Earnings call transcript: Aviat Networks Q1 2025 beats expectations, stock surges

Aviat Networks Inc. reported robust financial results for the first quarter of 2025, significantly surpassing analysts’ expectations with an earnings per share (EPS) of $0.88 compared to the forecasted $0.29. The company’s revenue also exceeded projections, reaching $112.6 million against an expected $107.33 million. This positive performance led to a 6.61% increase in the company’s stock price during after-hours trading, closing at $20.97. According to InvestingPro data, the stock has shown strong momentum with a 43.58% return over the past six months, though current analysis suggests the stock may be undervalued.

Key Takeaways

• Aviat Networks reported an EPS of $0.88, well above the forecast of $0.29.
• Revenue reached $112.6 million, surpassing expectations and showing a 1.6% year-over-year increase.
• The stock price rose by 6.61% in after-hours trading.
• Strong performance in North America contributed to revenue growth.
• The company is optimistic about future growth in the public safety and utility sectors.

Company Performance

Aviat Networks demonstrated strong performance in the first quarter of 2025, with revenue increasing by 1.6% year-over-year. The company’s focus on innovation and strategic market positioning, particularly in North America, has driven growth. The launch of new products such as the ProVision Plus software and advancements in fixed wireless access technology have bolstered Aviat’s competitive edge.

Financial Highlights

• Revenue: $112.6 million, up 1.6% year-over-year
• Earnings per share: $0.88, up 12.8% year-over-year
• Non-GAAP Gross Margin: 35.8%
• Adjusted EBITDA: $14.9 million, up 17.3% year-over-year

Earnings vs. Forecast

Aviat Networks significantly outperformed expectations, with an EPS of $0.88 compared to the forecasted $0.29. This represents a surprise of over 203%. The revenue of $112.6 million also exceeded the forecast of $107.33 million, marking a strong quarter for the company.

Market Reaction

Following the earnings announcement, Aviat Networks’ stock surged by 6.61% in after-hours trading, closing at $20.97. This positive movement reflects investor confidence in the company’s ability to exceed financial expectations and capitalize on growth opportunities in key markets.

Outlook & Guidance

Aviat Networks remains confident in its fiscal year 2025 outlook, anticipating revenue between $461 million and $470 million. The company is preparing for potential tariff impacts and aims to maintain a margin-neutral approach. Continued demand in public safety and utility sectors is expected to drive future growth. InvestingPro data shows analysts maintain a strong buy consensus with price targets ranging from $30 to $47, suggesting significant upside potential. Get detailed insights and Fair Value estimates for over 1,400 stocks with an InvestingPro subscription.

Executive Commentary

"We are pleased with the results from this quarter and believe we are on the right track to delivering a good end to fiscal year twenty twenty five," stated Pete Smith, CEO of Aviat Networks. CFO Michael Conaway highlighted the company’s operational efficiency, noting, "OpEx performance was certainly a bright spot for us in the quarter."

Risks and Challenges

• Potential tariff impacts could affect 2-2.5% of the cost of goods sold.
• Currency constraints in the African market may limit growth opportunities.
• Macro uncertainties could affect future demand and financial performance.

Q&A

During the earnings call, analysts inquired about the company’s strategies to mitigate tariff impacts and opportunities for U.S. supplier partnerships. Management reiterated its commitment to a margin-neutral approach and highlighted potential growth areas in the public safety and utility sectors.

Full transcript - Aviat Networks Inc (AVNW) Q3 2025:

Conference Operator: Good afternoon. Welcome to Aviat Networks Third Quarter Fiscal twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

I will now turn the conference over to your host, Mr. Andrew Fredrickson, Director of Investor Relations. Thank you. You may now begin.

Andrew Fredrickson, Director of Investor Relations, Aviat Networks: Thank you, and welcome to Aviat Networks Third Quarter Fiscal twenty twenty five Results Conference Call and Webcast. You can find our press release and updated investor presentation in the IR section of our website at www.aviatnetworks.com along with a replay of today’s call. With me today are Pete Smith, Aviat’s President and CEO, who will begin with opening remarks on the company’s fiscal quarter followed by Michael Conaway, our CFO, who will review the financial results for the quarter. Pete will then provide closing remarks on Aviat’s strategy and outlook followed by Q and A. As a reminder, during today’s call and webcast, management may make forward looking statements regarding Aviat’s business, including but not limited to statements relating to fiscal guidance, financial projections, business drivers, new products and expansions, and economic activity in different regions.

These and other forward looking statements reflect the company’s opinions only as of the date of this call and webcast and involve assumptions, risks, and uncertainties that could cause actual results to differ materially from those statements. Additional information on factors that could cause actual results to differ materially from the statements expressed or implied on this call can be found in our most recent annual report on Form 10 ks filed with the SEC. The company undertakes no obligations to revise or make public any revisions of these forward looking statements in light of new information or future events. Additionally, during today’s call and webcast management will reference both GAAP and non GAAP financial measures. Please refer to our press release, which is available in the IR section of our website at www.avionnetworks.com and financial tables therein, which include a GAAP to non GAAP reconciliation and other supplemental financial information.

At this time, I would like to turn the call over to Aviat’s President and CEO, Pete Smith. Pete?

Pete Smith, President and CEO, Aviat Networks: Thanks, Andrew, and good afternoon, everyone. Let’s review the highlights from the third quarter. Total revenue of $112,600,000 non GAAP gross margin of 35.8% record adjusted EBITDA of $14,900,000 up 17% versus the year ago period Non GAAP EPS of $0.88 up 13% year over year. These results were possible thanks to Aviat’s disciplined operating model and the hard work and commitment from the entire Aviat team. With our second consecutive quarter of record quarterly adjusted EBITDA, we see the work of our strategy to grow the scale of Aviat taking hold.

Let’s briefly discuss our end markets. Looking at our mobile service provider market, we had another good quarter. Products and services related to PASILINK were in line with our long term expectations for the business. Software volumes were good, assisting with our improved gross margins year over year. In a previous earnings call, we announced the launch of our ProVision Plus software for PASILINK.

We are happy to report initial sales of ProVision Plus to PASILINK customers during the third quarter. The successful effort to sell ProVision Plus shows the significant progress we have made servicing our Tier one and larger mobile service provider customers that joined from the PASO Link acquisition. In private networks, Aviat continues to maintain its share of demand in North America and expand the sales funnel internationally. In public safety, we’ve built and shipped additional phases of our recently won statewide network project. In the utility space, we’re making progress cross selling our offering of APRISA access radios and routers alongside microwave backhaul and are excited about the sales funnel developing with these customers.

Based on investor inquiries, I would like to add that we have not seen any cancellations to date with our U. S. Federal government customers as a result of spending reduction efforts. We attribute this to the mission critical nature of our deployments. Regarding tariffs and the impact to Aviat, our team has been working diligently to mitigate the impact to our business and customers.

We have deployed the playbook we used to successfully navigate the COVID supply chain crisis. In addition, our manufacturing partners have footprints that will permit optimization when the tariff landscape settles. Anticipating the tariffs, we ramped up our inventory purchases. For the vast majority of the hardware we sell in The U. S, it is assembled in The U.

S. We believe Aviat has the largest operational U. S. Footprint in the microwave space. During the quarter, we had strategic discussions with three U.

S. Headquartered Fortune 500 companies focused on doing more in The U. S. This may be a positive catalyst in approximately twelve months. Nonetheless, much of the tariff headline is focused on costs, and we do utilize components and contract manufacturing from international sources.

We are working alongside our contract manufacturer and suppliers to adjust sourcing locations as available, but we expect exposure over the next couple of quarters. Our goal with the tariff impact to our business will be to be margin neutral through productivity, sourcing, manufacturing footprint and price. I would now like to turn the call over to Michael to review the financial results of the quarter before coming back for some closing remarks.

Michael Conaway, CFO, Aviat Networks: Thank you very much, Pete, and good afternoon, everyone. I’ll review some of the key fiscal twenty twenty five third quarter results. Please note that our detailed financials can be found in our press release and all comparisons discussed are between the third quarter of fiscal year twenty twenty five and the third quarter of fiscal year twenty twenty four unless otherwise noted. For the third quarter, we reported total revenues of $112,600,000 as compared with $110,800,000 for the same period last year, an increase of $1,800,000 or 1.6 percent year over year. North America, which comprised 44% of our total revenues for the quarter, was $49,400,000 an increase of $5,000,000 or 11% from the same period last year due to growth in private networks.

International revenues were $63,200,000 for the quarter, a decrease of $3,200,000 or 5% from the same period last year. This was driven by a difficult year over year comparable with APAC recording its best quarter on record in the Q3 fiscal twenty twenty four period. Our trailing twelve month book to bill was over one in the quarter. Gross margins in 3Q were 34.9% on a GAAP basis and 35.8% on a non GAAP basis. This compares to 32.5% GAAP and 35.1% non GAAP in the prior year.

Gross margins improved, thanks to regional mix and software mix in the quarter. Third quarter GAAP operating expenses were 30,000,000 down versus $30,400,000 in the year ago period. Non GAAP operating expenses, which exclude the impact of restructuring charges, share based compensation and deal costs, were $27,200,000 a decrease of $200,000 versus the prior year. This decrease is due to disciplined cost management and increased efficiencies at Aviat. Third quarter operating income was $9,300,000 on a GAAP basis and $13,000,000 on a non GAAP basis.

This compares to $5,700,000 GAAP and $11,400,000 non GAAP in the year ago period. The third quarter tax provision was $1,100,000 representing an effective tax rate of 24%. As a reminder, the company has approximately $450,000,000 of net operating losses or NOLs that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future. Third quarter GAAP net income was 3,500,000 and non GAAP net income, which excludes restructuring charges, share based compensation, M and A related and other non recurring expenses and the non cash tax provision was $11,300,000 Third quarter non GAAP earnings per share came in at $0.88 on a fully diluted basis, up by $0.10 or 12.8% versus the year ago period. Adjusted EBITDA for the third quarter was $14,900,000 or 13.2% of revenues, an increase of $2,200,000 or 17.3 percent versus last year.

This is another quarterly record of adjusted EBITDA for Aviat and our second consecutive quarter of hitting this milestone. Moving on to the balance sheet. Our cash and marketable securities at the end of the third quarter were 49,400,000.0 Our outstanding debt was $73,900,000 bringing our net debt position to $24,500,000 With that, I’ll turn it back to Pete for some final comments. Pete?

Pete Smith, President and CEO, Aviat Networks: Thanks, Michael. We are pleased with the results from this quarter and believe we are on the right track to delivering a good end to fiscal year twenty twenty five. In regards to guidance, we believe that Aviat will deliver results for fiscal year twenty twenty five within the range of annual guidance previously provided. We expect to approximate the current full year consensus estimate on revenue and EBITDA. Over the last five years, we have most frequently issued guidance for the fiscal year in August.

Given the nature of the macro environment and tariffs, we will maintain this practice. With that, operator, let’s open up for questions.

Conference Operator: Thank you. As a reminder, to ask a question, you will need to press star, one, one, and wait for your name to be announced. Please stand by while we compile the Q and A roster. The first question comes from the line of Jason Schmidt of Lake Street. Jason, please go ahead.

Jason Schmidt, Analyst, Lake Street: Hi, guys. Thanks for taking my questions and congrats on the strong results. Pete, just want to start with guidance. I know you’re maintaining that four thirty to four seventy range. Just curious what the swing factor you think is to sort of that high end versus the low end.

Pete Smith, President and CEO, Aviat Networks: Yeah, well, think we also confirmed the consensus, so that’s where I think we should be. And I think there’s possibilities for some pull ins to avoid tariffs. We have the inventory. One of the questions that we got along the way during the quarter, what about push ins and pull outs? And I would say we probably had one or two pull ins and push outs, but you could imagine that there could be more to beat the tariffs in this quarter than previous quarters, so that would swing us up.

But what we’re most comfortable with is, leaving guiding on an annual basis and sticking to it as we try and improve our performance to street expectations.

Jason Schmidt, Analyst, Lake Street: Okay. No. That makes sense. And I know you’re not baking in sort of any significant contribution from The US tier one market, but just curious what you’re currently seeing there and if you think we’ve reached the bottom.

Pete Smith, President and CEO, Aviat Networks: Yeah, I would say that The U. S. Tier one CapEx cycle is probably bottomed with respect to us. And, you know, when you read The U. S.

Tier one capital spending, what I would remind everyone is the capital spending typically goes fiber first, and then as you move away from urban centers, you’re more likely to use microwave in the suburbs and in rural deployments. So as CapEx has bottomed and stabilized, I would say the lag period is about six months. So as the bottom what we think is the bottom in CapEx is in, we would expect a couple quarters an uptick in demand.

Jason Schmidt, Analyst, Lake Street: Got you. That’s helpful. And just the last one for me, and I’ll jump back into queue. Michael, looking at gross margin, obviously, early strong in March. Can you build upon that here in June?

Or just given the mix you had in March, would we expect it to take a step back?

Michael Conaway, CFO, Aviat Networks: Yes, no. Look, maybe I’ll just talk about I’ll talk about the results first, because you’re right. Gross profits were a good story in the quarter for sure, building on even Q2 results, Q3 was even better. And really two reasons for that, both M and A related. So Passalink is now in the comp in Q3 on a year on year basis.

So we’ve made some good improvements as we’ve integrated that business into Aviat. So we’re seeing the gross margin uplift on a year over year basis from that. And then the appraise of business as well, which was a Q1 twenty twenty five transaction mixes us up. As it relates to Q4, just a couple of thoughts. Number one, we’ll probably get into tariffs.

So I’ll save some of the remarks for when we may get asked about that. But as it relates to the macro uncertainty, that’s a part of it in Q4. And then we had a really strong software quarter in Q3, which we built upon a nice software quarter in revenues in Q2 as well. So that probably won’t persist to the Q3 levels in Q4. So those are the two reasons why we don’t see acceleration in gross margins in Q4.

And we were, as Pete alluded to, guiding to the consensus, we’re a little bit more conservative given the macro.

Jason Schmidt, Analyst, Lake Street: Okay. Perfect. Appreciate the color. Thanks, guys.

Conference Operator: One moment for your next question. The next question comes from the line of Scott Searle of Roth Capital Partners. Scott, please go ahead.

Scott Searle, Analyst, Roth Capital Partners: Hey, good afternoon. Thanks for taking the questions. Great job on the quarter. Pete, maybe just to jump in on North America, down a little bit sequentially, yet gross margin stayed pretty good there. I guess Mike answered that a little bit, but wondering if there’s anything in particular going on there, kind of what the outlook you’re seeing for North America and maybe fold that into Mike’s comments about gross margins and tariffs.

Can you kind of quantify what you think the impact is? What we should be thinking about, whether it’s June or as we start to get into fiscal twenty sixteen, the impact of the headwinds?

Pete Smith, President and CEO, Aviat Networks: Yeah, so I think Michael can talk about the tariffs. I thought the quarter had, you know, the North American quarter, we had good private network business. And if you roll back the clock, we are between projects with The US Tier one and that’s showed up in the revenue. What I often say to investors is a good proxy for The US private network business is to look at, you know, MSI’s report and, you know, they would say that the demand environment for public safety is very good. We would say the same.

Then, you know, utilities, which is our second biggest application in private networks has been historically under invested and things like video and grid security are driving demand. So we feel good about those and we are in between projects on U. S. Tier one and we’re hopeful that the next project will kick in. And the question that was asked previously about the demand cycle in Tier 1s, we would say the CapEx bottom is in and we’re a couple quarters from that rolling through to microwave demand.

Michael Conaway, CFO, Aviat Networks: Yes. And just as it relates to tariffs, because Pete mentioned part of it in his prepared remarks, but what I found after being in the chair for roughly a year is some of what we’re doing now springs from the playbook of how Aviat managed through COVID. And so one of the things we did that we talked about was we brought in some more inventory in anticipation of potential tariff regime changes. And then in terms of the effects, in order to put an illustrative upper bound on the exposure, we think in the near term, it could be as high as roughly somewhere between two percent and two point five percent of our COGS. But as of this very moment, we’re working hard with our supply base to minimize those effects.

At the same time, we’re committed to passing on to our customer base only what we can’t mitigate ourselves. So thinking linking it back to gross margins in the immediate term, this may cause a little bit of gross margin rate pressure for owners, but we do not anticipate any per share earnings leakage. Widening the aperture though over the long term, thinking about treating all our constituents as fairly as possible unlike partners we think will compound to longer term benefits to owners. So that’s what we’re doing on tariffs and a little bit of the spin through the P and L and how it may affect.

Scott Searle, Analyst, Roth Capital Partners: If I can sneak in just the oh, go ahead, Pete.

Pete Smith, President and CEO, Aviat Networks: Go ahead, Scott. No. I was

Scott Searle, Analyst, Roth Capital Partners: just gonna ask, Pete, in terms of just to follow-up on pull ins, right? It sounds like you haven’t seen them yet, but just want to clarify that you haven’t seen them, particularly looking at the North American numbers, that’s where I think it would show up. And if I could just throw in a last one, there had been some talk about potential opportunities with a large tier one in MDUs. I’m wondering if you could give us any updates or thoughts on progress on that front. Thanks.

Rustam Kanga, Analyst, Citizens: All

Pete Smith, President and CEO, Aviat Networks: right. So pull ins and push outs were normal. And I think if we were to put a quantify, I think we had two pull ins and two push outs in the quarter. And that’s kind of that’s less than the normal in terms of project movements. It’s a fair hypothesis to think that there could be more in this quarter to beat the tariffs.

I would also say, with respect to the tariffs, we performed well through COVID. We’re reusing the appropriate part of the playbook. And we recently exited Fukushima and put the PassLink business into our Centimeters, and that builds the proper processes. As the tariff landscape settles, we think we have the skill to move our product manufacturing from one site to another, and we’ll be able to probably in a couple of quarters find the low cost tariff solution. And then your last question, I believe, is around MDUs.

So I’m going to maybe be a little bit long winded. So the MDU is part of a trend for fixed wireless access for apartment buildings and it’s an example for data needs driving networks. It pushes capacity demands to the edge of the network. It creates an opportunity for Aviat technology to be used in applications outside of the traditional backhaul space and specifically high growth fixed wireless access. This trend could start with apartment building or some other category.

Nonetheless, some of the technology limitations with the contemplated architectures favor Aviat technology. And a lot of investors have called about a specific Tier one customer who recently said that they’ve launched an MD solution in more than 15 markets. That was a public disclosure. And what we would say what Aviat’s perspective is in general, the more MDU connections, especially with wireless access are good for future backhaul needs. We don’t want to comment on others public disclosures, but further we some super sleuthing Aviat investors have gone out in the field and saw some Aviat gear.

We want to acknowledge that so it’s not deniable. And then finally Aviat in conjunction with IntraCom have launched a 28 gigahertz and 39 gigahertz hardware platform that will serve the fixed wireless access space. And we also have Avion software and services to go along with the hardware. And we are excited about fixed wireless access. And given disclosure constraints, I think this is the appropriate place to stop.

So thanks for the question, Scott.

Scott Searle, Analyst, Roth Capital Partners: Thanks. I’ll get back in the queue.

Conference Operator: One moment for your next question. The next question comes from the line of Theodore O’Neill of Litchfield Hills Research. Theodore, please go ahead.

Theodore O’Neill, Analyst, Litchfield Hills Research: Thanks very much, and congratulations on strong quarter. My first question is about OpEx being able to hold it flat year over year. And I mean, looking at the numbers here, looks like R and D is the reason for it. Could you give us a little background on what’s happening there and whether you expect to continue holding OpEx?

Michael Conaway, CFO, Aviat Networks: Yeah, no. Our OpEx performance was certainly a bright spot for us in the quarter and it’s something that we’ve really worked hard on since I joined in particular. We messaged that the second half of twenty twenty five would be lower versus the first half in OpEx because we were rolling off of the transitional service agreement with NEC. And Theo, to your point in particular, even on a year over year basis, it’s in our R and D spending bucket. And so that’s what you see specifically going on there.

It’s the TSA and then the DSA, the developmental services agreement with NEC. But kind of moving on and zooming out a little important thing that we did in the first part of twenty twenty five was we took the opportunity to prune some additional costs out of the business and we’re also seeing that bear fruit now in an even better OpEx performance in Q3 than we thought we could achieve in the back half of twenty twenty five when we planned our year. So you kind of hit it, it’s down on a year over year basis a little bit. But as a percentage of revenues, if you look at it in that context, OpEx was just the shade over 24% of sales, which is the lowest it’s been in over two years. So I mean, look, you hear a lot of businesses talk about being disciplined, operational executors and whatnot, but where that actually starts at the root is spousing a low cost mindset in everything a company does.

The good thing is that’s something Pete and I share as a common leadership characteristic. So good to see that playing through. Asked if that’s gonna continue and the one word answer is yes.

Theodore O’Neill, Analyst, Litchfield Hills Research: Okay. Pete, in your prepared remarks you mentioned you’re having strategic communication with US customers about doing more business with US suppliers. Is that something that would be incremental to sales driven by the tariffs?

Pete Smith, President and CEO, Aviat Networks: I wouldn’t say let’s put it in the model, but it’s a possibility that didn’t exist in the pre tariff environment. So that’s why I said that it would take maybe twelve months to materialize, but some of our larger customers are thinking and what we believe we have the largest operational footprint with respect to U. S. Microwave assets. So if tariff environment is going to persist, this could be something that is beneficial to Aviara.

So it’s while we struggle to model what the cost of the tariffs might be in a changing environment, I want it to be balanced and say if tariffs persist then given our footprint there’s going to be possibilities to land you know, US oriented business as well.

Theodore O’Neill, Analyst, Litchfield Hills Research: It makes sense. Thanks very much.

Conference Operator: Yep. One moment for your next question. And as a reminder, in order to ask a question, please press 11 on your telephone and wait for your name to be announced. The next question comes from the line of Dave Kang of B. Riley.

Dave, please go ahead.

Dave Kang, Analyst, B. Riley: Thank you. Good afternoon. Steve, regarding your outlook, if you strip out first three quarters, the midpoint looks to be around 130, 1 hundred and 30 1, so that’s about 18,000,000, 19 million sequential increase. Just wondering if you can go over some of your assumptions on your bubble drive that $37,000,000 sequential uptick?

Michael Conaway, CFO, Aviat Networks: Yes. No, Dave, I wouldn’t the backwards math of taking out Q1 or kind of the arithmetic that you just verbalized. What we’re guiding to is we think consensus on the year is the right spot for us. So if backwards math in revenues, for example, using the current consensus as the guidepost on the year, you get to somewhere between $1.01 $6 1 point 2 0 dollars roughly in revenues. So in the context of the quarter, that’s kind of where we see it.

So the sequential build of $20,000,000 that you get to by maybe just doing the average or stripping out Q1 is not really what we’re guiding to in the context of the fourth quarter.

Dave Kang, Analyst, B. Riley: Got it. And then just a couple on the geography. First, so North America Tier 1s didn’t sound like they didn’t really pick up, but they were muted in 2Q and 3Q. Just wondering if you’re seeing any activities out of those guys going into this quarter?

Pete Smith, President and CEO, Aviat Networks: You know, it’s activity at the level between projects. We would say that we’re working on landing a couple more projects, but the CapEx, the Tier one CapEx spend was really designed to say we think that ticks up in probably two quarters. So that’s what we would say.

Dave Kang, Analyst, B. Riley: Got it. And then similarly, that was kind of muted last quarter or 2Q, just wondering what you saw out of those customers?

Michael Conaway, CFO, Aviat Networks: Yeah, nothing new or out of the ordinary, you alluded to it and it’s kind of a roughly flat environment.

Pete Smith, President and CEO, Aviat Networks: Look, think Africa is currency constrained, so the availability in Africa for dollars and euros is limiting that. So in a lower interest rate environment, I think that that would improve and I don’t think it’s going to improve significantly until interest rates moderate.

Dave Kang, Analyst, B. Riley: Got it. Thank you.

Conference Operator: One moment for your next question. The next question comes from the line of Tim Savageaux of Northland Capital Markets. Tim, please go ahead.

Tim Savageaux, Analyst, Northland Capital Markets: Thanks. Good afternoon, and congrats on the results. My first question is about seasonality, especially in The US. And you seem to have followed that pattern here down in March. We’ve seen that the last couple of years.

We’ve also seen 20% plus. I don’t know if that’s seasonal or just coincidental, but I think it’s seasonal increase in the June. I guess this year, is there anything that would lead you to conclude you might see something different? Are there some potential offsets on the international side to work against that? Or how do you see that your outlook for US revenues in the context of that seasonality?

Michael Conaway, CFO, Aviat Networks: No, mean it’s the guidance that we’re sort of affirming at this point, Tim, is the consensus. And if you back into what Q4 would be in it from a revenue standpoint, you get to a bit of a build versus Q3, yes, but not a 20% bump. As you alluded to, there have been years in the past where Q4 blows it out of the water versus Q3. And it’s just for us, it’s the uncertainty in the market as it relates to tariffs and the broader macro was something that we wanted to make sure we aired on the conservative side. I wouldn’t say though that there’s some specific dampening element going on that we talk about specifically.

So that’d be my spin on it.

Pete Smith, President and CEO, Aviat Networks: Yeah, so we’re trying not to get talked into higher consensus. Michael said that our were, our book to bill was over one, the bookings in this quarter look good at the, you know, five weeks into the quarter. So we think the demand environment is good. We acknowledge that, Africa is muted probably due to interest rate and we remain in between projects at The U. S.

Tier one. The Motorola stuff on public safety, we would agree with what has been published about Motorola’s demand environment. I think that’s a pretty fulsome set of remarks with respect to demand.

Tim Savageaux, Analyst, Northland Capital Markets: Okay, great. You mentioned several times now being between projects from a tier one standpoint and just looking to get a little more color on that. I think at least maybe pre PASA link you had Verizon threatening 10% of revenue here and again. I assume they’re much lower now. What I’m trying to get a sense of is to the extent you’re no longer between projects, what sort of impact that could have in the business from a revenue perspective of going back, whether it’s more five gs or fixed wireless access.

What could that look like from a business perspective?

Pete Smith, President and CEO, Aviat Networks: Yeah, just to comment on the customer concentration, we don’t have any single customer over 6.5% of revenue. And let’s say U. S. Tier one kicked in, there could be top line lift anywhere from 2.5% to 5% of revenue.

Tim Savageaux, Analyst, Northland Capital Markets: Thanks very much. Appreciate it.

Conference Operator: One moment for your last question. The last question comes from the line of Rustam Kanga of Citizens. Rustam, please go ahead.

Rustam Kanga, Analyst, Citizens: Great. Thanks. Thanks, guys. Thanks for taking the question and nice adjusted EBITDA outperformance. Just one on the tariffs.

Michael, appreciate you providing the upper bound of 2% to 2.5% on COGS. Just sort of thinking about your comment about only passing on surcharges to customers that you couldn’t mitigate yourselves. It sounds kind of like if the COVID playbook stakes out, then you wouldn’t need to do that, and the upper bound on the surcharge would be that 2% to 2.5% to get you to margin neutral. Am I thinking about that correctly?

Michael Conaway, CFO, Aviat Networks: Yeah. I mean, the arithmetic of it, you are. And it’s an intentional it’s an intentional playbook for us is first work back through the supply base as hard as possible to get offsets And then Pete and I are driving, he kind of alluded to it, driving more potential longer term manufacturing changes. And this is it’s the effect for us is ameliorated a little bit by an incumbent supply base in The US, which we think is the best in breed in our competitive space. So we’ve got a little bit of tailwind on already.

And then only after we get through those mitigation effects do we then pass on the delta. And I’ve seen this before, this movie and this level of uncertainty. You gotta be really careful to treat all your partners exactly as such. Treat them like partners. So that’s what we intend to do.

And I was really careful in my remarks and how I’m kinda broadcasting what we’re gonna do as it relates to tariffs that it’s earnings per share neutral. It may have a little bit of an effect on gross profit margin dampening in the near term. But for owners, I think it’s the right thing for us to do long term. So anyway, that’s a little bit more just of our own point of view as we think about it at the company level, just for those interested and then a little bit more detail on what we’re doing to mitigate the cost side of it.

Rustam Kanga, Analyst, Citizens: Super helpful color. Thanks, Michael.

Conference Operator: This now includes the question and answer session. I would now like to turn it back to Pete Smith for closing remarks.

Pete Smith, President and CEO, Aviat Networks: We’d like to thank everyone for joining and your interest in Aviat. We will talk to you again in another quarter, and thanks again. Bye.

Conference Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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