What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-03 compared with 2025-11-04 · 56 added, 70 removed, 97 unchanged (57% 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 unaudited condensed consolidated financial statements and accompanying notes.

In the discussion herein, the fiscal year ending June 26, 2026 is referred to as “fiscal 2026” or “2026” and the fiscal year ended June 27, 2025 is referred to as “fiscal 2025” or “2025.”

In the discussion herein, the fiscal year ending July 3, 2026 is referred to as “fiscal 2026” or “2026” and the fiscal year ended June 27, 2025 is referred to as “fiscal 2025” or “2025.”

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 500 patents.

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, microwave radio expertise and solutions for mission critical communications.

Aviat has a global presence.

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.

4RF is a leading provider of industrial wireless access solutions, including narrowband point-to-point/multi-point radios and Private LTE and 5G routers.

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

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

NEC’s Wireless Transport Business

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.

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 was subject to certain post-closing adjustments.

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 three months of fiscal 2026.

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

In early 2025, U.S.

tariffs on foreign imports were introduced.

Aviat will attempt to mitigate 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.

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

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

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

Three Months Ended Six Months Ended

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

North America $ 52,901 $ 57,962 $ (5,061) (8.7) % $ 105,548 $ 100,187 $ 5,361 5.4 %

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Total revenue $ 111,472 $ 118,197 $ (6,725) (5.7) % $ 218,792 $ 206,626 $ 12,166 5.9 %

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

Revenue in North America decreased by $5.1 million during the second quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to lower demand for products of 19%, partially offset by higher demand of services by 12%, across mobile network operators and private network customers.

Revenue in North America increased by $5.4 million during the first six months of fiscal 2026 compared with the same period of fiscal 2025, primarily due to higher demand for service and product offerings of 13% and 3%, respectively, across private network customers and mobile networks operators.

Revenue in Africa and the Middle East increased by $2.0 million during the second quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to increases in demand for products and services of 20% and 7%, respectively, across mobile network operators and private network customers.

Additionally, demand for software offerings increased by 15% compared with the same period of fiscal 2025.

Revenue in Africa and the Middle East increased by $4.3 million during the first six months of fiscal 2026 compared with the same period of fiscal 2025, primarily due to increases in demand for services and products of 36% and 17%, respectively, for mobile network operators and private network customers.

Revenue in Europe increased by $3.1 million during the second quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to increases in demand of services of 56% from project timing, increase in product demand of 35% for mobile network operators, and a 20% increase in demand of software offerings.

Revenue in Europe increased by $5.0 million during the first six months of fiscal 2026 compared with the same period of fiscal 2025.

The increase for the first six months of fiscal 2026 was primarily due to increases in demand for product and software offerings of 54% and 46%, respectively, for mobile network operators.

Revenue in Latin America and Asia Pacific decreased by $6.7 million during the second quarter of fiscal 2026 compared with the same period of fiscal 2025 primarily due to lower demand for services of 61%, partially offset by an increase of 36% on software offerings.

Revenue in Latin America and Asia Pacific decreased by $2.5 million during the first six months of fiscal 2026 compared with the same period of fiscal 2025 primarily due to due to lower demand for services and products of 31% and 14% respectively, partially offset by an increase of 139% on software offerings.

Three Months Ended Six Months Ended

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

Product sales $ 81,210 $ 82,312 $ (1,102) (1.3) % $ 156,294 $ 143,428 $ 12,866 9.0 %

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Total revenue $ 111,472 $ 118,197 $ (6,725) (5.7) % $ 218,792 $ 206,626 $ 12,166 5.9 %

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.

Revenue from product sales decreased by 1.3% and revenue from services decreased by 15.7% for the second quarter of fiscal 2026 compared with the same quarter of fiscal 2025.

Revenue from product sales increased by 9.0% and revenue from services decreased by 1.1% for the first six months of fiscal 2026 compared with the same period 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

Three Months Ended Six Months Ended

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

Revenue $ 111,472 $ 118,197 $ (6,725) (5.7) % $ 218,792 $ 206,626 $ 12,166 5.9 %

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Service margin % 30.9 % 37.7 % 36.2 % 38.6 %

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.

Gross margin for the second quarter of fiscal 2026 decreased by $4.8 million compared with the same quarter of fiscal 2025 primarily due to higher volumes on lower margin products.

Gross margin for the first six months of fiscal 2026 increased by $11.1 million due to higher sales volumes on higher margin products, specifically software offerings.

Research and Development

Three Months Ended

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

Three Months Ended Six Months Ended

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

Research and development $ 6,409 $ 10,222 $ (3,813) (37.3) % $ 13,507 $ 20,630 $ (7,123) (34.5) %

% of revenue 5.7 % 8.6 % 6.2 % 10.0 %

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.

Research and development expenses decreased by $3.8 million and $7.1 million for the three and six months ended December 26, 2025, respectively, compared with the same periods in fiscal 2025, primarily due to cost management initiatives and synergies related to acquisitions.

Selling and Administrative

Three Months Ended

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

Three Months Ended Six Months Ended

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

Selling and administrative $ 22,384 $ 21,279 $ 1,105 5.2 % $ 45,760 $ 46,227 $ (467) (1.0) %

% of revenue 20.1 % 18.0 % 20.9 % 22.4 %

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.

Selling and administrative expenses increased by $1.1 million for the second quarter of fiscal 2026 compared with the same quarter of fiscal 2025 primarily due to higher administrative costs.

Selling and administrative expenses decreased by $0.5 million for the first six months of fiscal 2026 compared with the same quarter of fiscal 2025 primarily due to cost management initiatives.

Interest Expense, net

Three Months Ended

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

Three Months Ended Six Months Ended

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

Interest expense, net $ 1,908 $ 1,580 $ 328 20.8 % $ 3,620 $ 2,695 $ 925 34.3 %

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

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

Interest expense, net increased by $0.3 million and $0.9 million for the three and six months ended December 26, 2025, respectively, primarily due to interest expense incurred on incremental Term Loan borrowings compared to the prior year period.

Other Expense, net

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

Three Months Ended Six Months Ended

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

Other (income) expense, net $ (2,744) $ 269 $ (3,013) (1,120.1) % $ (1,771) $ 979 $ (2,750) (280.9) %

Other (income) expense, net decreased by $3.0 million and $2.8 million for the three and six months ended December 26, 2025, respectively, compared with the same quarter of fiscal 2025 primarily as a result of foreign exchange rate movement.

Three Months Ended Six Months Ended

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

Income (loss) before income taxes $ 8,123 $ 6,121 $ 2,002 32.7 % $ 10,627 $ (11,272) $ 21,899 (194.3) %

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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 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.

The tax expense for the first six months of fiscal 2026 was primarily attributable to tax expense related to U.S.

and profitable foreign subsidiaries.

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

Liquidity, Capital Resources, and Financial Strategies

Sources of Cash

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

As of December 26, 2025, the Company’s total cash and cash equivalents were $86.5 million.

Approximately $33.3 million was held in the United States.

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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.

Net cash provided by (used in) operating activities was $12.2 million for the first six months of fiscal 2026, compared with $(6.4) million in the prior year.

The $18.6 million increase is primarily attributable to net income along with decreases in inventory, unbilled, and deferred taxes which was partially offset by an increase in accounts receivable and a decrease in accounts payable.

Investing Activities

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.

Net cash used in investing activities was $3.2 million for the first six months of fiscal 2026, compared to $23.5 million in the prior year.

The $20.3 million decrease is primarily due to the absence of prior year acquisition payments associated with the NEC Transaction in the current 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 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.

Net cash provided by financing activities was $17.1 million for the first six months of fiscal 2026, compared with $18.6 million in the prior year.

The $1.5 million decrease is primarily due to reduced net Term Loan borrowings of $17.9 million compared to $26.3 million in the prior year and the absence of prior year payments of deferred consideration for acquisitions of $5.8 million.

As of December 26, 2025, the Company’s principal sources of liquidity consisted of $86.5 million in cash and cash equivalents, $74.4 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.

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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 $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.

The Company borrowed and repaid $50.0 million against the Revolver during the first six months of fiscal 2026 and had $15.0 million borrowings outstanding under the Revolver.

As of December 26, 2025, the Company had $91.0 million outstanding under its Term Loan and during the first six months of fiscal 2026 borrowed $20.0 million and repaid $2.1 million against the Term Loan.

As of December 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