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Item 8. Financial Statements and Supplementary Data

2024-10-04 compared with 2023-08-30 · 788 added, 531 removed, 662 unchanged (67% of the section changed)

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Index to Financial Statements

Report of Independent Registered Public Accounting Firm s (PCAOB ID:

Report of Independent Registered Public Accounting Firms (PCAOB ID:

Consolidated Statements of Operations

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Commitments and Contingencies

Goodwill and Intangibles

Related Party Transactions

Revisions to Prior Period Consolidat ed Financial Statements

Subsequent Events

Report of Independent Registered Public Accounting Firm

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Aviat Networks, Inc.

and subsidiaries (the "Company") as of June 30, 2023, the related consolidated statements of operations, comprehensive income, cash flows, and equity, for the fiscal year ended June 30, 2023, the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023, and the results of its operations and its cash flows for the fiscal year ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 30, 2023 expressed an unqualified opinion on the Company's internal control over financial reporting.

We have audited the accompanying consolidated balance sheets of Aviat Networks, Inc.

and subsidiaries (the "Company") as of June 28, 2024 and June 30, 2023, the related consolidated statements of operations, comprehensive income, cash flows, and equity, for the fiscal years ended June 28, 2024 and June 30, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 28, 2024 and June 30, 2023, and the results of its operations and its cash flows for the fiscal years ended June 28, 2024 and June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 28, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 4, 2024, expressed an adverse opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition — Service Revenues - Estimated Costs to Complete - Refer to Note 3 to the financial statements

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products and services.

Revenues from services include revenues from network planning and design, engineering and installation-related services and are recognized based on an over-time recognition model using the cost-input method.

Judgment is required when estimating total contract costs and progress to completion on the over-time arrangements.

Revenues from services include revenues from network planning and design, engineering and installation-related services.

Long term contracts for these services are recognized based on an over-time recognition model using the cost-input method.

Judgment is required when estimating total contract costs.

The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial professionals.

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The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions.

Changes in these estimates or timing of when the costs occur can have a significant impact

on the revenue recognized each period.

Changes in these estimates can have a significant impact on the revenue recognized each period.

Auditing these elements involved especially challenging and subjective auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the duration of these contracts.

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Our audit procedures related to management’s estimates of costs to complete for open over-time revenue contracts used to recognize service revenues included the following, among others:

• We tested the effectiveness of controls related to estimated costs to complete, including controls over management’s review of cost estimates.

• We selected a sample of revenue contracts and performed the following:

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• We performed a lookback to evaluate management’s ability to estimate costs accurately by making a selection of changes in estimates during the year and testing whether the change in estimate was properly supported and recorded within the correct period

Acquisitions — NEC’s Wireless Transport Business – Key Assumptions in Valuation of Acquired Intangible Assets - Refer to Note 12 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of NEC’s Wireless Transport on November 30, 2023.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including intangible assets of $5.6 million.

Management estimated the fair value of the customer relationships intangible asset using the multi-period excess earnings method, and the fair value of the technology intangible asset using the relief from royalty method, both of which are specific discounted cash flow methods.

The fair value determination of the intangible assets required management to make significant estimates and assumptions related to the future profitability of the acquired business, the selection of the discount rate, and the selection of the royalty rate.

Given the fair value determination of intangible assets for NEC’s Wireless Transport Business requires management to make estimates about the future profitability of the acquired business, the selection of the discount rate, and the selection of the royalty rate, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assumptions of future profitability of the acquired business within the company’s forecasts of future cash flows and the selection of the discount rate and royalty rate for the intangible assets included the following, among others:

• We tested the reasonableness of the profitability assumptions within management’s forecasts of cash flows by comparing the projections to historical results and certain peer companies, and performing a retrospective review.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) discount rate, and (3) royalty rate by:

◦ Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.

◦ Developing a range of independent estimates and comparing those to the discount rate selected by management.

◦ Testing management’s return on assets model used in estimating the selected royalty rate.

◦ Performing a profit split analysis to assess the selected royalty rate.

• We evaluated whether the profitability assumptions within the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

/s/ Deloitte & Touche LLP

Austin, Texas

August 30, 2023

October 4, 2024

We have served as the Company's auditor since fiscal year 2023.

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Aviat Networks, Inc.

(the “Company”) as of July 1, 2022, the related consolidated statements of operations, comprehensive (loss) income, equity, and cash flows for each of the two fiscal years in the period ended July 1, 2022, the related notes and the financial statement schedule - Valuation and Qualifying Accounts (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at July 1, 2022, and the results of its operations and its cash flows for each of the two fiscal years in the period ended July 1, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated statements of operations, comprehensive income, equity, and cash flows of Aviat Networks, Inc.

(the “Company”) for the fiscal year ended July 1, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the fiscal year ended July 1, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

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Fiscal Year Ended

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

2023 July 1, 2022 July 2, 2021

(In thousands, except per share amounts) June 28, 2024 June 30, 2023 July 1, 2022

Product sales $ 274,205 $ 238,579 $ 208,100

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Operating income 19,401 24,620 28,745

Interest expense (income), net 2,337 532 ( 157 )

Other expense (income), net 158 2,774 ( 1,533 )

Income before income taxes 16,906 21,314 30,435

Provision for (benefit from) income taxes 11,575 9,275 ( 87,699 )

Provision for income taxes 6,146 11,145 9,275

Net income $ 10,760 $ 10,169 $ 21,160

Net income attributable to Aviat Networks $ 10,760 $ 10,169 $ 21,160

Net income per share:

Net income per share of common stock outstanding:

Basic $ 0.88 $ 0.90 $ 1.89

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Fiscal Year Ended

(In thousands) June 30,

2023 July 1, 2022 July 2, 2021

(In thousands) June 28, 2024 June 30, 2023 July 1, 2022

Net income $ 10,760 $ 10,169 $ 21,160

Other comprehensive income (loss):

Other comprehensive (loss) income:

Net change in cumulative translation adjustment ( 3,316 ) 25 ( 1,702 )

Other comprehensive income (loss) 25 ( 1,702 ) 642

Other comprehensive (loss) income ( 3,316 ) 25 ( 1,702 )

Comprehensive income $ 7,444 $ 10,194 $ 19,458

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CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts) June 30, 2023 July 1, 2022

(In thousands, except share and par value amounts) June 28, 2024 June 30, 2023

Current Assets:

Cash and cash equivalents $ 64,622 $ 22,242

Marketable securities 2 10,893

Accounts receivable, net 158,013 100,911

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Inventories 62,267 33,428

Assets held for sale

Other current assets 27,076 22,164

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Accrued expenses 42,148 24,442

Short-term lease liabilities 610 513

Operating lease liabilities

Advance payments and unearned revenue 58,839 44,268

Restructuring liabilities 600 1,381

Other current liabilities 21,614 600

Current portion of long-term debt 2,396 —

Total current liabilities 218,857 130,061

Long-term debt

Unearned revenue 7,413 7,416

Long-term lease liabilities 2,140 2,412

Long-term operating lease liabilities

Other long-term liabilities 394 314

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Commitments and contingencies (Note 13)

Stockholders’ equity

Preferred stock, $ 0.01 par value;

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300.0 million shares authorized;

11.5 million and 11.2 million shares issued and outstanding as of June 30, 2023 and July 1, 2022, respectively

Treasury stock 0.2 million and 0.2 million shares as of June 30, 2023 and July 1, 2022, respectively

12.6 million and 11.5 million shares issued and outstanding as of June 28, 2024 and June 30, 2023, respectively

Treasury stock 0.2 million and 0.2 million shares as of June 28, 2024 and June 30, 2023, respectively

( 6,479 ) ( 6,147 )

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Accumulated other comprehensive loss ( 19,320 ) ( 16,004 )

Total equity 220,098 201,753

TOTAL LIABILITIES AND EQUITY $ 364,496 $ 323,904

Total stockholders’ equity 255,885 218,739

Total liabilities and stockholders’ equity $ 535,223 $ 363,137

See accompanying Notes to Consolidated Financial Statements

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Fiscal Year Ended

(In thousands) June 30,

2023 July 1, 2022 July 2, 2021

(In thousands) June 28, 2024 June 30, 2023 July 1, 2022

Operating Activities

Net income $ 10,760 $ 10,169 $ 21,160

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

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

Depreciation of property, plant and equipment 3,991 5,475 4,463

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Share-based compensation 7,341 6,720 3,834

Deferred income taxes 9,442 8,004 ( 90,599 )

Charges for inventory and customer service inventory write-downs 2,138 1,735 1,452

Noncash lease expense 639 1,057 ( 342 )

Deferred taxes 3,625 9,012 8,004

Inventory write-downs 3,952 2,138 1,735

Non-cash lease expense 948 639 1,057

Net loss (gain) on marketable securities 41 1,734 ( 2,614 )

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Advance payments and unearned revenue 11,814 6,254 1,713

Income taxes payable or receivable 710 ( 1,620 ) 159

Income taxes payable 1,445 710 ( 1,620 )

Other assets and liabilities ( 4,919 ) ( 15,423 ) ( 7,899 )

Net cash (used in) provided by operating activities ( 1,644 ) 2,789 17,298

Net cash provided by (used in) operating activities 30,540 ( 1,644 ) 2,789

Investing Activities

Payments for acquisition of property, plant and equipment ( 5,335 ) ( 1,792 ) ( 2,847 )

Purchases of property, plant and equipment ( 2,675 ) ( 5,335 ) ( 1,792 )

Purchases of marketable securities ( 925 ) — ( 8,279 )

Proceeds from sale of marketable securities 538 9,157 —

Proceeds from sale of asset held for sale — 2,284 —

Acquisition, net of cash acquired and purchases of intangible assets ( 15,769 ) — —

Proceeds from sale of assets held for sale — — 2,284

Acquisitions, net of cash acquired ( 32,161 ) ( 15,769 ) —

Net cash used in investing activities ( 35,223 ) ( 11,947 ) ( 7,787 )

Financing Activities

Proceeds from borrowings 102,200 — —

Repayments of borrowings ( 102,200 ) — ( 9,000 )

Proceeds from revolver 33,200 102,200 —

Repayments of revolver ( 33,200 ) ( 102,200 ) —

Proceeds from term loan 50,000 — —

Repayments of term loan ( 1,250 ) — —

Payments of deferred financing costs ( 79 ) ( 753 ) —

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Payments for taxes related to net settlement of equity awards ( 696 ) ( 1,198 ) ( 541 )

Proceeds from issuance of common stock under employee stock plans and exercises of stock options 1,270 1,029 1,906

Net cash used in financing activities ( 681 ) ( 4,874 ) ( 8,048 )

Proceeds from issuance of common stock under employee stock plans 1,058 1,270 1,029

Net cash provided by (used in) financing activities 48,701 ( 681 ) ( 4,874 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 1,605 ) ( 311 ) ( 1,222 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 14,583 ) ( 11,094 ) 6,326

Net increase (decrease) in cash, cash equivalents and restricted cash 42,413 ( 14,583 ) ( 11,094 )

Cash, cash equivalents, and restricted cash, beginning of year 22,521 37,104 48,198

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(In thousands) June 28,

2023 July 1, 2022 July 2, 2021

Non-cash investing activities:

2024 June 30,

Non-cash investing and financing activities:

Unpaid property, plant and equipment $ 3,574 $ 168 $ 95

Common stock issued in connection with acquisition 22,331 — —

Supplemental disclosures of cash flow information:

Cash paid for interest $ 2,517 $ 880 $ —

Cash paid (received) for income taxes, net $ 1,613 $ 1,241 $ ( 2,119 )

Cash paid for income taxes, net 808 1,613 1,241

See accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF EQUITY

Common Stock Treasury Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders’

(In thousands) Shares $ Amount Shares $ Amount

Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands) Shares $

Amount Shares $

Balance as of July 2, 2021 11,154 $ 112 20 $ ( 787 ) $ 818,939 $ ( 620,602 ) $ ( 14,327 ) $ 183,335

Net income — — — — — 21,160 — 21,160

Other comprehensive (loss) income — — — — — — 642 642

Other comprehensive loss — — — — — — ( 1,702 ) ( 1,702 )

Issuance of common stock under employee stock plans 198 2 — — 1,029 — — 1,031

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Net income — — — — — 10,169 — 10,169

Other comprehensive (loss) income — — — — — — ( 1,702 ) ( 1,702 )

Other comprehensive income — — — — — — 25 25

Issuance of common stock under employee stock plans 396 3 — — 1,267 — — 1,270

Shares withheld for taxes related to vesting of equity awards ( 39 ) — — — ( 1,198 ) — — ( 1,198 )

Stock repurchase ( 175 ) ( 2 ) 175 ( 5,360 ) — — — ( 5,362 )

Share-based compensation — — — — 6,720 — — 6,720

Balance as of July 1, 2022 11,161 112 195 ( 6,147 ) 823,259 ( 599,442 ) ( 16,029 ) 201,753

Balance as of June 30, 2023 11,518 $ 115 195 $ ( 6,147 ) $ 830,048 $ ( 589,273 ) $ ( 16,004 ) $ 218,739

Net income — — — — — 10,760 — 10,760

Other comprehensive (loss) income — — — — — — 25 25

Other comprehensive loss — — — — — — ( 3,316 ) ( 3,316 )

Issuance of common stock under employee stock plans 400 4 — — 1,054 — — 1,058

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Share-based compensation — — — — 7,341 — — 7,341

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

Balance as of June 28, 2024 12,622 $ 126 206 $ ( 6,479 ) $ 860,071 $ ( 578,513 ) $ ( 19,320 ) $ 255,885

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Aviat Networks, Inc.

(“Aviat,” the “Company,” “we,” “us,” and “our”) designs, manufactures, and sells a range of wireless networking and access networking solutions and services to mobile and fixed telephone service providers, private network operators, government agencies, transportation and utility companies, public safety agencies and broadcast system operators across the globe.

Our products include broadband wireless access base stations and customer premises equipment for fixed and mobile, point-to-point digital microwave radio systems for access, backhaul, trunking and license-exempt applications, supporting new network deployments, network expansion, and capacity upgrades.

Aviat was incorporated in Delaware in 2006 to combine the businesses of Harris Corporation’s Microwave Communications Division (“MCD”) and Stratex Networks, Inc.

On January 28, 2010, we changed our corporate name from Harris Stratex Networks, Inc.

to Aviat Networks, Inc.

to more effectively reflect our business and communicate our brand identity to customers.

Additionally, the change of our corporate name was to comply with the termination of the Harris Corporation (“Harris”) trademark licensing agreement resulting from the spin-off by Harris of its interest in our stock to its stockholders in May 2009.

(“Aviat,” the “Company,” “we,” “us,” and “our”) designs, manufactures, and sells wireless networking and access networking solutions and services to mobile and fixed telephone service providers, private network operators, government agencies, transportation and utility companies, public safety agencies and broadcast system operators across the globe.

Aviat’s products include broadband wireless access base stations and customer premises equipment for fixed and mobile, point-to-point digital microwave radio systems for access, backhaul, trunking and license-exempt applications, supporting new network deployments, network expansion, and capacity upgrades.

Basis of Presentation

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All intercompany transactions and accounts have been eliminated.

Certain amounts in the financial statements have been reclassified for comparative purposes to conform to the current period financial statement presentation.

Our fiscal year includes 52 or 53 weeks and ends on the Friday nearest June 30.

This was June 30, 2023 for fiscal 2023, July 1, 2022 for fiscal 2022 and July 2, 2021 for fiscal 2021.

Certain amounts in the consolidated financial statements have been reclassified for comparative purposes to conform to the current period consolidated financial statement presentation.

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

This was June 28, 2024 for fiscal 2024, June 30, 2023 for fiscal 2023 and July 1, 2022 for fiscal 2022.

Fiscal 2024, 2023 and 2022 includes 52 weeks.

In these notes to consolidated financial statements, we refer to our fiscal years as “fiscal 2023”, “fiscal 2022” and “fiscal 2021.”

On April 7, 2021 we effected a two -for-one stock split in the form of a stock dividend to shareholders of record as of April 1, 2021.

Common stock, Additional paid-in-capital, per share and equity award amounts for all periods presented have been retrospectively reclassified to reflect the two -for-one stock split in the form of a stock dividend.

In the notes to consolidated financial statements, we refer to our fiscal years as “fiscal 2024”, “fiscal 2023” and “fiscal 2022.”

Use of Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) requires us to make estimates, assumptions and judgments affecting the amounts reported and related disclosures.

Estimates are based upon historical factors, current circumstances and the experience and judgment of our management.

We evaluate our estimates and assumptions on an ongoing basis and may employ outside experts to assist us in making these evaluations.

GAAP”) requires the Company to make estimates, assumptions and judgments affecting the amounts reported and related disclosures.

Estimates are based upon historical factors, current circumstances and the experience and judgment of management.

The Company evaluates estimates and assumptions on an ongoing basis and may employ outside experts to assist in making these evaluations.

Changes in such estimates, based on more accurate information, or different assumptions or conditions, may affect amounts reported in future periods.

Such estimates affect significant items, including revenue recognition, provision for uncollectible receivables, inventory valuation, goodwill and identified intangible assets in business combinations, valuation allowances for deferred tax assets and uncertainties in income taxes.

The actual results that we experience may differ materially from our estimates.

Actual results may differ materially from estimates.

Revisions to Prior Period Consolidated Financial Statements

Subsequent to the issuance of the consolidated financial statements and related disclosures for the fiscal year ended June 30, 2023, the Company identified certain errors impacting previously reported financial information.

In accordance with ASC 250, Accounting Changes and Error Corrections and Staff Accounting Bulletins (“SAB”) No.

99, Materiality and No.

108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the materiality of the errors and determined that the impacts were not material, individually or in the aggregate, to the Company’s previously issued consolidated financial statements for any of the prior reporting periods in which they occurred, but that correcting the error in the current reporting period would be material to the Company’s results of operations for fiscal 2024.

As a result, the Company has restated the prior period financial statements and related disclosures for fiscal 2023 to correct the errors for comparability across all periods presented herein.

Refer to Note 16.

Revisions to Prior Period Consolidated Financial Statements for further information.

Cash, Cash Equivalents and Restricted Cash

We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.

All highly liquid investments with an original maturity of three months or less at the date of purchase are considered to be cash equivalents.

Cash equivalents are carried at amortized cost, which approximates fair value due to the short-term nature of these investments.

Investments with an original maturity of greater than three months are accounted for as short-term investments and are classified as such at the time of purchase.

We hold cash and cash equivalents at several major financial institutions, which often significantly exceed Federal Deposit Insurance Corporation insured limits.

The Company’s cash and cash equivalents are held at several major financial institutions, which often significantly exceed Federal Deposit Insurance Corporation insured limits.

However, a substantial portion of the cash equivalents is invested in prime money market funds which are backed by the securities in the fund.

As of June 30, 2023 and July 1, 2022, all of our high-quality marketable securities were invested in prime money market funds.

Cash and cash equivalents that are restricted as to withdrawal or usage under the terms of contractual agreements are recorded as restricted cash.

Our restricted cash is included in other assets on our consolidated balance sheets and represents the cash balance on our disability insurance voluntary plan account that cannot be used by us for any operating purposes other than to pay benefits to the insured employees.

Balance Sheet Components for further information.

The Company’s restricted cash is included in long-term other assets on the consolidated balance sheets and represents the cash balance on its disability insurance voluntary plan account that cannot be used for any operating purposes other than to pay benefits to the insured employees.

Significant Concentrations

We typically invoice our customers for the sales order (or contract) value of the related products delivered at various milestones, including order receipt, shipment, installation and acceptance and for services when rendered.

Our trade receivables are derived from sales to customers located in North America, Africa, Europe, the Middle East, Asia-Pacific and Latin America.

Accounts receivable is presented net of allowance for estimated uncollectible accounts to reflect any loss anticipated on the collection of accounts receivable balances.

We calculate the allowance based on our history of write-offs, level of past due accounts and the economic status of the customers.

The fair value of our accounts receivable approximates their net realizable value.

We regularly require letters of credit from certain customers and, from time to time, we discount these letters of credit issued by customers through various financial institutions.

The Company typically invoices customers for the sales order (or contract) value of the related products delivered at various milestones, including order receipt, shipment, installation and acceptance and for services when rendered.

The Company’s trade receivables are derived from sales to customers located in North America, Latin America, Europe, Africa, the Middle East, and Asia-Pacific.

Accounts receivable is presented net of allowance for expected credit losses to reflect any loss anticipated on the collection of the Company’s trade receivable balances.

The allowance for expected credit losses is based on historical loss information, customer financial condition, and economic and geopolitical conditions for the locations where the Company’s customers operate.

Accounts receivable amounts are written off when attempts to collect outstanding amounts have been exhausted or there are other indicators that the amounts are no longer collectible.

The Company regularly requires letters of credit from certain customers and, from time to time, discounts these letters of credit issued by customers through various financial institutions.

The discounting of letters of credit depends on many factors, including the willingness of financial institutions to discount the letters of credit and the cost of such arrangements.

Under these arrangements, collection risk is fully transferred to the financial institutions.

We record the financing charges on discounting these letters of credit as interest expense.

During fiscal 2023 and 2021, no customer accounted for more than 10% of our total revenue.

During fiscal 2022 there was one customer that accounted for 13 % of our total revenue.

As of June 30, 2023 and July 1, 2022, a group of related entities accounted for approximately 14 % and 17 %, respectively, of our accounts receivable.

Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash equivalents, marketable securities, trade accounts receivable and financial instruments used in foreign currency hedging activities.

We invest our excess cash primarily in prime money market funds and certificates of deposit.

We are exposed to credit risks related to such instruments in the event of default or decrease in credit-worthiness of the issuers of the investments.

Risks associated with cash and cash equivalents, and investments are mitigated by banking with, and investing in, creditworthy institutions.

We perform ongoing credit evaluations of our customers and generally do not require collateral on accounts receivable, as the majority of our customers are large, well-established companies.

However, in certain circumstances, we may require letters of credit, additional guarantees or advance payments.

We maintain allowances for collection losses, but historically have not experienced any significant losses related to any particular geographic area.

Our customers are primarily in the telecommunications industry, so our accounts receivable are concentrated within one industry and exposed to concentrations of credit risk within that industry.

Accounts receivable are written off when attempts to collect outstanding amounts have been exhausted or there are other indicators that the amounts are no longer collectible.

We rely on third parties to manufacture our products and we purchase raw materials from third-party vendors.

In addition, we purchase certain strategic component inventory which is consigned to our third-party manufacturers.

Other components included in our products are sourced from various suppliers and are principally industry standard parts and components that are available from multiple vendors.

The inability of a contract manufacturer or supplier to fulfill our supply requirements or changes in their financial or business condition could disrupt our ability to supply quality products to our customers, and thereby may have a material adverse effect on our business and operating results.

Financing charges on discounting the letters of credit are recorded as interest expense.

During fiscal 2024 and 2023, no customer accounted for more than 10% of total revenue.

During fiscal 2022 there was one customer that accounted for 13 % of total revenue.

As of June 28, 2024, no customer accounted for more than 10% of accounts receivable.

As of June 30, 2023, a group of related entities accounted for approximately 14 %, of accounts receivable.

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash equivalents, trade accounts receivable and from time to time, financial instruments used in foreign currency hedging activities.

The Company invests excess cash primarily in prime money market funds and certificates of deposit.

The Company is exposed to credit risks related to such instruments in the event of default or decrease in credit-worthiness of the issuers of the investments.

Risks associated with the Company’s cash and cash equivalents are mitigated by banking with creditworthy institutions.

The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable, as the majority of customers are large, well-established companies.

However, in certain circumstances, the Company may require letters of credit, additional guarantees or advance payments.

The Company maintains allowances for expected credit losses, but historically has not experienced any significant losses related to any particular geographic area.

The Company’s customers are primarily in the telecommunications industry, and its accounts receivable is exposed to similar credit risk characteristics as that industry.

The Company engages third parties to manufacture its products and procures its raw materials from third-party suppliers.

In addition, certain strategic component inventory is consigned to third-party manufacturers.

Other components included in the Company’s products are sourced from various suppliers and are principally industry standard parts and components that are available from multiple vendors.

The inability of a contract manufacturer or supplier to fulfill the Company’s supply requirements or changes in their financial or business condition could disrupt the Company’s ability to supply quality products to its customers, and thereby may have a material adverse effect on the Company’s business and operating results.

Inventories are valued at the lower of cost or net realizable value.

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Cost is determined using standard cost, which approximates actual cost on a weighted-average first-in-first-out basis.

We regularly review inventory quantities on hand and record adjustments to reduce the cost of inventory for excess and obsolete inventory based primarily on our estimated forecast of product demand and production

requirements.

The Company regularly reviews inventory quantities on hand and records adjustments to reduce the cost of inventory for excess and obsolete inventory based primarily on estimated forecast of product demand and production requirements.

Inventory adjustments are measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales.

At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

We carry customer service related inventories such as service parts because we generally provide product warranty for 12 to 36 months and earn revenue by providing enhanced and extended warranty and repair service during and beyond this warranty period.

The Company stocks customer service related inventories such as service parts because the Company provides product warranties for 12 to 36 months and earns revenue by providing enhanced and extended warranty and repair service during and beyond this warranty period.

Customer service related inventories consist of both component parts, which are primarily used to repair defective units, and finished units, which are provided for customer use permanently or on a temporary basis while the defective unit is being repaired.

We record adjustments to reduce the carrying value of customer service inventories to their net realizable value.

The Company records adjustments to reduce the carrying value of customer service inventories to their net realizable value.

Factors influencing these adjustments include product life cycles, end of service life plans and volume of enhanced or extended warranty service contracts.

Estimates of net realizable value involve significant estimates and judgments about the future, and revisions would be required if these factors differ from our estimates.

Estimates of net realizable value involve significant estimates and judgments about the future, and revisions would be required if these factors differ from estimates.

Refer to Note 5.

Balance Sheet Components for further information.

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Property, plant and equipment are stated on the basis of cost less accumulated depreciation.

We capitalize costs of software, consulting services, hardware and other related costs incurred to purchase or develop internal-use software.

We expense costs incurred during preliminary project assessment, re-engineering, training and application maintenance.

Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets.

Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or the estimated useful life of the improvements.

The Company capitalizes costs of software, consulting services, hardware and other related costs incurred to purchase or develop internal-use software.

Costs incurred during preliminary project assessment, re-engineering, training and application maintenance are charged to expense.

Depreciation is charged to expense on a straight-line basis over the estimated useful lives of the respective assets.

Leasehold improvements are depreciated on a straight-line basis over the shorter of the remaining lease term or the estimated useful life of the improvements.

The useful lives of the assets are generally as follows:

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Leasehold improvements 2 to 10 years

Software 3 to 5 years

Machinery and equipment 2 to 5 years

Expenditures for maintenance and repairs are charged to expense as incurred and are included in cost of revenues and selling and administrative expenses on our consolidated statements of operations.

Cost and accumulated depreciation of assets sold or retired are removed from the respective property accounts, and any gain or loss is reflected in the consolidated statements of operations.

Software and equipment

Expenditures for maintenance and repairs are charged to expense as incurred and are included in cost of revenues and selling and administrative expenses on the consolidated statements of operations.

Cost and accumulated depreciation of assets sold or retired are removed from the respective property accounts, and any gain or loss is reflected on the consolidated statements of operations.

Business Combinations

The Company accounts for acquisitions as required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).

The assets and liabilities of acquired businesses are recorded at their estimated fair values at the date of acquisition.

The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of estimates and assumptions.

If our assumptions or estimates in the fair value calculation change based on information that becomes available during the one-year period from the acquisition date, we may record adjustments to the net assets acquired with a corresponding offset to goodwill.

Under the acquisition method of accounting, the assets and liabilities of acquired businesses are recorded at their estimated fair values at the date of acquisition.

The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recorded as goodwill.

Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates and assumptions to properly allocate purchase price consideration between the fair value of the assets acquired and liabilities assumed.

The Company leverages independent third-party valuations in determining the estimated fair values of acquired tangible assets, identifiable intangible assets, and assumed liabilities.

If assumptions or estimates used in determining fair values change based on information that becomes available during the one-year period from the acquisition date, we record measurement period adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

The Company accounts for goodwill as required by FASB ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”).

We test goodwill for impairment on an annual basis and when events occur that may suggest that the fair value of such assets cannot support the carrying value.

The Company tests goodwill for impairment on an annual basis and when events occur that may suggest that the fair value of such assets cannot support the carrying value.

ASC 350 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

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However, if an entity concludes otherwise, then the quantitative impairment test shall be used to identify the impairment and measure the amount of an impairment loss to be recognized (if applicable).

As of June 30, 2023, we had recorded goodwill in the amount of $ 5.1 million, related to the Redline acquisition completed in the first quarter of fiscal 2023.

We did not have any recorded goodwill as of July 1, 2022.

We test our goodwill for impairment on an annual basis on the first day of our fourth fiscal quarter.

We have determined that we have one reporting unit.

We performed a qualitative assessment in fiscal 2023.

This assessment considered changes in our projected future cash flows and discount rates, recent market transactions and overall macroeconomic conditions.

Based on this assessment, we concluded that it was more likely than not that the estimated fair value of our reporting unit was higher than its carrying value and that the performance of a quantitative impairment test was not required.

Segment and Geographic Information and Note 12.

Acquisitions for further information.

The Company tests goodwill for impairment on an annual basis on the first day of its fourth fiscal quarter.

The Company has one reporting unit.

A qualitative assessment was performed for fiscal 2024.

This assessment considered changes in the Company’s projected future cash flows and discount rates, recent market transactions and overall macroeconomic conditions.

Based on this assessment, the Company concluded that it was more likely than not that the estimated fair value of its reporting unit was higher than its carrying value and that the performance of a quantitative impairment test was not required.

Refer to Note 10.

Segment and Geographic Information, Note 12.

Acquisitions, and Note 14.

Goodwill and Intangible Assets for further information.

Valuation of Long-Lived Assets

The Company periodically reviews the carrying value of its long-lived assets, including finite-lived intangibles, and property, plant and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable or that the assigned useful lives may not longer be appropriate.

Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets.

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In estimating future cash flows, assets are grouped at the lowest levels for which there are identifiable cash flows that are largely independent of cash flows from other asset groups.

Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors.

The actual cash flows realized from these assets may vary significantly from our estimates.

There were no impairment losses recorded for fiscal 2023, 2022 or 2021.

The Company’s estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors.

The actual cash flows realized from these assets may vary significantly from estimates.

There were no impairment losses recorded for fiscal 2024, 2023 and 2022.

The Company amortizes the cost of finite-lived intangible assets on a straight-line basis over their estimated useful lives, which approximates the pattern of economic benefit.

The useful lives of the finite-lived purchased intangible assets are as follows:

Customer relationships 14

Trade names 16

On product sales, we provide for future warranty costs upon product delivery.

The specific terms and conditions of those warranties vary depending upon the product sold and the country in which we do business.

In the case of products sold by us, our warranties generally start from the delivery date and continue for one to three years , depending on the terms.

Many of our products are manufactured to customer specifications and their acceptance is based on meeting those specifications.

Refer to Note 14.

Goodwill and Intangible Assets for further information.

On product sales, the Company provides for future warranty costs upon product delivery.

The specific terms and conditions of those warranties vary depending upon the type of product sold and country of delivery.

In the case of products sold by the Company, product warranties generally start from the delivery date and continue for one to three years , depending on the terms.

Many of the Company’s products are manufactured to customer specifications and their acceptance is based on meeting those specifications.

Factors that affect our warranty liabilities include the number of product units subject to warranty protection, historical experience and management’s judgment regarding anticipated rates of warranty claims and cost per claim.

We assess the adequacy of our recorded warranty liabilities every quarter and make adjustments to the liabilities as necessary.

Refer to Note 5.

Balance Sheet Components for further information.

We lease facilities under non-cancelable operating lease agreements.

These leases have varying terms that range from one to 20 years and contain leasehold improvement incentives, rent holidays and escalation clauses.

In addition, some of these leases have renewal options for up to 3 years.

We determine if an arrangement contains a lease at inception.

These operating leases are included in right of use assets (ROU assets) on our June 30, 2023 consolidated balance sheets and represent our right to use the underlying asset for the lease term.

Our obligation to make lease payments are included in short-term lease liabilities and long-term lease liabilities on our June 30, 2023 consolidated balance sheets.

We have not entered into any financing leases during fiscal 2023.

Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

As most of our leases do not provide an implicit rate, we used

the incremental borrowing rate based on the remaining lease term at commencement date in determining the present value of future payments.

The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred.

Variable lease payments are expensed as incurred and are not included within the ROU asset and lease liability calculation.

The Company leases office space, assembly facilities, repair and service centers, and warehouses globally under non-cancelable operating lease agreements.

The Company determines if an arrangement contains a lease at inception.

Operating lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

As most of the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate based on the remaining lease term at commencement date is used in determining the present value of future payments.

The operating lease right-of-use assets also include any lease payments made and exclude lease incentives and initial direct costs incurred.

Variable lease payments are expensed as incurred and are not included within the right-of-use asset and lease liability calculation.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Certain of our lease arrangements include non-lease components and we account for non-lease components together with lease components for all such lease arrangements.

Certain of the Company’s lease arrangements include non-lease components and the Company accounts for non-lease components together with lease components for all such lease arrangements.

Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets.

We recognize lease expense for these leases on a straight-line basis over the lease term.

Lease expense for these leases are recognized on a straight-line basis over the lease term.

Refer to Note 4.

Leases for further information.

Foreign Currency Translation

The functional currency of our subsidiaries located in the United Kingdom, Singapore, Mexico, Algeria, Lebanon and New Zealand is the United States (“U.S.”) dollar.

The functional currency of certain of the Company’s international subsidiaries is the United States (“U.S.”) dollar.

Determination of the functional currency is dependent upon the economic environment in which an entity operates as well as the customers and suppliers the entity conducts business with.

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Non-monetary assets and liabilities are measured at historical rates.

Our other international subsidiaries use their respective local currency as their functional currency.

All other international subsidiaries use their respective local currency as their functional currency.

Assets and liabilities of these subsidiaries are translated at the current exchange rates in effect at the balance sheet date, and income and expense accounts are translated at average exchange rates during the period.

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Gains and losses resulting from foreign exchange transactions and re-measurement of monetary assets and liabilities in non-functional currencies are included in other expense (income), net in the accompanying consolidated statements of operations, based on the nature of the transactions.

Net foreign exchange (losses) gains recorded in our consolidated statements of operations during fiscal 2023, 2022 and 2021 were $( 1.0 ) million, $( 1.1 ) million, and $( 1.0 ) million, respectively.

Net foreign exchange (gains) losses recorded in the consolidated statements of operations during fiscal 2024, 2023 and 2022 were $( 0.3 ) million, $ 1.0 million and $ 1.1 million, respectively.

Retirement Benefits

As of June 30, 2023, we provided retirement benefits to substantially all employees primarily through our defined contribution retirement plans.

The Company provides retirement benefits to substantially all employees primarily through its defined contribution retirement plans.

These plans have matching and savings elements.

Contributions by us to these retirement plans are based on profits and employees’ savings with no other funding requirements.

Contributions by the Company to these retirement plans are based on profits and employees’ savings with no other funding requirements.

Contributions to retirement plans are expensed as incurred.

Retirement plan expense amounted to $ 2.1 million, $ 1.9 million and $ 1.8 million in fiscal 2023, 2022 and 2021, respectively.

Retirement plan expenses are included in cost of revenues, research and development, and selling and administrative expenses on our consolidated statements of operations.

Retirement plan expense incurred in fiscal 2024, 2023 and 2022 was $ 2.8 million, $ 2.1 million, and $ 1.9 million, respectively.

Retirement plan expenses are included in cost of revenues, research and development, and selling and administrative expenses on the consolidated statements of operations.

Revenue Recognition

We recognize revenue by applying the following five-step approach:

The Company recognizes revenue by applying the five-step approach in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”):

(1) identification of the contract with a customer;

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and (5) recognition of revenue when, or as, we satisfy a performance obligation.

Refer to Note 3.

Revenue Recognition for further information.

Cost of Product Sales and Services

Cost of sales consists primarily of materials, labor and overhead costs incurred internally and amounts incurred for contract manufacturers to produce our products, personnel and other implementation costs incurred to install our products and train customer personnel, and customer service and third party original equipment manufacturer costs to provide continuing support to our customers.

Shipping and handling costs are included as a component of costs of product sales in our consolidated statements of operations because they are also included in revenue that we bill our customers.

Cost of sales consists primarily of materials, labor and overhead costs incurred internally and amounts incurred for contract manufacturers to produce the Company’s products, personnel and other implementation costs incurred to install the Company’s products and train customer personnel, and customer service and third party original equipment manufacturer costs to provide continuing support to customers.

Shipping and handling costs are included as a component of costs of product sales in the consolidated statements of operations because they are also included as a component of revenue billed to customers.

Advertising Costs

We expense all advertising costs as incurred.

Advertising costs were immaterial during fiscal 2023, 2022 and 2021.

Advertising costs are expensed as incurred.

Advertising costs were not material during fiscal 2024, 2023 and 2022.

Presentation of Transactional Taxes Collected from Customers and Remitted to Government Authorities

We present transactional taxes such as sales and use tax collected from customers and remitted to governmental authorities on a net basis.

Transactional taxes such as sales and use tax collected from customers and remitted to governmental authorities are presented on a net basis.

Research and Development Costs

Our research and development costs, which include costs in connection with new product development, improvement of existing products, process improvement, and product use technologies, are generally charged to operations in the period in which they are incurred.

For certain software projects under development, we capitalize the development costs during the period between determining technological feasibility of the product and commercial release and are included in Other assets on the consolidated balance sheet.

We amortize the capitalized development cost upon commercial release, generally over three years .

To date, the amount of development costs capitalized and amount amortized have not been material.

The Company’s research and development costs, which include costs in connection with new product development, improvement of existing products, process improvement, and product use technologies, are generally charged to operations in the period in which they are incurred.

For certain software projects under development, development costs are capitalized during the period between determining technological feasibility of the product and commercial release and are included in long-term other assets on the consolidated balance sheets.

The amortization of capitalized development costs begins upon commercial release, generally over three years .

To date, the amount of development costs capitalized and amortized have not been material.

Share-Based Compensation

The Company has a share-based compensation plan which includes non-qualified stock options, restricted stock units and performance share awards.

We estimate the grant date fair value of our share-based awards and amortize the fair value over the requisite service period or vesting term.

To estimate the fair value of our stock option awards, we use the Black-Scholes option pricing model.

The determination of the fair value of stock option awards on the date of grant is affected by our stock price as well as assumptions regarding a number variables.

These variables include our expected stock price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, the risk-free interest rate and expected dividend yield.

Due to the inherent limitations of option valuation models, including consideration of future events that are unpredictable and the estimation process utilized in determining the valuation of the share-based awards, the ultimate value realized by our employees may vary significantly from the amounts expensed in our financial statements.

For restricted stock awards and units, we measure the grant date fair value based upon the market price of our common stock on the date of the grant.

The fair value of each performance share award with market conditions is estimated using a Monte-Carlo simulation model on the date of the grant.

We account for forfeitures as they occur.

We generally recognize compensation cost for share-based payment awards on a straight-line basis over the requisite service period.

The Company has one stock incentive plan for its employees and non-employee directors.

The stock incentive plan permits the Company to grant share-based awards in the form of options, restricted stock awards and units and performance share awards and units.

The estimated grant date fair value of share-based awards is amortized over the requisite service period or vesting term.

For non-qualified stock options, the Black-Scholes option pricing model is used to estimate the fair value as of the grant date.

The determination of the fair value of stock option awards is affected by the Company’s stock price and assumptions regarding a number variables.

These variables include the Company’s expected stock price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, the risk-free interest rate and expected dividend yield.

Due to the inherent limitations of option valuation models, including consideration of future events that are unpredictable and the estimation process utilized in determining the valuation of the share-based awards, the ultimate value realized by the Company’s employees may vary significantly from the amounts expensed in its financial statements.

For restricted stock awards and units and performance share awards and units with performance conditions, the market price of the Company’s common stock on the date of the grant is used to estimate the fair value.

For performance share awards and units with market conditions, the fair value is estimated using a Monte-Carlo simulation model as of the grant date.

The Company recognizes forfeitures of share-based awards as they occur.

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

For an award that has a graded vesting schedule, compensation expense is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

The amount of compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date.

For awards with a performance condition vesting feature, we recognize share-based compensation costs for the performance awards and units when achievement of the performance conditions is considered probable.

Any previously recognized compensation cost would be reversed if the performance condition is not satisfied or if it is not probable that the performance conditions will be achieved.

For awards with a market condition vesting feature, we recognize share-based compensation costs over the period the requisite service is rendered, regardless of when, if ever, the market condition is satisfied.

For awards with a performance condition vesting feature, share-based compensation costs are recognized when achievement of the performance conditions is considered probable.

Any previously recognized compensation cost is reversed if the performance condition is not satisfied or if it is not probable that the performance conditions will be achieved.

For awards with a market condition vesting feature, share-based compensation costs are recognized over the period the requisite service is rendered, regardless of when, and if ever, the market condition is satisfied.

Restructuring Charges

Our restructuring charges represent expenses incurred in connection with certain cost reduction programs that we have implemented, and consisted of the costs of employee termination costs, lease and other contract termination charges and other costs of exiting activities or geographies.

Restructuring charges represent expenses incurred in connection with certain cost reduction programs that the Company has implemented, and consists of the costs of employee termination costs, lease and other contract termination charges and other costs of exiting activities or geographies.

A liability for costs associated with an exit or disposal activity is measured at its fair value when the liability is incurred.

Expenses for one-time termination benefits are recognized at the date we notify the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period.

We recognize severance benefits provided as part of an ongoing benefit arrangement when the payment is probable, and the amounts can be reasonably estimated.

Expenses for one-time termination benefits are recognized at the date the employee is notified, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period.

The Company recognizes severance benefits provided as part of an ongoing benefit arrangement when the payment is probable and the amounts can be reasonably estimated.

Liabilities related to termination of an operating lease or contract are measured and recognized at fair value when the contract does not have any future economic benefit to the entity and the fair value of the liability is determined based on the present value of the remaining lease obligations, adjusted for the effects of deferred items recognized under the lease, and reduced by estimated sublease rentals that could be reasonably obtained for the property.

The assumptions in determining such estimates include anticipated timing of sublease rentals and estimates of sublease rental receipts and related costs based on market conditions.

We expense all other costs related to an exit or disposal activity as incurred.

All other costs related to an exit or disposal activity are expensed as incurred.

Refer to Note 8.

Restructuring Activities for further information.

Income Taxes and Related Uncertainties

We account for income taxes under the asset and liability method.

The Company accounts for income taxes under the asset and liability method.

Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement and tax basis of assets and liabilities, as measured by tax rates at which temporary differences are expected to reverse as well as operating loss and tax credit carry forwards.

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A valuation allowance is established to offset any deferred tax assets if, based upon the available information, it is more likely than not that some or all of the deferred tax assets will not be realized.

We are required to compute our income taxes in each federal, state, and foreign jurisdiction in which we operate.

This process requires that we estimate the current tax exposure as well as assess temporary differences between the accounting and tax treatment of assets and liabilities, including items such as accruals and allowances not currently deductible for tax purposes as well as operating loss and tax credit carry forwards.

The income tax effects of the differences we identify are classified as current or long-term deferred tax assets and liabilities in our consolidated balance sheets.

Our judgments, assumptions, and estimates relative to the current provision for income taxes take into account current tax laws, our interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities.

Changes in tax laws or our interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in our consolidated balance sheets and consolidated statements of operations.

We must also assess the likelihood that deferred tax assets will be realized from future taxable income and, based on this assessment, establish a valuation allowance, if required.

Our determination of our valuation allowance is based upon a number of assumptions, judgments, and estimates, including forecasted earnings, future taxable income, and the relative proportions of revenue and income before taxes in the various domestic and international jurisdictions in which we operate.

To the extent we establish a valuation allowance or change the valuation allowance in a period, we reflect the change with a corresponding increase or decrease to our tax provision in our consolidated statements of operations.

We use a two-step process to determine the amount of tax benefit to be recognized for uncertain tax positions.

The Company is required to compute its income taxes in each federal, state, and foreign jurisdiction the Company operates.

This process requires that the Company estimate the current tax exposure as well as assess temporary differences between the accounting and tax treatment of assets and liabilities, including items such as accruals and allowances not currently deductible for tax purposes as well as operating loss and tax credit carry forwards.

The income tax effects of the differences identified are classified as long-term deferred tax assets and liabilities on the consolidated balance sheets.

The Company’s judgments, assumptions, and estimates relative to the current provision for income taxes take into account current tax laws, the Company’s interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities.

Changes in tax laws or the Company’s interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in the consolidated balance sheets and consolidated statements of operations.

The Company must also assess the likelihood that deferred tax assets will be realized from future taxable income and, based on this assessment, establish a valuation allowance, if required.

The Company’s determination of its valuation allowance is based upon a number of assumptions, judgments, and estimates, including forecasted earnings, future taxable income, and the relative proportions of revenue and income before taxes in the various domestic and international jurisdictions in which the Company operates.

To the extent the Company establishes a valuation allowance or change the valuation allowance in a period, the change is reflected with a corresponding increase or decrease to the Company’s tax provision on the consolidated statements of operations.

The Company uses a two-step process to determine the amount of tax benefit to be recognized for uncertain tax positions.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.

The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes.

We reevaluate these uncertain tax positions on a quarterly basis.

The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

It is inherently difficult and subjective to estimate such amounts, as this requires the Company to determine the probability of various possible outcomes.

Uncertain tax positions are re-evaluated by the Company on a quarterly basis.

This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity.

Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

Accounting Standards Adopted

In June 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13) and also issued subsequent amendments to the initial guidance:

ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2022-02 (collectively, “Topic 326”).

Topic 326 requires measurement and recognition of expected credit losses for financial assets held.

Topic 326 became effective for our first quarter of fiscal 2023.

The adoption had no material impact on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.

ASU 2021-08 became effective for our first quarter of fiscal 2023.

The adoption had no material impact on the Company’s consolidated financial statements.

Refer to Note 11.

Income Taxes for further information.

Accounting Standards Not Yet Adopted

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The ASU enhances the transparency and usefulness of income tax information through improvements to disclosures primarily related to the rate reconciliation and income taxes paid information.

ASU 2023-09 is effective for the Company’s annual reporting beginning in fiscal 2026.

The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The ASU expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly presented to the chief operating decision maker.

The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment.

ASU 2023-07 is effective for the Company’s annual reporting beginning in fiscal 2025 and for interim periods beginning in fiscal 2026.

The Company is currently evaluating the impact of the ASU on its consolidated financial statements.

The Company considers the applicability and impact of all ASUs issued by the FASB.

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Net Income per Share of Common Stock

Net income per share is computed by dividing net income attributable to us by the weighted average number of shares of our outstanding common stock.

The following table presents the computation of basic and diluted net income per share attributable to our common stockholders:

Net income per share is computed by dividing net income attributable to the Company by the weighted average number of shares of its outstanding common stock.

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

(In thousands, except per share amounts) 2024 2023 2022

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Product assembly, product testing, complete system integration, and system testing may either be performed within our own facilities or at the locations of our third-party manufacturers.

Revenue from services includes certain network planning and design, engineering, installation and commissioning (“field services”), extended warranty, hosted software-as-a-service (“SaaS”), customer support, consulting, training, and

Maintenance and support services are generally offered to our customers and recognized over a specified period of time and from sales and subsequent renewals of maintenance and support contracts.

The network planning and design, engineering and installation related services noted are recognized based on an over-time recognition model using the cost-input method.

Certain judgment is required when estimating total contract costs and progress to completion on the over-time arrangements, as well as whether a loss is expected to be incurred on the contract.

Certain judgment is required when estimating total contract costs and progress to completion on the over-time

arrangements, as well as whether a loss is expected to be incurred on the contract.

The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial professionals.

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Stand-alone selling price is the price at which an entity would sell a good or service on a stand-alone (or separate) basis at contract inception.

Under the model, the observable price of a good or service sold separately provides the best evidence of stand-alone selling price.

Under the model, the observable price of a good or service sold separately provides the best

evidence of stand-alone selling price.

However, in certain situations, stand-alone selling prices will not be readily observable and the entity must estimate the stand-alone selling price.

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We elected the practical expedient to expense sales commissions as incurred when the amortization period of the related asset is one year or less.

These costs are recorded as selling and administrative expense and included in our consolidated balance sheet as accrued expenses until paid.

Our amortization expense was not material for the fiscal years ended June 30, 2023, July 1, 2022 and July 2, 2021.

These costs are recorded as selling and administrative expense and included in the consolidated balance sheet as accrued expenses until paid.

Amortization expense was not material for fiscal 2024, 2023 and 2022.

Contract Balances, Performance Obligations, and Backlog

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

June 30, 2023 July 1, 2022

The following table provides information about receivables and liabilities from contracts with customers:

(In thousands) June 28, 2024 June 30, 2023

Contract Assets

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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).

The contract balances have continued to grow as we continue to execute on large North American over time projects and International projects that carry notably longer payment terms.

From time to time, we may experience unforeseen events that could result in a change to the scope or price associated with an arrangement.

We would update the transaction price and measure of progress for the performance obligation and recognize the change as a cumulative catch-up to revenue.

Because of the nature and type of contracts we engage in, the timeframe to completion and satisfaction of current and future performance obligations can shift;

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

As of June 30, 2023, we had $ 51.7 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 72 % is expected to be recognized as revenue in fiscal 2024 and the remainder thereafter.

During fiscal 2023 and 2022, we recognized approximately $ 47.2 million and $ 23.3 million respectively, that was included in advance payments and unearned revenue at the beginning of each reporting period.

From time to time, the Company may experience unforeseen events that could result in a change to the scope or price associated with an arrangement.

When such events occur, the transaction price and measurement of progress for the performance obligation are updated and this change is recognized as a cumulative catch-up to revenue.

Because of the nature and type of contracts, the timeframe to completion and satisfaction of current and future performance obligations can shift;

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

As of June 28, 2024, the Company reported $ 66.3 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 75 % is expected to be recognized as revenue in the next twelve months and the remainder thereafter.

Approximately $ 34.1 million and $ 47.2 million respectively, of revenue was recognized during fiscal 2024 and 2023 that was included in advance payments and unearned revenue at the beginning of each reporting period.

Remaining Performance Obligations

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Of this amount, we expect to recognize approximately 50 % as revenue during fiscal 2025, with the remaining amount to be recognized as revenue beyond 12 months.

As of June 30, 2023, total ROU assets were approximately $ 2.6 million, and short-term lease liabilities and long-term lease liabilities were approximately $ 0.6 million and $ 2.1 million, respectively.

Cash paid for lease liabilities was $ 0.9 million for fiscal 2023.

As of July 1, 2022, total ROU assets were approximately $ 2.8 million, and short-term lease liabilities and long-term lease liabilities were approximately $ 0.5 million and $ 2.4 million, respectively.

Cash paid for lease liabilities was $ 0.7 million for fiscal 2022.

The following summarizes our lease costs, lease term and discount rate for fiscal 2023 and 2022 (in thousands):

Operating lease costs $ 1,288 $ 1,061

Short-term lease costs 1,999 2,252

Variable lease costs 107 171

Total lease costs $ 3,394 $ 3,484

Other information related to our operating leases for fiscal 2023 and 2022 (in thousands, except for weighted average):

The Company leases office space, assembly facilities, repair and service centers, and warehouses globally.

Operating lease right-of-use assets and lease liabilities are recognized with initial lease terms greater than one year.

Leases with an initial term of 12 months or less are not recognized on the consolidated balance sheets.

Lease expense is recognized on a straight-line basis over the lease term.

Supplemental lease information is as follows:

(In thousands) 2024 2023

Operating lease cost $ 1,114 $ 1,288

Short-term lease cost 3,065 1,999

Variable lease cost 249 107

Total lease cost $ 4,428 $ 3,394

(In thousands, except for weighted-average) 2024 2023

Weighted-average remaining lease term 5.7 years 6.9 years

Weighted-average discount rate 5.2 % 5.8 %

Operating lease assets obtained in exchange for operating lease liabilities $ 95 $ 104

Rental expense for operating leases, including rentals on a month-to-month basis was $ 3.4 million, $ 3.6 million, and $ 3.3 million for fiscal 2023, 2022 and 2021, respectively.

As of June 30, 2023, 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):

Fiscal years Amount

Right-of-use assets obtained in exchange for operating lease liabilities $ 2,105 $ 95

Cash paid for operating lease liabilities $ 1,044 $ 944

As of June 28, 2024, future minimum lease payments under all non-cancelable operating leases with an initial term greater than one year is as follows (in thousands):

Thereafter 1,028

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

(In thousands) June 30, 2023 July 1, 2022

(In thousands) June 28, 2024 June 30, 2023

Cash and cash equivalents $ 64,622 $ 22,242

Restricted cash included in other assets 279 227

Restricted cash included in long-term other assets

Total cash, cash equivalents, and restricted cash $ 64,934 $ 22,521

Cash and cash equivalents includes $ 2.6 million of collateralized cash for certain commercial commitments as of June 30, 2023.

Accounts receivable, net

Our net accounts receivable are summarized below:

(In thousands) June 30, 2023 July 1, 2022

(In thousands) June 28, 2024 June 30, 2023

Accounts receivable $ 159,867 $ 101,630

allowances for collection losses ( 719 ) ( 934 )

allowances for credit losses ( 1,854 ) ( 719 )

Total accounts receivable, net $ 158,013 $ 100,911

Our inventories are summarized below:

(In thousands) June 30, 2023 July 1, 2022

Changes to the Company’s allowance for expected credit losses was as follows:

(In thousands) 2024 2023 2022

Balance, beginning of period $ 719 $ 934 $ 2,141

Charges to (credits from) cost and expense 1,300 467 ( 1,207 )

Write-offs ( 165 ) ( 682 ) —

Balance, end of period $ 1,854 $ 719 $ 934

(In thousands) June 28, 2024 June 30, 2023

Finished products $ 44,890 $ 18,873

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Consigned inventories included within raw materials $ 11,456 $ 11,224

During fiscal 2023, 2022 and 2021, we recorded charges to adjust our inventories due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance.

Such charges incurred during

fiscal 2023, 2022 and 2021 were classified in cost of product sales as follows:

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 fiscal 2024, 2023 and 2022 were classified in cost of product sales as follows:

(In thousands) 2024 2023 2022

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Other current assets

Our other current assets are summarized below:

(In thousands) June 30, 2023 July 1, 2022

Contract manufacturing assets $ 6,487 $ 1,621

(In thousands) June 28, 2024 June 30, 2023

Prepaids and other current assets $ 13,559 $ 13,260

Taxes 8,623 2,417

Contract manufacturing assets 4,894 6,487

Total other current assets $ 27,076 $ 22,164

Assets held for sale

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

As of June 28, 2024, the aggregate carrying value of the assets held for sale was $ 2.7 million.

The Company completed the sale of the property in August 2024.

Property, plant and equipment, net

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

(In thousands) June 30, 2023 July 1, 2022

(In thousands) June 28, 2024 June 30, 2023

Land $ — $ 210

Buildings and leasehold improvements 1,302 5,889

Software 16,989 21,368

Machinery and equipment 47,150 49,584

Software and equipment

69,898 64,139

Total property, plant and equipment, gross 71,200 70,238

Less accumulated depreciation ( 61,720 ) ( 60,786 )

Total property, plant and equipment, net $ 9,480 $ 9,452

Included in the total plant, property and equipment above were $ 0.4 million and $ 1.2 million of assets in progress which have not been placed in service as of June 30, 2023 and July 1, 2022, respectively.

Included in the total plant, property and equipment above were $ 4.1 million and $ 0.4 million of assets in progress which have not been placed in service as of June 28, 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.

Depreciation expense related to property, plant and equipment was $ 4.0 million, $ 5.5 million and $ 4.5 million in fiscal 2024, 2023 and 2022, respectively.

Accrued expenses

Our accrued expenses are summarized below:

(In thousands) June 30, 2023 July 1, 2022

(In thousands) June 28, 2024 June 30, 2023

Project costs $ 14,305 $ 1,319

Compensation and benefits 9,689 10,368

Taxes 8,827 4,553

Professional fees 2,104 944

Warranties 2,996 2,100

Commissions 1,538 1,453

Professional fees 1,286 2,104

Other 3,507 2,545

Total accrued expenses $ 42,148 $ 24,442

We accrue for the estimated cost to repair or replace products under warranty.

Changes in our accrued warranty liability, were as follows:

The Company accrues for the estimated cost to repair or replace products under warranty.

Changes in the accrued warranty liability were as follows:

(In thousands) 2024 2023 2022

Balance as of the beginning of the fiscal year $ 2,913 $ 3,228 $ 3,196

Warranty provision recorded during the period 768 1,328 1,679

Balance, beginning of period $ 2,100 $ 2,913 $ 3,228

Warranty provision 2,254 768 1,328

Acquisition 446 55 —

Consumption during the period ( 1,636 ) ( 1,643 ) ( 1,647 )

Balance as of the end of the fiscal year $ 2,100 $ 2,913 $ 3,228

Consumption ( 1,804 ) ( 1,636 ) ( 1,643 )

Balance, end of period $ 2,996 $ 2,100 $ 2,913

Advance payments and unearned revenue

Our advance payments and unearned revenue are summarized below:

(In thousands) June 30, 2023 July 1, 2022

(In thousands) June 28, 2024 June 30, 2023

Advance payments $ 8,517 $ 1,607

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$ 58,839 $ 44,268

Excluded from the balances above are $ 7.4 million and $ 7.4 million in long-term unearned revenue as of June 28, 2024 and June 30, 2023, respectively.

Fair Value Measurements of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market in the absence of a principal market) for the asset or liability in an orderly transaction between market participants as of the measurement date.

We maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value and establish a three-level fair value hierarchy that prioritizes the inputs used to measure fair value.

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs in measuring fair value and established a three-level fair value hierarchy that prioritizes the observable inputs used to measure fair value.

The three levels of inputs used to measure fair value are as follows:

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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 carrying amounts, estimated fair values and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023 and July 1, 2022 were as follows:

June 30, 2023 July 1, 2022

(In thousands) Carrying

Value Carrying

Value Valuation

The estimated fair values and valuation input levels of financial assets and liabilities that are measured at fair value on a recurring basis as of June 28, 2024 and June 30, 2023 were as follows:

(In thousands) June 28, 2024 June 30, 2023 Valuation

Cash and cash equivalents:

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Bank certificates of deposit 3,706 3,793 Level 2

Marketable securities $ 2 $ 2 $ 10,893 $ 10,893 Level 1

Other accrued expenses:

Foreign exchange forward contracts $ — $ — $ 114 $ 114 Level 2

We classify items within Level 1 if quoted prices are available in active markets.

Our Level 1 items mainly are marketable securities and money market funds purchased from major financial institutions.

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.

As of June 30, 2023, these money market funds were valued at $ 1.00 net asset value per share by these financial institutions.

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.

certificates of deposit and foreign exchange forward contracts are classified within Level 2.

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 June 28, 2024 and June 30, 2023, the money market funds were valued at $ 1.00 net asset value per share.

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.

The Company’s bank certificates of deposit are classified within Level 2.

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

Foreign currency forward contracts are measured at fair value using observable foreign currency exchange rates.

We did not have any foreign currency forward contracts outstanding as of June 30, 2023.

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 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 did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

Credit Facility and Debt

On May 9, 2023, we entered into a Secured Credit Facility Agreement (the “Credit Facility” or “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender and Wells Fargo Securities LLC, Citigroup Global Markets Inc., and Regions Capital Markets as lenders.

The Company entered into a Secured Credit Facility Agreement (the “Credit Facility”), dated May 9, 2023, amended as of November 22, 2023, with Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender and Wells Fargo Securities LLC, Citigroup Global Markets Inc., and Regions Capital Markets as lenders.

The Credit Facility provides for a $ 40.0 million revolving credit facility (the “Revolver”) and a $ 50.0 million Delayed Draw Term Loan Facility (the “Term Loan”) with a maturity date of May 8, 2028.

The $ 40.0 million Revolver can be borrowed with a $ 10.0 million sublimit for letters of credit, and a $ 10.0 million swingline loan sublimit.

The Term Loan has a funding date on or prior to the closing date of the previously announced NEC Transaction with the proceeds used to settle the cash portion of the consideration and related expense.

The $ 40.0 million Revolver can be borrowed with a $ 10.0 million sub-limit for letters of credit, and a $ 10.0 million swingline loan sub-limit.

In November 2023, the Company borrowed $ 50.0 million against the Term Loan to primarily settle the cash portion of the consideration associated with the NEC Transaction.

Refer to Note 12.

Acquisitions for further information.

As of June 30, 2023, available credit under the Revolver was $ 40.0 million.

Available credit under the Term Loan was $ 50.0 million.

We borrowed $ 36.5 million and repaid $ 36.5 million against the Revolver during fiscal 2023.

As of June 30, 2023 there was no borrowing outstanding for either the Revolver or Term Loan.

Deferred financing costs of $ 0.8 million were paid in association with entering into the Credit Facility.

As of June 28, 2024, the available credit under the Revolver was $ 35.1 million, reflecting the available limit of $ 40.0 million less outstanding letters of credit of $ 4.9 million.

The Company borrowed $ 33.2 million and repaid $ 33.2 million against the Revolver in fiscal 2024.

As of June 28, 2024, the Company had $ 48.8 million outstanding under its Term Loan and no borrowings under its Revolver.

The following summarizes the Company’s outstanding long-term debt as of June 28, 2024:

(In thousands)

Term loan $ 48,750

unamortized deferred financing costs ( 400 )

Total debt 48,350

current portion of long-term debt ( 2,396 )

Total long-term debt $ 45,954

Outstanding borrowings under the Credit Facility bear interest at either:

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

As of June 28, 2024, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.5 % and 1.5 %, respectively.

The effective rate of interest on the outstanding Term Loan borrowings as of June 28, 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.

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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 June 30, 2023, we were in compliance with all financial covenants contained in the Credit Agreement.

On May 9, 2023, the Company and Silicon Valley Bank (“SVB”) terminated the Third Amended and Restated Loan and Security Agreement dated June 29, 2018, and as amended May 17, 2021 (the “SVB Credit Facility”), by and between the Company, as borrower, and SVB, as lender.

We borrowed $ 65.7 million and repaid $ 65.7 million against the SVB Credit Facility during fiscal 2023.

As of June 30, 2023, we had $ 2.6 million of collateralized cash on deposit with SVB associated with certain commercial commitments.

During fiscal 2023, the weighted-average interest rate under our available credit facilities was 7.6 %.

As of June 28, 2024, the Company was in compliance with all financial covenants contained in the Credit Facility.

As of June 28, 2024, scheduled maturities of outstanding long-term debt are as follows:

(In thousands)

Total $ 48,750

In the fourth quarter of fiscal 2023, the Company and Silicon Valley Bank (“SVB”) terminated the Third Amended and Restated Loan and Security Agreement dated June 29, 2018, and as amended May 17, 2021 (the “SVB Credit Facility”), by and between the Company, as borrower, and SVB, as lender.

Restructuring Activities

The following table summarizes our restructuring related activities during fiscal 2023, 2022 and 2021:

(In thousands) Employee Severance and Benefits Facilities and Other

Fiscal 2023 Plans Prior Years Plans Prior Years Plans Total

Balance as of July 3, 2020 $ — $ 2,502 $ 236 $ 2,738

Charges, net — 2,271 — 2,271

Cash payments — ( 2,291 ) — ( 2,291 )

Foreign currency translation (gain) loss — 7 12 19

The following table summarizes restructuring related activities during fiscal 2024, 2023 and 2022:

(In thousands) Employee Severance and Benefits Facilities and Other Total

Balance as of July, 2, 2021 $ 2,489 $ 248 $ 2,737

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Cash payments ( 1,559 ) — ( 1,559 )

Foreign currency translation (gain) loss — ( 23 ) ( 12 ) ( 35 )

Other ( 23 ) ( 12 ) ( 35 )

Balance as of July, 1, 2022 1,381 — 1,381

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Balance as of June, 30, 2023 600 — 600

As of June 30, 2023, the accrued restructuring balance of $ 0.6 million was in restructuring liabilities on the consolidated balance sheets.

Charges, net 3,901 — 3,901

Cash payments ( 2,783 ) — ( 2,783 )

Balance as of June, 28, 2024 $ 1,718 $ — $ 1,718

As of June 28, 2024, the accrued restructuring balance of $ 1.7 million was included in other current liabilities on the consolidated balance sheets.

Included in the above were positions identified for termination that have not been executed from a restructuring perspective.

The other activities primarily represent the impact of foreign currency movement.

Fiscal 2024 Plans

During fiscal 2023, our Board of Directors approved restructuring plans, primarily associated with the acquisition of Redline and reductions in workforce in our operations outside the United States.

The fiscal 2023 plans are expected to be completed through the end of first half of fiscal 2024.

Prior Years’ Plans

Activities under the prior years’ plans primarily included reductions in workforce across the Company, primarily in our operations outside the United States.

Payments related to the accrued restructuring balance for these plans are complete.

During fiscal 2024, the Company’s Board of Directors approved restructuring plans, primarily associated with the NEC Transaction (as defined below) and reductions in workforce in certain of the Company’s operations to optimize skill sets and align cost structure.

The fiscal 2024 plans are expected to be completed through the end of fiscal 2025.

Prior Fiscal Years’ Plans

Activities under the prior fiscal years’ plans primarily included reductions in workforce across the Company associated with the acquisition of Redline (as defined below) and certain of the Company’s operations outside the United States.

Payments related to the accrued restructuring balance for the prior fiscal years’ plans are complete.

Stockholders’ Equity

Stock Repurchase Program

During the second quarter of fiscal 2022 we completed the $ 7.5 million stock repurchase program approved by our Board of Directors in May 2018.

This repurchase program was temporarily suspended from February 2020 to February 2021.

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

During fiscal 2023 we did no t repurchase any shares of our common stock.

In fiscal 2022 and 2021 we repurchased $ 5.4 million and $ 0.8 million, respectively.

As of June 30, 2023, $ 7.3 million remained available for repurchase.

The following table summarizes the repurchase of our common stock:

(In thousands, except share and per-share amounts) Shares Weighted-Average Price Paid per Share Aggregate purchase price

Fiscal 2023 Treasury Shares — $ — $ —

Fiscal 2022 Treasury Shares 175,356 $ 30.57 $ 5,360

Fiscal 2021 Treasury Shares 19,587 $ 40.16 $ 787

Starting in February 2021, repurchased shares were recorded as treasury stock and we do not anticipate retiring them.

Treasury stock did not participate in the two -for-one stock split in the form of a stock dividend paid on April 7, 2021.

All repurchased shares prior to February 2021 were retired and reflected the two -for-one stock split.

In May 2018, the Company’s Board of Directors authorized a stock repurchase program to purchase up to $ 7.5 million of the Company’s common stock.

During the second quarter of fiscal 2022, the May 2018 stock repurchase program was exhausted.

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

As of June 28, 2024, $ 6.9 million remained available for repurchase under the November 2021 stock repurchase program.

Repurchased shares are recorded as treasury stock and are not formally retired.

The following table summarizes the Company’s repurchases of its common stock in fiscal 2024, 2023 and 2022:

Shares Purchased Average Price Paid Per Share Aggregate Purchase Amount

(In thousands)

Fiscal 2024 11,208 $ 29.59 $ 332

Fiscal 2023 — $ — $ —

Fiscal 2022 175,356 $ 30.57 $ 5,360

Stock Incentive Programs

Stock Equity Plan

As of June 30, 2023, we had one stock incentive plan for our employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

The 2018 Plan was approved by the Company’s stockholders in March 2018.

An increase of 1,250,000 shares available to grant to employees and non-employee directors was approved at the Annual Meeting of Stockholders in November 2021.

The 2018 Plan replaced the 2007 Plan as our primary long-term incentive program (“LTIP”).

In March 2018, the Company’s stockholders approved the 2018 Incentive Plan (the “2018 Plan”).

The 2018 Plan permits the Company to grant share-based awards in the form of options, stock appreciation rights, restricted stock awards and units (“restricted stock”) and performance share awards and units (“performance shares”) to the Company’s employees and non-employee directors.

The 2018 Plan replaced the 2007 Plan as the Company’s primary long-term incentive program.

The 2007 Plan was discontinued following stockholder approval of the 2018 Plan, but the outstanding awards under the 2007 Plan will continue to remain in effect in accordance with their terms;

provided that, as shares are returned under the 2007 Plan upon cancellation, termination or otherwise of awards outstanding under the 2007 Plan, such shares will be available for grant under 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.

Under the 2018 Plan, option exercise prices are equal to the fair market value of our common stock on the date the options are granted using our closing stock price.

After vesting, options generally may be exercised within seven years after the date of grant.

Restricted stock units are not transferable until vested and the restrictions lapse upon the achievement of continued employment or service over a specified time period.

Restricted stock units issued to employees generally vest three years from the date of grant ( three-year cliff or annually over three years ).

Restricted stock units issued to non-executive board members annually generally vest on the day before the annual stockholders’ meeting.

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.

We issue new shares of our common stock to our employees upon the exercise of stock options, vesting of restricted stock awards and units or vesting of performance share awards and units.

Under the 2018 Plan, option exercise prices are equal to the closing market value of the Company’s common stock on the date of grant.

Options granted to employees vest annually over three years and expire seven years from the date of grant.

Restricted stock granted to employees vest annually over three years from the date of grant.

Restricted stock granted to non-employee directors vest annually on the day before the annual stockholders’ meeting.

Performance shares granted to employees are subject to a three-year cliff vesting period from the date of grant, subject to the achievement of predetermined financial performance and market condition criteria.

The vesting of share-based awards granted to the Company’s employees and non-employee directors are generally subject to continued service through the vesting date.

New shares of the Company’s common stock are issued to employees upon the exercise of options, vesting of restricted stock, or vesting of performance shares.

All awards that are canceled prior to vesting or expire unexercised are returned to the approved pool of reserved shares and made available for future grants under the 2018 Plan.

Shares of our common stock remaining available for future issuance under the 2018 Plan totaled 1,822,810 as of June 30, 2023.

On March 3, 2020, our Board of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock, par value $ 0.01 per share, to our stockholders of record as of the close of business on March 3, 2020, (the “Record Date”).

As of June 28, 2024, 1,240,986 shares remain available for grant under the 2018 Plan.

In March 2020, the Company’s Board of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $ 0.01 per share, to the Company’s stockholders of record as of the close of business on March 3, 2020 (the “Record Date”).

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $ 0.01 per share (the “Preferred Shares”), of the Company at an exercise price of $35.00 per one one-thousandth of a Preferred Share, subject to adjustment.

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The complete terms of the Rights are set forth in the Amended and Restated Tax Benefit Preservation Plan (the “Plan”), dated as of August 27, 2020, and amended as of February 28, 2023, between the Company and Computershare Inc., as rights agent.

By adopting the Plan, we are helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”), which could be lost in the event of an “ownership change” as defined under Section 382 Code.

The amended Plan will be submitted to the Company’s stockholders for ratification at the Company’s 2023 annual meeting (the “Annual Meeting”), which extends the final expiration date of the Plan until March 3, 2026.

Also, on September 6, 2016, our Board of Directors adopted certain amendments to our Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”) The Charter Amendments are designed to preserve the Tax Benefits by restricting certain transfers of our common stock.

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan (“ESPP”), employees are entitled to purchase shares of our common stock at a 5 % discount from the fair market value at the end of a three-month purchase period.

We issued 1,254 shares under the ESPP during fiscal 2023.

The ESPP was terminated at the end of calendar year 2022 and the remaining shares reserved for future issuance expired.

By adopting the Plan, the Company is helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”), which could be lost in the event of an “ownership change” as defined under Section 382 of the U.S.

The amended Plan was approved at the Company’s Annual Meeting of Stockholders held in November 2023, which extended the final expiration date of the Plan until March 3, 2026.

In November 2023, the Company’s Board of Directors adopted certain amendments to Aviat’s Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”) The Charter Amendments are designed to preserve the Tax Benefits by restricting certain transfers of the Company’s common stock.

Share-Based Compensation

The following table presents the compensation expense for share-based awards included in our consolidated statements of operations for fiscal 2023, 2022 and 2021:

The following table presents the compensation expense for share-based awards included in the consolidated statements of operations for fiscal 2024, 2023 and 2022:

(In thousands) 2024 2023 2022

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Total share-based compensation expense $ 7,341 $ 6,720 $ 3,834

By Types of Award:

By Type of Award:

Options $ 1,549 $ 1,394 $ 582

Restricted stock awards and units 3,565 1,482 857

Performance share awards and units 1,761 1,770 1,307

Restricted stock 3,941 3,565 1,482

Performance shares 1,851 1,761 1,770

Total share-based compensation expense $ 7,341 $ 6,720 $ 3,834

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June 28, 2024

Unamortized Expense Weighted-Average Remaining Recognition Period

Unamortized Expense Remaining Recognition Period

(In thousands) (Years)

Options $ 2,185 1.63

Restricted stock awards and units $ 5,426 1.38

Performance share awards and units $ 2,096 0.98

Stock Options

A summary of the combined stock option activity under our equity plans during fiscal 2023 is as follows:

Shares Weighted-Average

Restricted stock 5,060 1.52

Performance shares 2,020 1.31

Total $ 9,265

A summary of the option activity during fiscal 2024 is as follows:

Number of Shares Weighted-Average

Exercise Price Weighted-Average

Life Aggregate

(Years) (In thousands)

Options outstanding as of July 1, 2022 469,716 $ 15.15 4.68 $ 5,599

Term Aggregate

(In thousands) (Years) (In thousands)

Options outstanding as of June 30, 2023 414 $ 21.77 3.78 $ 3,607

Granted 151 $ 33.62

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Options exercisable as of June 28, 2024 205 $ 21.11 3.51 $ 1,949

The aggregate intrinsic value represents the total pre-tax intrinsic value or the aggregate difference between the closing price of our common stock on June 30, 2023 of $ 33.37 , and the exercise price for in-the-money options that would have been received by the optionees if all options had been exercised on June 30, 2023.

Additional information related to our stock options is summarized below:

The aggregate intrinsic value represents the total pre-tax intrinsic value or the aggregate difference between the closing price of the Company’s common stock on June 28, 2024 of $ 28.69 , and the exercise price for in-the-money options that would have been received by the optionees if all options had been exercised on June 28, 2024.

Additional information related to stock options is summarized below:

(In thousands) 2024 2023 2022

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Fair value of options vested $ 1,190 $ 1,142 $ 608

The fair value of each option grant under our 2018 Plan was estimated using the Black-Scholes option pricing model on the date of grant.

A summary of the significant weighted-average assumptions we used in the Black-Scholes valuation model is as follows:

The fair value of each option grant was estimated using the Black-Scholes option pricing model on the date of grant.

A summary of the weighted-average significant assumptions used in the Black-Scholes valuation model is as follows:

2024 2023 2022

Expected dividends — % — % — %

Dividend yield — % — % — %

Expected volatility 60.8 % 62.9 % 61.9 %

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Expected term (in years) 3.6 3.0 3.0

The following summarizes all of our stock options outstanding and exercisable as of June 30, 2023:

The following summarizes options outstanding and exercisable as of June 28, 2024:

Options Outstanding Options Exercisable

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Exercise Price

$ 7.23 — $ 35.97

(In thousands) (Years) (In thousands)

$ 7.23 — $ 35.97 438 4.64 $ 27.51 205 $ 21.11

Restricted Stock Awards and Units

A summary of the status of our restricted stock as of June 30, 2023 and changes during fiscal 2023 is as follows:

Restricted Stock

A summary of the restricted stock activity during fiscal 2024 is as follows:

Shares Weighted-Average

Restricted stock outstanding as of July 1, 2022 383,257 $ 25.59

(In thousands)

Restricted stock outstanding as of June 30, 2023 273 $ 28.15

Granted 135 $ 32.12

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Restricted stock outstanding as of June 28, 2024 224 $ 32.16

The fair value of each restricted stock grant is based on the closing price of our common stock on the date of grant.

The fair value of each restricted stock grant is based on the closing price of the Company’s common stock on the date of grant.

The total grant date fair value of restricted stock that vested during fiscal 2024, 2023 and 2022 was $ 4.1 million, $ 3.4 million and $ 0.5 million, respectively.

Performance Share Awards and Units

A summary of the status of our performance shares as of June 30, 2023 and changes during fiscal 2023 is as follows:

Performance Shares

A summary of the performance shares activity during fiscal 2024 is as follows:

Shares Weighted-Average

Performance shares outstanding as of July 1, 2022 225,103 $ 16.69

(In thousands)

Performance shares outstanding as of June 30, 2023 180 $ 25.20

Granted 115 $ 26.99

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Performance shares outstanding as of June 28, 2024 139 $ 38.22

The fair value of performance shares was estimated using the Monte-Carlo simulation model.

A summary of the significant weighted-average assumptions is as follows:

Expected dividends — —

The fair value of performance shares with market condition terms was estimated using the Monte-Carlo simulation model.

A summary of the significant assumptions is as follows:

2024 2023 2022

Dividend yield — % — % — %

Expected volatility 57.7 % 63.7 % 61.1 %

Risk-free interest rate 4.7 % 3.5 % 0.4 %

Weighted-average grant date fair value per share granted $ 32.10 $ 35.56 - $ 31.38

The total grant date fair value of performance share units that vested during fiscal 2023, 2022 and 2021 was $ 1.0 million, $ 0.4 million and $ 0.4 million, respectively.

Expected term (in years) 2.9 2.8 2.9

The total grant date fair value of performance shares that vested during fiscal 2024, 2023 and 2022 was $ 1.8 million, $ 1.0 million and $ 0.4 million, respectively.

Segment and Geographic Information

We operate in one reportable business segment:

the design, manufacturing and sale of a range of wireless networking products, solutions and services.

We conduct business globally and our sales and support activities are managed on a geographic basis.

Our Chief Executive Officer is the Chief Operating Decision Maker (the “CODM”).

Our CODM manages our business primarily by function globally and reviews financial information on a consolidated basis, accompanied by disaggregated information about revenues by geographic region, for purposes of allocating resources and evaluating financial performance.

The profitability of our geographic regions is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company.

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 2023, 2022 and 2021 were as follows:

Aviat operates in one reportable business segment:

the design, manufacturing and sale of a range of wireless networking and access networking products, solutions and services.

Aviat conducts business globally and its sales and support activities are managed on a geographic basis.

The Company’s Chief Executive Officer (“CEO”) is the Chief Operating Decision Maker (the “CODM”).

The CODM manages the business primarily by function globally and reviews financial information on a consolidated basis, accompanied by disaggregated information about revenues by geographic region, for purposes of allocating resources and evaluating financial performance.

The profitability of geographic regions is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company.

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

Revenue by region for fiscal 2024, 2023 and 2022 were as follows:

(In thousands) 2024 2023 2022

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Total Revenue $ 408,083 $ 344,433 $ 302,959

Revenue by country comprising more than 10% of our total revenue for fiscal 2023, 2022 and 2021 was as follows:

Revenue by country comprising more than 10% of total revenue for fiscal 2024, 2023 and 2022 was as follows:

(In thousands, except percentages) Revenue % of

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United States $ 198,824 65.6 %

Our long-lived assets, consisting primarily of net property, plant and equipment, by geographic areas based on the physical location of the assets as of June 30, 2023 and July 1, 2022 were as follows:

(In thousands) June 30, 2023 July 1, 2022

New Zealand $ 3,619 $ 5,149

Long-lived assets, consisting primarily of net property, plant and equipment and operating lease right-of-use assets, by geographic areas based on physical location as of June 28, 2024 and June 30, 2023 were as follows:

(In thousands) June 28, 2024 June 30, 2023

United States $ 8,330 $ 6,965

Canada 1,039 687

New Zealand 467 3,619

Other countries 3,354 735

Total $ 13,190 $ 12,006

Income (loss) before provision for (benefit from) income taxes during fiscal 2023, 2022 and 2021 consisted of the following:

Income (loss) before provision for income taxes during fiscal 2024, 2023 and 2022 consisted of the following:

(In thousands) 2024 2023 2022

4 unchanged sentences

(In thousands) 2024 2023 2022

Current provision (benefit):

Federal $ 54 $ — $ 15

2 unchanged sentences

2,521 2,130 1,582

Deferred provision (benefit):

Federal 4,613 8,450 6,348

2 unchanged sentences

3,625 9,015 7,693

Total provision for (benefit from) income taxes $ 11,575 $ 9,275 $ ( 87,699 )

The provision for (benefit from) income taxes differed from the amount computed by applying the federal statutory rate of 21%, to our income before provision for (benefit from) income taxes as follows:

Total provision for income taxes $ 6,146 $ 11,145 $ 9,275

The provision for income taxes differed from the amount computed by applying the federal statutory rate of 21%, to the Company’s income before provision for income taxes as follows:

(In thousands) 2024 2023 2022

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Foreign withholding taxes 698 88 267

Brazil withholding tax receivable — — 72

Change in uncertain tax positions 869 406 644

2 unchanged sentences

Other 14 ( 9 ) ( 176 )

Total provision for (benefit from) income taxes

$ 11,575 $ 9,275 $ ( 87,699 )

Our provision for (benefit from) income taxes was $ 11.6 million of expense for fiscal 2023, $ 9.3 million of expense fiscal 2022 and $ 87.7 million of benefit for fiscal 2021.

Our tax expense for fiscal 2023 was primarily due to tax expense related to U.S.

and profitable foreign subsidiaries, including tax expense associated with our acquisition of Redline in July 2022 and subsequent restructuring and integration impact.

Acquisitions.

Our tax expense for fiscal 2022 was primarily due to tax expenses related to U.S.

and profitable foreign subsidiaries.

Total provision for income taxes $ 6,146 $ 11,145 $ 9,275

The Company’s provision for income taxes was $ 6.1 million for fiscal 2024, $ 11.1 million for fiscal 2023 and $ 9.3 million for fiscal 2022.

The Company’s tax expense for fiscal 2024 was primarily due to tax expense related to U.S.

and profitable foreign subsidiaries, partially offset by Canada valuation allowance release.

The Company’s tax expense for fiscal 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 (as defined below) in July 2022 and the subsequent restructuring and integration impact.

Refer to Note 12.

Acquisitions for further information.

The components of deferred tax assets and liabilities were as follows:

(In thousands) June 30, 2023 July 1, 2022

(In thousands) June 28, 2024 June 30, 2023

Deferred tax assets:

25 unchanged sentences

$ 82,700 $ 86,588

Our valuation allowance related to deferred income taxes, as reflected in our consolidated balance sheets, was $ 37.0 million as of June 30, 2023 and $ 37.5 million as of July 1, 2022.

The change in valuation allowance for the fiscal years ended June 30, 2023 and July 1, 2022 was an decrease of $ 0.5 million and an increase of $ 0.1 million, respectively.

The Company’s valuation allowance related to deferred income taxes, as reflected on the consolidated balance sheets, was $ 34.5 million as of June 28, 2024 and $ 37.1 million as of June 30, 2023.

The change in valuation allowance for the fiscal years ended June 28, 2024 and June 30, 2023 was a decrease of $ 2.6 million and a decrease of $ 0.4 million, respectively.

The decrease in the valuation allowance in fiscal 2024 was primarily due to the release of certain foreign valuation allowances.

The decrease in the valuation allowance in fiscal 2023 was primarily due to the release of certain U.S.

federal, state, and foreign valuation allowances, partially offset by losses in tax jurisdictions in which we cannot recognize tax benefits.

The increase in the valuation allowance in fiscal 2022 was primarily due to losses in tax jurisdictions in which we cannot recognize tax benefits, partially offset by the release of certain U.S.

federal, state, and foreign valuation allowances.

As of June 30, 2023, we continue to maintain a valuation allowance of $ 1.2 million on certain U.S.

federal and state deferred tax assets that we believe is not more likely than not to be realized in future periods.

federal, state, and foreign valuation allowances, partially offset by losses in tax jurisdictions in which the Company cannot recognize tax benefits.

As of June 28, 2024, the Company maintains a valuation allowance of $ 0.5 million on certain U.S.

federal and state deferred tax assets that the Company believes is not more likely than not to be realized in future periods.

Tax loss and credit carryforwards as of June 28, 2024 have expiration dates ranging between one year and no expiration in certain instances.

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The amount of foreign tax credit carryforwards as of June 28, 2024 was $ 3.2 million, and certain credits will begin to expire in fiscal 2026.

We use the flow-through method to account for investment tax credits generated on eligible scientific research and development expenditures.

The Company uses the flow-through method to account for investment tax credits generated on eligible scientific research and development expenditures.

Under this method, the investment tax credits are recognized as a benefit to income tax in the year they are generated.

United States income taxes have not been provided on basis differences in foreign subsidiaries of $ 2.8 million as of June 30, 2023 because of our intention to reinvest these earnings indefinitely.

United States income taxes have not been provided on basis differences in foreign subsidiaries of $ 13.3 million as of June 28, 2024 because of the Company’s intention to reinvest these earnings indefinitely.

Additionally, no foreign withholding taxes, federal or state taxes have been provided if these unremitted earnings of the Company’s foreign subsidiaries were distributed, as such amounts are considered permanently reinvested.

It is not practicable to estimate the additional income taxes, including applicable foreign withholding taxes, that would be due upon the repatriation of these earnings.

As of June 30, 2023, we had unrecognized tax benefits of $ 16.1 million for various federal, foreign, and state income tax matters.

Unrecognized tax benefits decreased by $ 1.6 million during fiscal 2023.

Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate was $ 8.1 million as of June 30, 2023.

These unrecognized tax benefits are presented on the accompanying consolidated balance sheets net of the tax effects of net operating loss carryforwards.

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

The interest accrued was $ 0.7 million as of June 30, 2023.

As of June 30, 2023, an immaterial amount of penalties have been accrued.

Our unrecognized tax benefit activity for fiscal 2023, 2022 and 2021 was as follows:

(In thousands) Amount

The Company’s unrecognized tax benefit activity for fiscal 2024, 2023 and 2022 was as follows:

(In thousands)

Unrecognized tax benefit as of July 2, 2021 $ 17,255

8 unchanged sentences

Decreases related to change of foreign exchange rate ( 1,953 )

Unrecognized tax benefit as of July 1, 2022 17,707

Unrecognized tax benefit as of June 30, 2023 16,086

Additions for tax positions in prior periods —

3 unchanged sentences

Unrecognized tax benefit as of June 28, 2024 $ 16,075

There was an immaterial change in our unrecognized tax benefit for tax positions in prior periods for fiscal 2023 related to settlements with tax authorities in the table above.

Our unrecognized tax benefit decreased for tax positions in prior periods by $ 0.0 million and $ 0.9 million for fiscal 2022 and 2021, respectively, related to settlements with tax authorities in the table above.

We have a number of years with open tax audits which vary from jurisdiction to jurisdiction.

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

As of June 28, 2024, the Company had unrecognized tax benefits of $ 16.1 million for various federal, foreign, and state income tax matters, compared to $ 16.1 million as of June 30, 2023.

The Company’s total unrecognized tax benefits that, if recognized, would affect its effective tax rate was $ 7.4 million as of June 28, 2024.

These unrecognized tax benefits are presented on the accompanying consolidated balance sheets net of the tax effects of net operating loss carryforwards.

The Company accounts for interest and penalties related to unrecognized tax benefits as part of its provision for income taxes.

The interest accrued was $ 0.7 million as of June 28, 2024.

An immaterial amount of penalties have been accrued as of June 28, 2024.

There was an immaterial change in the Company’s unrecognized tax benefit for tax positions in prior periods for fiscal 2024 related to settlements with tax authorities in the table above.

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.

The earliest years for these jurisdictions are as follows:

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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.

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

The Company will continue to examine the elements of the ARPA and the impact it may have on future business.

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act of 2022 (“IRA”) which includes a new corporate alternative minimum tax of 15% on adjusted financial statement income of corporations with profits greater than $1 billion, effective for taxable years beginning after December 31, 2022, and a 1% excise tax on stock repurchases

by public corporations after December 31, 2022.

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

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

NEC’s Wireless Transport Business

On May 9, 2023, the Company entered into a Master Sale of Business Agreement (the “Purchase Agreement”), with NEC Corporation.

Pursuant to the Purchase Agreement, the Company will purchase certain assets and liabilities from NEC relating to NEC’s wireless backhaul business (the “NEC Transaction”).

Initial consideration due at the closing of the NEC Transaction will be comprised of (i) an amount in cash equal to $ 45.0 million, subject to certain post-closing adjustments, and (ii) the issuance of $ 25 million in Company common stock.

Aggregate consideration will be approximately $ 70 million.

The Company has obtained permanent financing to fund the cash portion of the NEC Transaction.

On May 9, 2023, the Company entered into a Master Sale of Business Agreement (as amended on November 30, 2023, the “Purchase Agreement”) with NEC Corporation (“NEC”) to acquire NEC’s wireless transport business (the “NEC Transaction”).

The Company completed the NEC Transaction on November 30, 2023.

Prior to the acquisition date, NEC was a leader in wireless backhaul networks with an extensive installed base of their Pasolink series products.

The completion of the NEC Transaction increases the scale of Aviat, enhances the Company’s product portfolio with a greater capability to innovate, and creates a more diversified business.

The results of operations of the NEC Transaction have been included in the consolidated financial statements since the date of acquisition.

The fair value of the consideration transferred at the closing of the NEC Transaction was comprised of (i) cash of $ 32.2 million, and (ii) the issuance of 736,750 shares or $ 22.3 million of common stock of the Company.

The fair value of the shares issued was determined based on the closing market price of the Company’s common stock on the acquisition date.

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

As of June 28, 2024, the Company recorded accruals of approximately $ 19.9 million in estimated additional cash consideration, which is included in other current liabilities on the consolidated balance sheets.

The additional consideration is primarily related to the settlement of the post-closing working capital adjustment, and is expected to be transferred to NEC in the first half of fiscal 2025.

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

Refer to Note 7.

Credit Facility and Debt for further information.

The Purchase Agreement contains certain customary termination rights, including, among others, (i) the right of the Company or NEC to terminate if all the conditions to closing have not been either waived or satisfied on or before February 9, 2024 and (ii) there is a final non-appealable order of a government entity prohibiting the consummation of the NEC Transaction.

The NEC Transaction remains subject to, among other things, regulatory approvals and satisfaction of other customary closing conditions.

The Company expects to complete the NEC Transaction in the fourth quarter of calendar year 2023.

NEC is a leader in wireless backhaul networks with an extensive installed base of their Pasolink series products.

The NEC Transaction was accounted for as a business combination using the acquisition method of accounting.

The Company is in the process of obtaining final 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.

As of the acquisition date, the Company has recorded the assets acquired and the liabilities assumed at their respective estimated fair values.

The recognized goodwill is attributable to the workforce of the acquired business and expected synergies.

The goodwill from this acquisition is expected to be fully deductible for tax purposes.

Acquisition-related costs were expensed as incurred and are included in selling and administrative expenses in the consolidated statements of operations.

The Company incurred acquisition-related costs of $ 8.2 million related to the NEC Transaction during fiscal 2024.

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

Fair Value Useful Life in Years

(In thousands)

Accounts receivable, net $ 49,287

Inventories 34,175

Property, plant and equipment, net 539

Identifiable finite-lived intangible assets:

Customer relationships 3,800 15

Technology 1,800 7

Other assets 243

Accounts payable ( 13,182 )

Advance payments and unearned revenue ( 3,192 )

Other liabilities ( 2,187 )

Goodwill 3,105

Net assets acquired $ 74,388

The preliminary purchase price allocation is subject to adjustment based on the Company obtaining final independent third-party valuations, determining fair value and final 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.

Revenue and operating loss associated with the NEC Transaction included in the consolidated statements of operations from the acquisition date to the period ended June 28, 2024 were $ 54.9 million and $( 1.0 ) million, respectively.

The following unaudited supplemental pro forma information has been presented as if the NEC Transaction had 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 acquisition-related costs, net of income tax.

(In thousands) 2024 2023

Revenue $ 492,995 $ 530,891

Net income (loss) 19,637 ( 411 )

Fiscal 2023 unaudited supplemental pro forma earnings were adjusted to include $ 8.2 million of acquisition-related costs incurred in fiscal 2024.

There were no other material nonrecurring adjustments.

The unaudited supplemental 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 had occurred at the beginning of fiscal 2023, nor is it necessarily indicative of future operating results.

Redline Communications Group Inc.

On July 5, 2022, 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.

Acquiring Redline allows Aviat to expand its Private Networks Offering with Private LTE/5G and Unlicensed Wireless Access Solutions, by creating an integrated end-to-end offering for wireless access and transport in the Private Networks segment, leveraging Aviat's sales channel to address a large dollar Private LTE/5G addressable market and increasing Aviat’s reach in mission-critical industrial Private Networks.

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

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

Cash acquired as part of the all-cash acquisition was $ 4.6 million for total net consideration of $ 15.8 million.

3 unchanged sentences

The goodwill from this acquisition is expected to be deductible for tax purposes.

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

The preliminary purchase price allocation has been updated for certain measurement period adjustments based on the final valuation resulting in a $ 2.5 million increase in identifiable finite-lived intangible assets and a $ 2.6 million decrease in net tangible assets acquired.

These adjustments resulted in corresponding increase to goodwill.

The results of operations of Redline have been included in our consolidated financial statements since the date of acquisition.

The Company determined that the impact of this acquisition was not material to our consolidated financial statements;

therefore, revenue and earnings since the acquisition date and pro forma information are not required or presented.

Acquisition-related costs were expensed as incurred and are included in selling and administrative expenses in the consolidated statements of operations.

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

Fair Value Useful Life in Years

(In thousands)

4 unchanged sentences

Identifiable finite-lived intangible assets:

Patents 690 10

Customer relationships 7,730 14

6 unchanged sentences

Total consideration $ 20,411

The following table presents details of the acquired identifiable finite-lived intangible assets:

Useful life in Years Gross Accumulated amortization Net

Identifiable intangible assets:

Patents 10 $ 690 $ ( 69 ) $ 621

Customer relationships 14 7,730 ( 552 ) 7,178

Trade names 16 1,330 ( 83 ) 1,247

Total identifiable intangible assets $ 9,750 $ ( 704 ) $ 9,046

Amortization of finite-lived intangibles is included in selling and administrative expenses.

As of June 30, 2023, the estimated future amortization expense of intangible assets with finite lives is as follows:

(In thousands)

Thereafter 5,526

Total $ 9,046

Commitments and Contingencies

Purchase Orders and Other Commitments

From time to time in the normal course of business, we may enter into purchasing agreements with our suppliers that require us to accept delivery of, and remit full payment for, finished products that we have ordered, finished

products that we requested be held as safety stock, and work in process started on our behalf in the event we cancel or terminate the purchasing agreement.

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 June 30, 2023, we had outstanding purchase obligations and other commitments as follows:

Payments due by period

2024 2025 2026 2027 2028 Total

Purchase obligations with suppliers of contract manufacturers $ 34,004 $ 3,089 $ — $ — $ — $ 37,093

Contractual obligations associated with software as a service and software maintenance support 971 1,708 896 164 — 3,739

Total obligations $ 34,975 $ 4,797 $ 896 $ 164 $ — $ 40,832

From time to time in the normal course of business, the Company may enter into purchasing agreements with its suppliers that require the Company to accept delivery of and remit full payment for (i) finished products that it has ordered,

(ii) finished products that it requested be held as safety stock, and (iii) work in process started on its behalf, in the event it cancels or terminates the purchasing agreement.

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 June 28, 2024, the Company had outstanding purchase obligations with its suppliers or contract manufacturers of approximately $ 83.7 million.

In addition, the Company had purchase obligations of approximately $ 5.1 million associated with software as a service and software maintenance support.

Financial Guarantees and Commercial Commitments

Guarantees issued by banks, insurance companies or other financial institutions are contingent commitments issued to guarantee our performance under borrowing arrangements, such as bank overdraft facilities, tax and customs obligations and similar transactions or to ensure our performance under customer or vendor contracts.

Guarantees issued by banks, insurance companies, or other financial institutions are contingent commitments issued to guarantee performance under borrowing arrangements, such as bank overdraft facilities, tax and customs obligations, and similar transactions, or to ensure performance under customer or vendor contracts.

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 June 30, 2023, 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 June 30, 2023, we had commercial commitments of $ 61.0 million outstanding that were not recorded on our consolidated balance sheets.

As of June 28, 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 June 28, 2024, the Company had commercial commitments outstanding of $ 18.3 million, that were not recorded on the 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.

The following table presents details of the Company’s commercial commitments:

(In thousands)

June 28, 2024

Letters of credit $ 4,941

Indemnifications

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 June 30, 2023, 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;

and we have not paid any final judgment on behalf of any customer related to an infringement claim arising from the use of our products.

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 June 30, 2023, we had not recorded any liabilities related to these indemnifications.

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 June 28, 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;

and the Company has not paid any final judgment on behalf of any customer related to an infringement claim arising from the use of its products.

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 June 28, 2024, the Company 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.

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

We are aggressively defending all current litigation matters.

Although there can be no assurances and the outcome of these matters is currently not determinable, we currently believe that none of these claims or proceedings are likely to have a material adverse effect on our financial position.

There are many uncertainties associated with any litigation and these actions or other third-party claims against us may cause us to incur costly litigation and/or substantial settlement charges.

As a result, our business, financial condition, results of operations, and cash flows could be adversely affected.

The actual liability in any such matters may be materially different from our estimates, if any.

We record accruals for our outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

We evaluate, at least on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable.

We have not recorded any significant accrual for loss contingencies associated with such legal claims or litigation discussed above.

The Company is subject from time to time to disputes with customers concerning its products and services.

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

The Company is aggressively defending all current litigation matters.

Although there can be no assurances and the outcome of these matters is currently not determinable, the Company currently believes that none of these claims or proceedings are likely to have a material adverse effect on its financial position.

There are many uncertainties associated with any litigation and these actions or other third-party claims against the Company may cause it to incur costly litigation and/or substantial settlement charges.

As a result, the Company’s business, financial condition, results of operations, and cash flows could be adversely affected.

The actual liability in any such matters may be materially different from the Company’s estimates, if any.

The Company records accruals for its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

The Company evaluates, at least on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable.

The Company has not recorded any significant accrual for loss contingencies associated with such legal claims or litigation discussed above.

Contingent Liabilities

We record a loss contingency as a charge to operations when (i) it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements;

The Company records a loss contingency as a charge to operations when (i) it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements;

and (ii) the amount of the loss can be reasonably estimated.

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Gain contingencies are not recorded until realized.

We expense all legal costs incurred to resolve regulatory, legal and tax matters as incurred.

In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought against our subsidiary Aviat Networks (India) Private Limited (“Aviat India”) relating to the non-realization of intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the time frames dictated by the Indian regulations under the Foreign Exchange Management Act.

The Company expenses all legal costs incurred to resolve regulatory, legal and tax matters as incurred.

In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought against Aviat’s subsidiary Aviat Networks (India) Private Limited (“Aviat India”) relating to the non-realization of intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the time frames dictated by the Indian regulations under the Foreign Exchange Management Act.

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.

No settlement offers were discussed at the meeting and the matter is still ongoing with no subsequent hearing date currently scheduled as of June 30, 2023.

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

We currently cannot form an estimate of the range of loss in excess of our amounts already accrued.

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

Periodically, we review the status of each significant matter to assess the potential financial exposure.

If a potential loss is considered probable and the amount can be reasonably estimated, we reflect the estimated loss in our results of operations.

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 June 28, 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.

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

Periodically, the Company reviews the status of each significant matter to assess the potential financial exposure.

If a potential loss is considered probable and the amount can be reasonably estimated, the estimated loss is reflected in our results of operations.

Significant judgment is required to determine the probability that a liability has been incurred or an asset impaired and whether such loss is reasonably estimable.

Further, estimates of this nature are highly subjective, and the final outcome of these matters could vary significantly from the amounts that have been included in our consolidated financial statements.

As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise estimates accordingly.

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

Further, estimates of this nature are highly subjective, and the final outcome of these matters could vary significantly from the amounts that have been included in the consolidated financial statements.

As additional information becomes available, the Company will reassess the potential liability related to its pending claims and litigation and may revise estimates accordingly.

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

Goodwill and Intangible Assets

The following presents details of goodwill and intangible assets:

(In thousands)

June 28, 2024 June 30, 2023

Goodwill $ 8,217 $ 5,112

The $ 3.1 million increase in goodwill during fiscal 2024 is associated with the NEC Transaction as described in Note 12.

Acquisitions.

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

The fiscal 2024 annual goodwill impairment test did not result in an impairment.

Useful life in Years June 28, 2024 June 30, 2023

Intangible assets:

(In thousands)

Technology 7 $ 1,800 $ —

Patents 10 690 690

Customer relationships 14 — 15

Trade names 16 1,330 1,330

Total gross intangible assets $ 15,350 $ 9,750

Accumulated amortization ( 1,706 ) ( 704 )

Total net intangible assets $ 13,644 $ 9,046

The $ 5.6 million increase in finite-lived intangible assets during fiscal 2024 is associated with the NEC Transaction as described in Note 12.

Acquisitions.

Amortization of finite-lived intangibles for fiscal 2024 and 2023 was $ 1.0 million and $ 0.7 million, respectively, and is included in selling and administrative expenses.

There was no amortization expense in fiscal 2022.

There were no impairment charges recorded for fiscal 2024, 2023 and 2022.

As of June 28, 2024, the estimated future amortization expense of finite-lived intangible assets is as follows (in thousands):

(In thousands)

Thereafter 7,569

Total $ 13,644

Related Party Transactions

NEC Corporation

On November 30, 2023 (the “Closing Date”), the Company completed the NEC Transaction.

Refer to Note 12.

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.

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 June 28, 2024, NEC held approximately 5.8 % 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.

The agreements include arrangements covering manufacturing services and product supply, transition services, distribution services, research and development services, and licensing of trademark and intellectual property (“IP”).

The Manufacturing and Supply Agreement includes arrangements for NEC to manufacture and supply Pasolink products on behalf of and to the Company and its customers.

The transition services agreements include arrangements for the Company and NEC to provide and receive certain transition services, primarily associated with administrative functions.

The distribution services agreements includes arrangements where NEC will provide distribution services on behalf of and to the Company and its customers in certain international markets and territories.

The Research and Development Cooperating Agreement for Existing Products includes arrangements for NEC to provide the Company certain services relating to development work to maintain existing products of the NEC business.

The licensing agreements include arrangements where the Company will grant NEC a non-exclusive license to certain Pasolink trademarks in Japan, and NEC will grant the Company a non-exclusive, worldwide (excluding Japan) license to certain NEC IP, including mobile backhaul-related patents.

The licensing agreements are royalty-free and perpetual.

A summary of the related party activity between the Company and NEC during fiscal 2024 is as follows:

(In thousands)

Transition services received $ 4,472

Research and development services received 7,222

Purchase of inventories 10,853

As of June 28, 2024, the Company’s outstanding related party balances with NEC included in the consolidated balance sheets are as follows:

(In thousands)

Accounts receivable, net $ 638

Other current assets 400

Accounts payable 17,182

Other current liabilities 19,896

Revisions to Prior Period Consolidated Financial Statements

As described in Note 1.

The Company and Summary of Significant Accounting Policies, subsequent to the issuance of the consolidated financial statements and related disclosures for the fiscal year ended June 30, 2023, the Company identified certain errors in its previously issued consolidated financial statements.

The Company identified an error related to estimated total contract costs and progress to completion for an over-time arrangement.

The effect of the error resulted in revenues related to services being overstated by $ 1.4 million for the year ended June 30, 2023.

This error also impacted the previously issued quarterly financial statements for fiscal 2024.

The Company also identified that it had inappropriately recorded revenue and costs of sales in fiscal 2023 related to product sales recognized at a point-in-time for which control had not been transferred to the customer.

This resulted in an overstatement of revenue related to product sales of $ 0.7 million and cost of revenues related to product sales of $ 0.4 million for the year ended June 30, 2023.

In accordance with ASC 250, Accounting Changes and Error Corrections and Staff Accounting Bulletins (“SAB”) No.

99, Materiality and No.

As a result, the Company has restated the prior period financial statements and related disclosures for fiscal 2023 to correct the errors.

The Company will also correct previously issued quarterly financial statements and related disclosures for such immaterial errors in future filings, as applicable (see “Part II, Item 9B.

Other Information” below for additional information).

A summary of the corrections to the impacted financial statement line items in the Company’s previously issued Consolidated Statements of Operations, Comprehensive Income, Equity and Cash Flows for the twelve months ended June 30, 2023 and Consolidated Balance Sheets as of June 30, 2023 is provided below.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Year Ended June 30, 2023

(In thousands, except per share amounts) As Previously Reported

Product sales $ 239,321 $ ( 742 ) $ 238,579

Services 107,272 ( 1,418 ) 105,854

Total revenues 346,593 ( 2,160 ) 344,433

Cost of revenues:

Product sales 151,008 ( 371 ) 150,637

Services 71,414 — 71,414

Total cost of revenues 222,422 ( 371 ) 222,051

Gross margin 124,171 ( 1,789 ) 122,382

Operating expenses:

Research and development 24,908 — 24,908

Selling and administrative 69,842 — 69,842

Restructuring charges 3,012 — 3,012

Total operating expenses 97,762 — 97,762

Operating income 26,409 ( 1,789 ) 24,620

Interest expense, net 532 — 532

Other expense, net 2,774 — 2,774

Income before income taxes 23,103 ( 1,789 ) 21,314

Provision for income taxes 11,575 ( 430 ) 11,145

Net income $ 11,528 $ ( 1,359 ) $ 10,169

Net income attributable to Aviat Networks $ 11,528 $ ( 1,359 ) $ 10,169

Net income per share of common stock outstanding:

Basic $ 1.01 $ ( 0.11 ) $ 0.90

Diluted $ 0.97 $ ( 0.11 ) $ 0.86

Weighted average shares outstanding:

Basic 11,358 — 11,358

Diluted 11,855 — 11,855

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Fiscal Year Ended June 30, 2023

(In thousands) As Previously Reported

Net income $ 11,528 $ ( 1,359 ) $ 10,169

Other comprehensive income:

Net change in cumulative translation adjustment 25 — 25

Other comprehensive income 25 — 25

Comprehensive income $ 11,553 $ ( 1,359 ) $ 10,194

CONSOLIDATED BALANCE SHEETS

As of June 30, 2023

(In thousands, except share and par value amounts) As Previously Reported

Current Assets:

Cash and cash equivalents $ 22,242 $ — $ 22,242

Accounts receivable, net 101,653 ( 742 ) 100,911

Unbilled receivables 58,588 ( 1,418 ) 57,170

Inventories 33,057 371 33,428

Other current assets 22,164 — 22,164

Total current assets 237,704 ( 1,789 ) 235,915

Property, plant and equipment, net 9,452 — 9,452

Goodwill 5,112 — 5,112

Intangible assets, net 9,046 — 9,046

Deferred income taxes 86,650 430 87,080

Right-of-use assets

2,554 — 2,554

Other assets 13,978 — 13,978

Total assets $ 364,496 $ ( 1,359 ) $ 363,137

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable $ 60,141 $ — $ 60,141

Accrued expenses 24,442 — 24,442

Operating lease liabilities

Advance payments and unearned revenue 44,268 — 44,268

Other current liabilities 600 — 600

Total current liabilities 130,061 — 130,061

Unearned revenue 7,416 — 7,416

Long-term operating lease liabilities

2,140 — 2,140

Other long-term liabilities 314 — 314

Reserve for uncertain tax positions 3,975 — 3,975

Deferred income taxes 492 — 492

Total liabilities 144,398 — 144,398

Commitments and contingencies (Note 13)

Stockholders’ equity

Preferred stock

Treasury stock

( 6,147 ) — ( 6,147 )

Additional paid-in-capital 830,048 — 830,048

Accumulated deficit ( 587,914 ) ( 1,359 ) ( 589,273 )

Accumulated other comprehensive loss ( 16,004 ) — ( 16,004 )

Total stockholders’ equity 220,098 ( 1,359 ) 218,739

Total liabilities and stockholders’ equity $ 364,496 $ ( 1,359 ) $ 363,137

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Year Ended June 30, 2023

(In thousands) As Previously Reported

Operating Activities

Net income $ 11,528 $ ( 1,359 ) $ 10,169

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

Depreciation of property, plant and equipment 5,475 — 5,475

Amortization of intangible assets 704 — 704

Provision for uncollectible receivables 467 — 467

Share-based compensation 6,720 — 6,720

Deferred taxes 9,442 ( 430 ) 9,012

Inventory write-downs 2,138 — 2,138

Non-cash lease expense 639 — 639

Net loss on marketable securities 1,734 — 1,734

Other non-cash operating activities, net 67 — 67

Changes in operating assets and liabilities:

Accounts receivable ( 25,496 ) 742 ( 24,754 )

Unbilled receivables ( 13,816 ) 1,418 ( 12,398 )

Inventories ( 4,521 ) ( 371 ) ( 4,892 )

Accounts payable 16,040 — 16,040

Accrued expenses ( 4,306 ) — ( 4,306 )

Advance payments and unearned revenue 6,254 — 6,254

Income taxes payable 710 — 710

Other assets and liabilities ( 15,423 ) — ( 15,423 )

Net cash used in operating activities ( 1,644 ) — ( 1,644 )

Investing Activities

Purchases of property, plant and equipment ( 5,335 ) — ( 5,335 )

Proceeds from sale of marketable securities 9,157 — 9,157

Acquisitions, net of cash acquired ( 15,769 ) — ( 15,769 )

Net cash used in investing activities ( 11,947 ) — ( 11,947 )

Financing Activities

Proceeds from revolver 102,200 — 102,200

Repayments of revolver ( 102,200 ) — ( 102,200 )

Payments of deferred financing costs ( 753 ) — ( 753 )

Payments for taxes related to net settlement of equity awards ( 1,198 ) — ( 1,198 )

Proceeds from issuance of common stock under employee stock plans 1,270 — 1,270

Net cash used in financing activities ( 681 ) — ( 681 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 311 ) — ( 311 )

Net decrease in cash, cash equivalents and restricted cash ( 14,583 ) — ( 14,583 )

Cash, cash equivalents, and restricted cash, beginning of year 37,104 — 37,104

Cash, cash equivalents, and restricted cash, end of year $ 22,521 $ — $ 22,521

CONSOLIDATED STATEMENTS OF EQUITY

Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands) Shares $

Amount Shares $

As Previously Reported

Balance as of July 2, 2022 11,161 $ 112 195 $ ( 6,147 ) $ 823,259 $ ( 599,442 ) $ ( 16,029 ) $ 201,753

Net income — — — — — 11,528 — 11,528

Other comprehensive income — — — — — — 25 25

Issuance of common stock under employee stock plans 396 3 — — 1,267 — — 1,270

Shares withheld for taxes related to vesting of equity awards ( 39 ) — — — ( 1,198 ) — — ( 1,198 )

Share-based compensation — — — — 6,720 — — 6,720

Balance as of June 30, 2023 11,518 $ 115 195 $ ( 6,147 ) $ 830,048 $ ( 587,914 ) $ ( 16,004 ) $ 220,098

Balance as of July 2, 2022

— $ — — $ — $ — $ — $ — $ —

Net income — — — — — ( 1,359 ) — ( 1,359 )

Other comprehensive income — — — — — — — —

Issuance of common stock under employee stock plans — — — — — — — —

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

Share-based compensation — — — — — — — —

Balance as of June 30, 2023 — $ — — $ — $ — $ ( 1,359 ) $ — $ ( 1,359 )

Balance as of July 2, 2022 11,161 $ 112 195 $ ( 6,147 ) $ 823,259 $ ( 599,442 ) $ ( 16,029 ) $ 201,753

Net income — — — — — 10,169 — 10,169

Other comprehensive income — — — — — — 25 25

Issuance of common stock under employee stock plans 396 3 — — 1,267 — — 1,270

Shares withheld for taxes related to vesting of equity awards ( 39 ) — — — ( 1,198 ) — — ( 1,198 )

Share-based compensation — — — — 6,720 — — 6,720

Balance as of June 30, 2023 11,518 $ 115 195 $ ( 6,147 ) $ 830,048 $ ( 589,273 ) $ ( 16,004 ) $ 218,739

Subsequent Events

On July 2, 2024, Aviat acquired 4RF Limited (“4RF”), a New Zealand company.

Aviat purchased all of the issued and outstanding shares of 4RF in an all-cash transaction.

4RF is a leading provider of industrial wireless access solutions, including narrowband point-to-point/multi-point radios and Private LTE and 5G routers.

The acquisition of 4RF allows Aviat to expand its product offering for the global industrial wireless access markets including Private LTE/5G.

Due to the timing of the closing of the acquisition and delivery of related data, there was insufficient time to incorporate additional disclosures related to the preliminary purchase price allocation and fair value of the assets acquired and liabilities assumed.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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-K

Item 8. Financial Statements and Supplementary Data