Aviat Networks(US:AVNW)2024-11-05 23:48Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $88.4 million, a 1.7% increase from $86.9 million in Q1 2024 [13] - Non-GAAP gross margin was 23%, down from 36.2% in the prior year [5][14] - Adjusted EBITDA was minus $7.7 million, impacted by lower gross margins and elevated operating expenses [12][16] - Non-GAAP EPS loss was $0.87 [5][16] - GAAP net income was minus $11.9 million, while non-GAAP net income was minus $11.1 million [16] Business Line Data and Key Metrics Changes - North America revenue decreased by 23% to $42 million, accounting for 48% of total revenue, due to Tier 1 softness and project timing [13] - International revenue increased by 44% to $46 million, primarily driven by the Pasolink acquisition [13] - Gross margins were significantly impacted by lower volume and a mix shift away from North America towards international business [7] Market Data and Key Metrics Changes - The global microwave market contracted by 8% year-over-year, marking the fourth consecutive quarter of revenue declines [6] - Aviat has continued to grow its share of demand in North America and globally, despite the broader market decline [6] Company Strategy and Development Direction - The company is focusing on its private network business and the global 5G opportunity, with an attractive funnel and backlog [17] - Plans to transfer Pasolink product manufacturing to Aviat's contract manufacturer to improve order management and reduce costs [10] - The company anticipates a more favorable operating leverage in the second half of fiscal year 2025 [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in Q1 due to Tier 1 market weakness and project timing but remains optimistic about Q2 and the latter half of fiscal year 2025 [17] - The company adjusted its fiscal year 2025 guidance, expecting revenue between $430 million and $470 million and adjusted EBITDA between $30 million and $40 million [17] Other Important Information - The company has approximately $450 million of net operating losses, which will minimize cash tax payments for the foreseeable future [16] - The Pasolink upgrade opportunity is estimated to be $50 million over the next five years [8] Q&A Session Summary Question: Can you help us think about the trajectory of gross margin and its potential recovery in the December quarter? - Management indicated that gross margins were impacted by a mix shift and expect improvements in Q2 and beyond as revenues ramp up [19] Question: What gives you confidence in the recovery and how are orders tracking for the December quarter? - Management noted a book-to-bill ratio greater than 1 in Q1 and a strong order trajectory for Q2, with expectations for record bookings [21][22] Question: Can you provide insights on the performance in India and any potential MDU opportunities? - Management confirmed that India remains a growth area with good demand, and there are opportunities related to MDU projects, although they are not in a leading position [29] Question: What is the opportunity in fixed wireless access and how does it relate to Aviat's products? - Management highlighted the growing demand for fixed wireless access connections, which favorably impacts backhaul needs and aligns with Aviat's offerings [32] Question: Will merger acquisition expenses decrease in the upcoming quarter? - Management confirmed that such expenses are expected to attenuate in Q2 and beyond, barring any new M&A activities [33]