Aviat Networks (AVNW) Q2 Revenue Guidance Misses Consensus

Aviat Networks, Inc. (NASDAQ: AVNW) the leading expert in wireless transport solutions, today announced that its fiscal 2020 second quarter and first half results are anticipated to come in lower than previously forecasted due to a cyberattack at one of the Company's contract manufacturing vendors. This effectively shut down the vendor's production and shipments of Aviat products for a three-week period. While this issue was quickly and fully remediated by the vendor and is not expected to have any impact on Aviat on a go-forward basis, the Company's revenue, gross margins and anticipated profitability for the first half of its fiscal 2020 were affected. However, order flow continued to be strong, cash increased sequentially and from the prior year end, and the Company remains on track for improved profitability for the full fiscal year.

Pete Smith, Aviat's newly appointed President and Chief Executive Officer stated, "While it's disappointing to come in below our prior guidance, I'm quite pleased with how the team responded to assist our vendor and support our customers. Our vendor lost production capacity for three weeks of the quarter, or approximately 23% of its available capacity, resulting in us missing our top-line budget by approximately 5%, though bookings were very strong. Business is not lost, just delayed, and our revenue outlook for the fiscal year has not changed. This event, however, impacted profitability for the first half of fiscal 2020. We still believe Aviat will post year-over-year bottom-line improvements and end the fiscal year with a stronger balance sheet. Long-term, with continued investments in 5G, public safety and other mission-critical networks, we feel good about Aviat's competitive position and ability to enhance stockholder value."

The Company had previously stated that for the comparable six-month periods in fiscal 2020 and fiscal 2019, total revenue would be down modestly, gross margins would improve, non-GAAP operating income would be approximately $6 million, and adjusted earnings before interest, tax, depreciation and amortization and other non-GAAP adjustments ("Adjusted EBITDA") would be approximately $7.5 million. Based on preliminary, unaudited results for the fiscal 2020 second quarter and six-months ended December 27, 2019, and taking into account the impact of production and shipment constraints, and timing of variable expenses incurred in the fiscal 2020 second quarter, the Company provided the following financial updates:

• Total revenue is expected to be $55.5 to $56.5 million in the fiscal 2020 second quarter and $114.0 to $115.0 million for the fiscal 2020 six-month period. North America revenue is expected to be up $10.5 to $11.5 million and international revenue is expected to be down $21.5 to $22.5 million when comparing the fiscal 2020 and fiscal 2019 six-month periods.
• Gross margins are anticipated to be 32.5% to 33.0% in the fiscal 2020 second quarter and 35.5% to 36.0% in the fiscal 2020 six-month period. In the fiscal 2019 six-month period, the Company reported gross margins of 32.2%.
• Non-GAAP operating loss in the fiscal 2020 second quarter is anticipated to be $0.9 million to $1.1 million and for the fiscal 2020 six-month period, non-GAAP operating income is expected to be $2.0 to $2.2 million. Adjusted EBITDA in the fiscal 2020 second quarter is anticipated to be near break-even, and for the fiscal 2020 six-month period is expected to be $4.0 to $4.2 million. Capacity constraints caused by a cyberattack at one of our contract manufacturers, and higher sales commissions based on stronger than anticipated bookings, among others, have the most direct impact on non-GAAP operating income and Adjusted EBITDA.
• Cash and cash equivalents as of December 27, 2019 were anticipated to be approximately $38 million, approximately a $6 million increase, as compared to June 28, 2019, and an approximately $3.5 million improvement sequentially, as compared to September 27, 2019.

(Consensus sees Q2 EPS of $0.51 on revenue of $60.9 million)

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