What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-09-10 compared with 2024-10-04 · 56 added, 52 removed, 254 unchanged (30% of the section changed)

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MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s consolidated financial statements and accompanying notes.

In the discussion herein, the fiscal years ended June 28, 2024, June 30, 2023, and July 1, 2022 are referred to as “fiscal 2024”, “fiscal 2023” and “fiscal 2022”, respectively.

In the discussion herein, the fiscal years ended June 27, 2025, June 28, 2024, and June 30, 2023, are referred to as “fiscal 2025”, “fiscal 2024” and “fiscal 2023”, respectively.

Aviat’s fiscal year ends on the Friday nearest to June 30.

For a comparison of the results of operations for fiscal 2023 and 2022, refer to Aviat’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023, filed with the SEC on August 30, 2023.

For a comparison of the results of operations for fiscal 2024 and 2023, refer to Aviat’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024, filed with the SEC on October 4, 2024.

Aviat is a global supplier of microwave networking and access networking solutions, backed by an extensive suite of professional services and support.

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Aviat’s technology is underpinned by more than 400 patents.

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

Aviat competes on the basis of Total Cost of Ownership (“TCO”), microwave radio expertise and solutions for mission critical communications.

On July 2, 2024, the Company acquired 4RF Limited (“4RF”), a New Zealand company, Aviat purchased all of the issued and outstanding shares of 4RF in an all-cash transaction for $18.2 million, net of $1.2 million cash acquired.

4F 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.

Acquisitions of the Notes to the consolidated financial statements in this Annual Report on Form 10-K (the “Notes”) for further information.

NEC’s Wireless Transport Business

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Refer to Note 12.

Acquisitions of the Notes to the consolidated financial statements in this Annual Report on Form 10-K (the “Notes”) for further information.

Acquisitions of the Notes to the consolidated financial statements in this Annual Report on Form 10-K for further information.

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 Company common stock.

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

The Company estimates additional cash consideration of approximately $19.9 million will be transferred to NEC in the first half of fiscal 2025, primarily related to settlement of the post-closing working capital adjustment.

In fiscal 2025, the Company transferred consideration of $18.6 million to settle the post-closing working capital adjustment.

The Company funded the cash portion of the NEC Transaction with Term Loan borrowings under its Credit Facility (as defined below).

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Aviat’s position continues to be to support its customers for 5G and LTE readiness and ensure that its technology roadmap is well aligned with evolving market requirements.

Aviat’s strength in turnkey and after-sale support

services is a differentiating factor that wins business for the Company and enables it to expand its business with existing customers.

Aviat’s strength in turnkey and after-sale support services is a differentiating factor that wins business for the Company and enables it to expand its business with existing customers.

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

In 2025, new U.S.

tariffs on foreign imports were proposed, and in certain cases implemented.

In response, Aviat implemented mitigation strategies by optimizing its sourcing and operations to minimize the effects and took pricing actions to offset the impact of these tariffs.

However, as disclosed in the “Risk Factors” section in Item 1A of this Annual Report on Form 10-K, 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.

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 in its previously issued consolidated 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.

The Company has revised the prior period financial statements for fiscal 2024 and fiscal 2023 to correct the errors.

The revisions ensure comparability across all periods presented herein.

Refer to Note 16.

Revisions to Prior Period Consolidated Financial Statements of the Notes for further information.

Fiscal 2025 Compared to Fiscal 2024

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Total Revenue $ 434,606 $ 408,083 $ 26,523 6.5 %

The Company achieved revenue growth of 18.5% in fiscal 2024 primarily driven by contributions from the NEC Transaction and increased private network and mobile 5G operator demand.

Contributions from the NEC Transaction totaled $54.9 million for the period from December 2023 to June 2024.

Key revenue growth areas include 44% growth in software sales, 359% growth in Access LTE/5G, 36% growth in Managed Services and an increase in sales through the Aviat Store of 21%.

Revenue in North America increased by $5.4 million in fiscal 2024 primarily due to private network and mobile 5G operator demand.

Services revenue in North America remained flat year-over-year as significant projects ended in fiscal 2024.

Revenue in Africa and the Middle East decreased by $(10.8) million in fiscal 2024 primarily due to cyclical softness in the capital expenditure plans of large mobile operators in the region and currency impacts from locally provided services.

The Middle East as a sub-region increased by $3.3 million primarily due to contributions from the NEC Transaction of $2.5 million.

Revenue in Europe increased by $5.8 million in fiscal 2024 primarily due to increased sales to mobile operators in the region.

The NEC Transaction contributed $5.6 million in sales in Europe.

Revenue in Latin America and Asia Pacific increased by $63.2 million in fiscal 2024 primarily due to contributions from the NEC Transaction totaling $44.6 million and higher volumes of projects with mobile operators, including organic volume growth of $17.6 million in Asia Pacific compared to the prior year.

The Company achieved revenue growth of 6.5% in fiscal 2025 primarily driven by contributions from the NEC Transaction and the 4RF acquisition, and 21% growth in managed services driven by increased demand on a larger install base.

This was partially offset by lower demand for software offerings and equipment, which both decreased 3%.

During fiscal 2025, contributions from the NEC Transaction and 4RF acquisition totaled $126.8 million and $25.3 million, respectively.

Revenue in North America increased by $1.5 million in fiscal 2025 primarily due to contributions of the 4RF acquisition of $18.8 million, partially offset by lower mobile operator demand, which decreased $17 million.

Revenue in Africa and the Middle East increased by $0.5 million in fiscal 2025 primarily due to increased demand of managed services and software offerings on a larger install base, which increased 36% and 42%, respectively, partially offset by a 12% decrease in equipment sales.

Revenue in Europe increased by $7.1 million in fiscal 2025 primarily due to increased equipment sales to mobile operators in the region.

Revenue in Latin America and Asia Pacific increased by $17.3 million in fiscal 2025 primarily due to higher demand for Pasolink projects and services increasing 37%, higher demand for software which increased 13%, and contributions from the 4RF acquisition of $5.4 million, partially offset by lower equipment sales to mobile operators.

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

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Service margin % 40.7 % 31.6 %

Gross margin for fiscal 2024 increased by $22.4 million compared with fiscal 2023 primarily due to the revenue growth described previously.

Gross margin as a percentage of revenue was flat compared to the prior year as a result of the expected near term dilution effect of the NEC Transaction, offsetting margin expansion in the core Aviat business compared to the prior year driven by favorable customer mix and higher software sales compared to fiscal 2023.

Gross margin for fiscal 2025 decreased by $(5.3) million, while gross margin as a percentage of revenue reduced by 3.4 percentage points due to higher volumes on lower margin sales.

Research and Development Expenses

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% of revenue 8.2 % 8.9 %

Research and development expenses increased by $11.5 million in fiscal 2024 primarily due to increased product development activities and additional costs resulting from the NEC Transaction.

The NEC Transaction contributed $7.2 million of the increase compared to the prior year.

Research and development expenses decreased by $(0.7) million in fiscal 2025 primarily due to synergies achieved leading to cost optimization from the NEC Transaction.

Selling and Administrative Expenses

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% of revenue 20.6 % 20.8 %

Selling and administrative expenses increased by $15.2 million in fiscal 2024 primarily due to merger and acquisition expenses and additional costs resulting from the NEC Transaction.

Selling and administrative expenses increased by $4.4 million in fiscal 2025 primarily due to merger and acquisition expenses and additional costs resulting from the NEC Transaction and 4RF acquisition.

Restructuring Charges

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% of revenue 0.8 % 0.9 %

During fiscal 2024 restructuring charges were $3.9 million, an increase of $0.9 million compared to fiscal 2023, primarily related to restructuring activities associated with the NEC Transaction and reductions in workforce in certain of the Company’s operations.

The prior year includes non-recurring restructuring charges primarily associated with the Redline acquisition completed in the first quarter of fiscal 2023.

During fiscal 2025 restructuring charges were $3.6 million, a decrease of $(0.3) million compared to fiscal 2024.

Fiscal 2025 restructuring activities were 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 success in restructuring initiatives has 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 business.

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Interest expense, net $ 6,058 $ 2,337 $ 3,721 159.2 %

Interest expense, net increased by $1.8 million in fiscal 2024 primarily due to interest expense incurred on the Term Loan borrowings used to fund the NEC Transaction in the second quarter of fiscal 2024.

Interest expense, net increased by $3.7 million in fiscal 2025 primarily due to interest expense incurred on incremental Term Loan borrowings.

Other Expense, Net

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Other expense, net $ 941 $ 158 $ 783 495.6 %

Other expense, net decreased by $(2.6) million in fiscal 2024 primarily due to non-recurring losses of $1.7 million recognized on the sale of marketable securities included in the prior year.

Other expense, net increased by $0.8 million in fiscal 2025 primarily as a result of foreign exchange rate movement.

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

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Tax expense in fiscal 2025 was primarily attributable to tax expense for the U.S.

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

entity, profitable foreign subsidiaries, and withholding taxes, partially offset by a Canada valuation allowance release.

Tax expense in fiscal 2024 was primarily attributable to tax expense related to U.S.

and profitable foreign subsidiaries, including deferred tax expense associated with the acquisition of Redline (as defined above) in July 2022 and the subsequent restructuring and integration impact.

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

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted.

We continue to analyze the OBBBA and at this time do not expect a material effect on our consolidated financial statements.

Fiscal 2024 Compared to Fiscal 2023

For a comparison of the results of operations for fiscal 2024 and 2023, refer to “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Aviat’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023, filed with the SEC on August 30, 2023.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Aviat’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024, filed with the SEC on October 4, 2024.

Liquidity, Capital Resources and Financial Strategies

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

Net cash provided by (used in) operating activities was $30.5 million for fiscal 2024, compared with $(1.6) million in the prior year.

The $32.2 million increase is primarily attributable to increased net income prior to non-cash adjustments and improvements in the net changes in operating assets and liabilities compared to the prior year.

Net cash provided by operating activities was $5.7 million for fiscal 2025, compared with $30.5 million in the prior year.

The $(24.8) million decrease is primarily attributable to decreased net income prior to non-cash adjustments and overall decreases in the net changes in operating assets and liabilities compared to the prior year.

Net changes in operating assets and liabilities resulted in $(16.8) million of cash used in operating activities for fiscal 2025, compared to $(2.5) million in fiscal 2024.

The $36.3 million decrease compared to the prior year is primarily attributable to decreases in inventory on higher sales volume, increases in accounts payable and accrued expenses due to the timing of payments, and non-recurring increases in contract manufacturing and other prepaid assets included in the prior year comparison period.

These improvements were partially offset by net increases in accounts receivable and unbilled costs as a result of the timing of sales, billing activities and cash collections in the current year.

The $(14.3) million increase compared to the prior year is primarily attributable to increases in inventory as well as an increase in accounts receivable which is primarily driven by increased sales in the year and timing of receiving payments.

These impacts were partially offset by an increase in accounts payable due to purchasing of increased inventory as well as the timing of payments as compared to the prior year.

Investing Activities

Net cash used in investing activities was $28.5 million for fiscal 2025, compared to $35.2 million in the prior year.

The $23.3 million increase is primarily due to payments of the cash consideration associated with the NEC Transaction of $32.2 million, partially offset by non-recurring activity included in the prior year related to proceeds received on the sale of marketable securities of $9.2 million.

The $6.7 million decrease is driven by prior year cash paid for the NEC Transaction of $32.2 million compared to current year net cash paid for the 4RF acquisition of $18.2 million.

This is partially offset by an increase in purchases of property, plant, and equipment of $10.3 million compared to the prior year.

Financing Activities

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 (used in) financing activities was $48.7 million for fiscal 2024, compared with $(0.7) million in the prior year.

The $49.4 million increase is primarily due to the $50.0 million of Term Loan borrowings primarily used to settle the cash portion of the consideration associated with the NEC Transaction.

Net cash provided by financing activities was $18.7 million for fiscal 2025, compared with $48.7 million in the prior year.

The $(30.0) million decrease is primarily due to payment of deferred consideration of $18.6 million related to the NEC acquisition and repayment of $50.6 million in the current year on Term Loan borrowings compared to $1.3 million in the prior year.

The decrease is partially offset by increased net borrowings of $15.0 million on the Revolver (as defined below) in the current year.

As of June 27, 2025, the Company’s sources of liquidity consisted of $59.7 million in cash and cash equivalents, $51.3 million of available credit under its Credit Facility, and future collections of receivables from customers.

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Available Credit Facility, Borrowings and Repayment of Debt

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 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 $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.

On August 28, 2025, the Company entered into an amendment under the Credit Facility to increase the Term Loan and Revolver commitments by $20 million for each instrument.

Refer to Note 7.

Credit Facility and Debt of the Notes for further information.

Credit Facility and Debt and Note 16.

Subsequent Events of the Notes 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.

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As of June 27, 2025, the available credit under the Revolver was $51.3 million, reflecting the available limit of $60.0 million less outstanding letters of credit of $8.7 million.

The Company borrowed 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 Company borrowed $95.0 million and repaid $80.0 million against the Revolver in fiscal 2025.

The Company borrowed $75.0 million and repaid $50.6 million against the Term Loan in fiscal 2025.

As of June 27, 2025, the Company had $73.1 million outstanding under its Term Loan and $15.0 million borrowings under its Revolver.

Outstanding borrowings under the Credit Facility bear interest at either:

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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.

The Credit Facility also requires that the Company maintain a maximum leverage ratio of 3.00 times EBITDA, with a step-down to 2.75 times EBITDA after four full quarters, and 2.50 times EBITDA after eight full quarters.

The Credit Facility also requires that the Company maintain a maximum leverage ratio of 3.00 times Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), with a step-down to 2.75 times EBITDA after four full quarters, and 2.50 times EBITDA after eight full quarters.

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.

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Exposure on Borrowings

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

As of June 27, 2025, the Company had $73.1 million outstanding under its Term Loan and $15.0 million outstanding under its Revolver.

Refer to Note 7 Credit Facility and Debt of the Notes for further information.

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The Company’s consolidated financial statements are prepared in accordance with U.S.

Generally Accepted Accounting Principles ("GAAP").

These accounting principles require us to make certain estimates, judgments and assumptions.

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These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which the circumstances that gave rise to the revision become known to us.

As of June 27, 2025, favorable and unfavorable changes in contract estimates are not considered material for each period presented.

We perform ongoing profitability analysis of our service contracts accounted for under this method to determine whether the latest estimates of revenues, costs, and profits require updating.

In rare circumstances if these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately.

As of June 27, 2025, contract losses recognized are not considered material during each period presented and there are no material loss contracts for each period presented.

Inventory Valuation and Provisions for Excess and Obsolete Losses

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We record 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.

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.

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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 7. Management’s Discussion and Analysis