,814 | $6,565 | | Net income | $4,682 | $5,936 | | Basic EPS | $0.42 | $0.55 | | Diluted EPS | $0.39 | $0.54 | Condensed Consolidated Statements of Comprehensive Income (Loss) | Comprehensive Income (In thousands) | Three Months Ended Oct 1, 2021 | Three Months Ended Oct 2, 2020 | | :--- | :--- | :--- | | Net income | $4,682 | $5,936 | | Other comprehensive (loss) income | $(164) | $414 | | Comprehensive income | $4,518 | $6,350 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activities (In thousands) | Three Months Ended Oct 1, 2021 | Three Months Ended Oct 2, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $682 | $4,241 | | Net cash used in investing activities | $(349) | $(1,018) | | Net cash used in financing activities | $(804) | $(8,705) | | Net decrease in cash | $(658) | $(5,393) | Condensed Consolidated Statements of Equity - Total equity increased from $183.3 million at the beginning of the period to $187.9 million as of October 1, 2021, primarily driven by a net income of $4.7 million, partially offset by a $0.7 million stock repurchase and a $0.2 million other comprehensive loss[19] Notes to Condensed Consolidated Financial Statements - The company designs, manufactures, and sells wireless networking solutions globally, with financial statements prepared under U.S. GAAP for interim reporting[23][24] - A two-for-one stock split was effected on April 7, 2021, with all share and per-share amounts retrospectively reclassified[26] - As of October 1, 2021, remaining performance obligations totaled $82.0 million, with approximately 70% expected to be recognized as revenue within 12 months[67] - Motorola Solutions, Inc. was a significant customer, contributing 15% of total revenue for the three months ended October 1, 2021[71] - The company repurchased 22,543 shares for $0.7 million during the quarter, with $1.9 million remaining available under the stock repurchase program as of October 1, 2021[73] - Restructuring charges of $0.7 million were recorded in the first quarter of fiscal 2022 related to the Fiscal 2021 Plan, aimed at reducing operating costs[81][134] - The COVID-19 pandemic negatively impacted gross margin due to supply chain and logistical bottlenecks, which the company is actively monitoring[105][108] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2022 financial results, highlighting a 10.4% revenue increase to $73.2 million, a slight gross margin decline, and solid liquidity with $47.3 million cash Results of Operations Revenue by Region | Revenue by Region (In thousands) | Q1 FY2022 | Q1 FY2021 | % Change | | :--- | :--- | :--- | :--- | | North America | $50,937 | $45,499 | 12.0% | | Africa and the Middle East | $10,702 | $10,571 | 1.2% | | Europe and Russia | $2,703 | $2,262 | 19.5% | | Latin America and Asia Pacific | $8,816 | $7,958 | 10.8% | | Total revenue | $73,158 | $66,290 | 10.4% | Revenue by Type | Revenue by Type (In thousands) | Q1 FY2022 | Q1 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Product sales | $50,847 | $44,464 | 14.4% | | Services | $22,311 | $21,826 | 2.2% | | Total revenue | $73,158 | $66,290 | 10.4% | - Gross margin as a percentage of revenue decreased to 35.7% in Q1 FY2022 from 36.6% in the prior-year quarter, impacted by inflationary pressures and supply chain bottlenecks, partially offset by price increases[129] - Research and development (R&D) expenses increased by 21.9% to $5.9 million, primarily due to increased product development activities[131] - Selling and administrative (S&A) expenses decreased by 1.1% to $12.7 million, mainly due to savings from restructuring efforts[133] - Restructuring charges of $0.7 million were recognized in Q1 FY2022 related to the Fiscal 2021 Plan[134] Liquidity, Capital Resources, and Financial Strategies - As of October 1, 2021, total cash and cash equivalents were $47.3 million, with $23.2 million (48.9%) held by foreign subsidiaries[139] - Net cash provided by operating activities was $0.7 million for the first three months of fiscal 2022, a decrease from $4.2 million in the prior year, primarily due to changes in accounts receivable and accounts payable[140] - The company has a $25.0 million SVB Credit Facility, with $22.5 million available credit as of October 1, 2021, and no outstanding borrowings[144][145] - Existing cash, available credit, and future cash collections are expected to be sufficient for working capital and capital expenditure needs for at least the next 12 months[145] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from foreign currency and interest rate changes, using derivatives for hedging, with minimal expected impact from rate fluctuations - The company uses derivative instruments, specifically foreign exchange forward contracts, to reduce volatility in earnings and cash flows from foreign currency exchange rate changes[155] - As of October 1, 2021, no foreign currency forward contracts were outstanding[158] - Interest rate risk on cash equivalents and borrowings is minimal, with a 10% rate change not materially impacting financial results[158][159] Controls and Procedures Management concluded disclosure controls and procedures were effective as of October 1, 2021, with no material changes to internal controls over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of October 1, 2021[160] - No material changes occurred during the quarter that affected internal controls over financial reporting[161] Part II. Other Information Legal Proceedings The company refers to Note 12 for legal proceedings, noting various claims in the normal course of business are not expected to materially impact financial position - For details on legal proceedings, the report refers to 'Note 12 Commitments and Contingencies' in the financial statements[164] - A claim from a customer alleging defective products, received in May 2016, was settled for an immaterial amount during the third quarter of 2021[99] Risk Factors No material changes have occurred from the risk factors previously disclosed in the company's fiscal 2021 Annual Report on Form 10-K - There have been no material changes from the risk factors described in the company's fiscal 2021 Annual Report on Form 10-K[165] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 FY2022, the company repurchased 22,543 shares for $0.7 million, with $1.9 million remaining under the stock repurchase program Stock Repurchase Program Activity | Period | Total Shares Repurchased | Average Price Paid per Share | Approx. Dollar Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | | July 3 - July 30, 2021 | 8,643 | $29.19 | $2,375 | | Aug 25 - Oct 1, 2021 | 13,900 | $33.07 | $1,915 | | Total for Quarter | 22,543 | - | $1,915 | - The stock repurchase program, approved in May 2018 for up to $7.5 million, does not have an expiration date[166] Defaults upon Senior Securities This section is not applicable Mine Safety Disclosures This section is not applicable Other Information This section is not applicable Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, and officer certifications - Exhibits filed with the report include CEO and CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350) and XBRL data files[170]