Aviat Networks Q1 Earnings Call Highlights

Key Points

• Supply constraints pressured Q1 results: Revenue fell to $102.0 million from $107.3 million a year earlier, while gross margin declined to 29.6%. Component shortages and flooding in Thailand were estimated to reduce revenue by about $10 million.
• Demand remains strong despite delivery limits: Record first-quarter bookings topped $150 million, up 75% year over year, and backlog increased $70 million from the prior quarter. A major MDU program represents an opportunity of more than $100 million annually, but component availability is limiting shipments.
• Fiscal 2027 guidance reflects supply and customer changes: Aviat forecast revenue of $450 million to $475 million and adjusted EBITDA of $50 million to $55 million. It removed about $25 million to $30 million of lower-margin business from its plan after failing to agree on price increases with some customers.

Aviat Networks NASDAQ: AVNW reported lower revenue and narrower gross margins for its fiscal first quarter, as electronic component shortages and flooding at a contract manufacturer in Thailand constrained shipments. The company said it is also walking away from some lower-margin business after failing to agree on price increases with customers.

Revenue fell to $102.0 million from $107.3 million a year earlier. Gross margin declined to 29.6% on both a GAAP and non-GAAP basis, compared with 33.2% and 33.8%, respectively, in the prior-year quarter. CFO Andy Schmidt attributed the decline to regional and product mix, component shortages and related price inflation.

Despite the pressure on results, President and CEO Pete Smith said bookings exceeded $150 million, a record for a first quarter and an increase of 75% year over year. The book-to-bill ratio was greater than 1.5, and backlog rose by $70 million, or 19%, from the fourth quarter of fiscal 2026.

Supply constraints shape outlook

Aviat expects fiscal 2027 revenue of $450 million to $475 million, widening its previous range of $455 million to $470 million while leaving the midpoint unchanged. Its adjusted EBITDA forecast remains $50 million to $55 million.

Smith said demand supports the upper end of the revenue range, while component shortages and the decision to exit some customer business underpin the lower end. After failing to agree on pricing with a limited number of lower-margin customers in Asia-Pacific, Aviat is removing approximately $25 million to $30 million of revenue from its plan. Smith said the company does not expect the change to hurt profitability.

Schmidt estimated that component shortages and the Thailand flooding together reduced quarterly revenue by about $10 million, with roughly $8 million attributable to components and $2 million to flooding. He cautioned that the figures were estimates.

To improve its allocation of scarce components, Aviat reduced accounts payable by $26.2 million. Smith said the company is competing with hyperscalers for supply, even though it has little to no revenue from data centers.

MDU demand exceeds available supply

Smith described a multi-dwelling-unit, or MDU, program with a Tier 1 customer as potentially the largest in Aviat’s history. The company previously disclosed a follow-on order of $35 million to $40 million in September and has since received additional orders, though Smith did not quantify them.

Demand for products and services exceeds what Aviat has booked because component availability limits its ability to deliver base stations and terminals and perform related services, Smith said. He expects the program to be in a full ramp during the March quarter.

Smith said Aviat would like the September order to ship in the current fiscal year, but some deliveries could slip into the July-through-September quarter of fiscal 2028. He also confirmed an analyst’s characterization of the total MDU opportunity as more than $100 million annually, while saying supply constraints were limiting Aviat’s ability to serve demand.

Elsewhere, bookings for the Aprisa portfolio rose 61% from a year earlier. Aviat also received its first orders related to the Broadband Equity, Access, and Deployment program. Smith said he continues to view BEAD as primarily a calendar 2027-and-beyond opportunity and estimated it could contribute a couple of percentage points of growth at its peak, though the timing remains uncertain.

Profit and cash flow

Aviat reported a GAAP net loss of $2.8 million, or 22 cents per diluted share, and non-GAAP net income of $1.5 million, or 12 cents per diluted share. Adjusted EBITDA was $6.0 million, equivalent to 5.9% of revenue.

GAAP operating income fell to $0.9 million from $5.2 million a year earlier. Non-GAAP operating income declined to $3.9 million from $7.9 million, even as non-GAAP operating expenses fell to $26.2 million from $28.4 million.

The company used $6.3 million of cash in operating activities during the quarter. Schmidt said the reduction in accounts payable was a strategic decision aimed at securing product availability and managing relationships with critical vendors.

About Aviat Networks (NASDAQ:AVNW)

Aviat Networks, Inc provides wireless networking solutions for communications service providers, government agencies and enterprises. The company specializes in mission-critical connectivity for applications where reliable, high-capacity communications are essential, including telecommunications, public safety, utilities, transportation and defense.

Its product portfolio includes microwave and millimeter-wave wireless transmission systems, routers, access and aggregation equipment, network management software and related cybersecurity solutions.

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