What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-04 compared with 2025-05-06 · 60 added, 76 removed, 107 unchanged (56% of the section changed)

28 unchanged sentences

See “Item 1A.

Risk Factors” in the Company’s fiscal 2024 Annual Report on Form 10-K filed with the SEC on October 4, 2024 for more information regarding factors that may cause its results to differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Risk Factors” in the Company’s fiscal 2025 Annual Report on Form 10-K filed with the SEC on September 10, 2025 for more information regarding factors that may cause its results to differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q.

You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only as of the date of the filing of this Quarterly Report on Form 10-Q.

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NEC’s Wireless Transport Business

On November 30, 2023, the Company completed the acquisition of NEC Corporation’s (“NEC”) wireless transport business (the “NEC Transaction”).

On May 9, 2023, the Company entered into a Master Sale of Business Agreement (as amended on November 30, 2023) with NEC Corporation (“NEC”), to acquire NEC’s wireless transport business (the “NEC Transaction”).

The Company completed the NEC Transaction on November 30, 2023.

Prior to the acquisition date, NEC was a leader in wireless backhaul networks with an extensive installed base of their Pasolink series products.

The completion of the NEC Transaction increases the scale of Aviat, enhances the Company’s product portfolio with a greater capability to innovate, and creates a more diversified business.

Refer to Note 11.

Acquisitions of the Notes for further information.

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

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.

The Company estimates additional cash consideration of approximately $13.2 million will be transferred to NEC, primarily related to settlement of the remaining 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.

Refer to Note 6.

Credit Facility and Debt of the Notes for further information.

Operations Review

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

The market for mobile backhaul continued to be the Company’s primary addressable market segment globally in the first three months of fiscal 2026.

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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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.

Revisions to Prior Period Consolidated Financial Statements

Subsequent to the third quarter of fiscal 2024, the Company identified certain errors in the quarterly financial statements for fiscal 2024.

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 to correct the errors.

The revisions ensure comparability across all periods presented herein.

Refer to Note 1.

The Company and Basis of Presentation and Note 15.

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

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

Aviat has and may continue to 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 September 10, 2025, 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.

The Company manages its sales activities primarily on a geographic basis in North America and three international geographic regions:

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

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

Revenue by region for the three months ended September 26, 2025 and September 27, 2024 and the related changes were as follows:

Three Months Ended

(In thousands, except percentages) September 26, 2025 September 27, 2024 $ Change % Change

North America $ 52,647 $ 42,225 $ 10,422 24.7 %

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Total revenue $ 107,320 $ 88,429 $ 18,891 21.4 %

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

Revenue in North America increased by $10.4 million during the first quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to increases in demand for product and services, of 54% and 15%, respectively, across mobile network operators and private network customers.

This was partially offset by lower demand for software offerings decreasing by 15%.

Revenue in Africa and the Middle East increased by $2.3 million during the first quarter of fiscal 2026 compared with the same period of fiscal 2025.

This was primarily due to increases in demand for services and products of 81% and 14%, respectively across mobile network operators and private network customers in Africa.

This was partially offset by lower demand for software offerings by 17%.

Revenue in Europe increased by $2.0 million during the first quarter of fiscal 2026 compared with the same period of fiscal 2025.

The increases were primarily due to increased demand for software offerings of 147% and higher product volumes across private network customers of 76%, partially offset by a 57% decrease in services revenue due to project timing.

Revenue in Latin America and Asia Pacific increased by $4.2 million during the first quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to higher sales volumes of software offerings and an increase in demand for services of 289% and 20%, respectively, partially offset by a decrease of 34% on equipment sales.

Three Months Ended

(In thousands, except percentages) September 26, 2025 September 27, 2024 $ Change % Change

Product sales $ 75,084 $ 61,116 $ 13,968 22.9 %

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Total revenue $ 107,320 $ 88,429 $ 18,891 21.4 %

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 from product sales increased by 22.9% and revenue from services increased by 18.0% for the first quarter of fiscal 2026 compared with the same quarter of fiscal 2025.

The changes were primarily due to the factors discussed above.

Three Months Ended

(In thousands, except percentages) September 26, 2025 September 27, 2024 $ Change % Change

Revenue $ 107,320 $ 88,429 $ 18,891 21.4 %

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Service margin % 41.2 % 39.8 %

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.

Gross margin for the first quarter of fiscal 2026 increased by $15.9 million compared with the same quarter of fiscal 2025 primarily due to higher sales volumes on higher margin products, specifically software offerings.

Research and Development

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

Three Months Ended

(In thousands, except percentages) September 26, 2025 September 27, 2024 $ Change % Change

Research and development $ 7,098 $ 10,408 $ (3,310) (31.8) %

% of revenue 6.6 % 11.8 %

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.

Research and development expenses decreased by $3.3 million compared with the same quarter of fiscal 2025 primarily due to cost management initiatives and synergies related to acquisitions.

Selling and Administrative

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

Three Months Ended

(In thousands, except percentages) September 26, 2025 September 27, 2024 $ Change % Change

Selling and administrative $ 23,376 $ 24,948 $ (1,572) (6.3) %

% of revenue 21.8 % 28.2 %

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 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) %

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.

Selling and administrative expenses decreased by $1.6 million for the first quarter of fiscal 2026 compared with the same quarter of fiscal 2025 primarily due to cost management initiatives.

Interest Expense, net

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

Three Months Ended

(In thousands, except percentages) September 26, 2025 September 27, 2024 $ Change % Change

Interest expense, net $ 1,712 $ 1,115 $ 597 53.5 %

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.

Interest expense, net increased by $0.6 million for the first quarter of fiscal 2026 compared with the same quarter of fiscal 2025 primarily due to interest expense incurred on incremental Term Loan borrowings compared to the prior year.

Other Expense, net

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

Three Months Ended

(In thousands, except percentages) September 26, 2025 September 27, 2024 $ Change % Change

Other expense, net $ 973 $ 710 $ 263 37.0 %

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

Other expense, net increased by $0.3 million for the first quarter of fiscal 2026 compared with the same quarter of fiscal 2025, primarily as a result of foreign exchange rate movement.

Three Months Ended

(In thousands, except percentages) September 26, 2025 September 27, 2024 $ Change % Change

Income (loss) before income taxes $ 2,504 $ (17,393) $ 19,897 (114.4) %

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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 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.

The tax benefit for the first three months of fiscal 2026 was primarily due to tax benefit resulting from year-to-date losses.

The tax expense for the first three months of fiscal 2025 was primarily attributable to tax expense related to U.S.

and profitable foreign subsidiaries.

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Sources of Cash

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

As of September 26, 2025, the Company’s total cash and cash equivalents were $64.8 million.

Approximately $22.7 million was held in the United States.

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Operating Activities

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 $(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.

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

Net cash used in operating activities was $(11.7) million for the first three months of fiscal 2026, compared with $(27.2) million in the prior year.

The $15.4 million increase is primarily attributable to increases in net income and deferred taxes compared to the prior year.

Investing Activities

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.

Net cash used in investing activities was $1.7 million for the first three months of fiscal 2026, compared to $21.2 million in the prior year.

The $19.4 million decrease is primarily due to prior year acquisition payments associated with the NEC Transaction.

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 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 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.

Net cash provided by financing activities was $18.5 million for the first three months of fiscal 2026, compared with $34.3 million in the prior year.

The $(15.8) million decrease is primarily due to reduced Revolver net borrowings compared to the prior year of $35 million, which was partially offset by increased borrowings on the Term Loan of $20 million.

As of September 26, 2025, the Company’s principal sources of liquidity consisted of $64.8 million in cash and cash equivalents, $72.1 million of available credit under its Credit Facility, and future collections of receivables from customers.

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.

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.

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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 $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.

The Company borrowed and repaid $25.0 million against the Revolver during the first three months of fiscal 2026 and had $15.0 million borrowings outstanding under the Revolver.

As of September 26, 2025, the Company had $92.2 million outstanding under its Term Loan and during the first three months of fiscal 2026 borrowed $20.0 million and repaid $0.9 million against the Term Loan.

As of September 26, 2025, the Company was in compliance with all financial covenants contained in the Credit Facility.

Critical Accounting 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-Q

Item 2. Management’s Discussion and Analysis