AVIAT NETWORKS, INC. Q3 FY2025 earnings call

• Total revenue of $112.6 million, non-GAAP gross margin of 35.8%, record adjusted EBITDA of $14.9 million, and non-GAAP EPS of $0.88 were achieved.
• Mobile service provider market: Pasolink products/services in line with long-term expectations, initial sales of ProVision Plus to Pasolink customers.
• Private networks: Maintaining share of demand in North America and expanding sales funnel internationally.
• Public safety: Shipped additional phases of recently won statewide network project.
• Utility space: Making progress cross-selling Aprisa access radios and routers alongside microwave backhaul.
• Tariffs: Team working to mitigate impact, ramped up inventory purchases, largest US operational footprint in microwave, had strategic discussions with US headquartered Fortune 500 companies.

Total revenue for the third quarter was $112.6 million. North America contributed $49.4 million, which was 44% of total revenue and saw an increase of $5 million or 11% year-over-year due to growth in private networks. International revenues were $63.2 million, 56% of total revenue, a decrease of $3.2 million or 5% year-over-year. GAAP gross margin was 34.9% and non-GAAP gross margin was 35.8%. Adjusted EBITDA was $14.9 million, up 17% versus the year ago period. Non-GAAP EPS was $0.88, up 13% year-over-year.

• Maintains revenue guidance range of $430 million to $470 million.
• Expects to approximate the current full year consensus estimate on revenue and EBITDA.
• Possibilities for pull-ins to avoid tariffs could swing the range upward, but company is comfortable guiding annually and aiming to meet Street expectations.

• Tariffs impacting business, with potential 2% to 2.5% impact on COGS. Working to mitigate through supply base efforts and manufacturing changes, but may cause near-term gross margin dampening.

Q: Jason Schmidt asks about guidance swing factors and Tier 1 market.

A: Pete Smith says there could be pull-ins/push-outs to avoid tariffs and that the US Tier 1 CapEx cycle has likely bottomed.

Q: Scott Searle asks about North America gross margin and MDU opportunities.

A: Michael Connaway talks about tariff impact on gross margin and Pete Smith discusses MDU trends and Aviat's technology in fixed wireless access.

Q: Theodore O'Neill asks about OpEx and US suppliers.

A: Michael Connaway mentions OpEx discipline and Pete Smith notes strategic communication with US customers about more business with US suppliers.

Q: Dave Kang asks about revenue outlook and geography.

A: Pete Smith and Michael Connaway discuss revenue guidance and impacts of geography such as Africa being currency constrained.

Q: Tim Savageaux asks about seasonality and Tier 1 projects.

A: Pete Smith comments on Tier 1 project potential and the CapEx cycle.

Q: Rustam Kanga asks about tariffs and surcharges.

A: Michael Connaway explains tariff mitigation efforts and passing on surcharges only after mitigation.