Aviat Networks, Inc. (AVNW) Q2 2026 Earnings Call Transcript
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Overview
The earnings call summary presents mixed signals: improved operational efficiency and cash flow, but declining margins and operating income. The Q&A session adds uncertainty with vague timelines and minimal contributions from key projects like 5G routers and BEAD. The positive aspects include a strong bookings record and plans to resume buybacks. However, the lack of concrete guidance and declining margins balance out these positives, resulting in a neutral sentiment. The absence of market cap information prevents further refinement of the prediction.
Key Financial Performance
Total Revenues (Q2 FY26) $111.5 million, down from $118.2 million in Q2 FY25. The decrease is attributed to regional and product mix changes.
Total Revenues (First Half FY26) $218.8 million, up $12.2 million or 5.9% compared to the prior 6-month period. This reflects overall growth in the business.
North America Revenues (Q2 FY26) $52.9 million, comprising 47.5% of total revenues.
International Revenues (Q2 FY26) $58.6 million, comprising 52.5% of total revenues.
Gross Margins (Q2 FY26) 32.4% GAAP and 32.9% non-GAAP, down from 34.6% GAAP and 35.3% non-GAAP in Q2 FY25. The decline is due to regional and product mix changes.
Gross Margins (First Half FY26) 32.8% GAAP and 33.4% non-GAAP, up from 29.4% GAAP and 30.1% non-GAAP in the same period last year, reflecting improved operational efficiency.
GAAP Operating Expenses (Q2 FY26) $28.8 million, down from $32.9 million in Q2 FY25, reflecting cost optimization efforts.
Non-GAAP Operating Expenses (Q2 FY26) $27.1 million, excluding restructuring charges, share-based compensation, and deal costs.
GAAP Operating Income (Q2 FY26) $7.3 million, down from $8 million in Q2 FY25.
Non-GAAP Operating Income (Q2 FY26) $9.6 million, down from $12.6 million in Q2 FY25.
GAAP Net Income (Q2 FY26) $5.7 million.
Non-GAAP Net Income (Q2 FY26) $7 million, excluding restructuring charges, share-based compensation, M&A-related and other nonrecurring expenses, and a noncash tax provision.
Non-GAAP EPS (Q2 FY26) $0.54, up over $1 compared to the prior year.
GAAP EPS (Q2 FY26) $0.44.
Adjusted EBITDA (Q2 FY26) $11.3 million or 10.1% of revenues.
Adjusted EBITDA (First Half FY26) $20.4 million, a significant improvement of $13.2 million compared to the same period last year.
Cash and Marketable Securities (End of Q2 FY26) $86.5 million.
Outstanding Debt (End of Q2 FY26) $105.4 million, resulting in a net debt position of $18.9 million, an improvement of $23 million compared to Q1 FY26.
Cash Generated from Operating Activities (Q2 FY26) $23.9 million, driven by disciplined inventory management and strong cash collections.
Inventory Reduction (Q2 FY26) $7.4 million, contributing to positive cash outcomes.
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Operating Highlights
Aprisa LTE 5G router: Launched for police, fire, and emergency vehicles, targeting a $1.6 billion market. Received first order and engaged in critical trials.
Multi-dwelling unit (MDU) solution: Initial purchase order received from a U.S. Tier 1 provider for fixed wireless access Internet. Covers multiple market deployments, with potential for future orders.
Private networks: Continued leadership in mission-critical wireless networks for public safety, utilities, and critical infrastructure globally.
Mobile networks: Engaged globally to expand share in 5G upgrade cycle. Competitive landscape changes creating new opportunities.
Revenue growth: Total revenues increased by 5.9% in the first half of fiscal 2026 compared to the prior year.
Cost optimization: Reduced non-GAAP operating expenses by $3.7 million in the first half of fiscal 2026.
Cash generation: Generated $23.9 million in positive cash from operations in Q2, with year-to-date cash from operations at $12.2 million.
BEAD program: Encouraged by potential positive impact in fiscal 2027 from the Broadband Equity Access and Deployment Fund, with fixed wireless access capturing 10%-15% of locations served.
Leadership addition: New CFO, Andy Schmidt, brings over 20 years of experience, aligning with strategic goals in public safety and software sales growth.
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Risk or Challenges
Revenue Decline: Total revenues for the second quarter decreased to $111.5 million from $118.2 million in the same period last year, indicating potential challenges in maintaining or growing revenue.
Gross Margin Decline: Gross margins decreased to 32.4% GAAP and 32.9% non-GAAP compared to 34.6% GAAP and 35.3% non-GAAP in the prior year, primarily due to regional and product mix, which could impact profitability.
Uncertainty in BEAD Program Impact: The company has not included the potential impact of the Broadband Equity Access and Deployment Fund (BEAD) in its fiscal guidance due to lack of clarity on timing, creating uncertainty in future revenue projections.
Timing of Multi-Dwelling Unit (MDU) Solution Orders: The company is still working with a Tier 1 provider to determine the timing and impact of ramping up orders for its MDU solution, which introduces uncertainty in realizing revenue from this segment.
Competitive Landscape in 5G: Changes in the competitive landscape for 5G upgrades globally could pose challenges in capturing market share and sustaining growth.
Debt Levels: The company has outstanding debt of $105.4 million, which, despite improvements, could pose financial risks if not managed effectively.
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Guidance & Outlook
Revenue Guidance: Aviat Networks maintains its fiscal 2026 revenue guidance in the range of $440 million to $460 million.
Adjusted EBITDA Guidance: The company projects full-year adjusted EBITDA to be between $45 million and $55 million.
Broadband Equity Access and Deployment Fund (BEAD): Aviat anticipates a positive impact from the BEAD program in fiscal 2027, with the program likely to commence in the back half of calendar 2026. Fixed wireless access Internet is expected to capture 10%-15% of locations served by BEAD.
5G Market Opportunities: The ongoing 5G upgrade cycle globally presents opportunities for Aviat to expand its market share. The company is monitoring changes in the competitive landscape and expects to provide updates in future quarters.
Multi-Dwelling Unit (MDU) Solution: Aviat has received an initial purchase order for its MDU solution from a U.S. Tier 1 provider, covering multiple market deployments. The company is working to determine the timing and impact of this order and anticipates growth opportunities in this segment in the coming years.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the outlook for the second half of the year, and what are the key factors influencing it?
A:The outlook for the second half of the year implies a range of $110 million to $120 million per quarter. Key factors include organic opportunities, BEAD (Broadband Equity, Access, and Deployment) program developments, cellular router progress, and the MDU (Multi-Dwelling Unit) project. BEAD is expected to materialize between July and December 2026, while the cellular router and MDU projects are still in early stages and not yet significantly impacting financial forecasts.
Q:Is the 5G router, BEAD, or MDU project included in the guidance?
A:The guidance includes a minimal contribution from the 5G router, no contribution from BEAD, and a small contribution from the MDU project as it is not yet material.
Q:What is the reason for the pressure on services margins, and how is the company managing its capital structure?
A:The pressure on services margins is due to the mix of higher equipment sales in lower-cost regions, which is seen as positive as it enables future sales in services and software. The company has strong free cash flow and plans to resume its buyback program, with $6.5 million remaining in authorization.
Q:What is the update on backlog and bookings, and what are the key drivers?
A:The company reported its highest bookings in 10 years, with a book-to-bill ratio over 1 for the last two quarters. The growth is broad-based across service providers and private networks, with no significant state network wins recently but diverse customer wins in state public safety and utility sectors.
Q:What is the status of the MDU project and its impact on bookings?
A:The MDU project is progressing but is not yet a significant driver of bookings. The company is optimistic about future orders, which could lead to increased backlog and potentially higher guidance.
Q:What is the competitive advantage of the cellular router business, and what is its current status?
A:The cellular router business benefits from the company's strong presence in U.S. 911 networks and its acquisition of the 4RF business. The company is engaged with about 15 customers and expects the business to become material in fiscal year 2027.
Q:What is driving the strength in Europe?
A:The strength in Europe is attributed to a new EMEA leader who has implemented discipline and a focus on private networks, leading to success in the region.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the backlog metric and book-to-bill ratio, citing the project nature of the business. They also did not quantify the impact of state network projects on bookings, instead emphasizing broad-based growth. Additionally, while optimistic about the MDU project and cellular router business, management did not provide concrete timelines or financial impacts, using vague language about future potential.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Accounting Officer
BEAD number
BEAD policy
CFO SVP
CFO experience
Corporate Finance
Deployment Fund
Finance Networks
Finance reminder
Fund BEAD
Internet backhaul
Internet subscriber
MDU offering
NTIA
President Corporate
Schmidt
Tier provider
Vice President
access Internet
account
cash activity
cash collection
cash generation
improvement
inventory
month period
non period
opening
order
plan
revenue month
revenue non
segment
share basis
state
timing
AVNW Transcript
Aviat Networks, Inc. (AVNW) Q2 2026 Earnings Call Transcript
Unknown2-3
The earnings call summary presents mixed signals: improved operational efficiency and cash flow, but declining margins and operating income. The Q&A session adds uncertainty with vague timelines and minimal contributions from key projects like 5G routers and BEAD. The positive aspects include a strong bookings record and plans to resume buybacks. However, the lack of concrete guidance and declining margins balance out these positives, resulting in a neutral sentiment. The absence of market cap information prevents further refinement of the prediction.
Aviat Networks, Inc. (AVNW) Q1 2026 Earnings Call Transcript
Positive11-4
The earnings call reveals strong financial performance with improved gross margins, significant reductions in operating expenses, and a positive net income. While there are some uncertainties, like potential government shutdown impacts, the optimistic guidance for U.S. public safety and cellular routing solutions, along with promising growth opportunities in various markets, suggest a positive outlook. Despite management's cautious tone, the overall sentiment leans towards positive, supported by strategic initiatives and market validations.
Aviat Networks, Inc. (AVNW) Q4 2025 Earnings Call Transcript
Unknown9-11
The earnings call presents a mixed outlook. While there are positive aspects such as increased North American revenues, backlog growth, and record adjusted EBITDA, these are offset by declines in international revenues, gross margins, and a conservative fiscal '26 outlook due to past underperformance. The Q&A section highlights uncertainties, particularly with the BEAD program and fiscal '26 growth, which tempers the overall sentiment. The company's cautious guidance and lack of new partnerships or shareholder return announcements further support a neutral sentiment, indicating limited stock price movement in the near term.
Aviat Networks, Inc. (AVNW) Q3 2025 Earnings Call Transcript
Unknown5-6
The earnings call presents a mixed picture: strong adjusted EBITDA and revenue growth, but challenges like international revenue decline and tariff impacts. The Q&A highlights uncertainties around tariffs and U.S. Tier 1 market timing. No share repurchase program is a neutral factor, and guidance remains unchanged. Overall, the financial health appears stable, but market uncertainties and lack of strong positive catalysts suggest a neutral stock price movement.
AVNW Slides
AVNW Report
Frequently Asked Questions
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