What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2025-02-04 · 61 added, 57 removed, 122 unchanged (49% of the section changed)

20 unchanged sentences

the impact of foreign exchange and inflation;

the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships;

and assumptions underlying any of the foregoing.

19 unchanged sentences

Aviat’s technology is underpinned by more than 500 patents.

Aviat competes on the basis of total cost of ownership, microwave radio expertise and solutions for mission critical communications.

competes on the basis of total cost of ownership, microwave radio expertise and solutions for mission critical communications.

Aviat has a global presence.

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Operations Review

The market for mobile backhaul continued to be the Company’s primary addressable market segment globally in the first six months of fiscal 2025.

The market for mobile backhaul continued to be the Company’s primary addressable market segment globally in the first nine months of fiscal 2025.

In North America, the Company supported 5G and long-term evolution (“LTE”) deployments of its mobile operator customers, public safety network deployments for state and local governments, and private network implementations for utilities and other customers.

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Additionally, Aviat operates an e-commerce platform that provides low-cost services, simple experience, and fast delivery to mobile operators and private network customers.

In early 2025, new U.S.

tariffs on foreign imports were proposed and introduced.

Aviat plans to mitigate these tariffs by optimizing its sourcing and operations to minimize any cost impact.

Aviat may also implement pricing actions to offset the impact of these tariffs.

However, as disclosed above and in the “Risk Factors” section in Item 1A of its Annual Report on Form 10-K filed with the SEC on October 4, 2024, a number of factors could prevent the Company from achieving its objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that it serves.

9 unchanged sentences

(1) Africa and the Middle East, (2) Europe, and (3) Latin America and Asia Pacific.

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

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Revenue by region for the three and nine months ended March 28, 2025 and March 29, 2024 and the related changes were as follows:

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

North America $ 49,402 $ 44,400 $ 5,002 11.3 % $ 149,589 $ 149,868 $ (279) (0.2) %

3 unchanged sentences

Total revenue $ 112,640 $ 110,822 $ 1,818 1.6 % $ 319,266 $ 291,423 $ 27,843 9.6 %

Revenue in North America increased by $7.3 million during the second quarter of fiscal 2025 compared with the same period of fiscal 2024 primarily due to increased volume for private network projects.

Revenue in North America decreased by $5.3 million during the first six months of fiscal 2025 compared with the same period of fiscal 2024, primarily due to lower demand from Tier 1 mobile network operators and timing of certain private network projects, partially offset by contributions from the 4RF transaction.

Revenue in Africa and the Middle East decreased by $1.8 million during the second quarter of fiscal 2025 compared with the same period of fiscal 2024.

Revenue in Africa and the Middle East decreased by $1.3 million during the first six months of fiscal 2025 compared with the same period of fiscal 2024.

The decreases for the second quarter and the first six months of fiscal 2025 were primarily due to continued softness in the capital expenditure plans of large mobile operators in the region.

Revenue in Europe increased by $2.8 million during the second quarter of fiscal 2025 compared with the same period of fiscal 2024.

Revenue in Europe increased by $3.1 million during the first six months of fiscal 2025 compared with the same period of fiscal 2024.

The increases for the second quarter and the first six months of fiscal 2025 were primarily due to increased sales to mobile operators in the region driven by volumes from the NEC transaction.

Revenue in Latin America and Asia Pacific increased by $16.2 million during the second quarter of fiscal 2025 compared with the same period of fiscal 2024.

Revenue in Latin America and Asia Pacific increased by $29.5 million during the first six months of fiscal 2025 compared with the same period of fiscal 2024.

The increases were primarily due to contributions resulting from the NEC transaction and higher volumes of projects with mobile operators.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Revenue in North America increased by $5.0 million during the third quarter of fiscal 2025 compared with the same period of fiscal 2024 primarily due to higher private network project revenues.

Revenue in North America decreased by $0.3 million during the first nine months of fiscal 2025 compared with the same period of fiscal 2024, primarily due to lower demand from Tier 1 mobile network operators and timing of certain private network projects, partially offset by contributions from the 4RF transaction.

Revenue in Africa and the Middle East increased by $3.7 million during the third quarter of fiscal 2025 compared with the same period of fiscal 2024.

Revenue in Africa and the Middle East increased by $2.4 million during the first nine months of fiscal 2025 compared with the same period of fiscal 2024.

The increases for the third quarter and the first nine months of fiscal 2025 were primarily due to increased volumes from private networks in the Middle East.

Revenue in Europe increased by $2.9 million during the third quarter of fiscal 2025 compared with the same period of fiscal 2024.

Revenue in Europe increased by $6.0 million during the first nine months of fiscal 2025 compared with the same period of fiscal 2024.

The increases for the third quarter and the first nine months of fiscal 2025 were primarily due to increased sales to mobile operators in the region driven by volumes from the NEC Transaction.

Revenue in Latin America and Asia Pacific decreased by $9.7 million during the third quarter of fiscal 2025 compared with the same period of fiscal 2024 primarily due to timing of capital expenditure plans of mobile operators in the Asia Pacific region.

Revenue in Latin America and Asia Pacific increased by $19.8 million during the first nine months of fiscal 2025 compared with the same period of fiscal 2024 primarily due to contributions resulting from the NEC Transaction and higher volumes of projects with mobile operators.

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

Product sales $ 76,824 $ 70,844 $ 5,980 8.4 % $ 220,252 $ 195,410 $ 24,842 12.7 %

1 unchanged sentence

Total revenue $ 112,640 $ 110,822 $ 1,818 1.6 % $ 319,266 $ 291,423 $ 27,843 9.6 %

Revenue from product sales increased by 26.6% and revenue from services increased by 25.2% for the second quarter of fiscal 2025 compared with the same quarter of fiscal 2024.

Revenue from product sales and services increased by 15.1% and 12.8%, respectively for the first six months of fiscal 2025 compared with the same period of fiscal 2024.

The increases were primarily due to the factors discussed above and product sales contribution from the NEC Transaction.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Revenue from product sales increased by 8.4% and revenue from services decreased by 10.4% for the third quarter of fiscal 2025 compared with the same quarter of fiscal 2024.

Revenue from product sales and services increased by 12.7% and 3.1%, respectively for the first nine months of fiscal 2025 compared with the same period of fiscal 2024.

The changes were primarily due to the factors discussed above and product sales contribution from the NEC Transaction.

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

Revenue $ 112,640 $ 110,822 $ 1,818 1.6 % $ 319,266 $ 291,423 $ 27,843 9.6 %

4 unchanged sentences

Service margin % 38.6 % 32.5 % 38.6 % 30.4 %

Gross margin for the second quarter of fiscal 2025 increased by $4.6 million compared with the same quarter of fiscal 2024 primarily due to sales volume and changes in regions and customers.

Gross margin for the first six months of fiscal

2025 decreased by $6.8 million primarily due to changes in regions and customers and the expected near-term dilution as a result of the NEC Transaction driven from first quarter results.

Gross margin for the third quarter of fiscal 2025 increased by $3.2 million compared with the same quarter of fiscal 2024 primarily due to sales volume and changes in regions and customers and product mix.

Gross margin for the first nine months of fiscal 2025 decreased by $3.6 million primarily due to changes in regions and customers and the expected near-term dilution as a result of the NEC Transaction.

Research and Development

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

Research and development $ 7,704 $ 10,623 $ (2,919) (27.5) % $ 28,334 $ 25,441 $ 2,893 11.4 %

% of revenue 6.8 % 9.6 % 8.9 % 8.7 %

Research and development expenses increased by $1.8 million and $5.8 million for the three and six months ended December 27, 2024, respectively, primarily due to development activity related to the NEC transaction.

Research and development expenses decreased by $2.9 million compared with the same quarter of fiscal 2024 primarily due to cost management.

Research and development expenses increased by $2.9 million for the first nine months of fiscal 2025 primarily due to development activity related to the NEC Transaction.

Selling and Administrative

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

Selling and administrative $ 22,121 $ 20,198 $ 1,923 9.5 % $ 68,348 $ 61,979 $ 6,369 10.3 %

% of revenue 19.6 % 18.2 % 21.4 % 21.3 %

Selling and administrative expenses decreased by $1.3 million for the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 primarily due to lower spending and cost reduction activities.

Selling and administrative expenses increased $4.4 million for the first six months of fiscal 2025 primarily due to merger and acquisition expenses and additional costs resulting from the NEC and 4RF transactions.

Selling and administrative expenses increased by $1.9 million for the third quarter of fiscal 2025 and $6.4 million for the first nine months of fiscal 2025 primarily due to merger and acquisition expenses and additional costs resulting from the NEC and 4RF transactions.

Restructuring

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

Restructuring charges $ 177 $ (417) $ 594 (142.4) % $ 1,592 $ 2,227 $ (635) (28.5) %

In the second quarter of fiscal 2025, there were $1.4 million of restructuring charges incurred, primarily associated with reductions in workforce in certain of the Company’s operations to optimize skill sets and align cost structure.

The prior year period includes restructuring charges primarily associated with the NEC Transaction.

For the first nine months of fiscal 2025, there were $1.6 million of restructuring charges incurred, primarily associated with reductions in workforce in certain of the Company’s operations to optimize skill sets and align cost structure.

The prior year comparison period includes restructuring charges primarily associated with the NEC Transaction.

The Company’s successfully executed restructuring initiatives have enabled it to restructure specific groups to optimize skill sets and align its organizational structure to execute on strategic deliverables, in addition to aligning cost structure with the core of the business.

Interest Expense, net

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

Interest expense, net $ 1,557 $ 928 $ 629 67.8 % $ 4,252 $ 1,421 $ 2,831 199.2 %

Interest expense, net increased by $1.2 million and $2.2 million for the three and six months ended December 27, 2024, respectively, primarily due to interest expense incurred on incremental Term Loan borrowings compared to the prior year period.

Interest expense, net increased by $0.6 million and $2.8 million for the three and nine months ended March 28, 2025, respectively, primarily due to interest expense incurred on incremental Term Loan borrowings compared to the prior year period.

Other Expense, net

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Other expense (income), net $ 269 $ (637) $ 906 (142.2) % $ 979 $ 165 $ 814 493.3 %

Other expense, net increased by $0.9 million and $0.8 million for the three and six months ended December 27, 2024, respectively, primarily as a result of losses recognized on the extinguishment of debt and foreign exchange rate movement.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 27, 2024 December 29, 2023 $ Change % Change December 27, 2024 December 29, 2023 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

Other expense, net $ 3,068 $ 63 $ 3,005 4,769.8 % $ 4,047 $ 228 $ 3,819 1,675.0 %

Other expense, net increased by $3.0 million and $3.8 million for the three and nine months ended March 28, 2025, respectively, primarily as a result of foreign exchange rate movement and losses recognized on the extinguishment of debt.

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 28, 2025 March 29, 2024 $ Change % Change March 28, 2025 March 29, 2024 $ Change % Change

Income (loss) before income taxes $ 4,669 $ 4,676 $ (7) (0.1) % $ (6,603) $ 12,297 $ (18,900) (153.7) %

1 unchanged sentence

The Company estimates its annual effective tax rate at the end of each quarterly period and records the tax effect of certain discrete items in the interim period in which they occur, including changes in judgment about uncertain tax positions and deferred tax valuation allowances.

The tax benefit for the first six months of fiscal 2025 was primarily due to tax benefit resulting from year-to-date losses.

The tax expense for the first six months of fiscal 2024 was primarily attributable to tax expense related to U.S.

The tax benefit for the first nine months of fiscal 2025 was primarily due to tax benefit resulting from year-to-date losses.

The tax expense for the first nine months of fiscal 2024 was primarily attributable to tax expense related to U.S.

and profitable foreign subsidiaries.

1 unchanged sentence

Sources of Cash

As of December 27, 2024, the Company’s total cash and cash equivalents were $52.6 million.

As of March 28, 2025, the Company’s total cash and cash equivalents were $49.4 million.

Approximately $12.7 million was held in the United States.

2 unchanged sentences

Operating cash flows is presented as net (loss) income adjusted for certain non-cash items and changes in operating assets and liabilities.

Net cash (used in) provided by operating activities was $(6.4) million for the first six months of fiscal 2025, compared with $6.9 million in the prior year.

Net cash (used in) provided by operating activities was $(4.8) million for the first nine months of fiscal 2025, compared with $22.2 million in the prior year.

The $(27.0) million decrease is primarily attributable to increases in working capital and decreased earnings compared to the prior year.

Investing Activities

Net cash used in investing activities was $23.5 million for the first six months of fiscal 2025, compared to $33.5 million in the prior year.

Net cash used in investing activities was $26.3 million for the first nine months of fiscal 2025, compared to $35.0 million in the prior year.

The $8.7 million decrease is primarily due to higher acquisition payments in the prior year associated with the NEC Transaction.

1 unchanged sentence

Financing cash flows consist primarily of borrowings and repayments under the Company’s Credit Facility and proceeds from the exercise of employee stock options.

Net cash provided by financing activities was $18.6 million for the first six months of fiscal 2025, compared with $50.3 million in the prior year.

Net cash provided by financing activities was $17.6 million for the first nine months of fiscal 2025, compared with $49.3 million in the prior year.

The $(31.7) million decrease is primarily due to reduced Term Loan borrowings compared to the prior year as the prior year period included the $50.0 million of Term Loan borrowings primarily used to fund the NEC Transaction.

As of December 27, 2024, the Company’s principal sources of liquidity consisted of $52.6 million in cash and cash equivalents, $66.7 million of available credit under its Credit Facility, and future collections of receivables from customers.

In the first quarter of fiscal 2025, the Company amended its Credit Facility which increased the borrowing capacity to $75.0 million for each of the Term Loan and Revolver facilities.

The Company regularly requires letters of credit from certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce its credit and sovereign risk.

As of March 28, 2025, the Company’s principal sources of liquidity consisted of $49.4 million in cash and cash equivalents, $66.3 million of available credit under its Credit Facility, and future collections of receivables from customers.

In the second quarter of fiscal 2025, the Company amended its Credit Facility which increased the borrowing capacity to $75.0 million for each of the Term Loan and Revolver facilities.

The Company regularly requires letters of credit from certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs

in order to meet immediate liquidity requirements and to reduce its credit and sovereign risk.

Historically, the Company’s primary sources of liquidity have been cash flows from operations and credit facilities.

1 unchanged sentence

In addition, the Company believes these sources of liquidity will be sufficient to provide for its anticipated requirements and plans for cash beyond the next 12 months.

The Company borrowed and repaid $35.0 million against the Revolver during the first six months of fiscal 2025.

As of December 27, 2024, the Company had $75.0 million outstanding under its Term Loan and no borrowings outstanding under its Revolver and was in compliance with all financial covenants contained in the Credit Facility.

The Company borrowed and repaid $55.0 million against the Revolver during the first nine months of fiscal 2025.

As of March 28, 2025, the Company had $74.1 million outstanding under its Term Loan and no borrowings outstanding under its Revolver and was in compliance with all financial covenants contained in the Credit Facility.

Critical Accounting Estimates

2 unchanged sentences

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 2. Management’s Discussion and Analysis