Aviat Networks Q4 Earnings Call Highlights

Key Points

• Fiscal 2026 ended with solid growth: Fourth-quarter revenue rose 4.8% to $120.9 million, full-year revenue increased 1.2% to $439.7 million, and backlog climbed 14% to $367 million. North American sales and EMEA private-network activity were key contributors.
• Margins were pressured by supply costs: Fourth-quarter non-GAAP gross margin fell to 30.9% due to component shortages and inflation, although Aviat reduced operating expenses and ended the year with $72.8 million in cash and marketable securities.
• Management expects acceleration in fiscal 2027: Revenue is forecast at $455 million–$470 million and adjusted EBITDA at $50 million–$55 million, supported by a $25 million–$30 million MDU order, private-network opportunities and potential BEAD demand. Growth is expected to be weighted toward the second half of the year.

Aviat Networks NASDAQ: AVNW reported fourth-quarter fiscal 2026 revenue growth, a higher year-end backlog and its sixth consecutive year of annual revenue growth, while management outlined fiscal 2027 guidance calling for accelerating revenue and adjusted EBITDA.

Fourth-quarter revenue rose 4.8% year over year to $120.9 million, while full-year revenue increased 1.2% to $439.7 million. President and Chief Executive Officer Pete Smith said fiscal 2026 marked the first time in more than a decade that the company generated at least $100 million of revenue in each fiscal quarter.

“This marks a strong end to Aviat’s fiscal 2026,” Smith said. The company ended the year with backlog of $367 million, up 14% from the end of fiscal 2025.

Fourth-Quarter Results and Margins

North American revenue increased 17.8% to $68.3 million in the fourth quarter and represented 56.5% of consolidated sales. The quarter included a limited set of deployments for a North American multi-dwelling-unit, or MDU, project. International revenue totaled $52.6 million.

For the full year, North American revenue rose 6% to $220 million, while international revenue declined to $219.6 million from $227 million in fiscal 2025. Smith said revenue in Europe, the Middle East and Africa increased 53% during the fourth quarter and 33% for the full fiscal year, driven in part by international private-network wins involving defense and energy customers.

Fourth-quarter GAAP gross margin fell to 30.8% from 34.2% a year earlier, while non-GAAP gross margin declined to 30.9% from 34.7%. Chief Financial Officer Andy Schmidt said component shortages and associated price inflation weighed on the period’s margins.

Aviat is particularly focused on securing supplies of memory, printed circuit boards, capacitors and field-programmable gate arrays, Smith said. The company is using approaches developed during the COVID-era supply-chain disruption to obtain supplier allocations and plans to pass component cost increases to customers.

Fourth-quarter GAAP operating income was $5.8 million, compared with $8.9 million a year earlier. Non-GAAP operating income was $10 million, compared with $12.9 million in the prior-year quarter. The company reported a GAAP net loss of $1.3 million, or $0.10 per diluted share, alongside non-GAAP net income of $8.3 million, or $0.64 per diluted share.

Adjusted EBITDA totaled $11.9 million, or 9.8% of revenue, for the quarter. Full-year adjusted EBITDA was $36.7 million.

Balance Sheet and Cost Actions

Aviat ended the quarter with $72.8 million in cash and marketable securities and $97 million of outstanding debt, resulting in net debt of $24.2 million. The company generated $13.6 million of operating cash flow during fiscal 2026.

Schmidt said unbilled receivables declined for a third consecutive quarter, falling $3.1 million sequentially to $82.1 million. Inventory decreased $3.6 million from the prior quarter to $69 million.

During the quarter, Aviat spent $2.2 million to repurchase approximately 131,000 shares at an average price of $16.55 per share. Schmidt also said the company had fully remediated its five previously disclosed material weaknesses in its control environment.

For fiscal 2026, GAAP operating expenses declined by $9.8 million to $119.1 million, while non-GAAP operating expenses decreased $4.3 million to $109.2 million. Management attributed the reductions to cost management, reviews of corporate needs and process-efficiency efforts.

MDU, Private Networks and Satellite Opportunities

Smith said Aviat’s expansion beyond its core microwave business into mission-critical access products has contributed to significant growth in non-microwave sales during fiscal 2026. The company is targeting private-network demand among public-safety and utility customers, including demand created by bandwidth-intensive applications such as drones and body cameras.

The company expects its MDU opportunity to become a meaningful fiscal 2027 contributor. Aviat previously announced an order from an existing customer worth approximately $25 million to $30 million and expects all associated revenue to be recognized in fiscal 2027.

Management expects the MDU deployment ramp to occur primarily in the fiscal second quarter, though Smith said some contribution could occur in the fiscal first quarter. He said the company has completed additional proof-of-concept work and believes it has become the preferred vendor with the customer.

Smith described the total annual MDU market opportunity as being “in the $100 million neighborhood,” contingent on subscriber growth and Aviat’s share against competitors. He said Aviat is operating in or slated to enter approximately 25 markets, compared with a smaller number of markets previously.

Aviat also sees low-Earth-orbit satellite connectivity as complementary to its offerings rather than a direct threat. Smith said the company is working with customers on trials combining satellite services with microwave and cellular-router solutions to provide backup connectivity at remote locations and automatic failover where LTE or 5G coverage is unavailable. However, he said no low-Earth-orbit revenue is included in fiscal 2027 guidance.

Fiscal 2027 Outlook

Aviat forecast fiscal 2027 revenue of $455 million to $470 million and adjusted EBITDA of $50 million to $55 million. Management expects the first fiscal quarter to be the year’s lowest revenue quarter, with revenue increasing thereafter and the second half exceeding the first half.

Andrew Fredrickson, vice president of corporate finance, said investors could model revenue seasonality at roughly 45% in the first half and 55% in the second half, somewhat more back-half weighted than historical patterns.

Schmidt said first-quarter gross margin will be affected by lower revenue volume, but the company expects its pricing and supply-chain actions to create more upward pressure on gross margin beginning in the second quarter. He characterized mid-30% gross-margin expectations for the second half as “aspirational,” noting MDU business is expected to carry a more middle-of-the-product-strategy margin profile.

Management said the guidance includes only a small, conservative amount of revenue tied to the Broadband Equity, Access, and Deployment program. Smith said Aviat has customer quotes outstanding and expects the first material BEAD revenue impact in the December quarter, while continuing to view the program as a multiyear opportunity.

Potential factors that could move revenue toward the high end of guidance include greater MDU subscriber growth and share gains, stronger BEAD activity, private-network wins, adoption of Aprisa and LTE router offerings, and increased interest from global tier-one customers, Smith said.

About Aviat Networks (NASDAQ:AVNW)

Aviat Networks, Inc is a specialist in wireless transport solutions, designing, manufacturing and selling microwave networking products that enable the secure and reliable transmission of data, voice and video. The company's offerings address mission-critical communications needs for a broad range of end markets, including telecommunications service providers, utilities, government agencies and enterprises. Its product portfolio spans high-capacity packet microwave radios, IP transport systems and network management software.

Aviat's core product lines include the WTM series of packet microwave platforms, which deliver scalable throughput and advanced resilience features, and the Eclipse packet microwave systems, which combine broadband capacity with synchronization, security and quality-of-service capabilities.

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