What changed in this filing

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Item 1. Financial Statements

2024-05-01 compared with 2024-02-06 · 189 added, 160 removed, 527 unchanged (40% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended

(In thousands, except per share amounts) December 29,

2023 December 30,

2022 December 29,

2023 December 30,

Three Months Ended Nine Months Ended

(In thousands, except per share amounts) March 29,

2024 March 31,

2023 March 29,

2024 March 31,

Product sales $ 70,857 $ 54,811 $ 196,794 $ 175,473

9 unchanged sentences

Selling and administrative 21,300 15,842 61,979 49,913

Restructuring charges 2,000 928 2,644 2,878

Restructuring (recovery) charges ( 417 ) ( 23 ) 2,227 2,855

Total operating expenses 31,506 22,337 89,647 71,420

Operating income 5,028 7,496 15,569 20,087

Other (income) expense, net ( 243 ) ( 460 ) 658 2,322

Interest expense, net 928 122 1,421 210

Other expense, net 63 306 228 2,540

Income before income taxes 4,037 7,068 13,920 17,337

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

(In thousands) December 29,

2023 December 30,

2022 December 29,

2023 December 30,

Three Months Ended Nine Months Ended

(In thousands) March 29,

2024 March 31,

2023 March 29,

2024 March 31,

Net income $ 3,418 $ 4,889 $ 10,313 $ 8,189

Other comprehensive income (loss):

Other comprehensive (loss) income:

Net change in cumulative translation adjustments

( 341 ) 370 237 258

Other comprehensive income (loss) 545 1,001 578 ( 112 )

Other comprehensive (loss) income ( 341 ) 370 237 258

Comprehensive income $ 3,077 $ 5,259 $ 10,550 $ 8,447

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts) December 29,

(In thousands, except share and par value amounts) March 29,

2024 June 30,

1 unchanged sentence

Cash and cash equivalents $ 58,201 $ 22,242

Marketable securities

Accounts receivable, net of allowances of $ 1,250 and $ 719

2 unchanged sentences

Inventories 56,812 33,057

Assets held for sale

Other current assets 30,721 22,162

27 unchanged sentences

Preferred stock, $ 0.01 par value, 50.0 million shares authorized, none issued

Common stock, $ 0.01 par value, 300.0 million shares authorized, 12.5 million shares issued and outstanding at December 29, 2023;

Common stock, $ 0.01 par value, 300.0 million shares authorized, 12.6 million shares issued and outstanding at March 29, 2024;

11.5 million shares issued and outstanding at June 30, 2023

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

(In thousands) December 29,

2023 December 30,

Nine Months Ended

(In thousands) March 29,

2024 March 31,

Operating Activities

6 unchanged sentences

Deferred taxes 2,180 5,189

Charges for inventory write-downs 1,185 1,138

Inventory write-downs 3,589 1,715

Noncash lease expense 575 524

Net loss on marketable securities — 1,740

Net (gain) loss on marketable securities ( 61 ) 1,730

Other non-cash operating activities, net 83 34

10 unchanged sentences

Investing Activities

Payments for acquisition of property, plant and equipment ( 1,369 ) ( 672 )

Purchase of property, plant and equipment ( 1,866 ) ( 5,055 )

Purchase of marketable securities ( 925 ) —

Proceeds from sale of marketable securities — 9,163

5 unchanged sentences

Proceeds from term loan 50,000 —

Repayments of term loan ( 625 ) —

Payments of deferred financing costs ( 79 ) —

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended December 29, 2023

Three Months Ended March 29, 2024

Common Stock Treasury Stock Additional Paid-in Capital

1 unchanged sentence

(In thousands) Shares $

Balance as of September 29, 2023 11,719 $ 117 $ ( 6,147 ) $ 832,060 $ ( 583,909 ) $ ( 15,971 ) $ 226,150

Balance as of December 29, 2023 12,521 $ 125 $ ( 6,479 ) $ 856,735 $ ( 581,019 ) $ ( 15,426 ) $ 253,936

Net income — — — — 3,418 — 3,418

Other comprehensive income — — — — — 545 545

Other comprehensive loss — — — — — ( 341 ) ( 341 )

Issuance of common stock under employee stock plans 58 1 — 174 — — 175

3 unchanged sentences

Common stock issued in connection with acquisition — — — — — — —

Balance as of December 29, 2023 12,521 $ 125 $ ( 6,479 ) $ 856,735 $ ( 581,019 ) $ ( 15,426 ) $ 253,936

Three Months Ended December 30, 2022

Balance as of March 29, 2024 12,562 $ 126 $ ( 6,479 ) $ 858,228 $ ( 577,601 ) $ ( 15,767 ) $ 258,507

Three Months Ended March 31, 2023

Common Stock Treasury Stock Additional

1 unchanged sentence

(In thousands) Shares $

Balance as of September 30, 2022 11,313 $ 113 $ ( 6,147 ) $ 824,786 $ ( 602,188 ) $ ( 17,142 ) $ 199,422

Balance as of December 30, 2022 11,378 $ 114 $ ( 6,147 ) $ 826,812 $ ( 596,142 ) $ ( 16,141 ) $ 208,496

Net income — — — — 4,889 — 4,889

3 unchanged sentences

Share-based compensation — — — 1,638 — — 1,638

Balance as of December 30, 2022 11,378 $ 114 $ ( 6,147 ) $ 826,812 $ ( 596,142 ) $ ( 16,141 ) $ 208,496

Balance as of March 31, 2023 11,437 $ 114 $ ( 6,147 ) $ 828,411 $ ( 591,253 ) $ ( 15,771 ) $ 215,354

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Six Months Ended December 29, 2023

Nine Months Ended March 29, 2024

Common Stock Treasury Stock Additional

9 unchanged sentences

Common stock issued in connection with acquisition 737 7 — 22,324 — — 22,331

Balance as of December 29, 2023 12,521 $ 125 $ ( 6,479 ) $ 856,735 $ ( 581,019 ) $ ( 15,426 ) $ 253,936

Six Months Ended December 30, 2022

Balance as of March 29, 2024 12,562 $ 126 $ ( 6,479 ) $ 858,228 $ ( 577,601 ) $ ( 15,767 ) $ 258,507

Nine Months Ended March 31, 2023

Common Stock Treasury Stock Additional

3 unchanged sentences

Net income — — — — 8,189 — 8,189

Other comprehensive loss — — — — — ( 112 ) ( 112 )

Other comprehensive income — — — — — 258 258

Issuance of common stock under employee stock plans 310 2 — 1,072 — — 1,074

1 unchanged sentence

Share-based compensation — — — 5,135 — — 5,135

Balance as of December 30, 2022 11,378 $ 114 $ ( 6,147 ) $ 826,812 $ ( 596,142 ) $ ( 16,141 ) $ 208,496

Balance as of March 31, 2023 11,437 $ 114 $ ( 6,147 ) $ 828,411 $ ( 591,253 ) $ ( 15,771 ) $ 215,354

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

11 unchanged sentences

In the opinion of the Company’s 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 six months ended December 29, 2023 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The results for the nine months ended March 29, 2024 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 Aviat’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

3 unchanged sentences

Aviat’s fiscal year includes 52 or 53 weeks and ends on the Friday nearest to June 30.

The three months ended December 29, 2023 and December 30, 2022 both consisted of 13 weeks.

The three months ended March 29, 2024 and March 31, 2023 both consisted of 13 weeks.

Fiscal year 2024 contains 52 weeks and will end on June 28, 2024.

9 unchanged sentences

Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies as of and for the six months ended December 29, 2023, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

There have been no material changes in the Company’s significant accounting policies as of and for the nine months ended March 29, 2024, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Accounting Standards Not Yet Adopted

14 unchanged sentences

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

Three Months Ended Six Months Ended

(In thousands, except per share amounts) December 29,

2023 December 30,

2022 December 29,

2023 December 30,

Three Months Ended Nine Months Ended

(In thousands, except per share amounts) March 29,

2024 March 31,

2023 March 29,

2024 March 31,

Net income $ 3,418 $ 4,889 $ 10,313 $ 8,189

9 unchanged sentences

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 29,

2023 December 30,

2022 December 29,

2023 December 30,

Three Months Ended Nine Months Ended

(In thousands) March 29,

2024 March 31,

2023 March 29,

2024 March 31,

Stock options 337 211 315 189

4 unchanged sentences

(In thousands)

December 29, 2023 June 30, 2023

2024 June 30,

Contract assets

Accounts receivable, net $ 138,366 $ 101,653

Contract assets

Unbilled receivables

74,650 58,588

8 unchanged sentences

however, this will have no impact on the Company’s future obligation to bill and collect.

As of December 29, 2023, the Company reported $ 63.0 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 30 % is expected to be recognized as revenue in the remainder of fiscal 2024 and the remainder thereafter.

Approximately $ 8.7 million and $ 16.1 million, respectively, of revenue was recognized during the three and six months ended December 29, 2023, which was included in advance payments and unearned revenue at June 30, 2023.

As of March 29, 2024, the Company reported $ 49.8 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 64 % is expected to be recognized as revenue in the next twelve months and the remainder thereafter.

Approximately $ 9.2 million and $ 29.1 million, respectively, of revenue was recognized during the three and nine months ended March 29, 2024, which was included in advance payments and unearned revenue at June 30, 2023.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $ 152.6 million at December 29, 2023.

The aggregate amount of transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $ 154.5 million at March 29, 2024.

Of this amount, approximately 50 % is expected to be recognized as revenue during the next 12 months, with the remaining amount to be recognized thereafter.

The unsatisfied (or partially unsatisfied) performance obligations excludes the impact of the NEC Transaction (as defined below).

The Company is in the process of reviewing the acquired contracts.

However, due to the timing of the transaction, there was insufficient time to finalize the analysis for incorporation into this disclosure.

Three Months Ended Six Months Ended

2023 December 30, 2022 December 29,

2023 December 30, 2022

Acquisitions for further information.

The Company is in the process of reviewing the contracts acquired in connection with the NEC Transaction.

However, due to the timing of the closing of the NEC Transaction and delivery of related data, there was insufficient time to finalize the analysis for incorporation into this disclosure.

Three Months Ended Nine Months Ended

2024 March 31,

2023 March 29,

2024 March 31,

(In thousands)

4 unchanged sentences

$ 1,505 $ 772 $ 3,483 $ 2,416

The weighted average lease term and discount rate as of December 29, 2023 were as follows:

The weighted average lease term and discount rate as of March 29, 2024 were as follows:

Weighted average remaining lease term 6.2 years

Weighted average discount rate 5.4 %

As of December 29, 2023, 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 March 29, 2024, future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):

Remainder of fiscal 2024 $ 206

6 unchanged sentences

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

(In thousands) December 29,

(In thousands) March 29,

2024 June 30,

2 unchanged sentences

Total cash, cash equivalents, and restricted cash in the Statement of Cash Flows $ 58,479 $ 22,521

(In thousands) December 29,

(In thousands) March 29,

2024 June 30,

7 unchanged sentences

The Company records charges to adjust inventories due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance.

The charges incurred during the three and six months ended December 29, 2023 and December 30, 2022 were included in cost of product sales as follows:

Three Months Ended Six Months Ended

The charges incurred during the three and nine months ended March 29, 2024 and March 31, 2023 were included in cost of product sales as follows:

Three Months Ended Nine Months Ended

(In thousands)

2023 December 30,

2022 December 29,

2023 December 30,

2024 March 31,

2023 March 29,

2024 March 31,

Excess and obsolete inventory $ 2,251 $ 275 $ 2,937 $ 856

2 unchanged sentences

Other Current Assets

(In thousands) December 29,

(In thousands) March 29,

2024 June 30,

Contract manufacturing assets $ 4,250 $ 6,487

Taxes 10,082 2,417

Due from related party

Contract manufacturing assets $ 3,204 $ 6,487

Prepaid and other current assets 13,235 13,258

Total other current assets $ 30,721 $ 22,162

Assets Held for Sale

During the third quarter of fiscal 2024, management initiated the sale of the Company’s property located in New Zealand.

The Company expects to complete the sale within twelve months.

As of March 29, 2024, the aggregate carrying value of the assets held for sale was $ 2.7 million.

Property, Plant and Equipment, net

(In thousands) December 29,

(In thousands) March 29,

2024 June 30,

7 unchanged sentences

Total property, plant and equipment, net $ 6,398 $ 9,452

Included in the total property, plant and equipment, gross were $ 0.7 million and $ 0.4 million of assets in progress which have not been placed in service as of December 29, 2023 and June 30, 2023, respectively.

Included in the total property, plant and equipment, gross were $ 1.3 million and $ 0.4 million of assets in progress which have not been placed in service as of March 29, 2024 and June 30, 2023, respectively.

During the third quarter of fiscal 2024, $ 0.2 million of land, $ 4.7 million of buildings and improvements, and $ 2.2 million of accumulated depreciation, were reclassified from property, plant and equipment, net to Assets held for sale on the Company’s unaudited condensed consolidated balance sheets.

Depreciation expense related to property, plant and equipment, was as follows:

Three Months Ended Six Months Ended

(In thousands) December 29,

2023 December 30,

2022 December 29,

2023 December 30,

Three Months Ended Nine Months Ended

(In thousands) March 29,

2024 March 31,

2023 March 29,

2024 March 31,

Depreciation $ 1,004 $ 1,428 $ 3,077 $ 4,193

Accrued Expenses

(In thousands) December 29,

(In thousands) March 29,

2024 June 30,

Project costs $ 10,342 $ 1,319

Compensation and benefits 8,690 10,368

Taxes 6,233 4,616

Project costs 5,016 1,319

Professional fees 4,600 2,104

Due to related party

Warranties 2,796 2,100

Commissions 1,376 1,453

Professional fees 994 2,104

Other 3,782 2,482

2 unchanged sentences

Changes in the warranty liability were as follows:

Three Months Ended Six Months Ended

(In thousands) December 29,

2023 December 30,

2022 December 29,

2023 December 30,

Three Months Ended Nine Months Ended

(In thousands) March 29,

2024 March 31,

2023 March 29,

2024 March 31,

Balance as of the beginning of the period $ 2,746 $ 2,549 $ 2,100 $ 2,913

4 unchanged sentences

Advance Payments and Unearned Revenue

(In thousands) December 29,

(In thousands) March 29,

2024 June 30,

2 unchanged sentences

Total advance payments and unearned revenue $ 42,144 $ 44,268

Excluded from the balances above are $ 8.0 million and $ 7.4 million in long-term unearned revenue as of December 29, 2023 and June 30, 2023, respectively.

Excluded from the balances above are $ 7.7 million and $ 7.4 million in long-term unearned revenue as of March 29, 2024 and June 30, 2023, respectively.

Fair Value Measurements of Assets and Liabilities

5 unchanged sentences

• 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 estimated fair values and valuation input levels of assets and liabilities that are measured at fair value on a recurring basis as of December 29, 2023 and June 30, 2023 were as follows:

December 29, 2023 June 30, 2023 Valuation Inputs

The estimated fair values and valuation input levels of assets and liabilities that are measured at fair value on a recurring basis as of March 29, 2024 and June 30, 2023 were as follows:

March 29, 2024 June 30, 2023 Valuation Inputs

(In thousands) Fair Value Fair Value

2 unchanged sentences

Bank certificates of deposit $ 3,408 $ 3,793 Level 2

Marketable securities

$ 988 $ 2 Level 1

Items are classified within Level 1 if quoted prices are available in active markets.

The Company’s Level 1 items are primarily money market funds.

As of December 29, 2023 and June 30, 2023, these money market funds were valued at $ 1.00 net asset value per share.

The Company’s Level 1 items are primarily money market funds and marketable securities.

As of March 29, 2024 and June 30, 2023, the money market funds were valued at $ 1.00 net asset value per share.

Marketable securities include publicly traded stock measured at fair value and classified within Level 1.

Items are classified within 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.

1 unchanged sentence

The carrying value of bank certificates of deposit approximates their fair value.

As of December 29, 2023 and June 30, 2023, there were no recurring assets or liabilities valued using significant unobservable inputs.

The Company’s 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 six months of fiscal 2024 and 2023, there were no transfers of assets or liabilities measured at fair value between levels of the fair value hierarchy.

As of March 29, 2024 and June 30, 2023, there were no recurring assets or liabilities valued using significant unobservable inputs.

Credit Facility and Debt

4 unchanged sentences

Acquisitions for further information.

As of December 29, 2023, the available credit under the Revolver was $ 37.7 million, reflecting the available limit of $ 40.0 million less outstanding letters of credit of $ 2.3 million.

The Company borrowed $ 33.2 million and repaid $ 33.2 million against the Revolver during the six months ended December 29, 2023.

As of December 29, 2023, the Company had $ 50.0 million outstanding under its Term Loan and no borrowings under its Revolver.

The following summarizes the Company’s outstanding long-term debt as of December 29, 2023:

As of March 29, 2024, the available credit under the Revolver was $ 35.2 million, reflecting the available limit of $ 40.0 million less outstanding letters of credit of $ 4.8 million.

The Company borrowed $ 33.2 million and repaid $ 33.2 million against the Revolver during the nine months ended March 29, 2024.

As of March 29, 2024, the Company had $ 49.4 million outstanding under its Term Loan and no borrowings under its Revolver.

The following summarizes the Company’s outstanding long-term debt as of March 29, 2024:

(In thousands)

1 unchanged sentence

unamortized deferred financing costs ( 428 )

Total debt, net 49,546

current portion of long-term debt, net ( 2,395 )

Total long-term debt, net $ 47,151

Total debt 48,947

current portion of long-term debt ( 2,395 )

Total long-term debt $ 46,552

Outstanding borrowings under the Credit Facility bear interest at either:

2 unchanged sentences

The pricing levels for interest rate margins are determined based on the Consolidated Total Leverage Ratio as determined and adjusted quarterly.

As of December 29, 2023, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.75 % and 1.75 %, respectively.

The effective rate of interest on the outstanding Term Loan borrowings as of December 29, 2023 was 8.2 %.

As of March 29, 2024, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.50 % and 1.50 %, respectively.

The effective rate of interest on the outstanding Term Loan borrowings as of March 29, 2024 was 7.9 %.

The Credit Facility requires the Company and its subsidiaries to maintain a fixed charge coverage ratio to be greater than 1.25 to 1.00 as of the last day of any fiscal quarter of the Company.

1 unchanged sentence

The Credit Facility contains customary affirmative and negative covenants, including, among others, covenants limiting the ability of the Company and its subsidiaries to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to customary exceptions.

As of December 29, 2023, the Company was in compliance with all financial covenants contained in the Credit Facility.

As of December 29, 2023, scheduled maturities of outstanding long-term debt are as follows:

As of March 29, 2024, the Company was in compliance with all financial covenants contained in the Credit Facility.

As of March 29, 2024, scheduled maturities of outstanding long-term debt are as follows:

(In thousands)

12 unchanged sentences

Accrual balance, December 29, 2023 $ 1,532 $ — $ 1,532

As of December 29, 2023, the accrual balance of $ 1.5 million was classified as current.

Charges (recoveries), net ( 635 ) 214 ( 421 )

Cash payments ( 547 ) ( 214 ) ( 761 )

Accrual balance, March 29, 2024 350 — 350

As of March 29, 2024, the accrual balance of $ 0.4 million was classified as current.

Fiscal 2024 Plans

7 unchanged sentences

In November 2021, the Company’s Board of Directors approved a stock repurchase program to purchase up to $ 10.0 million of the Company’s common stock.

As of December 29, 2023, $ 6.9 million remains available and Aviat may choose to suspend or discontinue the repurchase program at any time.

As of March 29, 2024, $ 6.9 million remains available and Aviat may choose to suspend or discontinue the repurchase program at any time.

Repurchased shares are recorded as treasury stock.

During the second quarter of fiscal 2024, the Company repurchased 11,208 shares of its common stock in the open market for an aggregate purchase price, including commissions, of $ 0.3 million.

During the third quarter of fiscal 2024, the Company did not repurchase any shares of its common stock.

During the nine months ended March 29, 2024, the Company repurchased 11,208 shares of its common stock in the open market for an aggregate purchase price, including commissions, of $ 0.3 million.

Stock Incentive Programs

As of December 29, 2023, the Company had one stock incentive plan for its employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

As of March 29, 2024, the Company had one stock incentive plan for its 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.

5 unchanged sentences

Vesting of performance share awards and units is subject to the achievement of predetermined financial performance and share price criteria, and continued employment through the end of the applicable period.

During the six months ended December 29, 2023, the Company granted 98,816 restricted stock units, 64,643 performance share awards and 151,094 stock options.

During the nine months ended March 29, 2024, the Company granted 100,689 restricted stock units, 64,643 performance share awards and 151,094 stock options.

The Company recognizes compensation cost for share-based payment awards on a straight-line basis over the requisite service period.

2 unchanged sentences

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

Three Months Ended Six Months Ended

(In thousands) December 29,

2023 December 30,

2022 December 29,

2023 December 30,

Three Months Ended Nine Months Ended

(In thousands) March 29,

2024 March 31,

2023 March 29,

2024 March 31,

By Expense Category:

8 unchanged sentences

Total share-based compensation expense $ 1,886 $ 1,638 $ 5,545 $ 5,135

As of December 29, 2023, there was approximately $ 3.1 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 December 29, 2023, there was $ 9.8 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.5 years.

As of March 29, 2024, 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 1.9 years.

As of March 29, 2024, there was $ 8.2 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.5 years.

Segment and Geographic Information

3 unchanged sentences

The Company reports revenue by region and country based on the location where its customers accept delivery of products and services.

Revenue by region for the three and six months ended December 29, 2023 and December 30, 2022 was as follows:

Three Months Ended Six Months Ended

(In thousands) December 29,

2023 December 30,

2022 December 29,

2023 December 30,

Revenue by region for the three and nine months ended March 29, 2024 and March 31, 2023 was as follows:

Three Months Ended Nine Months Ended

(In thousands) March 29,

2024 March 31,

2023 March 29,

2024 March 31,

North America

6 unchanged sentences

The Company’s effective tax rate varies from the U.S.

federal statutory rate of 21% primarily due to global intangible low-taxed income inclusion (GILTI) in the U.S., state taxes and certain jurisdictions where the tax benefit on prior year losses were not recognized.

federal statutory rate of 21% primarily due to non-deductible transaction costs, global intangible low-taxed income inclusion (GILTI) in the U.S., state taxes and certain jurisdictions where the tax benefit on prior year losses were not recognized.

During interim periods, tax expenses are accrued for jurisdictions that are anticipated to be profitable for fiscal 2024.

The determination of income taxes for the six months ended December 29, 2023 and December 30, 2022 was based on the Company’s estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

Tax expense for the six months ended December 29, 2023 was primarily due to tax expense related to U.S.

The determination of income taxes for the nine months ended March 29, 2024 and March 31, 2023 was based on the Company’s estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

Tax expense for the nine months ended March 29, 2024 was primarily due to tax expense related to U.S.

and profitable foreign subsidiaries.

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

Tax expense for the nine months ended March 31, 2023 was primarily due to tax expense related to U.S.

and profitable foreign subsidiaries, including deferred tax expense associated with the acquisition of Redline in July 2022 and the subsequent multi-step restructuring plan in which two Canadian Redline corporations converted to unlimited liability companies and then amalgamated by the end of September 2022.

Aviat has a number of years with open tax audits which vary from jurisdiction to jurisdiction.

The Company has a number of years with open tax audits which vary from jurisdiction to jurisdiction.

The major tax jurisdictions that are open and subject to potential audits include the U.S., Singapore, Ghana, Kenya, Nigeria, Saudi Arabia and Tanzania.

6 unchanged sentences

Interest and penalties related to unrecognized tax benefits are accounted for as part of the provision for federal, foreign, and state income taxes.

Such interest expense was not material for the six months ended December 29, 2023 and December 30, 2022.

Such interest expense was not material for the nine months ended March 29, 2024 and March 31, 2023.

On March 11, 2021, the US 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.

12 unchanged sentences

Aggregate consideration transferred at closing was approximately $ 54.5 million, which is subject to certain post-closing adjustments.

The Company estimates additional cash consideration of approximately $ 22.9 million will be transferred to NEC in the fourth quarter of fiscal 2024, primarily related to settlement of the post-closing working capital adjustment.

As of December 29, 2023, the accrual balance related to the estimated additional consideration was included in other current liabilities on the unaudited condensed consolidated balance sheets.

The Company estimates additional cash consideration of approximately $ 22.4 million will be transferred to NEC in the first quarter of fiscal 2025, primarily related to settlement of the post-closing working capital adjustment.

As of March 29, 2024, the accrual balance related to the estimated additional consideration was included in other current liabilities on the unaudited condensed consolidated balance sheets.

The Company funded the cash portion of the consideration with Term Loan borrowings under its Credit Facility.

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The Company is in the process of identifying the amounts assigned to certain assets, including the acquired intangible assets and goodwill for the acquisition.

The Company is in the process of obtaining an independent third-party valuation of certain intangible and tangible assets acquired.

The Company is in the process of obtaining independent third-party valuations of certain intangible and tangible assets acquired.

The fair values of the acquired intangible assets are based on estimates and assumptions that are considered reasonable by the Company.

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Transaction costs related to the acquisition were expensed as incurred and are included in selling and administrative expenses in the consolidated statements of operations.

For the three and six months ended December 29, 2023, the Company incurred transaction costs of $ 3.7 million and $ 6.4 million, respectively.

For the three and nine months ended March 29, 2024, the Company incurred transaction costs of $ 1.3 million and $ 7.7 million, respectively.

A summary of the preliminary purchase price allocation is as follows:

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Other liabilities ( 2,187 )

Goodwill 3,106

Net assets acquired $ 76,889

The preliminary purchase price allocation has been updated for certain measurement period adjustments based on revised estimates of fair value, which primarily resulted in a $ 1.4 million decrease in inventories and a $ 1.5 million decrease in identifiable finite-lived intangible assets acquired.

The adjustments resulted in corresponding increases to goodwill.

The preliminary purchase price allocation is subject to adjustment based on the Company obtaining final independent third-party valuations, determining fair value and allocations of purchase price to the identifiable assets acquired and liabilities assumed, and determining the final consideration, including adjustments related to settlement of the final post-closing working capital adjustment.

The amounts recorded as of November 30, 2023 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis.

Therefore, the provisional measurements of fair value and the preliminary purchase price allocation are not final and subject to change.

The following unaudited consolidated pro forma information has been presented as if the NEC Transaction occurred on July 2, 2022 and is based on historical operating results and certain pro forma adjustments for additional interest, depreciation and amortization expense, net of income tax.

Three Months Ended Six Months Ended

2023 December 30, 2022 December 29,

2023 December 30, 2022

$ 131,156 $ 138,061 $ 267,515 $ 269,264

Revenue and operating loss associated with the NEC Transaction included in the consolidated statements of operations for the three months ended March 29, 2024 were $ 22.5 million and $( 0.4 ) million, respectively.

Revenue and operating loss associated with the NEC Transaction included in the consolidated statements of operations from the acquisition date to the period ending March 29, 2024 were $ 29.8 million and $( 1.2 ) million, respectively.

The following unaudited supplemental pro forma information has been presented as if the NEC Transaction occurred at the beginning of fiscal 2023 and includes certain pro forma adjustments for interest expense, depreciation and amortization expense, the fair value of acquired inventory, and transaction costs, net of income tax:

Three Months Ended Nine Months Ended

2024 March 31,

2023 March 29,

2024 March 31,

Revenue $ 111,613 $ 139,094 $ 379,128 $ 408,358

Net income (loss) 4,393 7,812 18,765 ( 1,214 )

8,644 3,018 15,091 ( 5,813 )

The unaudited pro forma information presented above is for informational purposes only and is not necessarily indicative of the operating results that would have occurred if the NEC Transaction occurred at the beginning of fiscal 2023, nor is it necessarily indicative of future operating results.

1 unchanged sentence

In the first quarter of fiscal 2023, the Company acquired all of the issued and outstanding shares of Redline Communications Group Inc.

(“Redline”), for a purchase price of $ 20.4 million.

Redline is a leading provider of mission-critical data infrastructure.

(“Redline”), a leading provider of mission-critical data infrastructure, for a purchase price of $ 20.4 million.

Acquisitions to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 for the final purchase price allocation, valuation methodology, and other information related to the completion of the Redline acquisition.

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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 the Company has no present intention to cancel or terminate any of these agreements, the Company currently does not believe that it has any future liability under these agreements.

As of December 29, 2023, the Company had outstanding purchase obligations with its suppliers or contract manufacturers of $ 36.7 million.

As of March 29, 2024, the Company had outstanding purchase obligations with its suppliers or contract manufacturers of $ 53.5 million.

In addition, the Company had contractual obligations of approximately $ 4.4 million associated with software licenses.

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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 December 29, 2023, the Company had no guarantees applicable to its debt arrangements.

As of March 29, 2024, the Company had no guarantees applicable to its debt arrangements.

The Company has 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 December 29, 2023, the Company had commercial commitments outstanding of $ 57.3 million, that were not recorded on the unaudited condensed consolidated balance sheets.

As of March 29, 2024, the Company had commercial commitments outstanding of $ 16.6 million, that were not recorded on the unaudited condensed consolidated balance sheets.

The Company does 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.

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Under the terms of substantially all of the Company’s license agreements, it has agreed to defend and pay any final judgment against its customers arising from claims against such customers that the Company’s products infringe the intellectual property rights of a third party.

As of December 29, 2023, the Company has not received any notice that any customer is subject to an infringement claim arising from the use of its products;

As of March 29, 2024, the Company has not received any notice that any customer is subject to an infringement claim arising from the use of its products;

the Company has not received any request to defend any customers from infringement claims arising from the use of its 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, the Company cannot estimate the maximum amount of potential future payments, if any, related to its indemnification provisions.

As of December 29, 2023, the Company had not recorded any liabilities related to these indemnifications.

As of March 29, 2024, the Company had not recorded any liabilities related to these indemnifications.

Legal Proceedings

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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, the Company’s 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 scheduled as of December 29, 2023.

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

In March 2024, the Company appeared before the Joint Director of Enforcement to review the transactions at issue.

No subsequent hearing date has been scheduled as of March 29, 2024.

The Company has accrued an immaterial amount representing the estimated probable loss for which it would settle the matter.

The Company currently cannot form an estimate of the range of loss in excess of its amounts already accrued.

The Company currently cannot form an estimate of the range of

loss in excess of its amounts already accrued.

If the outcome of this matter is greater than the current immaterial amount accrued, the Company intends to dispute it vigorously.

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(In thousands)

December 29, 2023 June 30, 2023

2024 June 30,

Goodwill $ 8,217 $ 5,112

The Company recognized goodwill of $ 0.5 million associated with the NEC Transaction in the second quarter of fiscal 2024, based on the preliminary estimated fair value of the assets acquired and liabilities assumed.

The Company recognized goodwill of $ 3.1 million associated with the NEC Transaction, based on the preliminary estimated fair value of the assets acquired and liabilities assumed.

Acquisitions for further information.

The Company performs its annual goodwill impairment test on the first day of its fourth fiscal quarter.

1 unchanged sentence

(In thousands except useful life)

Useful life in Years December 29, 2023 June 30, 2023

Useful life in Years March 29,

2024 June 30,

Intangible assets:

6 unchanged sentences

Total net intangible assets $ 13,995 $ 9,046

Amortization of finite-lived intangibles for the three and six months ended December 29, 2023 was $ 0.2 million and $ 0.4 million, respectively, and is included in selling and administrative expenses.

There were no impairment charges recorded for the six months ended December 29, 2023 and December 30, 2022.

As of December 29, 2023, the estimated future amortization expense of finite-lived intangible assets is as follows (in thousands):

Amortization of finite-lived intangibles for the three and nine months ended March 29, 2024 was $ 0.2 million and $ 0.7 million, respectively, and is included in selling and administrative expenses.

There were no impairment charges recorded for the three and nine months ended March 29, 2024 and March 31, 2023.

As of March 29, 2024, the estimated future amortization expense of finite-lived intangible assets is as follows (in thousands):

Remainder of 2024 $ 304

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NEC Corporation

On the November 30, 2023, the Company completed the NEC Transaction.

On November 30, 2023, the Company completed the NEC Transaction.

Acquisitions for further information..

A portion of the total consideration in the NEC Transaction included the issuance of 736,750 shares in Company common stock to NEC.

On the Closing Date, the

Company and NEC entered into a Registration Rights and Lock-Up Agreement, restricting NEC’s ability to transfer shares (the “Lock-Up”), except for certain limited exceptions as provided in the Registration Rights and Lock-Up Agreement, until one day after the one-year anniversary of the Closing Date (the “Initial Lock-Up Expiration Date”).

On the Closing Date, the Company and NEC entered into a Registration Rights and Lock-Up Agreement, restricting NEC’s ability to transfer shares (the “Lock-Up”), except for certain limited exceptions as provided in the Registration Rights and Lock-Up Agreement, until one day after the one-year anniversary of the Closing Date (the “Initial Lock-Up Expiration Date”).

Starting one day after the Initial Lock-Up Expiration Date, one-twelfth of the issued shares shall be released from the Lock-Up each month, such that all issued shares shall be released from Lock-Up by the two-year anniversary of the Closing Date.

Pursuant to the Purchase Agreement, NEC will have the right to nominate a director to the Company’s Board of Directors from the Closing Date and for a period of two years thereafter.

As of December 29, 2023, NEC holds approximately 5.9 % of the Company’s outstanding common stock.

As of March 29, 2024, NEC holds approximately 5.9 % of the Company’s outstanding common stock.

In connection with the closing of the NEC Transaction and as of the Closing Date, the Company and NEC entered into agreements covering the performance of certain post-closing services and licensing arrangements.

6 unchanged sentences

The licensing agreements are royalty-free and perpetual.

For the three and six months ended December 29, 2023, the Company incurred expenses of $ 1.1 million for transition services and $ 1.1 million for research and development services, which is included in accrued expenses on the unaudited condensed consolidated balance sheets.

For the three and nine months ended March 29, 2024, the Company made aggregate inventory purchases from NEC of $ 4.8 million.

For the three months ended March 29, 2024, the Company incurred expenses of $ 1.2 million for transition services and $ 3.2 million for research and development services.

For the nine months ended March 29, 2024, the Company incurred expenses of $ 2.2 million for transition services and $ 4.3 million for research and development services.

As of March 29, 2024, the Company had outstanding related party receivable balances due from NEC of $ 4.7 million, of which $ 0.5 million is included in accounts receivable, net and $ 4.2 million is included in other current assets on the unaudited condensed consolidated balance sheets.

As of March 29, 2024, the Company had outstanding related party payable balances due to NEC of $ 12.9 million, of which $ 8.6 million is included in accounts payable and $ 4.3 million is included in accrued expenses on the unaudited condensed consolidated balance sheets.

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