What changed in this filing

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Item 1. Financial Statements

2023-02-01 compared with 2022-11-02 · 204 added, 157 removed, 427 unchanged (46% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts) September 30,

(In thousands, except share and par value amounts) December 30,

Current Assets:

13 unchanged sentences

Other assets 9,834 10,445

TOTAL ASSETS $ 326,728 $ 323,904

$ 349,288 $ 323,904

LIABILITIES AND EQUITY

14 unchanged sentences

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 11,312,974 shares issued and outstanding at September 30, 2022;

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 11,377,066 shares issued and outstanding at December 30, 2022;

11,160,160 shares issued and outstanding at July 1, 2022

5 unchanged sentences

TOTAL LIABILITIES AND EQUITY

$ 349,288 $ 323,904

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

(In thousands, except per share amounts) September 30,

2022 October 1,

Three Months Ended Six Months Ended

(In thousands, except per share amounts) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

Revenue from product sales $ 65,561 $ 53,467 $ 120,662 $ 104,314

9 unchanged sentences

Selling and administrative expenses 16,567 13,739 34,071 26,437

Restructuring charges 1,950 659

Restructuring charges (recovery) 928 ( 960 ) 2,878 ( 301 )

Total operating expenses 23,542 18,948 49,083 38,215

Operating income 8,678 9,208 12,591 16,022

Other expense (income), net 2,782 ( 28 )

Other (income)/expense, net ( 460 ) 240 2,322 212

Income before income taxes 9,138 8,968 10,269 15,810

Provision for income taxes 3,092 3,052 6,969 5,212

Net (loss) income $ ( 2,746 ) $ 4,682

Net (loss) income per share of common stock outstanding:

Net income $ 6,046 $ 5,916 $ 3,300 $ 10,598

Net income per share of common stock outstanding:

Basic $ 0.53 $ 0.52 $ 0.29 $ 0.95

5 unchanged sentences

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three Months Ended

(In thousands) September 30,

2022 October 1,

Net (loss) income $ ( 2,746 ) $ 4,682

Other comprehensive (loss)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

(In thousands) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

Net income $ 6,046 $ 5,916 $ 3,300 $ 10,598

Other comprehensive income (loss):

Net change in cumulative translation adjustments

1,001 ( 108 ) ( 112 ) ( 272 )

Other comprehensive (loss) ( 1,113 ) ( 164 )

Comprehensive (loss) income $ ( 3,859 ) $ 4,518

Other comprehensive income (loss) 1,001 ( 108 ) ( 112 ) ( 272 )

Comprehensive income $ 7,047 $ 5,808 $ 3,188 $ 10,326

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

(In thousands) September 30,

2022 October 1,

Six Months Ended

(In thousands) December 30,

2022 December 31,

Operating Activities

Net (loss) income $ ( 2,746 ) $ 4,682

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Net income $ 3,300 $ 10,598

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization of property, plant and equipment 2,765 2,393

Amortization of intangible assets acquired 248 —

Provision for (Recoveries of) uncollectible receivables 182 ( 2 )

Provision (recoveries) for uncollectible receivables 474 ( 3 )

Share-based compensation 3,497 1,624

Deferred tax expense 3,338 1,116

Deferred tax assets, net 5,278 3,548

Charges for inventory and customer service inventory write-downs 1,138 658

1 unchanged sentence

Net loss on marketable securities 1,740 —

Restructuring recoveries — ( 301 )

Changes in operating assets and liabilities:

9 unchanged sentences

Change in lease liabilities ( 352 ) ( 472 )

Net cash (used in) provided by operating activities ( 6,314 ) 682

Net cash used in operating activities ( 8,359 ) ( 2,163 )

Investing Activities

9 unchanged sentences

Proceeds from issuance of common stock under employee stock plans 747 586

Net cash used in financing activities ( 310 ) ( 804 )

Net cash provided by (used in) financing activities 58 ( 2,393 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 41 ( 291 )

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended September 30, 2022

Three Months Ended December 30, 2022

Common Stock Treasury Stock Additional

1 unchanged sentence

(In thousands, except share amounts) Shares $

Balance as of July 1, 2022 11,160,160 $ 112 $ ( 6,147 ) $ 823,259 $ ( 599,442 ) $ ( 16,029 ) $ 201,753

Net loss — — — — ( 2,746 ) — ( 2,746 )

Balance as of September 30, 2022 11,312,974 $ 113 $ ( 6,147 ) $ 824,786 $ ( 602,188 ) $ ( 17,142 ) $ 199,422

Net income — — — — 6,046 — 6,046

Other comprehensive income, net of tax — — — — — 1,001 1,001

Issuance of common stock under employee stock plans 64,757 1 — 386 — — 387

Shares withheld for taxes related to vesting of equity awards ( 665 ) — — ( 19 ) — — ( 19 )

Share-based compensation — — — 1,659 — — 1,659

Balance as of December 30, 2022 11,377,066 $ 114 $ ( 6,147 ) $ 826,812 $ ( 596,142 ) $ ( 16,141 ) $ 208,496

Three Months Ended December 31, 2021

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands, except share amounts) Shares $

Balance as of October 1, 2021 11,187,003 $ 112 $ ( 1,500 ) $ 819,711 $ ( 615,920 ) $ ( 14,491 ) $ 187,912

Net income — — — — 5,916 — 5,916

Other comprehensive loss, net of tax — — — — — ( 108 ) ( 108 )

1 unchanged sentence

Shares withheld for taxes related to vesting of equity awards — — — — — — —

Stock repurchase ( 60,895 ) ( 1 ) ( 1,908 ) — — — ( 1,909 )

Share-based compensation — — — 761 — — 761

Balance as of September 30, 2022 11,312,974 $ 113 $ ( 6,147 ) $ 824,786 $ ( 602,188 ) $ ( 17,142 ) $ 199,422

Three Months Ended October 1, 2021

Balance as of December 31, 2021 11,195,542 $ 112 $ ( 3,408 ) $ 820,791 $ ( 610,004 ) $ ( 14,599 ) $ 192,892

Six Months Ended December 30, 2022

Common Stock Treasury Stock Additional

3 unchanged sentences

Net income — — — — 3,300 — 3,300

Other comprehensive income, net of tax — — — — — ( 112 ) ( 112 )

Issuance of common stock under employee stock plans 239,074 3 — 744 — — 747

Shares withheld for taxes related to vesting of equity awards ( 22,168 ) ( 1 ) — ( 688 ) — — ( 689 )

Stock repurchase — — — — — — —

Share-based compensation — — — 3,497 — — 3,497

Balance as of December 30, 2022 11,377,066 $ 114 $ ( 6,147 ) $ 826,812 $ ( 596,142 ) $ ( 16,141 ) $ 208,496

Six Months Ended December 31, 2021

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands, except share amounts) Shares $

Balance as of July 2, 2021 11,153,445 $ 112 $ ( 787 ) $ 818,939 $ ( 620,602 ) $ ( 14,327 ) $ 183,335

Net income — — — — 10,598 — 10,598

Other comprehensive loss, net of tax — — — — — ( 272 ) ( 272 )

3 unchanged sentences

Share-based compensation — — — 1,624 — — 1,624

Balance as of October 1, 2021 11,187,003 $ 112 $ ( 1,500 ) $ 819,711 $ ( 615,920 ) $ ( 14,491 ) $ 187,912

Balance as of December 31, 2021 11,195,542 $ 112 $ ( 3,408 ) $ 820,791 $ ( 610,004 ) $ ( 14,599 ) $ 192,892

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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In the opinion of our management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows for such periods.

The results for the three months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The results for the three and six months ended December 30, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 1, 2022.

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We operate on a 52-week or 53-week year ending on the Friday closest to June 30.

The three months ended September 30, 2022 and the three months ended October 1, 2021 both consisted of 13 weeks.

The three months ended December 30, 2022 and the three months ended December 31, 2021 both consisted of 13 weeks.

Fiscal year 2023 will be comprised of 52 weeks and will end on June 30, 2023.

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Summary of Significant Accounting Policies

There have been no material changes in our significant accounting policies as of September 30, 2022 and for the three months ended September 30, 2022, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 1, 2022.

There have been no material changes in our significant accounting policies as of December 30, 2022 and for the six months ended December 30, 2022, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 1, 2022.

Accounting Standards Adopted

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The adoption had no material impact on our unaudited condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848).

This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.

This guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and will be effective through December 31, 2022.

We are currently evaluating the potential impact of ASU 2020-04 will have on our consolidated financial statements.

Balance Sheet Components

Cash, Cash Equivalents, and Restricted Cash

The following table provides a summary of our cash, cash equivalents, and restricted cash reported within our unaudited condensed consolidated balance sheets that reconciles to the corresponding amount in our unaudited condensed consolidated statement of cash flows:

(In thousands) September 30,

The following table provides a summary of the cash, cash equivalents, and restricted cash reported within our unaudited condensed consolidated balance sheets that reconciles to the corresponding amount in our unaudited condensed consolidated statement of cash flows:

(In thousands) December 30,

Cash and cash equivalents $ 21,360 $ 36,877

3 unchanged sentences

Our net accounts receivable are summarized below:

(In thousands) September 30,

(In thousands) December 30,

Accounts receivable $ 92,289 $ 74,102

2 unchanged sentences

Our inventories are summarized below

(In thousands) September 30,

(In thousands) December 30,

Finished products $ 21,396 $ 14,916

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$ 9,590 $ 9,796

We currently rely on a few vendors for substantially all of our inventory purchases.

We record charges to adjust our inventory and customer service inventory due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning, or discontinuance.

The charges during the three months ended September 30, 2022 and October 1, 2021 were classified in cost of product sales as follows:

Three Months Ended

(In thousands) September 30,

2022 October 1,

The charges during the three and six months ended December 30, 2022 and December 31, 2021 consisted of the following which were recorded in cost of product sales:

Three Months Ended Six Months Ended

(In thousands) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

Excess and obsolete inventory $ 411 $ 107 $ 581 $ 240

1 unchanged sentence

Total inventory charges

$ 733 $ 277 $ 1,138 $ 658

Assets Held for Sale

2 unchanged sentences

During the second quarter of fiscal 2021 management initiated the sale of our facility located in the United Kingdom.

We completed the sale during the third quarter of fiscal 2022 with proceeds of $ 2.3 million, reflecting a gain of $ 0.1 million.

We have no assets held for sale as of September 30, 2022.

We completed the sale during the third quarter of fiscal 2022 with proceeds of $ 2.3 million, reflecting a gain of $ 0.1 million We have no assets held for sale as of December 30, 2022.

Property, Plant and Equipment, net

Our property, plant and equipment, net are summarized below:

(In thousands) September 30,

(In thousands) December 30,

Land $ 210 $ 210

5 unchanged sentences

Total property, plant and equipment, net $ 11,416 $ 8,887

Included in the total plant, property and equipment above there was $ 1.1 million of assets in progress which have not been placed in service as of September 30, 2022 and $ 1.2 million as of July 1, 2022.

Included in the total plant, property and equipment above there was $ 0.7 million of assets in progress which have not been placed in service as of December 30, 2022 and $ 1.2 million as of July 1, 2022.

Depreciation and amortization expense related to property, plant and equipment, including amortization of software developed for internal use, was as follows:

Three Months Ended

(In thousands) September 30,

2022 October 1,

Three Months Ended Six Months Ended

(In thousands) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

Depreciation and amortization $ 1,421 $ 1,129 $ 2,765 $ 2,393

1 unchanged sentence

Our accrued expenses are summarized below:

(In thousands) September 30,

(In thousands) December 30,

Accrued compensation and benefits $ 8,182 $ 11,625

6 unchanged sentences

Changes in our warranty liability, which are included as a component of accrued expenses in our unaudited condensed consolidated balance sheets were as follows:

Three Months Ended

(In thousands) September 30,

2022 October 1,

Three Months Ended Six Months Ended

(In thousands) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

Balance as of the beginning of the period $ 2,755 $ 3,318 $ 2,913 $ 3,228

5 unchanged sentences

Our advance payments and unearned revenue are summarized below:

(In thousands) September 30,

(In thousands) December 30,

Advance payments $ 2,884 $ 1,870

1 unchanged sentence

Total advance payments and unearned revenue $ 38,870 $ 33,740

Excluded from the balances above are $ 7.8 million and $ 8.9 million in long-term unearned revenue as of September 30, 2022 and July 1, 2022, respectively.

Excluded from the balances above are $ 7.8 million and $ 8.9 million in long-term unearned revenue as of December 30, 2022 and July 1, 2022, respectively.

Fair Value Measurements of Assets and Liabilities

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• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair values, and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and July 1, 2022 were as follows:

September 30, 2022 July 1, 2022 Valuation Inputs

The fair values, and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of December 30, 2022 and July 1, 2022 were as follows:

December 30, 2022 July 1, 2022 Valuation Inputs

(In thousands) Fair Value Fair Value

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Our Level 1 items mainly are money market funds.

As of September 30, 2022 and July 1, 2022, these money market funds were valued at $ 1.00 net asset value per share.

As of December 30, 2022 and July 1, 2022, these money market funds were valued at $ 1.00 net asset value per share.

Our marketable securities are included in current assets on our balance sheet as they are available to be converted into cash to fund current operations.

These marketable securities are publicly traded stock measured at fair value and classified within Level 1.

During the first quarter ended September 30, 2022, we recognized a loss of $ 1.2 million associated with the sales of our marketable securities.

These marketable securities are publicly traded stock measured at fair value and classified

within Level 1.

For the six months ended December 30, 2022 we recognized a loss of $ 1.7 million associated with the sales of our marketable securities.

We classify items in Level 2 if the observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes, or alternative pricing sources are available with reasonable levels of price transparency.

Our bank certificates of deposit are classified within Level 2.

As of September 30, 2022 and July 1, 2022, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

As of December 30, 2022 and July 1, 2022, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

Our policy is to recognize asset or liability transfers among Level 1, Level 2, and Level 3 as of the actual date of the events or change in circumstances that caused the transfer.

During the first three months of fiscal 2023 and 2022, we had no transfers between levels of the fair value hierarchy of our assets or liabilities measured at fair value.

During the first six months of fiscal 2023 and 2022, we had no transfers between levels of the fair value hierarchy of our assets or liabilities measured at fair value.

The Company has facilities under non-cancelable operating lease agreements.

3 unchanged sentences

Our obligations to make lease payments are included in "Short-term lease liabilities" and "Long-term lease liabilities" on our unaudited condensed consolidated balance sheets.

We did not enter into any finance leases during the three months ended September 30, 2022.

We did not enter into any finance leases during the six months ended December 30, 2022.

The following summarizes our lease costs (in thousands):

Three Months Ended

September 30,

2022 October 1, 2021

(In thousands)

Three Months Ended Six Months Ended

2022 December 31, 2021 December 30,

2022 December 31, 2021

(In thousands) (In thousands)

Operating lease costs $ 235 $ 245 $ 547 $ 562

3 unchanged sentences

$ 746 $ 805 $ 1,644 $ 1,836

The following summarizes our lease term and discount rate for the three months ended September 30, 2022:

The following summarizes our lease term and discount rate for the six months ended December 30, 2022:

Weighted average remaining lease term 6.8 years

Weighted average discount rate 5.7 %

As of September 30, 2022, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):

As of December 30, 2022, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):

(In thousands)

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We may prepay loans under the SVB Credit Facility in whole or in part at any time without premium or penalty.

As of September 30, 2022, available credit under the SVB Credit Facility was $ 22.0 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 3.0 million.

We borrowed and repaid $ 15.0 million against the SVB Credit Facility during the fiscal quarter and the interest rate was 5.83 %.

As of September 30, 2022 there was no borrowing outstanding.

As of December 30, 2022, available credit under the SVB Credit Facility was $ 22.0 million, reflecting the available limit of $ 25.0 million less outstanding letters of credit of $ 3.0 million.

We borrowed and repaid $ 24.0 million against the SVB Credit Facility during the six months ended December 30, 2022 and the interest rate was 6.07 %.

As of December 30, 2022 there was no borrowing outstanding.

The SVB Credit Facility carries an interest rate computed, at our option, based on either (i) at the prime rate reported in the Wall Street Journal plus a spread of 0.50 % to 1.50 %, with such spread determined based on our adjusted quick ratio;

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Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default at a per annum rate of interest equal to 5.00 % above the applicable interest rate.

As of September 30, 2022, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.

As of December 30, 2022, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.

Revenue Recognition

1 unchanged sentence

The following table provides information about receivables and liabilities from contracts with customers (in thousands):

September 30, 2022 July 1, 2022

December 30, 2022 July 1, 2022

Contract Balances

5 unchanged sentences

Unearned revenue, long-term $ 7,824 $ 8,920

Capitalized commissions are classified as both current and long term in included in other assets.

Significant changes in contract balances may arise as a result of recognition over time for services, transfer of control for equipment, and periodic payments (both in arrears and in advance).

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however, this will have no impact on our future obligation to bill and collect.

As of September 30, 2022, we had $ 43.3 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 44 % is expected to be recognized as revenue in the remainder of fiscal 2023 and the balance thereafter.

During the three months ended September 30, 2022 we recognized approximately $ 5.9 million of revenue which was included in advance payments and unearned revenue at July 1, 2022.

As of December 30, 2022, we had $ 46.7 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 38 % is expected to be recognized as revenue in the remainder of fiscal 2023 and the balance thereafter.

During the three and six months ended December 30, 2022 we recognized $ 6.0 million and $ 11.9 million, respectively, of revenue which was included in advance payments and unearned revenue at July 1, 2022.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 120.1 million at September 30, 2022.

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 115.9 million at December 30, 2022.

Of this amount, we expect to recognize approximately 51 % as revenue during the next 12 months, with the remaining amount to be recognized as revenue within two to five years .

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We report revenue by region and country based on the location where our customers accept delivery of our products and services.

Revenue by region for the three months ended September 30, 2022 and October 1, 2021 was as follows:

Three Months Ended

(In thousands) September 30,

2022 October 1,

Revenue by region for the three and six months ended December 30, 2022 and December 31, 2021 was as follows:

Three Months Ended Six Months Ended

(In thousands) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

North America

5 unchanged sentences

$ 90,683 $ 77,864 $ 171,934 $ 151,022

The loss of a significant portion of business from any significant customers could adversely affect our unaudited condensed consolidated financial statements.

Customers accounting for 10% or more of our total revenue were as follows:

Three Months Ended

September 30,

2022 October 1,

Three Months Ended Six Months Ended

2022 December 31,

2021 December 30,

2022 December 31,

Motorola Solutions, Inc.

* 11.0 % 11.4 % 13.0 %

Verizon Wireless 10.1 % * * *

* Less than 10.0%

Customer accounting for 10% or more of our accounts receivable were as follows:

September 30,

2022 July 1, 2022

December 30, 2022 July 1, 2022

Mobile Telephone Networks Group (MTN Group) * 17.0 %

* Less than 10.0%

Stock Repurchase Program

In November 2021 our Board of Directors approved a stock repurchase program to purchase up to $ 10.0 million of our common stock.

As of September 30, 2022, $ 8.0 million remains available and we may choose to suspend or discontinue the repurchase program at any time.

During the first quarter of fiscal 2023, we did not repurchase any shares of our common stock in the open market.

As of December 30, 2022, $ 8.0 million remains available and we may choose to suspend or discontinue the repurchase program at any time.

During the first six months of fiscal 2023, we did not repurchase any shares of our common stock in the open market.

Stock Incentive Programs

As of September 30, 2022, we had one stock incentive plan for our employees and non-employee directors, the 2018 Amended and Restated Incentive Plan (the “2018 Plan”).

As of December 30, 2022, we had one stock incentive plan for our employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

The 2018 Plan provides for the issuance of share-based awards in the form of stock options, stock appreciation rights, restricted stock awards and units, and performance share awards and units.

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Market-based stock units vest upon meeting certain predetermined share price performance criteria and continued employment through the end of the applicable period.

During the three months ended September 30, 2022, we granted 51,772 restricted stock units, 49,321 market-based stock units and 110,945 stock options to purchase shares of our common stock.

During the six months ended December 30, 2022, we granted 72,162 restricted stock units, 49,321 market-based stock units and 110,945 stock options to purchase shares of our common stock.

Total compensation expense for share-based awards included in our unaudited condensed consolidated statements of operations was as follows:

Three Months Ended

(In thousands) September 30,

2022 October 1,

Three Months Ended Six Months Ended

(In thousands) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

By Expense Category:

7 unchanged sentences

Total share-based compensation expense $ 1,659 $ 761 $ 3,497 $ 1,624

As of September 30, 2022, there was approximately $ 2.7 million of total unrecognized compensation expense related to non-vested stock options granted which is expected to be recognized over a weighted-average period of 2.1 years.

As of September 30, 2022, there was $ 11.8 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.9 years.

As of December 30, 2022, there was approximately $ 2.3 million of total unrecognized compensation expense related to non-vested stock options granted which is expected to be recognized over a weighted-average period of 1.8 years.

As of December 30, 2022, there was $ 10.6 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.8 years.

Restructuring Activities

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Severance and Benefits Total

(In thousands) Q1 2023 Plan Q4 2022 Plan Fiscal 2021 Plan

(In thousands) Q2 2023 Plan Q1 2023 Plan Q4 2022 Plan Fiscal 2021 Plan

Accrual balance, July 1, 2022 $ — $ — $ 295 $ 1,086 $ 1,381

1 unchanged sentence

Cash payments — ( 1,437 ) ( 272 ) ( 100 ) ( 1,809 )

Foreign exchange impact — — — —

Accrual balance, September 30, 2022 — 513 23 986 1,522

As of September 30, 2022, the accrual balance of $ 1.5 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Charges, net 928 — — — 928

Cash payments ( 452 ) ( 377 ) — ( 149 ) ( 978 )

Foreign exchange impact — — — — —

Accrual balance, December 30, 2022 $ 476 $ 136 $ 23 $ 837 $ 1,472

As of December 30, 2022, the accrual balance of $ 1.5 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Included in the above plans for which we were carrying a provision were positions identified for termination that have not been executed from a restructuring perspective.

During the second quarter of fiscal 2023, our Board of Directors approved a restructuring plan, (the “Q2 2023 Plan”) which is anticipated to generate cost savings from the elimination of 6 roles.

The Q2 2023 plan is expected to be implemented through the end of first half of fiscal 2024.

During the first quarter of fiscal 2023, our Board of Directors approved a restructuring plan, (the “Q1 2023 Plan”) from the acquisition of Redline Communications, Inc.

The Q1 2023 Plan which is anticipated to generate cost saving on integration of Redline, entails a reduction in force of approximately 20 employees due to integrating work into existing Aviat teams, to be implemented through the end of Q3 2023.

During the fourth quarter of fiscal 2022, our Board of Directors approved a restructuring plan (the “Q4 2022 Plan”) to restructure specific groups to optimize skill sets and align structure to execute on strategic deliverables.

The Q4 2022 Plan was anticipated to entail a reduction in force of approximately 11 employees to be implemented through early fiscal year 2023, with a certain number of positions being consolidated.

The Q4 2022 Plan was anticipated to entail a reduction in force of approximately 11 employees to be implemented through the end of fiscal year 2023, with a certain number of positions being consolidated.

Fiscal 2021 Plan

During the third quarter of fiscal 2021, our Board of Directors approved restructuring plans (the “Fiscal 2021 Plan”) to continue to reduce our operating costs and improve profitability as part of our transformational initiative to optimize our

business model and increase efficiencies.

We recorded restructuring charges of $ 2.4 million related to the Fiscal 2021 Plan in fiscal 2021.

The Fiscal 2021 Plan was anticipated to entail a reduction in force of approximately 30 employees and will be completed in the current fiscal year, with a certain number of positions being consolidated and/or relocated.

The Fiscal 2021 Plan was anticipated to entail a reduction in force of approximately 30 employees and will be completed through the end of fiscal 2023, with a certain number of positions being consolidated and/or relocated.

In the first quarter of fiscal 2023, we completed the acquisition of Redline, a leading provider of mission-critical data infrastructure.

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A summary of the preliminary allocation, pursuant to the completion of purchase price allocation, of the total purchase consideration is as follows:

(In thousands) Purchase consideration Net tangible assets acquired Purchased intangible assets Goodwill

Redline $ 20,411 $ 8,171 $ 7,290 $ 4,950

(In thousands)

Purchase consideration

Net tangible assets acquired

Purchased intangible assets

$ 20,411 $ 8,171 $ 7,290 $ 4,950

The following table presents details of our intangible assets:

(In thousands except for useful life)

Goodwill $ 4,950

Useful life in Years Gross Accumulate amortization Net

Useful life in Years

Accumulate amortization

Purchased intangible with finite lives:

Patents 11 $ 630 $ ( 14 ) $ 616

11 $ 630 $ ( 29 ) $ 601

Customer relationship

Trade names 16 1,160 ( 18 ) 1,142

15 5,500 ( 183 ) 5,317

16 1,160 ( 36 ) 1,124

Total purchased intangible assets with finite lives

Amortization of purchased intangible assets for the three months ended September 30, 2022 was $ 0.1 million included in operating expenses.

There were no impairment charges for the three months ended September 30, 2022.

Pro forma information for this acquisition is not provided because it did not have a material effect on the Company’s consolidated results of operations.

The estimated future amortization expense of intangible assets with finite lives as of September 30, 2022 is as follows (in thousands):

$ 7,290 $ ( 248 ) $ 7,042

Amortization of purchased intangible assets for the six months ended December 30, 2022 was $ 0.2 million included in operating expenses.

There were no impairment charges for the three or six months ended December 30, 2022.

Pro forma results of operations for this acquisition have not been presented because the effects on revenue and net income were not material to our historic consolidated financial statements.

The estimated future amortization expense of intangible assets with finite lives as of December 30, 2022 is as follows:

(In thousands)

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During interim periods, we accrue tax expenses for jurisdictions that are anticipated to be profitable for fiscal 2023.

The determination of our income taxes for the three months ended September 30, 2022 and October 1, 2021 was based on our estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

Our tax expense for the three months ended September 30, 2022 was primarily due to tax expense related to U.S.

and profitable subsidiaries, including deferred tax expense associated with our acquisition of Redline in July 2022 and the subsequent multi-step restructure plan where the two Redline Communication Canadian corporations converted to ULC companies and then amalgamated by the end of September 2022.

The tax expense for the three months ended October 1, 2021 was primarily due to tax expense related to U.S.

and profitable subsidiaries.

The determination of our income taxes for the six months ended December 30, 2022 and December 31, 2021 was based on our estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

Our tax expense for the six months ended December 30, 2022 was primarily due to tax expense related to U.S.

and profitable foreign subsidiaries, including deferred tax expense associated with our acquisition of Redline in July 2022 and the subsequent multi-step restructure plan where the two Redline Communication Canadian corporations converted to ULC companies and then amalgamated by the end of September 2022.

The tax expense for the six months ended December 31, 2021 was primarily due to tax expense related to U.S.

and profitable foreign subsidiaries.

We have a number of open income tax audits covering various tax years, which vary from jurisdiction to jurisdiction.

7 unchanged sentences

We account for interest and penalties related to unrecognized tax benefits as part of our provision for federal, foreign, and state income taxes.

Such interest expense was not material for the three months ended September 30, 2022 and October 1, 2021.

Such interest expense was not material for the six months ended December 30, 2022 and December 31, 2021.

On March 11, 2021, the U.S.

enacted the American Rescue Plan Act of 2021 (“ARPA”) which expands Section 162(m) to cover the next five most highly compensated employees for the taxable year, in addition to the “covered employees” effective for taxable years beginning after December 31, 2026.

We continue to examine the elements of the CAA and ARPA and the impact they may have on our future business.

We continue to examine the elements of the ARPA and the impact they may have on our future business.

On August 16, 2022, the U.S.

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We will continue to evaluate the applicability and effect of the IRA as more guidance is issued.

Net (Loss) Income Per Share of Common Stock

Net Income Per Share of Common Stock

The following table presents the computation of basic and diluted net income per share:

Three Months Ended

(In thousands, except per share amounts) September 30,

2022 October 1,

Net (loss) income $ ( 2,746 ) $ 4,682

Three Months Ended Six Months Ended

(In thousands, except per share amounts) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

Net income $ 6,046 $ 5,916 $ 3,300 $ 10,598

Weighted-average shares outstanding, basic

1 unchanged sentence

Effect of potentially dilutive equivalent shares

458 651 522 723

Weighted-average shares outstanding, diluted

11,805 11,960 11,795 11,895

Net (loss) income per share of common stock outstanding:

Net income per share of common stock outstanding:

$ 0.53 $ 0.52 $ 0.29 $ 0.95

$ 0.51 $ 0.49 $ 0.28 $ 0.89

The following table summarizes the weighted-average equity awards that were excluded from the diluted net (loss) income per share calculations since they were anti-dilutive:

Three Months Ended

(In thousands) September 30,

2022 October 1,

The following table summarizes the weighted-average equity awards that were excluded from the diluted net income per share calculations since they were anti-dilutive:

Three Months Ended Six Months Ended

(In thousands) December 30,

2022 December 31,

2021 December 30,

2022 December 31,

Stock options 220 123 190 48

1 unchanged sentence

Total shares of common stock excluded

258 177 261 89

Commitments and Contingencies

2 unchanged sentences

Because these agreements do not specify fixed or minimum quantities, do not specify minimum or variable price provisions, and do not specify the approximate timing of the transaction, and we have no present intention to cancel or terminate any of these agreements, we currently do not believe that we have any future liability under these agreements.

As of September 30, 2022, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 62.7 million.

In addition, we had contractual obligations of approximately $ 3.7 million associated with software licenses.

We currently rely on a few vendors for substantially all of our inventory purchases.

As of December 30, 2022, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 63.8 million.

In addition, we had contractual obligations of approximately $ 3.8 million associated with software licenses as of December 30, 2022.

Financial Guarantees and Commercial Commitments

1 unchanged sentence

The terms of the guarantees are generally equal to the remaining term of the related debt or other obligations and are generally limited to two years or less.

As of September 30, 2022, we had no guarantees applicable to our debt arrangements.

As of December 30, 2022, we had no guarantees applicable to our debt arrangements.

We have entered into commercial commitments in the normal course of business including surety bonds, standby letters of credit agreements, and other arrangements with financial institutions primarily relating to the guarantee of future performance on certain contracts to provide products and services to customers.

As of September 30, 2022, we had commercial commitments outstanding of $ 64.3 million, that were not recorded on our unaudited condensed consolidated balance sheets.

As of December 30, 2022, we had commercial commitments of $ 68.3 million outstanding that were not recorded on our unaudited condensed consolidated

balance sheets.

We do not believe, based on historical experience and information currently available, that it is probable that any significant amounts will be required to be paid on these performance guarantees in the future.

The following table presents details of our commercial commitments:

September 30,

Letters of credit $ 3,026

1 unchanged sentence

Under the terms of substantially all of our license agreements, we have agreed to defend and pay any final judgment against our customers arising from claims against such customers that our products infringe the intellectual property rights of a third party.

As of September 30, 2022, we have not received any notice that any customer is subject to an infringement claim arising from the use of our products;

As of December 30, 2022, we have not received any notice that any customer is subject to an infringement claim arising from the use of our products;

we have not received any request to defend any customers from infringement claims arising from the use of our products;

1 unchanged sentence

Because the outcome of infringement disputes is related to the specific facts of each case and given the lack of previous or current indemnification claims, we cannot estimate the maximum amount of potential future payments, if any, related to our indemnification provisions.

As of September 30, 2022, we had not recorded any liabilities related to these indemnifications.

As of December 30, 2022, we had not recorded any liabilities related to these indemnifications.

Legal Proceedings

We are subject from time to time to disputes with customers concerning our products and services.

In May 2016, we received notification of a claim for damages from a customer alleging that certain of our products were defective which we settled with an immaterial amount during the third quarter of 2021.

From time to time, we may be involved in various other legal claims and litigation that arise in the normal course of our operations.

16 unchanged sentences

In November 2017, the Indian Department of Revenue, Ministry of Finance also initiated a similar action against Telsima Communications Private Limited (“Telsima India”), a subsidiary of the Company, relating to the non-realization of intercompany receivables and non-payment of intercompany payables which originated from the period prior to our acquisition of Telsima India in February 2009.

In September 2019, our directors of Aviat India appeared before the Ministry of Finance Enforcement Directorate.

settlement offers were discussed at the meeting and the matter is still ongoing with no subsequent hearing date currently scheduled.

September 2019, our directors of Aviat India appeared before the Ministry of Finance Enforcement Directorate.

No settlement offers were discussed at the meeting and the matter is still ongoing with no subsequent hearing date currently scheduled as of December 30, 2022.

We have accrued an immaterial amount representing the estimated probable loss for which we would settle the matter.

7 unchanged sentences

Such revisions in the estimates of the potential liabilities could have a material impact on our results of operations and financial position.

In March 2020, the World Health Organization characterized a recent pandemic of respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic.

The pandemic continues to result in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns in various locations.

Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic.

The COVID-19 pandemic may have an impact on our operations, supply chains and distribution systems and increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with certainty, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume.

Management is actively monitoring the impact of the COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

Our first priority remains the health and safety of our employees and their families.

Employees whose tasks can be done off-site have been instructed to work from home.

Our manufacturing sites support essential businesses and remain operational.

We are maintaining social distancing for workers on-site and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements