Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aviat Networks Inc (AVNW, Financial) reported a year-over-year revenue increase of 1.7%, reaching $88.4 million for the first quarter of fiscal 2025.
- The company has seen growth in its international revenue, which increased by 44% from the same period last year, driven primarily by the Palink acquisition.
- Aviat Networks Inc (AVNW) is experiencing a growing demand for its network management software, Provision Plus, which represents a significant upgrade opportunity for over 1 million Palink radios.
- The company has successfully secured its first purchase order for the Prisa 5G router from an American utility company, marking progress in its private 5G business.
- Aviat Networks Inc (AVNW) is optimistic about its future, with expectations of stronger results in the back half of fiscal year 2025, supported by a strong bookings trajectory and a favorable demand environment.
Negative Points
- The company reported a non-GAAP gross margin of 23% and an adjusted EBITDA of minus $7.7 million, indicating financial challenges.
- Aviat Networks Inc (AVNW) faced difficulties due to ongoing Tier 1 CapEx weakness and timing challenges from private network and international projects.
- The global microwave market saw an 8% year-over-year contraction, impacting Aviat Networks Inc (AVNW) as it was unable to offset Tier 1 weakness.
- Gross margins were significantly impacted by lower volume and a mix shift away from North America towards international business.
- The company had to manage higher operating expenses associated with the preparation for the stoppage of transition services with NEC, affecting profitability.
Q & A Highlights
Q: Can you help us think about the trajectory of gross margins and how big of a snap back can it have in the December quarter?
A: Michael Connaway, CFO: Our gross margins on a non-GAAP basis were 23.2%. The majority of the erosion in margins was mix-related, with lower revenue in the Americas and a shift towards APAC. We expect these factors to normalize in the quarters ahead, with Q2 showing a nice step up in gross profit margins, and further improvements in Q3 and Q4 as revenues ramp up.
Q: What gives you confidence in the sequential ramp from December through June, given the downward adjustment to the full-year outlook?
A: Michael Connaway, CFO: We had a book-to-bill greater than one in Q1, and Q2 is shaping up to be even stronger. Pete Smith, CEO: If things hold together, we expect record bookings in the December quarter. We see demand bouncing back and are encouraged by the current trajectory.
Q: Could you talk about the recovery in the December quarter and sustaining that in March and June, particularly by geography?
A: Peter Smith, CEO: Our book-to-bill over the past 4-6 quarters has been around 1.05, and it was higher in the recent quarter. We see sequential demand building for Passlink and improving private network funnels in the US. This gives us confidence in the recovery.
Q: Are you starting to see visibility to the levels you originally anticipated with the Passlink acquisition?
A: Peter Smith, CEO: Passlink was accretive this quarter, and we expect it to be more so going forward. We are increasingly confident that we will exit FY25 at the anticipated run rate. We plan to provide more details on returns from the investment in the coming quarters.
Q: Could you discuss the opportunity in fixed wireless access and the products you have for this market?
A: Peter Smith, CEO: Fixed wireless access is a significant growth driver for 5G networks, with connections expected to grow annually by 17%. This creates more backhaul needs, which is favorable for us. Our E-band and multiband solutions are well-positioned to capitalize on this demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
