Aviat Networks Announces Fiscal Third Quarter 2013 Financial Results PR Newswire SANTA CLARA, Calif., May 1, 2013 SANTA CLARA, Calif., May 1, 2013 /PRNewswire/ --Aviat Networks, Inc. (NASDAQ: AVNW), the leading expert in microwave networking solutions, today reported financial results for the third quarter of fiscal year 2013, which ended March29, 2013. Financial Highlights for Q3FY13 oRevenue within the guidance range at $118.3 million oGAAP Gross Margin at 28.8%; Non-GAAP Gross Margin at 29.1% oGAAP Operating Expense at $35.1 million; Non-GAAP Operating Expense at $32.6 million oGAAP Net Loss including discontinued operations at $(1.7) million or $(0.03) per share; Non-GAAP Net Income from continuing operations was within the guidance range at $1.2 million or $0.02 per diluted share; an inventory write down of $1.1 million, associated with a customer filing bankruptcy in the quarter, had a $(0.02) per share impact oFollowing a seasonally strong fiscal second quarter, book to bill was less than 1 GAAP Financial Results For the third quarter of fiscal year 2013, revenue was $118.3 million, compared with $111.6 million in the year-ago quarter. The Company reported net loss, including discontinued operations, of $(1.7) million or $(0.03) per share, compared with a net loss of $(3.2) million or $(0.05) per share in the year-ago quarter. Loss from continuing operations for the quarter was $(1.6) million, or $(0.03) per share, compared with the loss from continuing operations of $(0.8) million, or $(0.01) per share, in the year-ago quarter. Revenue and results of operations from our WiMAX business are classified as discontinued operations for all periods presented. Cash and cash equivalents were $92.9 million as of March29, 2013 compared with $94.8 million as of the end of the prior quarter. While the Company had strong collections of customer receivables in the third quarter, the slight decrease in cash was due primarily to capital spending for product introduction and our IT infrastructure upgrade project. Non-GAAP Financial Results Non-GAAP income from continuing operations for the quarter was $1.2 million, or $0.02 per diluted share, compared with a non-GAAP income from continuing operations of $2.2 million, or $0.04 per diluted share, in the year-ago quarter. Adjusted EBITDA was $3.3 million compared with $3.2 million in the year ago period. The third quarter of fiscal year 2013 non-GAAP income from continuing operations excluded $2.8 million of pre-tax charges composed primarily of the following: o$1.4 million for share-based compensation expense o$0.3 million for amortization of purchased intangibles o$0.4 million of restructuring charges o$0.7 million of transactional taxes assessments Loss from discontinued operations, net of taxes was $(0.1) million for the quarter. Adjusted EBITDA excluded $1.3 million for depreciation and amortization on property, plant and equipment, $0.2 million for interest expense, $0.6 million for income taxes provision, and non-GAAP pre-tax adjustments as set forth above from GAAP income from continuing operations. A reconciliation of GAAP to non-GAAP financial measures for the quarterly comparison with the year-ago period is provided on Table 4 along with the accompanying notes. Third Quarter Revenue by Region Revenue in the North America region was $52.9 million in the third quarter of fiscal 2013, compared with $42.6 million in the year-ago quarter and $41.4 million in the prior quarter. International revenue was $65.4 million, compared with $69.0 million in the year ago quarter and $87.6 million in the prior quarter. "Fiscal third quarter revenue was driven by solid bookings in the seasonally strong fiscal second quarter and strong performances from Africa and North America," said Michael Pangia, president and CEO, Aviat Networks. "We expect demand for mobile connectivity to be a significant growth driver for the microwave backhaul industry in the geographic markets that we serve." Outlook Based on current trends, the fourth quarter of fiscal 2013 revenue outlook range is expected to be between $105 million and $115 million. Non-GAAP income from continuing operations is expected to be in the range of $0.00 - $0.03 per diluted share. We expect fiscal fourth quarter non-GAAP operating expense to decline sequentially from last quarter. Due to the high variability and difficulty in predicting certain items that affect GAAP net income (loss), such as tax rates and stock price, Aviat Networks is unable to provide a complete reconciliation of GAAP net income (loss) per diluted share to non-GAAP income per diluted share on a forward-looking basis without unreasonable efforts. Conference Call Details Aviat Networks, Inc. will host a conference call today at 4:30 p.m. Eastern Time to discuss the Company's financial results. Those wishing to join the call should dial 480-629-9856 or toll free at 888-846-5003 access code 4614416 at approximately 4:20 p.m. Eastern Time. A replay also will be available starting approximately one hour after the completion of the call until May 8, 2013. To access the replay, dial 303-590-3030 or toll free at 800-406-7325 access code 4614416. A live and archived webcast of the conference call will also be available via the Company's Web site at http://investors.aviatnetworks.com/events.cfm. Non-GAAP Measures and Comparative Financial Information Aviat Networks, Inc. reports information in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Management of Aviat Networks monitors gross margin, research and development expenses, selling and administrative expenses, operating income or loss, income tax provision or benefit, income or loss from continuing operations, basic and diluted income or loss per share from continuing operations, adjusted earnings before interest, tax, depreciation and amortization ("adjusted EBITDA") on a non-GAAP basis for planning and forecasting results in future periods, and may use these measures for some management compensation purposes. These measures exclude certain costs, expenses, gains and losses as shown on the attached Reconciliation of Non-GAAP Financial Measures table. As a result, management is presenting these non-GAAP measures in addition to results reported in accordance with GAAP to better communicate underlying operational and financial performance in each period. Management believes these non-GAAP measures provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionate positive or negative impact on results in any given period. Management also believes that these non-GAAP measures enhance the ability of an investor to analyze trends in Aviat Networks' business and to better understand our performance. Aviat Networks' management does not, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Aviat Networks presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company's financial performance. Reconciliations of these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP are included in the tables below. About Aviat Networks Aviat Networks, Inc. (NASDAQ: AVNW) is a leading global provider of microwave networking solutions transforming communications networks to handle the exploding growth of IP-centric, multi-Gigabit data services. With more than 750,000 systems installed around the world, Aviat Networks provides LTE-proven microwave networking solutions to mobile operators, including some of the largest and most advanced 4G/LTE networks in the world. Public safety, utility, government and defense organizations also trust Aviat Networks' solutions for their mission-critical applications where reliability is paramount. In conjunction with its networking solutions, Aviat Networks provides a comprehensive suite of localized professional and support services enabling customers to effectively and seamlessly migrate to next generation Carrier Ethernet/IP networks. For more than 50 years, customers have relied on Aviat Networks' high performance and scalable solutions to help them maximize their investments and solve their most challenging network problems. Headquartered in Santa Clara, California, Aviat Networks operates in 46 countries around the world. For more information, visit www.aviatnetworks.com or connect with Aviat Networks on Twitter, Facebook and LinkedIn. Forward-Looking Statements The information contained in this document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act and Section 27A of the Securities Act, including statements regarding worldwide demand for mobile connectivity driving growth in our business, regarding continued investment to drive expected growth and regarding our expected results for the fourth quarter of fiscal 2013. All statements, trend analyses and other information contained herein about the markets for the services and products of Aviat Networks, Inc. and trends in revenue, as well as other statements identified by the use of forward-looking terminology, including "anticipate," "believe," "plan," "estimate," "expect," "goal," "will," "see," "continue," "delivering," "view," and "intend," or the negative of these terms or other similar expressions, constitute forward-looking statements. These forward-looking statements are based on estimates reflecting the current beliefs of the senior management of Aviat Networks. 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 document. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include the following: ocontinued price erosion as a result of increased competition in the microwave transmission industry; othe impact of the volume, timing and customer, product and geographic mix of our product orders; oour ability to meet projected new product development dates or anticipated cost reductions of new products; oour suppliers' inability to perform and deliver on time as a result of their financial condition, component shortages or other supply chain constraints; ocustomer acceptance of new products; othe ability of our subcontractors to timely perform; ocontinued weakness in the global economy affecting customer spending; oretention of our key personnel; oour ability to manage and maintain key customer relationships; ouncertain economic conditions in the telecommunications sector combined with operator and supplier consolidation; othe timing of our receipt of payment for products or services from our customers; oour failure to protect our intellectual property rights or defend against intellectual property infringement claims by others; othe effects of currency and interest rate risks; and othe impact of political turmoil in countries where we have significant business. For more information regarding the risks and uncertainties for our business, see "Risk Factors" in our Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on September 4, 2012 as well as other reports filed by Aviat Networks, Inc. with the SEC from time to time. Aviat Networks undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future. Financial Tables to Follow: Table 1 AVIAT NETWORKS, INC. Fiscal Year 2013 Third Quarter Summary CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Quarter Ended Three Quarters Ended March 30, March 30, March29, 2013 March29, 2013 2012 ^(1) 2012 ^(1) (In millions, except per share amounts) Revenue from product $ 118.3 $ 111.6 $ 362.3 $ 328.0 sales and services Cost of product sales 84.2 77.3 255.8 229.1 and services Gross margin 34.1 34.3 106.5 98.9 Research and development 9.9 8.9 29.0 26.7 expenses Selling and 24.7 25.4 71.7 75.6 administrative expenses Amortization of 0.1 0.1 0.3 1.5 intangible assets Goodwill impairment — — — 5.6 charges Restructuring charges 0.4 0.4 0.9 1.4 Operating income (loss) (1.0) (0.5) 4.6 (11.9) Interest income 0.2 — 0.7 0.3 Interest expense (0.2) (0.2) (0.7) (1.0) Income (loss) from continuing operations before (1.0) (0.7) 4.6 (12.6) income taxes Provision for income 0.6 0.1 12.0 1.9 taxes Loss from continuing (1.6) (0.8) (7.4) (14.5) operations Loss from discontinued (0.1) (2.4) (1.8) (8.3) operations, net of tax Net loss $ (1.7) $ (3.2) $ (9.2) $ (22.8) Loss per common share, basic and diluted: Continuing operations $ (0.03) $ (0.01) $ (0.12) $ (0.25) Discontinued operations $ — $ (0.04) $ (0.03) $ (0.14) Net loss $ (0.03) $ (0.05) $ (0.15) $ (0.39) Weighted average shares outstanding, basic and 60.3 59.2 59.9 59.0 diluted ____________________________________________________ (1) Certain prior year period amounts are reclassified to conform to current period presentation. Table 2 AVIAT NETWORKS, INC. Fiscal Year 2013 Third Quarter Summary CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March29, 2013 June 29, 2012 ^(1) (In millions) Assets Cash and cash equivalents $ 92.9 $ 96.0 Receivables, net 80.0 90.7 Unbilled costs 27.5 25.9 Inventories 40.5 56.8 Customer service inventories 16.8 18.5 Other current assets 19.1 16.7 Property, plant and equipment, net 25.3 21.7 Identifiable intangible assets, net 1.0 1.8 Other assets 1.0 1.5 $ 304.1 $ 329.6 Liabilities and Stockholders' Equity Short-term debt $ 9.8 $ 4.1 Accounts payable 40.8 55.8 Accrued expenses and other current 80.1 95.5 liabilities Long-term debt — 8.8 Reserve for uncertain tax positions and 19.4 7.9 other long-term liabilities Stockholders' equity 154.0 157.5 $ 304.1 $ 329.6 ____________________________________________________ (1) Certain prior year period amounts are reclassified to conform to current period presentation. Table 3 AVIAT NETWORKS, INC. Fiscal Year 2013 Third Quarter Summary CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Quarters Ended March29, 2013 March30, 2012 ^(1) (In millions) Operating Activities Net loss $ (9.2) $ (22.8) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of identifiable intangible 0.8 2.0 assets Depreciation and amortization of 4.2 3.5 property, plant and equipment Goodwill impairment charges — 5.6 Bad debt expense 2.3 2.9 Share-based compensation expense 4.7 3.7 Charges for inventory write-downs 2.0 3.0 Loss (gain) on disposition of the WiMAX (0.1) 1.9 business Other non-cash items (0.1) — Changes in operating assets and liabilities: Receivables 8.5 23.4 Unbilled costs (1.6) (4.3) Inventories 14.9 (0.4) Customer service inventories 1.1 0.2 Accounts payable (15.1) (15.5) Accrued expenses (4.8) (2.7) Advance payments and unearned income (6.7) (3.4) Income taxes payable or receivable (3.2) 1.2 Reserve for uncertain tax positions and 11.9 — deferred taxes Other assets and liabilities (2.7) 0.9 Net cash provided by (used in) operating 6.9 (0.8) activities Investing Activities Cash disbursed related to sale of WiMAX (0.1) (1.1) business, net Additions of property, plant and (7.3) (4.4) equipment Net cash used in investing activities (7.4) (5.5) Financing Activities Proceeds from long-term debt — 8.3 Payments on long-term debt (3.1) (0.4) Proceeds from share-based 0.2 — compensation awards Redemption of preference shares — (8.3) Payments on capital lease (0.1) — obligations Net cash used in financing activities (3.0) (0.4) Effect of exchange rate changes on cash 0.4 (1.0) and cash equivalents Net Decrease in Cash and Cash Equivalents (3.1) (7.7) Cash and Cash Equivalents, Beginning of 96.0 98.2 Period Cash and Cash Equivalents, End of Period $ 92.9 $ 90.5 ____________________________________________________ (1) Certain prior year period amounts are reclassified to conform to current period presentation. AVIAT NETWORKS, INC. Quarter Ended March29, 2013 Summaries RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE To supplement the consolidated financial statements presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we provide additional measures of gross margin, research and development expenses, selling and administrative expenses, operating income or loss, income tax provision or benefit, income or loss from continuing operations, basic and diluted income or loss per share from continuing operations, and adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA"), adjusted to exclude certain costs, charges, gains and losses, as set forth below. We believe that these non-GAAP financial measures, when considered together with the GAAP financial measures provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionate positive or negative impact on results in any particular period. We also believe these non-GAAP measures enhance the ability of investors to analyze trends in our business and to understand our performance. In addition, we may utilize non-GAAP financial measures as a guide in our forecasting, budgeting and long-term planning process and to measure operating performance for some management compensation purposes. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP follow. Table 4 AVIAT NETWORKS, INC. Fiscal Year 2013 Third Quarter Summary RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES ^ (1) Condensed Consolidated Statements of Operations (Unaudited) Quarter Ended Three Quarters Ended March 29, % of March 30, % of March 29, % of March 30, % of 2013 2012 2013 2012 Revenue Revenue Revenue Revenue (In millions, except percentages and per share amounts) GAAP gross $ 34.1 28.8 % $ 34.3 30.7 % $ 106.5 29.4 % $ 98.9 30.2 % margin Share-based 0.1 0.3 0.4 0.5 compensation Write-off of excess and — — — 1.0 obsolete inventories Amortization of purchased 0.2 0.1 0.5 0.5 technology Non-GAAP gross 34.4 29.1 % 34.7 31.1 % 107.4 29.6 % 100.9 30.8 % margin GAAP research and $ 9.9 8.4 % $ 8.9 8.0 % $ 29.0 8.0 % $ 26.7 8.1 % development expenses Share-based — (0.2) (0.7) (0.7) compensation Non-GAAP research and 9.9 8.4 % 8.7 7.8 % 28.3 7.8 % 26.0 7.9 % development expenses GAAP selling and $ 24.7 20.9 % $ 25.4 22.8 % $ 71.7 19.8 % $ 75.6 23.0 % administrative expenses Share-based (1.3) (1.0) (3.6) (2.5) compensation Transactional taxes (0.7) (0.3) (1.3) (0.6) assessments Other nonrecurring — (0.5) — (0.9) charges Non-GAAP selling and 22.7 19.2 % 23.6 21.1 % 66.8 18.4 % 71.6 21.8 % administrative expenses GAAP operating $ (1.0) (0.8)% $ (0.5) (0.4)% $ 4.6 1.3 % $ (11.9) (3.6)% income (loss) Share-based 1.4 1.5 4.7 3.7 compensation Write-off of excess and — — — 1.0 obsolete inventories Amortization of purchased 0.2 0.1 0.5 0.5 technology Transactional taxes 0.7 0.3 1.3 0.6 assessments Other nonrecurring — 0.5 — 0.9 charges Amortization of intangible 0.1 0.1 0.3 1.5 assets Goodwill impairment — — — 5.6 charges Restructuring 0.4 0.4 0.9 1.4 charges Non-GAAP operating 1.8 1.5 % 2.4 2.2 % 12.3 3.4 % 3.3 1.0 % income GAAP income $ 0.6 0.5 % $ 0.1 0.1 % $ 12.0 3.3 % $ 1.9 0.6 % tax provision Adjustment to reflect pro — (0.1) (10.1) (1.9) forma tax rate Non-GAAP income tax 0.6 0.5 % — — % 1.9 0.5 % — — % provision GAAP loss from continuing $ (1.6) (1.4)% $ (0.8) (0.7)% $ (7.4) (2.0)% $ (14.5) (4.4)% operations Share-based 1.4 1.5 4.7 3.7 compensation Write-off of excess and — — — 1.0 obsolete inventories Amortization of purchased 0.2 0.1 0.5 0.5 technology Transactional taxes 0.7 0.3 1.3 0.6 assessments Other nonrecurring — 0.5 — 0.9 charges Amortization of intangible 0.1 0.1 0.3 1.5 assets Goodwill impairment — — — 5.6 charges Restructuring 0.4 0.4 0.9 1.4 charges Adjustment to reflect pro — 0.1 10.1 1.9 forma tax rate Non-GAAP income from $ 1.2 1.0 % $ 2.2 2.0 % $ 10.4 2.9 % $ 2.6 0.8 % continuing operations Income (loss) per share from continuing operations Basic: GAAP $ (0.03) $ (0.01) $ (0.12) $ (0.25) Non-GAAP $ 0.02 $ 0.04 $ 0.17 $ 0.04 Diluted: GAAP $ (0.03) $ (0.01) $ (0.12) $ (0.25) Non-GAAP $ 0.02 $ 0.04 $ 0.17 $ 0.04 Shares used in computing income (loss) per share from continuing operations Basic: GAAP 60.3 59.2 59.9 59.0 Non-GAAP 61.3 61.3 61.3 60.9 Diluted: GAAP 60.3 59.2 59.9 59.0 Non-GAAP 62.7 61.3 61.8 60.9 Quarter Ended Three Quarters Ended ADJUSTED March 29, % of March 30, % of March 29, % of March 30, % of EBITDA: 2013 Revenue 2012 (1) Revenue 2013 Revenue 2012 (1) Revenue (In millions, except percentages) GAAP loss from continuing $ (1.6) (1.4)% $ (0.8) (0.7)% $ (7.4) (2.0)% $ (14.5) (4.4)% operations Depreciation and amortization 1.3 0.8 4.2 3.5 of property, plant and equipment Interest 0.2 0.2 0.7 1.0 expense Share-based 1.4 1.5 4.7 3.7 compensation Write-off of excess and — — — 1.0 obsolete inventories Amortization of purchased 0.2 0.1 0.5 0.5 technology Transactional taxes 0.7 0.3 1.3 0.6 assessments Other nonrecurring — 0.5 — 0.9 charges Amortization of intangible 0.1 0.1 0.3 1.5 assets Goodwill impairment — — — 5.6 charges Restructuring 0.4 0.4 0.9 1.4 charges Provision for 0.6 0.1 12.0 1.9 income taxes Adjusted $ 3.3 2.8 % $ 3.2 2.9 % $ 17.2 4.7 % $ 7.1 2.2 % EBITDA _____________________________________________________ (1) The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by us. Our non-GAAP income or loss from continuing operations excluded share-based compensation, write-off of excess and obsolete inventory,amortization of purchased technology, transactional taxes assessments, amortization of intangible assets, goodwill impairment charges, restructuring charges, and adjustment to reflect pro forma tax rate. Adjusted EBITDA was determined by excludingdepreciation and amortization on property, plant and equipment, interest expense, provision for income taxes, and non-GAAP pre-tax adjustments, as set forth above, from the GAAP income from continuing operations. We believe that the presentationof these non-GAAP items provides meaningful supplemental information to investors, when viewed in conjunction with, and not in lieu of, our GAAP results. However, the non-GAAP financial measures have not been prepared under a comprehensive setof accounting rules or principles. Non-GAAP information should not be considered in isolation from, or as a substitute for, information prepared in accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAPfinancial measures. Table 5 AVIAT NETWORKS, INC. Fiscal Year 2013 Third Quarter Summary SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA (Unaudited) Quarter Ended Three Quarters Ended March29, 2013 March30, 2012 March29, March30, 2013 2012 (in millions) North America $ 52.9 $ 42.6 $ 133.0 $ 123.8 International: Africa and Middle East 37.7 33.9 150.6 100.7 Europe and Russia 9.4 11.8 31.0 39.9 Latin America and Asia 18.3 23.3 47.7 63.6 Pacific 65.4 69.0 229.3 204.2 Total Revenue $ 118.3 $ 111.6 $ 362.3 $ 328.0 SOURCE Aviat Networks, Inc. Website: http://www.aviatnetworks.com Contact: Media Contact: Ned Hayes, Aviat Networks, Inc., (408) 567-7120, Ned.Hayes@aviatnet.com; Investor Relations: Peter Salkowski, Aviat Networks, Inc., (408) 567-7117, Investorinfo@aviatnet.com
Aviat Networks Announces Fiscal Third Quarter 2013 Financial Results
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