AVIAT NETWORKS, INC. Q1 FY2025 earnings call

• The quarter was challenging due to US Tier 1 CapEx weakness, private network and international project timing issues, and distractions from audit/SEC filings. The global microwave market saw an 8% year-over-year contraction. Aviat faced difficulty offsetting Tier 1 weakness but continued to grow share in North America.
• Product and customer updates: ProVision Plus software has a $50 million upgrade opportunity over 5 years; Aprisa product line had first purchase order; projects with Midwestern electric utilities; manufacturing transfer for Pasolink products with $20 million to $25 million inventory build.
• Financial results: Total revenue $88.4 million (+1.7% year-over-year), North America $42 million (-23% year-over-year), International $46 million (+44% year-over-year), GAAP gross margin 22.4%, non-GAAP 23.2%, operating expenses adjusted, cash and marketable securities at end of quarter $51 million, outstanding debt $81 million.

Total revenue for the first quarter was $88.4 million. North America accounted for 48% of total revenue, amounting to $42 million, a decrease of 23% from the same period last year due to Tier 1 softness and timing of certain large projects in the private networks business. International revenue was $46 million, representing 46% of total revenue, an increase of $14 million or 44% from the same period last year, driven primarily by the addition of revenues from the Pasolink acquisition. Non-GAAP gross margin was 23%. Adjusted EBITDA was -$7.7 million. Non-GAAP EPS loss was $0.87.

• Adjusted fiscal 2025 revenue to be in the range of $430 million to $470 million and adjusted EBITDA to be in the range of $30 million to $40 million.
• Book-to-bill was over 1 in the first quarter, Q2 expected to be stronger than Q1, and the back half of fiscal year 2025 expected to have more favorable operating leverage.

• Market softness in the global microwave market due to mobile network CapEx declines. - Gross margins impacted by lower volume and mix shift away from higher margin regions. - Execution challenges from audit/SEC filings and project timing issues.

Q: About gross margin trajectory and snapback in the December quarter A: Michael Connaway said margins in Pasolink were solid in Q1, erosion in margins was mix-related (America's business down, software outcome weaker in US, margin timing effects on hardware), expecting Q2 to be a step-up in gross profit margins and Q3/Q4 to get leverage on period costs Q: Pasolink visibility and accretion A: Pete Smith said Pasolink was accretive this quarter, expects more, aiming for $140 million run rate by end of FY25 Q: Fixed wireless access opportunity A: Pete Smith talked about fixed wireless access growth, data consumption differences, and MDU impact on fixed wireless access and backhaul Q: Merger acquisition expense A: Michael Connaway said merger acquisition expenses will attenuate as the year progresses Q: US performance and backlog A: Pete Smith discussed Tier 1 and state project factors contributing to US weakness, and expected improvement in Q2 with US coming back and international Tier 1s growing