Aviat Networks Inc.

02/03/2026 | Press release | Distributed by Public on 02/03/2026 15:18

Quarterly Report for Quarter Ending December 26, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q, including "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including without limitation statements of, about, concerning or regarding: our ability to maintain effective internal control over financial reporting and management systems and remediate material weaknesses; our plans, strategies and objectives for future operations, including with respect to growing our business and sustaining profitability; our restructuring efforts; our research and development efforts and new product releases and services; trends in revenue; drivers of our business and the markets in which we operate; future economic conditions, performance or outlook, and changes in our industry and the markets we serve; the outcome of contingencies; the value of our contract awards; beliefs or expectations; the sufficiency of our cash and our capital needs and expenditures; our intellectual property protection; our compliance with regulatory requirements and the associated expenses; expectations regarding litigation; our intention not to pay cash dividends; seasonality of our business; the impact of foreign exchange and inflation; taxes; the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships; and assumptions underlying any of the foregoing. Forward-looking statements may be identified by the use of forward-looking terminology, such as "anticipates," "believes," "expects," "may," "should," "would," "will," "intends," "plans," "estimates," "strategy," "projects," "targets," "goals," "seeing," "delivering," "continues," "forecasts," "future," "predict," "might," "could," "potential," or the negative of these terms, and similar words or expressions.
These forward-looking statements are based on estimates reflecting the current beliefs of the senior management of Aviat Networks, Inc. ("Aviat," the "Company," "we," "us," and "our"). These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should therefore be considered in light of various important factors, including those set forth in this Quarterly Report on Form 10-Q.
See "Item 1A. Risk Factors" in the Company's fiscal 2025 Annual Report on Form 10-K filed with the SEC on September 10, 2025 for more information regarding factors that may cause its results to differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q.
You should not place undue reliance on these forward-looking statements, which reflect our management's opinions only as of the date of the filing of this Quarterly Report on Form 10-Q. Forward-looking statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), along with provisions of the Private Securities Litigation Reform Act of 1995, and we expressly disclaim any obligation, other than as required by law, to update any forward-looking statements to reflect further developments or information obtained after the date of filing of this Quarterly Report on Form 10-Q or, in the case of any document incorporated by reference, the date of that document.
Overview of Business; Operating Environment and Key Factors Impacting Fiscal 2026 and 2025 Results
The following Management's Discussion and Analysis ("MD&A") is intended to help the reader understand Aviat's results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's unaudited condensed consolidated financial statements and accompanying notes. In the discussion herein, the fiscal year ending July 3, 2026 is referred to as "fiscal 2026" or "2026" and the fiscal year ended June 27, 2025 is referred to as "fiscal 2025" or "2025."
Overview
Aviat is a global supplier of microwave networking and access networking solutions, backed by an extensive suite of professional services and support. Aviat sells radios, routers, software and services integral to the functioning of data transport networks. Aviat has more than 3,000 customers and significant relationships with global service providers and private network operators. Aviat's North America manufacturing base consists of a combination of contract manufacturing and assembly and testing operated in Austin, Texas by Aviat. Additionally, Aviat utilizes a contract manufacturer based in Asia for much of its international equipment demand. Aviat's technology is underpinned by more than 500 patents. Aviat competes on the basis of total cost of ownership, microwave radio expertise and solutions for mission critical communications. Aviat has a global presence.
Operations Review
The market for mobile backhaul continued to be the Company's primary addressable market segment globally in the first six months of fiscal 2026. 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. In early 2025, U.S. tariffs on foreign imports were introduced. Aviat will attempt to mitigate these tariffs; 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 September 10, 2025, 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.
Revenue
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 26, 2025 and December 27, 2024 and the related changes were as follows:
Three Months Ended Six Months Ended
(In thousands, except percentages) December 26, 2025 December 27, 2024 $ Change % Change December 26, 2025 December 27, 2024 $ Change % Change
North America $ 52,901 $ 57,962 $ (5,061) (8.7) % $ 105,548 $ 100,187 $ 5,361 5.4 %
Africa and the Middle East 14,626 12,674 1,952 15.4 % 27,422 23,124 4,298 18.6 %
Europe 11,425 8,347 3,078 36.9 % 18,985 13,947 5,038 36.1 %
Latin America and Asia Pacific 32,520 39,214 (6,694) (17.1) % 66,837 69,368 (2,531) (3.6) %
Total revenue $ 111,472 $ 118,197 $ (6,725) (5.7) % $ 218,792 $ 206,626 $ 12,166 5.9 %
Revenue in North America decreased by $5.1 million during the second quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to lower demand for products of 19%, partially offset by higher demand of services by 12%, across mobile network operators and private network customers. Revenue in North America increased by $5.4 million during the first six months of fiscal 2026 compared with the same period of fiscal 2025, primarily due to higher demand for service and product offerings of 13% and 3%, respectively, across private network customers and mobile networks operators.
Revenue in Africa and the Middle East increased by $2.0 million during the second quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to increases in demand for products and services of 20% and 7%, respectively, across mobile network operators and private network customers. Additionally, demand for software offerings increased by 15% compared with the same period of fiscal 2025. Revenue in Africa and the Middle East increased by $4.3 million during the first six months of fiscal 2026 compared with the same period of fiscal 2025, primarily due to increases in demand for services and products of 36% and 17%, respectively, for mobile network operators and private network customers.
Revenue in Europe increased by $3.1 million during the second quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to increases in demand of services of 56% from project timing, increase in product demand of 35% for mobile network operators, and a 20% increase in demand of software offerings. Revenue in Europe increased by $5.0 million during the first six months of fiscal 2026 compared with the same period of fiscal 2025. The increase for the first six months of fiscal 2026 was primarily due to increases in demand for product and software offerings of 54% and 46%, respectively, for mobile network operators.
Revenue in Latin America and Asia Pacific decreased by $6.7 million during the second quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to lower demand for services of 61%, partially offset by an increase of 36% on software offerings. Revenue in Latin America and Asia Pacific decreased by $2.5 million during the first six months of fiscal 2026 compared with the same period of fiscal 2025 primarily due to due to lower demand for services and products of 31% and 14% respectively, partially offset by an increase of 139% on software offerings.
Three Months Ended Six Months Ended
(In thousands, except percentages) December 26, 2025 December 27, 2024 $ Change % Change December 26, 2025 December 27, 2024 $ Change % Change
Product sales $ 81,210 $ 82,312 $ (1,102) (1.3) % $ 156,294 $ 143,428 $ 12,866 9.0 %
Services 30,262 35,885 (5,623) (15.7) % 62,498 63,198 (700) (1.1) %
Total revenue $ 111,472 $ 118,197 $ (6,725) (5.7) % $ 218,792 $ 206,626 $ 12,166 5.9 %
Revenue from product sales decreased by 1.3% and revenue from services decreased by 15.7% for the second quarter of fiscal 2026 compared with the same quarter of fiscal 2025. Revenue from product sales increased by 9.0% and revenue from services decreased by 1.1% for the first six months of fiscal 2026 compared with the same period of fiscal 2025. The changes were primarily due to the factors discussed above.
Gross Margin
Three Months Ended Six Months Ended
(In thousands, except percentages) December 26, 2025 December 27, 2024 $ Change % Change December 26, 2025 December 27, 2024 $ Change % Change
Revenue $ 111,472 $ 118,197 $ (6,725) (5.7) % $ 218,792 $ 206,626 $ 12,166 5.9 %
Cost of revenue 75,371 77,311 (1,940) (2.5) % 147,028 145,952 1,076 0.7 %
Gross margin $ 36,101 $ 40,886 $ (4,785) (11.7) % $ 71,764 $ 60,674 $ 11,090 18.3 %
% of revenue 32.4 % 34.6 % 32.8 % 29.4 %
Product margin % 32.9 % 33.2 % 31.4 % 25.3 %
Service margin % 30.9 % 37.7 % 36.2 % 38.6 %
Gross margin for the second quarter of fiscal 2026 decreased by $4.8 million compared with the same quarter of fiscal 2025 primarily due to higher volumes on lower margin products. Gross margin for the first six months of fiscal 2026 increased by $11.1 million due to higher sales volumes on higher margin products, specifically software offerings.
Research and Development
Three Months Ended Six Months Ended
(In thousands, except percentages) December 26, 2025 December 27, 2024 $ Change % Change December 26, 2025 December 27, 2024 $ Change % Change
Research and development $ 6,409 $ 10,222 $ (3,813) (37.3) % $ 13,507 $ 20,630 $ (7,123) (34.5) %
% of revenue 5.7 % 8.6 % 6.2 % 10.0 %
Research and development expenses decreased by $3.8 million and $7.1 million for the three and six months ended December 26, 2025, respectively, compared with the same periods in fiscal 2025, primarily due to cost management initiatives and synergies related to acquisitions.
Selling and Administrative
Three Months Ended Six Months Ended
(In thousands, except percentages) December 26, 2025 December 27, 2024 $ Change % Change December 26, 2025 December 27, 2024 $ Change % Change
Selling and administrative $ 22,384 $ 21,279 $ 1,105 5.2 % $ 45,760 $ 46,227 $ (467) (1.0) %
% of revenue 20.1 % 18.0 % 20.9 % 22.4 %
Selling and administrative expenses increased by $1.1 million for the second quarter of fiscal 2026 compared with the same quarter of fiscal 2025 primarily due to higher administrative costs. Selling and administrative expenses decreased by $0.5 million for the first six months of fiscal 2026 compared with the same quarter of fiscal 2025 primarily due to cost management initiatives.
Interest Expense, net
Three Months Ended Six Months Ended
(In thousands, except percentages) December 26, 2025 December 27, 2024 $ Change % Change December 26, 2025 December 27, 2024 $ Change % Change
Interest expense, net $ 1,908 $ 1,580 $ 328 20.8 % $ 3,620 $ 2,695 $ 925 34.3 %
Interest expense, net increased by $0.3 million and $0.9 million for the three and six months ended December 26, 2025, respectively, primarily due to interest expense incurred on incremental Term Loan borrowings compared to the prior year period.
Other Expense, net
Three Months Ended Six Months Ended
(In thousands, except percentages) December 26, 2025 December 27, 2024 $ Change % Change December 26, 2025 December 27, 2024 $ Change % Change
Other (income) expense, net $ (2,744) $ 269 $ (3,013) (1,120.1) % $ (1,771) $ 979 $ (2,750) (280.9) %
Other (income) expense, net decreased by $3.0 million and $2.8 million for the three and six months ended December 26, 2025, respectively, compared with the same quarter of fiscal 2025 primarily as a result of foreign exchange rate movement.
Income Taxes
Three Months Ended Six Months Ended
(In thousands, except percentages) December 26, 2025 December 27, 2024 $ Change % Change December 26, 2025 December 27, 2024 $ Change % Change
Income (loss) before income taxes $ 8,123 $ 6,121 $ 2,002 32.7 % $ 10,627 $ (11,272) $ 21,899 (194.3) %
Provision for (benefit from) income taxes $ 2,405 $ 1,626 $ 779 47.9 % $ 4,747 $ (3,888) $ 8,635 (222.1) %
The Company estimates its annual effective tax rate at the end of each quarterly period and records the tax effect of certain discrete items in the interim period in which they occur, including changes in judgment about uncertain tax positions and deferred tax valuation allowances.
The tax expense for the first six months of fiscal 2026 was primarily attributable to tax expense related to U.S. and profitable foreign subsidiaries. The tax benefit for the first six months of fiscal 2025 was primarily resulting from year-to-date losses.
Liquidity, Capital Resources, and Financial Strategies
Sources of Cash
As of December 26, 2025, the Company's total cash and cash equivalents were $86.5 million. Approximately $33.3 million was held in the United States. The remaining balance of $53.2 million, or 62%, was held outside the United States.
Operating Activities
Operating cash flows is presented as net income (loss) adjusted for certain non-cash items and changes in operating assets and liabilities. Net cash provided by (used in) operating activities was $12.2 million for the first six months of fiscal 2026, compared with $(6.4) million in the prior year. The $18.6 million increase is primarily attributable to net income along with decreases in inventory, unbilled, and deferred taxes which was partially offset by an increase in accounts receivable and a decrease in accounts payable.
Investing Activities
Net cash used in investing activities was $3.2 million for the first six months of fiscal 2026, compared to $23.5 million in the prior year. The $20.3 million decrease is primarily due to the absence of prior year acquisition payments associated with the NEC Transaction in the current year.
Financing Activities
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 $17.1 million for the first six months of fiscal 2026, compared with $18.6 million in the prior year. The $1.5 million decrease is primarily due to reduced net Term Loan borrowings of $17.9 million compared to $26.3 million in the prior year and the absence of prior year payments of deferred consideration for acquisitions of $5.8 million.
As of December 26, 2025, the Company's principal sources of liquidity consisted of $86.5 million in cash and cash equivalents, $74.4 million of available credit under its Credit Facility, and future collections of receivables from customers. On August 28, 2025, the Company entered into an amendment under the Credit Facility to increase the Term Loan and Revolver commitments by $20 million for each instrument. 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.
The Company believes that its existing cash and cash equivalents, the available borrowings under its Credit Facility and future cash collections from customers will be sufficient to provide for its anticipated requirements and plans for cash for at least the next 12 months. In addition, the Company believes these sources of liquidity will be sufficient to provide for its anticipated requirements and plans for cash beyond the next 12 months.
The Company borrowed and repaid $50.0 million against the Revolver during the first six months of fiscal 2026 and had $15.0 million borrowings outstanding under the Revolver. As of December 26, 2025, the Company had $91.0 million outstanding under its Term Loan and during the first six months of fiscal 2026 borrowed $20.0 million and repaid $2.1 million against the Term Loan. As of December 26, 2025, the Company was in compliance with all financial covenants contained in the Credit Facility.
Critical Accounting Estimates
For information about the Company's critical accounting estimates, see the "Critical Accounting Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in its fiscal 2025 Annual Report on Form 10-K.
Aviat Networks Inc. published this content on February 03, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 03, 2026 at 21:18 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]