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Item 1. Financial Statements

2025-02-04 compared with 2024-11-05 · 273 added, 154 removed, 534 unchanged (44% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

(In thousands, except per share amounts) September 27,

2024 September 29,

Three Months Ended Six Months Ended

(In thousands, except per share amounts) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

Product sales $ 82,312 $ 65,021 $ 143,428 $ 124,566

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Total operating expenses 32,916 32,938 68,272 59,243

Operating (loss) income ( 15,568 ) 4,890

Operating income (loss) 7,970 3,389 ( 7,598 ) 8,279

Interest expense, net 1,580 394 2,695 493

Other expense, net 710 802

(Loss) income before income taxes ( 17,393 ) 3,989

(Benefit from) provision for income taxes ( 5,514 ) 432

Net (loss) income $ ( 11,879 ) $ 3,557

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

Other expense (income), net 269 ( 637 ) 979 165

Income (loss) before income taxes 6,121 3,632 ( 11,272 ) 7,621

Provision for (benefit from) income taxes 1,626 1,848 ( 3,888 ) 2,280

Net income (loss) $ 4,495 $ 1,784 $ ( 7,384 ) $ 5,341

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

Basic $ 0.35 $ 0.15 $ ( 0.58 ) $ 0.45

5 unchanged sentences

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three Months Ended

(In thousands) September 27,

2024 September 29,

Net (loss) income $ ( 11,879 ) $ 3,557

Other comprehensive income:

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended Six Months Ended

(In thousands) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

Net income (loss) $ 4,495 $ 1,784 $ ( 7,384 ) $ 5,341

Other comprehensive (loss) income:

Net change in cumulative translation adjustments

Other comprehensive income 2,153 33

Comprehensive (loss) income $ ( 9,726 ) $ 3,590

( 3,416 ) 545 ( 1,263 ) 578

Other comprehensive (loss) income ( 3,416 ) 545 ( 1,263 ) 578

Comprehensive income (loss) $ 1,079 $ 2,329 $ ( 8,647 ) $ 5,919

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts) September 27,

(In thousands, except share and par value amounts) December 27,

2024 June 28,

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

Common stock, $ 0.01 par value, 300.0 million shares authorized, 12.7 million and 12.6 million shares issued and outstanding as of September 27, 2024 and June 28, 2024, respectively.

Treasury stock 0.2 million and 0.2 million shares as of September 27, 2024 and June 28, 2024, respectively

Common stock, $ 0.01 par value, 300.0 million shares authorized, 12.7 million and 12.6 million shares issued and outstanding as of December 27, 2024 and June 28, 2024, respectively.

Treasury stock 0.2 million and 0.2 million shares as of December 27, 2024 and June 28, 2024, respectively

( 6,978 ) ( 6,479 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

(In thousands) September 27,

2024 September 29,

Six Months Ended

(In thousands) December 27,

2024 December 29,

Operating Activities

8 unchanged sentences

Non-cash lease expense 749 393

Loss on extinguishment of debt 485 —

Other non-cash operating activities, net ( 49 ) 43

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Repayments of revolver ( 35,000 ) ( 33,200 )

Proceeds from term loan 75,000 50,000

Repayments of term loan ( 48,750 ) —

Payments of deferred financing costs ( 529 ) ( 79 )

Payments of deferred consideration for acquisitions ( 5,815 ) —

Payments for repurchase of common stock - treasury shares ( 499 ) ( 332 )

Payments for taxes related to net settlement of equity awards ( 886 ) ( 123 )

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Cash, cash equivalents, and restricted cash, end of period $ 53,494 $ 46,192

Supplemental disclosures of cash flow information

Non-cash investing and financing activities:

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

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended September 27, 2024

Three Months Ended December 27, 2024

Common Stock Treasury Stock Additional Paid-in Capital

1 unchanged sentence

(In thousands) Shares $

Balance as of September 27, 2024 12,676 $ 127 $ ( 6,479 ) $ 861,023 $ ( 590,392 ) $ ( 17,167 ) $ 247,112

Net income — — — — 4,495 — 4,495

Other comprehensive loss — — — — — ( 3,416 ) ( 3,416 )

Issuance of common stock under employee stock plans 50 — — 96 — — 96

Shares withheld for taxes related to vesting of equity awards ( 7 ) — — ( 175 ) — — ( 175 )

Stock repurchase ( 35 ) — ( 499 ) — — — ( 499 )

Share-based compensation — — — 1,974 — — 1,974

Balance as of December 27, 2024 12,684 $ 127 $ ( 6,978 ) $ 862,918 $ ( 585,897 ) $ ( 20,583 ) $ 249,587

Three Months Ended December 29, 2023

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands) Shares $

Balance as of September 29, 2023 11,719 $ 117 $ ( 6,147 ) $ 832,060 $ ( 585,716 ) $ ( 15,971 ) $ 224,343

Net income — — — — 1,784 — 1,784

Other comprehensive income — — — — — 545 545

Issuance of common stock under employee stock plans 77 1 — 544 — — 545

Shares withheld for taxes related to vesting of equity awards ( 1 ) — — ( 18 ) — — ( 18 )

Stock repurchase ( 11 ) — ( 332 ) — — — ( 332 )

Share-based compensation — — — 1,825 — — 1,825

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

Balance as of December 29, 2023 12,521 $ 125 $ ( 6,479 ) $ 856,735 $ ( 583,932 ) $ ( 15,426 ) $ 251,023

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Six Months Ended December 27, 2024

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands) Shares $

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

Net loss — — — — ( 7,384 ) — ( 7,384 )

Other comprehensive income — — — — — 2,153 2,153

Other comprehensive loss — — — — — ( 1,263 ) ( 1,263 )

Issuance of common stock under employee stock plans 130 1 — 95 — — 96

Shares withheld for taxes related to vesting of equity awards ( 33 ) — — ( 886 ) — — ( 886 )

Stock repurchase ( 35 ) — ( 499 ) — — — ( 499 )

Share-based compensation — — — 3,638 — — 3,638

Balance as of September 27, 2024 12,676 $ 127 $ ( 6,479 ) $ 861,023 $ ( 590,392 ) $ ( 17,167 ) $ 247,112

Three Months Ended September 29, 2023

Balance as of December 27, 2024 12,684 $ 127 $ ( 6,978 ) $ 862,918 $ ( 585,897 ) $ ( 20,583 ) $ 249,587

Six Months Ended December 29, 2023

Common Stock Treasury Stock Additional

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Shares withheld for taxes related to vesting of equity awards ( 4 ) — — ( 123 ) — — ( 123 )

Stock repurchase ( 11 ) — ( 332 ) — — — ( 332 )

Share-based compensation — — — 3,659 — — 3,659

Balance as of September 29, 2023 11,719 $ 117 $ ( 6,147 ) $ 832,060 $ ( 585,716 ) $ ( 15,971 ) $ 224,343

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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

Balance as of December 29, 2023 12,521 $ 125 $ ( 6,479 ) $ 856,735 $ ( 583,932 ) $ ( 15,426 ) $ 251,023

AVIAT NETWORKS, INC.

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

The results for the three months ended September 27, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The results for the six months ended December 27, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in Aviat’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024.

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

The three months ended September 27, 2024 and September 29, 2023 both consisted of 13 weeks.

The three months ended December 27, 2024 and December 29, 2023 both consisted of 13 weeks.

Fiscal year 2025 contains 52 weeks and will end on June 27, 2025.

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Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies as of and for the three months ended September 27, 2024, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024.

There have been no material changes in the Company’s significant accounting policies as of and for the six months ended December 27, 2024, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024.

Accounting Standards Not Yet Adopted

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

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03 (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

The ASU requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

ASU 2024-03 is effective for the Company’s annual reporting beginning in fiscal 2028 and for interim periods beginning in fiscal 2029.

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

In December 2023, the FASB ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

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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.

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

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

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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 is currently evaluating the impact of the ASU on its consolidated financial statements and disclosures.

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

The Company determined at this time that all other ASUs issued but not yet adopted are either not applicable or are expected to have a minimal impact on its financial position and results of operations.

Net (Loss) Income Per Share of Common Stock

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

Three Months Ended

(In thousands, except per share amounts) September 27,

2024 September 29,

Net (loss) income $ ( 11,879 ) $ 3,557

Net Income (Loss) Per Share of Common Stock

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

Three Months Ended Six Months Ended

(In thousands, except per share amounts) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

Net income (loss) $ 4,495 $ 1,784 $ ( 7,384 ) $ 5,341

Weighted-average shares outstanding, basic

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12,784 12,229 12,667 12,093

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

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

$ 0.35 $ 0.15 $ ( 0.58 ) $ 0.45

$ 0.35 $ 0.15 $ ( 0.58 ) $ 0.44

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

Three Months Ended

(In thousands) September 27,

2024 September 29,

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

Three Months Ended Six Months Ended

(In thousands) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

Stock options 327 348 385 304

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(In thousands)

September 27,

2024 June 28,

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

As of September 27, 2024, the Company reported $ 86.9 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 80 % is expected to be recognized as revenue in the next twelve months and the remainder thereafter.

Approximately $ 16.6 million of revenue was recognized during the three months ended September 27, 2024, which was included in advance payments and unearned revenue at June 28, 2024.

As of December 27, 2024, the Company reported $ 79.4 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 70 % is expected to be recognized as revenue in the next twelve months and the remainder thereafter.

Approximately $ 16.6 million and $ 33.2 million of revenue was recognized during the three and six months ended December 27, 2024, respectively, which was included in advance payments and unearned revenue at June 28, 2024.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $ 144.8 million at September 27, 2024 relating to our long-term field service projects.

The aggregate amount of transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $ 150.9 million at December 27, 2024 relating to our long-term field service projects.

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

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

(In thousands) September 27,

(In thousands) December 27,

2024 June 28,

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Total cash, cash equivalents, and restricted cash $ 53,494 $ 64,934

(In thousands) September 27,

(In thousands) December 27,

2024 June 28,

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

The charges incurred during the three months ended September 27, 2024 and September 29, 2023 were included in cost of product sales as follows:

Three Months Ended

The charges incurred during the three and six months ended December 27, 2024 and December 29, 2023 were included in cost of product sales as follows:

Three Months Ended Six Months Ended

(In thousands)

September 27,

2024 September 29,

2024 December 29,

2023 December 27,

2024 December 29,

Excess and obsolete inventory $ 303 $ 392 $ 613 $ 686

1 unchanged sentence

Total charges

$ 575 $ 638 $ 1,076 $ 1,185

Other Current Assets

(In thousands) September 27,

(In thousands) December 27,

2024 June 28,

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Property, Plant and Equipment, net

(In thousands) September 27,

(In thousands) December 27,

2024 June 28,

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Total property, plant and equipment, net $ 14,057 $ 9,480

Included in the total property, plant and equipment, gross were $ 4.2 million and $ 4.1 million of assets in progress which have not been placed in service as of September 27, 2024 and June 28, 2024, respectively.

Included in the total property, plant and equipment, gross were $ 7.0 million and $ 4.1 million of assets in progress which have not been placed in service as of December 27, 2024 and June 28, 2024, respectively.

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

Three Months Ended

(In thousands) September 27,

2024 September 29,

Three Months Ended Six Months Ended

(In thousands) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

Depreciation $ 1,473 $ 905 $ 2,790 $ 2,073

Accrued Expenses

(In thousands) September 27,

(In thousands) December 27,

2024 June 28,

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Project costs 6,236 14,305

Other 5,816 3,507

Warranties 3,926 2,996

Commissions 1,533 1,538

Professional fees 1,629 1,286

Commissions 1,560 1,538

Other 5,523 3,507

Total accrued expenses $ 38,163 $ 42,148

1 unchanged sentence

Changes in the warranty liability were as follows:

Three Months Ended

(In thousands) September 27,

2024 September 29,

Three Months Ended Six Months Ended

(In thousands) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

Balance as of the beginning of the period $ 3,510 $ 2,100 $ 2,996 $ 2,100

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Advance Payments and Unearned Revenue

(In thousands) September 27,

(In thousands) December 27,

2024 June 28,

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Total advance payments and unearned revenue $ 71,128 $ 58,839

Excluded from the balances above are $ 7.5 million and $ 7.4 million in long-term unearned revenue as of September 27, 2024 and June 28, 2024, respectively.

Excluded from the balances above are $ 8.3 million and $ 7.4 million in long-term unearned revenue as of December 27, 2024 and June 28, 2024, respectively.

Fair Value Measurements of Assets and Liabilities

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

The estimated fair values and valuation input levels of assets and liabilities that are measured at fair value on a recurring basis as of September 27, 2024 and June 28, 2024 were as follows:

(In thousands) September 27, 2024 June 28, 2024 Valuation Inputs

The estimated fair values and valuation input levels of assets and liabilities that are measured at fair value on a recurring basis as of December 27, 2024 and June 28, 2024 were as follows:

(In thousands) December 27, 2024 June 28, 2024 Valuation Inputs

Cash and cash equivalents:

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

As of September 27, 2024 and June 28, 2024, the money market funds were valued at $ 1.00 net asset value per share.

As of December 27, 2024 and June 28, 2024, 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.

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The Company entered into a Secured Credit Facility Agreement (the “Credit Facility”), dated May 9, 2023, amended as of November 22, 2023 and October 18, 2024, 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 Credit Facility provides for a $ 75.0 million revolving credit facility (the “Revolver”) and a $ 75.0 million Term Loan Facility (the “Term Loan”) with a maturity date of October 18, 2029.

The $ 75.0 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.

Refer to Note 16.

Subsequent Events for further information.

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 (as defined below).

Acquisitions for further information.

As of September 27, 2024, the available credit under the Revolver was $ 0.7 million, reflecting the available limit of $ 5.0 million less outstanding letters of credit of $ 4.3 million.

The Company borrowed $ 35.0 million against the Revolver during the three months ended September 27, 2024.

As of September 27, 2024, the Company had $ 48.8 million outstanding under its Term Loan and $ 35.0 million outstanding under its Revolver.

The following summarizes the Company’s outstanding long-term debt as of September 27, 2024:

As of December 27, 2024, the available credit under the Revolver was $ 66.7 million, reflecting the available limit of $ 75.0 million less outstanding letters of credit of $ 8.3 million.

The Company borrowed and repaid $ 35.0 million against the Revolver during the six months ended December 27, 2024.

The Company borrowed $ 75.0 million and repaid $ 48.8 million against the Term Loan during the six months ended December 27, 2024.

The following summarizes the Company’s outstanding long-term debt as of December 27, 2024:

(In thousands)

Revolver $ 35,000

Term loan 75,000

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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 September 27, 2024, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.50 % and 1.50 %, respectively.

The effective rate of interest on the outstanding Term Loan and Revolver borrowings as of September 27, 2024 was 7.4 % and 7.6 %, respectively.

As of December 27, 2024, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.75 % and 1.75 %, respectively.

The effective rate of interest on the outstanding Term Loan borrowings as of December 27, 2024 was 7.2 %.

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 September 27, 2024, the Company was in compliance with all financial covenants contained in the Credit Facility.

As of September 27, 2024, scheduled maturities of outstanding long-term debt are as follows:

As of December 27, 2024, the Company was in compliance with all financial covenants contained in the Credit Facility.

As of December 27, 2024, scheduled maturities of outstanding long-term debt by fiscal year are as follows:

(In thousands)

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Restructuring

The following table summarizes restructuring related activities during the three months ended September 27, 2024:

The following table summarizes restructuring related activities during the six months ended December 27, 2024:

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

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Balance as of September, 27, 2024 $ 1,638 $ — $ 1,638

As of September 27, 2024, the accrued restructuring balance of $ 1.6 million was included in other current liabilities on the unaudited condensed consolidated balance sheets.

Charges, net 1,415 — 1,415

Cash payments ( 2,403 ) — ( 2,403 )

Balance as of December, 27, 2024 $ 650 $ — $ 650

As of December 27, 2024, the accrued restructuring balance of $ 0.7 million was included in other current liabilities on the unaudited condensed consolidated balance sheets.

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

Fiscal 2025 Plans

During fiscal 2025, the Company’s Board of Directors approved restructuring plans, primarily associated with reductions in workforce in certain of the Company’s operations to optimize skill sets and align cost structure.

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

Prior Years’ Plans

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

As of September 27, 2024, $ 6.9 million remains available and Aviat may choose to suspend or discontinue the repurchase program at any time.

As of December 27, 2024, $ 6.4 million remains available and Aviat may choose to suspend or discontinue the repurchase program at any time.

Repurchased shares are recorded as treasury stock.

During the first quarter of fiscal 2025, the Company did not repurchase any shares of its common stock.

During the second quarter of fiscal 2025, the Company repurchased 34,600 shares of its common stock in the open market for an aggregate purchase price, including commissions, of $ 0.5 million.

Stock Incentive Programs

As of September 27, 2024, the Company had one stock incentive plan for its employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

As of December 27, 2024, the Company had one stock incentive plan for its employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

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

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

During the three months ended September 27, 2024, the Company granted 9,140 restricted stock units.

During the six months ended December 27, 2024, the Company granted 264,788 restricted stock units and 162,170 performance share awards.

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

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

Three Months Ended

(In thousands) September 27,

2024 September 29,

Three Months Ended Six Months Ended

(In thousands) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

By Expense Category:

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Restricted stock and performance share awards and units

1,699 1,406 3,036 2,894

Total share-based compensation expense $ 1,974 $ 1,825 $ 3,638 $ 3,659

As of September 27, 2024, there was approximately $ 1.8 million of total unrecognized compensation expense related to non-vested stock options granted which is expected to be recognized over a weighted-average period of 1.7 years.

As of September 27, 2024, there was $ 5.9 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.5 years.

As of December 27, 2024, there was approximately $ 1.5 million of total unrecognized compensation expense related to non-vested stock options granted which is expected to be recognized over a weighted-average period of 1.4 years.

As of December 27, 2024, there was $ 12.7 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 2.0 years.

Segment and Geographic Information

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

Revenue by region for the three months ended September 27, 2024 and September 29, 2023 was as follows:

Three Months Ended

(In thousands) September 27,

2024 September 29,

Revenue by region for the three and six months ended December 27, 2024 and December 29, 2023 was as follows:

Three Months Ended Six Months Ended

(In thousands) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

North America

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During interim periods, tax expense or benefit are accrued for jurisdictions that are anticipated to be profitable for fiscal 2025.

The determination of income taxes for the three months ended September 27, 2024 and September 29, 2023 was based on the Company’s estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

The tax benefit for the three months ended September 27, 2024 was primarily due to tax benefit resulting from year-to-date losses.

The tax expense for the three months ended September 29, 2023 was primarily due to tax expense related to U.S.

The determination of income taxes for the six months ended December 27, 2024 and December 29, 2023 was based on the Company’s estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

The tax benefit for the six months ended December 27, 2024 was primarily due to tax benefit resulting from year-to-date losses.

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

and profitable foreign subsidiaries.

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

Such interest expense was not material for the three months ended September 27, 2024 and September 29, 2023.

On March 11, 2021, the US enacted the American Rescue Plan Act of 2021 (“ARPA”) which expands Section 162(m) to cover the next five most highly compensated employees for the taxable year, in addition to the “covered employees” effective for taxable years beginning after December 31, 2026.

Such interest expense was not material for the six months ended December 27, 2024 and December 29, 2023.

On March 11, 2021, the U.S.

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

The Company will continue to examine the elements of the ARPA and the impact it may have on future business.

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The acquisition of 4RF allows Aviat to expand its product offering for the global industrial wireless access markets including Private LTE/5G.

The Company is in the process of determining the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed.

The preliminary estimated fair value of the assets acquired and liabilities assumed consisted of working capital of $ 5.6 million, other assets and liabilities of $ 1.6 million, intangible assets of $ 8.5 million, and goodwill of $ 2.5 million.

The 4RF acquisition was accounted for as a business combination using the acquisition method of accounting.

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

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

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

(In thousands)

Cash and cash equivalents $ 1,215

Accounts receivable, net 2,575

Inventories 6,861

Property, plant and equipment, net 235

Identifiable finite-lived intangible assets:

Customer relationships 7,300

Technology 2,100

Trade names 300

Other assets 3,350

Accounts payable ( 5,104 )

Advance payments and unearned revenue ( 323 )

Other liabilities ( 2,134 )

Goodwill 2,990

Net assets acquired $ 19,365

The preliminary purchase price allocation has been updated for certain measurement period adjustments based on revised estimates of fair value, which primarily resulted in a $ 2.0 million decrease in inventories, a $ 1.2 million increase in identifiable finite-lived intangible assets acquired and a $ 0.5 million increase to goodwill.

The preliminary purchase price allocation is subject to adjustment based on the Company obtaining final independent third-party valuations and determining fair value and final allocations of purchase price to the identifiable assets acquired and liabilities assumed.

The goodwill from this acquisition is non-deductible for tax purposes.

7 unchanged sentences

The fair value of the shares issued was determined based on the closing market price of the Company’s common stock on the Closing Date.

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

As of September 27, 2024, the Company recorded accruals of approximately $ 19.6 million in estimated additional cash consideration, which is included in other current liabilities on the unaudited condensed 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 second quarter of fiscal 2025.

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

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

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

Credit Facility and Debt for further information.

In the second quarter of fiscal 2025, the Company transferred consideration of $ 5.8 million to settle a portion of the post-closing working capital adjustment.

As of December 27, 2024, the Company recorded accruals of approximately $ 13.2 million in estimated additional cash consideration, which is included in other current liabilities on the unaudited condensed consolidated balance sheets.

The additional consideration is primarily related to the settlement of the remaining post-closing working capital adjustment.

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 Company has obtained final independent third-party valuations of the 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.

2 unchanged sentences

The goodwill from this acquisition is expected to be fully deductible for tax purposes.

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

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

(In thousands)

11 unchanged sentences

Net assets acquired $ 73,520

The preliminary purchase price allocation has been updated for certain measurement period adjustments based on revised estimates of fair value, which primarily resulted in a $ 6.8 million decrease in accounts receivables, a $ 4.9 million decrease in inventories, a $ 6.8 million increase in identifiable finite-lived intangible assets acquired and a $ 4.9 million increase to goodwill.

The preliminary purchase price allocation is subject to adjustment based on the Company obtaining final independent third-party valuations, determining fair value and 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 income associated with the NEC Transaction included in the consolidated statements of operations for the three months ended September 27, 2024 were $ 25.0 million and $ 1.0 million, respectively.

The final purchase price allocation has been updated for certain measurement period adjustments based on revised estimates of fair value, which primarily resulted in a $ 3.1 million increase in other liabilities and a $ 2.5 million increase to goodwill.

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

Three Months Ended Six Months Ended

2023 December 29,

Revenue $ 129,812 $ 265,514

Net income 7,153 12,810

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

Commitments and Contingencies

2 unchanged sentences

Because these agreements do not specify fixed or minimum quantities, do not specify minimum or variable price provisions, and do not specify the approximate timing of the transaction, and 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 September 27, 2024, the Company had outstanding purchase obligations with its suppliers or contract manufacturers of $ 72.0 million.

As of December 27, 2024, the Company had outstanding purchase obligations with its suppliers or contract manufacturers of $ 60.6 million.

In addition, the Company had purchase obligations of approximately $ 5.9 million associated with software as a service and software maintenance support.

2 unchanged sentences

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

As of September 27, 2024, the Company had no guarantees applicable to its debt arrangements.

As of December 27, 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 September 27, 2024, the Company had commercial commitments outstanding of $ 19.7 million, that were not recorded on the unaudited condensed consolidated balance sheets.

The Company does not believe, based on historical experience and information currently

available, that it is probable that any significant amounts will be required to be paid on these performance guarantees in the future.

As of December 27, 2024, the Company had commercial commitments outstanding of $ 23.3 million, that were not recorded on the unaudited condensed consolidated balance sheets.

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

The following table presents details of the Company’s commercial commitments:

(In thousands)

September 27,

Letters of credit $ 8,254

1 unchanged sentence

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 September 27, 2024, the Company has not received any notice that any customer is subject to an infringement claim arising from the use of its products;

As of December 27, 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 September 27, 2024, the Company had not recorded any liabilities related to these indemnifications.

indemnification provisions.

As of December 27, 2024, the Company had not recorded any liabilities related to these indemnifications.

Legal Proceedings

19 unchanged sentences

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 September 27, 2024.

No subsequent hearing date has been scheduled as of December 27, 2024.

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

10 unchanged sentences

(In thousands)

September 27,

2024 June 28,

Goodwill $ 18,329 $ 8,217

The $ 6.9 million increase for the three months ended September 27, 2024 is associated with the preliminary purchase price allocations for the 4RF acquisition and the NEC Transaction.

The $ 10.1 million increase for the six months ended December 27, 2024 is associated with the purchase price allocations for the 4RF acquisition and the NEC Transaction.

Refer to Note 11.

3 unchanged sentences

(In thousands except useful life)

Useful life in Years September 27,

Useful life in Years December 27,

2024 June 28,

8 unchanged sentences

Total net intangible assets $ 28,177 $ 13,644

Amortization of finite-lived intangibles for the three months ended September 27, 2024 was $ 0.5 million and is included in selling and administrative expenses.

There were no impairment charges recorded for the three months ended September 27, 2024.

As of September 27, 2024, the estimated future amortization expense of finite-lived intangible assets is as follows (in thousands):

Amortization of finite-lived intangibles for the three and six months ended December 27, 2024 was $ 0.8 million and $ 1.3 million, respectively, and is included in selling and administrative expenses.

There were no impairment charges recorded for the three and six months ended December 27, 2024.

As of December 27, 2024, the estimated future amortization expense of finite-lived intangible assets is as follows (in thousands):

Remainder of 2025 $ 1,438

8 unchanged sentences

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 September 27, 2024, NEC held approximately 5.8 % of the Company’s outstanding common stock.

Pursuant to the Purchase Agreement, NEC had 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.

NEC’s nominee for director was elected to the Company’s Board of Directors at the Company’s 2024 Annual Meeting of Stockholders held in November 2024.

As of December 27, 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.

6 unchanged sentences

The licensing agreements are royalty-free and perpetual.

A summary of the related party activity between the Company and NEC during the three months ended September 27, 2024 is as follows:

(In thousands)

A summary of the related party activity between the Company and NEC is as follows:

Three Months Ended Six Months Ended

(In thousands) December 27,

2024 December 29,

2023 December 27,

2024 December 29,

Transition services received $ 1,150 $ 1,084 $ 1,895 $ 1,084

1 unchanged sentence

Purchase of inventories 15,046 — 23,339 —

As of September 27, 2024, the Company’s outstanding related party balances with NEC included in the unaudited condensed consolidated balance sheets are as follows:

As of December 27, 2024, the Company’s outstanding related party balances with NEC included in the unaudited condensed consolidated balance sheets are as follows:

(In thousands)

9 unchanged sentences

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.

The Company has revised the prior period financial statements and related disclosures for the first quarter of fiscal 2024 to correct the errors.

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 three months ended September 29, 2023 is provided below.

The Company has revised the prior period financial statements and related disclosures for the second quarter of fiscal 2024 to correct the errors.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Three Months Ended September 29, 2023

Three Months Ended December 29, 2023

Six Months Ended December 29, 2023

(In thousands, except per share amounts) As Previously Reported

As Previously Reported

Product sales $ 66,392 $ ( 1,371 ) $ 65,021 $ 125,937 $ ( 1,371 ) $ 124,566

Services 28,644 27 28,671 56,665 ( 630 ) 56,035

Total revenues 95,036 ( 1,344 ) 93,692 182,602 ( 2,001 ) 180,601

Cost of revenues:

Product sales 37,671 ( 778 ) 36,893 73,984 ( 778 ) 73,206

Services 20,535 ( 63 ) 20,472 39,936 ( 63 ) 39,873

Total cost of revenues 58,206 ( 841 ) 57,365 113,920 ( 841 ) 113,079

Gross margin 36,830 ( 503 ) 36,327 68,682 ( 1,160 ) 67,522

Operating expenses:

Selling and administrative 21,442 1,102 22,544 40,679 1,102 41,781

Operating income 4,994 ( 1,605 ) 3,389 10,541 ( 2,262 ) 8,279

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Three Months Ended September 29, 2023

Three Months Ended December 29, 2023

Six Months Ended December 29, 2023

(In thousands) As Previously Reported

As Previously Reported

Net income $ 2,890 $ ( 1,106 ) $ 1,784 $ 6,895 $ ( 1,554 ) $ 5,341

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Three Months Ended September 29, 2023

Six Months Ended December 29, 2023

(In thousands) As Previously Reported

1 unchanged sentence

Net income $ 6,895 $ ( 1,554 ) $ 5,341

Adjustments to reconcile net income to net cash provided by operating activities:

Deferred taxes 605 ( 708 ) ( 103 )

Accounts receivable 3,063 631 3,694

Unbilled receivables ( 18,772 ) 1,370 ( 17,402 )

Inventories 852 ( 848 ) 4

Accrued expenses 5,171 7 5,178

Other assets and liabilities ( 3,907 ) 1,102 ( 2,805 )

Net cash provided by operating activities $ 6,909 $ — $ 6,909

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)

Three Months Ended September 29, 2023

Three Months Ended December 29, 2023

Accumulated Deficit Total Equity

1 unchanged sentence

As Previously Reported

Balance as of June 30, 2023

Balance as of September 29, 2023

$ ( 583,909 ) $ 226,150

Net income 2,890 2,890

Balance as of December 29, 2023

$ ( 581,019 ) $ 253,936

Balance as of September 29, 2023

$ ( 1,807 ) $ ( 1,807 )

Net income ( 1,106 ) ( 1,106 )

Balance as of December 29, 2023

$ ( 2,913 ) $ ( 2,913 )

Balance as of September 29, 2023

$ ( 585,716 ) $ 224,343

Net income 1,784 1,784

Balance as of December 29, 2023

$ ( 583,932 ) $ 251,023

Six Months Ended December 29, 2023

Accumulated Deficit Total Equity

(In thousands)

As Previously Reported

Balance as of June 30, 2023

1 unchanged sentence

Net income 6,895 6,895

Balance as of September 29, 2023

Balance as of December 29, 2023

$ ( 581,019 ) $ 253,936

2 unchanged sentences

Net income ( 1,554 ) ( 1,554 )

Balance as of September 29, 2023

Balance as of December 29, 2023

$ ( 2,913 ) $ ( 2,913 )

Subsequent Events

Credit Facility Amendment

On October 18, 2024, the Company entered into a Second Amendment to Credit Agreement (the “Credit Facility Amendment”), 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 Amendment amends and modifies that certain Credit Facility dated May 9, 2023.

The Credit Facility Amendment provided for changes and modifications to the Credit Facility, which include, among other things, (i) changes to certain payment term mechanics, (ii) a commitment to make term loans in the aggregate principal amount of $ 75.0 million for the purpose of refinancing the Term Loan currently outstanding under the Credit Facility, and (iii) an increase in the Revolver to $ 75.0 million in the aggregate.

Refer to Note 6.

Credit Facility and Debt for further information.

Balance as of June 30, 2023

$ ( 589,273 ) $ 218,739

Net income 5,341 5,341

Balance as of December 29, 2023

$ ( 583,932 ) $ 251,023

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

What changed 10-Q

Item 1. Financial Statements