AVIAT NETWORKS INC

Previous wording

The fair value of the consideration transferred at the closing of the NEC Transaction was comprised of (i) cash of $32.2 million, and (ii) the issuance of 736,750 shares or $22.3 million of Company common stock. Aggregate consideration transferred at closing was approximately $54.5 million, which is subject to certain post-closing adjustments. The Company estimates additional cash consideration of approximately $19.6 million will be transferred to NEC in the second quarter of fiscal 2025, primarily related to settlement of the post-closing working capital adjustment. The Company funded the cash portion of the NEC Transaction with Term Loan borrowings under its Credit Facility. See Note 6. Credit Facility and Debt of the Notes for further information.

Current wording

The fair value of the consideration transferred at the closing of the NEC Transaction was comprised of (i) cash of $32.2 million, and (ii) the issuance of 736,750 shares or $22.3 million of Company common stock. Aggregate consideration transferred at closing was approximately $54.5 million, which was subject to certain post-closing adjustments. In the second quarter of fiscal 2025, the Company transferred consideration of $5.8 million to settle a portion of the post-closing working capital adjustment. The Company estimates additional cash consideration of approximately $13.2 million will be transferred to NEC, primarily related to settlement of the remaining post-closing working capital adjustment.

Previous wording

The market for mobile backhaul continued to be the Company’s primary addressable market segment globally in the first three months of fiscal 2025. In North America, the Company supported 5G and long-term evolution (“LTE”) deployments of its mobile operator customers, public safety network deployments for state and local governments, and private network implementations for utilities and other customers. In international markets, the Company’s business continued to rely on a combination of customers increasing their capacity to handle subscriber growth and the ongoing build-out of some large LTE and 5G deployments. Aviat’s position continues to be to support its customers for 5G and LTE readiness and ensure that its technology roadmap is well aligned with evolving market requirements. Aviat’s strength in turnkey and after-sale support services is a differentiating factor that wins business for the Company and enables it to expand its business with existing customers. Additionally, Aviat operates an e-commerce platform that provides low-cost services, simple experience, and fast delivery to mobile operators and private network customers. However, as disclosed above and in the “Risk Factors” section in Item 1A of its Annual Report on Form 10-K filed with the SEC on October 4, 2024, a number of factors could prevent the Company from achieving its objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that it serves.

Current wording

The market for mobile backhaul continued to be the Company’s primary addressable market segment globally in the first six months of fiscal 2025. In North America, the Company supported 5G and long-term evolution (“LTE”) deployments of its mobile operator customers, public safety network deployments for state and local governments, and private network implementations for utilities and other customers. In international markets, the Company’s business continued to rely on a combination of customers increasing their capacity to handle subscriber growth and the ongoing build-out of some large LTE and 5G deployments. Aviat’s position continues to be to support its customers for 5G and LTE readiness and ensure that its technology roadmap is well aligned with evolving market requirements. Aviat’s strength in turnkey and after-sale support services is a differentiating factor that wins business for the Company and enables it to expand its business with existing customers. Additionally, Aviat operates an e-commerce platform that provides low-cost services, simple experience, and fast delivery to mobile operators and private network customers. However, as disclosed above and in the “Risk Factors” section in Item 1A of its Annual Report on Form 10-K filed with the SEC on October 4, 2024, a number of factors could prevent the Company from achieving its objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that it serves.

Previous wording

The Company manages its sales activities primarily on a geographic basis in North America and three international geographic regions: (1) Africa and the Middle East, (2) Europe, and (3) Latin America and Asia Pacific. Revenue by region for the three months ended September 27, 2024 and September 29, 2023 and the related changes were as follows:

Current wording

The Company manages its sales activities primarily on a geographic basis in North America and three international geographic regions: (1) Africa and the Middle East, (2) Europe, and (3) Latin America and Asia Pacific. Revenue by region for the three and six months ended December 27, 2024 and December 29, 2023 and the related changes were as follows:

Previous wording

Revenue in North America decreased by $12.6 million during the first quarter of fiscal 2025 compared with the same period of fiscal 2024 primarily due to lower demand from Tier 1 mobile network operators and timing of certain private network projects.

Current wording

Revenue in North America increased by $7.3 million during the second quarter of fiscal 2025 compared with the same period of fiscal 2024 primarily due to increased volume for private network projects. Revenue in North America decreased by $5.3 million during the first six months of fiscal 2025 compared with the same period of fiscal 2024, primarily due to lower demand from Tier 1 mobile network operators and timing of certain private network projects, partially offset by contributions from the 4RF transaction.

Previous wording

Revenue in Europe increased by $0.3 million during the first quarter of fiscal 2025 compared with the same period of fiscal 2024 primarily due to increased sales to mobile operators in the region.

Current wording

Revenue in Europe increased by $2.8 million during the second quarter of fiscal 2025 compared with the same period of fiscal 2024. Revenue in Europe increased by $3.1 million during the first six months of fiscal 2025 compared with the same period of fiscal 2024. The increases for the second quarter and the first six months of fiscal 2025 were primarily due to increased sales to mobile operators in the region driven by volumes from the NEC transaction.

Previous wording

Revenue in Latin America and Asia Pacific increased by $13.3 million during the first quarter of fiscal 2025 compared with the same period of fiscal 2024 primarily due to contributions resulting from the NEC Transaction.

Current wording

Revenue in Latin America and Asia Pacific increased by $16.2 million during the second quarter of fiscal 2025 compared with the same period of fiscal 2024. Revenue in Latin America and Asia Pacific increased by $29.5 million during the first six months of fiscal 2025 compared with the same period of fiscal 2024. The increases were primarily due to contributions resulting from the NEC transaction and higher volumes of projects with mobile operators.

Previous wording

Revenue from product sales increased by 2.6% and revenue from services decreased by 0.2% for the first quarter of fiscal 2025 compared with the same quarter of fiscal 2024 primarily due to the factors discussed above and product sales contribution from the NEC Transaction.

Current wording

Revenue from product sales increased by 26.6% and revenue from services increased by 25.2% for the second quarter of fiscal 2025 compared with the same quarter of fiscal 2024. Revenue from product sales and services increased by 15.1% and 12.8%, respectively for the first six months of fiscal 2025 compared with the same period of fiscal 2024. The increases were primarily due to the factors discussed above and product sales contribution from the NEC Transaction.

Previous wording

Gross margin for the first quarter of fiscal 2025 decreased by $11.4 million compared with the same quarter of fiscal 2024 primarily due to changes in regions and customers and the expected near-term dilution as a result of the NEC Transaction.

Current wording

2025 decreased by $6.8 million primarily due to changes in regions and customers and the expected near-term dilution as a result of the NEC Transaction driven from first quarter results.

Previous wording

Selling and administrative expenses increased by $5.7 million for the first quarter of fiscal 2025 compared with the first quarter of fiscal 2024 primarily due to merger and acquisition expenses and additional costs resulting from the NEC Transaction.

Current wording

Selling and administrative expenses decreased by $1.3 million for the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 primarily due to lower spending and cost reduction activities. Selling and administrative expenses increased $4.4 million for the first six months of fiscal 2025 primarily due to merger and acquisition expenses and additional costs resulting from the NEC and 4RF transactions.

Previous wording

In the first quarter of fiscal 2025, there were no restructuring charges incurred, compared to $0.6 million in the first quarter of fiscal 2024. The prior year period includes restructuring charges primarily associated with reductions in workforce to optimize skill sets and align cost structure across the Company.

Current wording

In the second quarter of fiscal 2025, there were $1.4 million of restructuring charges incurred, primarily associated with reductions in workforce in certain of the Company’s operations to optimize skill sets and align cost structure. The prior year period includes restructuring charges primarily associated with the NEC Transaction.

Previous wording

Other expense, net decreased by $(0.1) million for the first quarter of fiscal 2025, primarily as a result of foreign exchange rate movement.

Current wording

Other expense, net increased by $0.9 million and $0.8 million for the three and six months ended December 27, 2024, respectively, primarily as a result of losses recognized on the extinguishment of debt and foreign exchange rate movement.

Previous wording

The tax benefit for the first three months of fiscal 2025 was primarily due to tax benefit resulting from year-to-date losses. The tax expense for the first three months of fiscal 2024 was primarily attributable to tax expense related to U.S. and profitable foreign subsidiaries.

Current wording

The tax benefit for the first six months of fiscal 2025 was primarily due to tax benefit resulting from year-to-date losses. The tax expense for the first six months of fiscal 2024 was primarily attributable to tax expense related to U.S. and profitable foreign subsidiaries.

Previous wording

As of September 27, 2024, the Company’s total cash and cash equivalents were $51.0 million. Approximately $12.5 million was held in the United States. The remaining balance of $38.6 million, or 76%, was held outside the United States.

Current wording

As of December 27, 2024, the Company’s total cash and cash equivalents were $52.6 million. Approximately $21.6 million was held in the United States. The remaining balance of $31.0 million, or 59%, was held outside the United States.

Previous wording

Operating cash flows is presented as net (loss) income adjusted for certain non-cash items and changes in operating assets and liabilities. Net cash (used in) provided by operating activities was $(27.2) million for the first three months of fiscal 2025, compared with $14.0 million in the prior year. The $(41.1) million decrease is primarily attributable to increases in working capital and decreased earnings compared to the prior year.

Current wording

Operating cash flows is presented as net (loss) income adjusted for certain non-cash items and changes in operating assets and liabilities. Net cash (used in) provided by operating activities was $(6.4) million for the first six months of fiscal 2025, compared with $6.9 million in the prior year. The $(13.3) million decrease is primarily attributable to increases in working capital and decreased earnings compared to the prior year.

Previous wording

Net cash used in investing activities was $21.2 million for the first three months of fiscal 2025, compared to $0.7 million in the prior year. The $20.5 million increase is primarily due to payments associated with the acquisition of 4RF.

Current wording

Net cash used in investing activities was $23.5 million for the first six months of fiscal 2025, compared to $33.5 million in the prior year. The $10.1 million decrease is primarily due to higher acquisition payments in the prior year associated with the NEC Transaction.

Previous wording

Financing cash flows consist primarily of borrowings and repayments under the Company’s Credit Facility and proceeds from the exercise of employee stock options. Net cash provided by financing activities was $34.3 million for the first three months of fiscal 2025, compared with $0.2 million in the prior year. The $34.1 million increase is primarily due to the $35.0 million of borrowings on the Company’s Revolver.

Current wording

Financing cash flows consist primarily of borrowings and repayments under the Company’s Credit Facility and proceeds from the exercise of employee stock options. Net cash provided by financing activities was $18.6 million for the first six months of fiscal 2025, compared with $50.3 million in the prior year. The $(31.7) million decrease is primarily due to reduced Term Loan borrowings compared to the prior year as the prior year period included the $50.0 million of Term Loan borrowings primarily used to fund the NEC Transaction.

Previous wording

As of September 27, 2024, the Company’s principal sources of liquidity consisted of $51.0 million in cash and cash equivalents, $0.7 million of available credit under its Credit Facility, and future collections of receivables from customers. On October 18, 2024, the Company amended its Credit Facility which increased the borrowing capacity to $75.0 million for each of the Term Loan and Revolver facilities. The Company regularly requires letters of credit from certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce its credit and sovereign risk. Historically, the Company’s primary sources of liquidity have been cash flows from operations and credit facilities.

Current wording

As of December 27, 2024, the Company’s principal sources of liquidity consisted of $52.6 million in cash and cash equivalents, $66.7 million of available credit under its Credit Facility, and future collections of receivables from customers. In the first quarter of fiscal 2025, the Company amended its Credit Facility which increased the borrowing capacity to $75.0 million for each of the Term Loan and Revolver facilities. The Company regularly requires letters of credit from certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce its credit and sovereign risk. Historically, the Company’s primary sources of liquidity have been cash flows from operations and credit facilities.

Previous wording

The Company borrowed $35.0 million against the Revolver during the first three months of fiscal 2025. As of September 27, 2024, the Company had $48.8 million outstanding under its Term Loan and $35.0 million outstanding under its Revolver and was in compliance with all financial covenants contained in the Credit Facility.

Current wording

The Company borrowed and repaid $35.0 million against the Revolver during the first six months of fiscal 2025. As of December 27, 2024, the Company had $75.0 million outstanding under its Term Loan and no borrowings outstanding under its Revolver and was in compliance with all financial covenants contained in the Credit Facility.