Aviat Networks(AVNW) - 2024 Q3 - Quarterly Results

Fiscal 2024 Third Quarter Performance Overview Aviat Networks reported strong year-over-year growth in its fiscal 2024 third quarter, driven by significant international sales and the integration of the Pasolink business Third Quarter Highlights Aviat Networks achieved its 15th consecutive quarter of trailing twelve-month growth in revenue and Adjusted EBITDA, generated positive free cash flow, and secured new orders in the Indian market - Achieved 15th consecutive quarter of growth in both revenue and Adjusted EBITDA on a trailing twelve-month basis[2] - Core Aviat revenue grew by 7%, primarily fueled by strong international sales and expansion in private networks[2] - Secured inaugural microwave backhaul radio orders in India, opening up an estimated $200 million addressable market segment[2] - The integration of the acquired Pasolink business is progressing ahead of schedule in terms of profitability and cash flow[3] Third Quarter Financial Summary For the third quarter of fiscal 2024, Aviat Networks reported total revenues of $111.6 million, a 33.7% increase year-over-year, with Adjusted EBITDA growing 11.1% to $12.0 million Q3 FY2024 Key Financial Metrics (YoY) | Metric | Q3 FY2024 (M) | Q3 FY2023 (M) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $111.6 | $83.5 | +33.7% | | Adjusted EBITDA | $12.0 | $10.8 | +11.1% | | GAAP Net Income | $3.4 | $4.9 | -30.6% | | Non-GAAP Net Income | $9.4 | $8.9 | +5.6% | | GAAP Net Income per Share | $0.27 | $0.41 | -34.1% | | Non-GAAP Net Income per Share | $0.73 | $0.75 | -2.7% | - The company ended the quarter with $59.2 million in net cash and marketable securities, and cash net of debt stood at $10.2 million[3] Detailed Financial Analysis (Q3 & Nine Months FY2024) This section provides an in-depth analysis of Aviat Networks' revenue, profitability, net income, EPS, Adjusted EBITDA, balance sheet, and cash flow for Q3 and the nine months of FY2024 Revenue Analysis Total revenue for Q3 FY2024 increased by 33.7% to $111.6 million, largely due to a 79.6% surge in international revenue, offsetting a decline in North America Revenue by Geography (Q3 FY2024 vs Q3 FY2023) | Region | Q3 FY2024 Revenue (M) | Q3 FY2023 Revenue (M) | YoY Change | | :--- | :--- | :--- | :--- | | North America | $44.4 | $46.1 | -3.6% | | International | $67.2 | $37.4 | +79.6% | | Total | $111.6 | $83.5 | +33.7% | Revenue by Geography (Nine Months Ended March 2024 vs 2023) | Region | Nine Months FY2024 Revenue (M) | Nine Months FY2023 Revenue (M) | YoY Change | | :--- | :--- | :--- | :--- | | North America | $151.2 | $147.0 | +2.9% | | International | $143.0 | $108.5 | +31.8% | | Total | $294.2 | $255.4 | +15.2% | Profitability Analysis Q3 FY2024 profitability was impacted by the Pasolink acquisition and M&A-related expenses, leading to a decrease in GAAP gross margin and operating income, while non-GAAP measures showed growth Gross Margin Q3 FY2024 GAAP gross margin decreased to 32.7% from 35.7% in the prior year, primarily due to the near-term impact of the Pasolink business acquisition Gross Margin Comparison (Q3 FY2024 vs Q3 FY2023) | Margin Type | Q3 FY2024 | Q3 FY2023 | Basis Point Change | | :--- | :--- | :--- | :--- | | GAAP Gross Margin | 32.7% | 35.7% | -300 bps | | Non-GAAP Gross Margin | 35.2% | 35.9% | -70 bps | Operating Expenses GAAP operating expenses for Q3 FY2024 rose by 41.0% to $31.5 million, reflecting expanded operations following recent acquisitions Operating Expenses (Q3 FY2024 vs Q3 FY2023) | Expense Type | Q3 FY2024 (M) | Q3 FY2023 (M) | YoY Change | | :--- | :--- | :--- | :--- | | GAAP Operating Expenses | $31.5 | $22.3 | +41.0% | | Non-GAAP Operating Expenses | $28.5 | $20.7 | +37.9% | Operating Income GAAP operating income for Q3 FY2024 decreased by 32.9% to $5.0 million due to M&A-related expenses, while non-GAAP operating income increased by 16.2% to $10.8 million Operating Income (Q3 FY2024 vs Q3 FY2023) | Income Type | Q3 FY2024 (M) | Q3 FY2023 (M) | YoY Change | | :--- | :--- | :--- | :--- | | GAAP Operating Income | $5.0 | $7.5 | -32.9% | | Non-GAAP Operating Income | $10.8 | $9.3 | +16.2% | Net Income and Earnings Per Share (EPS) Q3 FY2024 GAAP net income decreased to $3.4 million, or $0.27 per diluted share, while non-GAAP net income increased to $9.4 million, or $0.73 per share Net Income and EPS (Q3 FY2024 vs Q3 FY2023) | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | GAAP Net Income | $3.4M | $4.9M | | GAAP EPS (Diluted) | $0.27 | $0.41 | | Non-GAAP Net Income | $9.4M | $8.9M | | Non-GAAP EPS (Diluted) | $0.73 | $0.75 | Net Income and EPS (Nine Months Ended March 2024 vs 2023) | Metric | Nine Months FY2024 | Nine Months FY2023 | | :--- | :--- | :--- | | GAAP Net Income | $10.3M | $8.2M | | GAAP EPS (Diluted) | $0.84 | $0.69 | | Non-GAAP Net Income | $31.6M | $28.8M | | Non-GAAP EPS (Diluted) | $2.57 | $2.43 | Adjusted EBITDA Adjusted EBITDA for Q3 FY2024 increased by 11.1% to $12.0 million, and for the nine-month period, it grew by 10.0% to $37.9 million Adjusted EBITDA Performance | Period | FY2024 (M) | FY2023 (M) | YoY Change | | :--- | :--- | :--- | :--- | | Third Quarter | $12.0 | $10.8 | +11.1% | | Nine Months | $37.9 | $34.4 | +10.0% | Balance Sheet and Cash Flow As of March 29, 2024, the company reported strong liquidity with $59.2 million in cash and marketable securities, improving working capital through reduced receivables and inventory - Cash from operations was $15.3 million in the current quarter and $22.2 million year-to-date[1] - Accounts receivable and unbilled receivables decreased by $14.1 million, and inventory declined by $10.0 million in Q3 FY2024[13] - Total debt was $48.9 million as of March 29, 2024, showing a slight decrease of $0.6 million from the previous quarter[13] Fiscal 2024 Full Year Outlook Aviat Networks has updated its full-year revenue guidance for fiscal 2024 to between $408 million and $418 million, while maintaining its Adjusted EBITDA forecast Updated Guidance Aviat Networks updated its full-year fiscal 2024 revenue guidance to $408 million-$418 million, with Adjusted EBITDA remaining at $51.0 million-$56.0 million FY2024 Full Year Guidance | Metric | Guidance Range (M) | | :--- | :--- | | Full Year Revenue | $408 - $418 | | Full Year Adjusted EBITDA | $51.0 - $56.0 | Financial Statements and Supplemental Data This section provides detailed financial statements including consolidated statements of operations, balance sheets, non-GAAP reconciliations, and supplemental revenue data by geographical area Condensed Consolidated Statements of Operations This statement provides a detailed breakdown of the company's revenues, costs, and expenses, leading to the net income for the third quarter and first nine months of fiscal 2024 Q3 FY2024 Income Statement Highlights (in thousands) | Line Item | Q3 FY2024 (K) | Q3 FY2023 (K) | | :--- | :--- | :--- | | Total Revenues | $111,613 | $83,480 | | Gross Margin | $36,534 | $29,833 | | Operating Income | $5,028 | $7,496 | | Net Income | $3,418 | $4,889 | Condensed Consolidated Balance Sheets This statement presents the company's financial position as of March 29, 2024, detailing assets, liabilities, and stockholders' equity, with a comparison to the fiscal year-end of June 30, 2023 Balance Sheet Highlights (in thousands) | Account | March 29, 2024 (K) | June 30, 2023 (K) | | :--- | :--- | :--- | | Cash and cash equivalents | $58,201 | $22,242 | | Total Assets | $490,343 | $364,496 | | Total Liabilities | $231,836 | $144,398 | | Total Stockholders' Equity | $258,507 | $220,098 | Reconciliation of Non-GAAP Financial Measures This section provides a detailed reconciliation of GAAP financial measures to their non-GAAP counterparts, adjusting for various items to offer a clearer view of operational performance Q3 FY2024 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP (K) | Adjustments (K) | Non-GAAP (K) | | :--- | :--- | :--- | :--- | | Gross Margin | $36,534 | $2,776 | $39,310 | | Operating Income | $5,028 | $5,776 | $10,804 | | Net Income | $3,418 | $5,958 | $9,376 | Supplemental Schedule of Revenue by Geographical Area This schedule offers a granular view of revenue sources, breaking down total revenue by major geographical regions for both the quarter and nine-month periods Q3 FY2024 Revenue by Geography (in thousands) | Region | Q3 FY2024 (K) | Q3 FY2023 (K) | | :--- | :--- | :--- | | North America | $44,409 | $46,064 | | Africa and the Middle East | $11,401 | $19,235 | | Europe | $6,549 | $3,871 | | Latin America and Asia Pacific | $49,254 | $14,310 | | Total Revenue | $111,613 | $83,480 | Other Information This section includes details regarding the conference call for Q3 FY2024 results and the standard forward-looking statements disclaimer Conference Call Information Aviat Networks scheduled a conference call for May 1, 2024, to discuss Q3 FY2024 results, featuring key executives and a Q&A session - The conference call to discuss Q3 FY2024 results was held on May 1, 2024, at 5:00 p.m. ET[15] - Participants included CEO Peter Smith, CFO David Gray, and Director of Corporate Development Andrew Fredrickson[15] Forward-Looking Statements This section contains a safe harbor statement, cautioning investors about forward-looking statements subject to risks such as integration challenges, supply chain issues, and global economic conditions - The document includes forward-looking statements regarding outlook, business conditions, and future financial performance[18] - Key risks that could affect future results include disruption from the NEC transaction, supply chain issues, inflation, and geopolitical conflicts[19]