Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand Aviat Networks, Inc.’s (“Aviat”, the “Company”, “we”, “us”, or “our”) results of operations and financial condition during the two-year period ended June 27, 2025. MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s consolidated financial statements and accompanying notes. In the discussion herein, the fiscal years ended June 27, 2025, June 28, 2024, and June 30, 2023, are referred to as “fiscal 2025”, “fiscal 2024” and “fiscal 2023”, respectively. Aviat’s fiscal year ends on the Friday nearest to June 30. For a comparison of the results of operations for fiscal 2024 and 2023, refer to Aviat’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024, filed with the SEC on October 4, 2024.
Overview
Aviat is a global supplier of microwave networking and access networking solutions, backed by an extensive suite of professional services and support. Aviat sells radios, routers, software and services integral to the functioning of data transport networks. Aviat has more than 3,000 customers and significant relationships with global service providers and private network operators. Aviat’s North America manufacturing base consists of a combination of contract manufacturing and assembly and testing operated in Austin, Texas by Aviat. Additionally, Aviat utilizes a contract manufacturer based in Asia for much of its international equipment demand. Aviat’s technology is underpinned by more than 400 patents. Aviat competes on the basis of Total Cost of Ownership (“TCO”), microwave radio expertise and solutions for mission critical communications.
Acquisitions
4RF Limited
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. 4F 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. See Note 12. Acquisitions of the Notes to the consolidated financial statements in this Annual Report on Form 10-K (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, the “Purchase Agreement”) 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 12. Acquisitions of the Notes to the consolidated financial statements in this Annual Report on Form 10-K 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 is 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 (as defined below). Refer to Note 7. Credit Facility and Debt of the Notes for further information.
Redline Communications Group Inc.
In the first quarter of fiscal 2023, the Company acquired all of the issued and outstanding shares of Redline Communications Group Inc. (“Redline”), for a purchase price of $20.4 million. Redline is a leading provider of mission-critical data infrastructure. See Note 12. Acquisitions of the Notes for further information.
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Operations Review
The market for mobile backhaul continued to be the Company’s primary addressable market segment globally in fiscal 2025. 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. In international markets, the Company’s business continued to rely on a combination of customers increasing their capacity to handle subscriber growth and the ongoing build-out of some large LTE and 5G deployments. Aviat’s position continues to be to support its customers for 5G and LTE readiness and ensure that its technology roadmap is well aligned with evolving market requirements. Aviat’s strength in turnkey and after-sale support services is a differentiating factor that wins business for the Company and enables it to expand its business with existing customers. Additionally, Aviat operates an e-commerce on-line platform, Aviat Store, that provides low-cost services, a simple experience, and fast delivery to mobile operators and private network customers. In 2025, new U.S. tariffs on foreign imports were proposed, and in certain cases implemented. In response, Aviat implemented mitigation strategies by optimizing its sourcing and operations to minimize the effects and took pricing actions to offset the impact of these tariffs. However, as disclosed in the “Risk Factors” section in Item 1A of this Annual Report on Form 10-K, 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.
Fiscal 2025 Compared to Fiscal 2024
Revenue
The Company manages its sales activities primarily on a geographic basis in North America and three international geographic regions: (1) Africa and the Middle East, (2) Europe and (3) Latin America and Asia Pacific. Revenue by region for fiscal 2025 and 2024 and the related changes were as follows:
Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
The Company achieved revenue growth of 6.5% in fiscal 2025 primarily driven by contributions from the NEC Transaction and the 4RF acquisition, and 21% growth in managed services driven by increased demand on a larger install base. This was partially offset by lower demand for software offerings and equipment, which both decreased 3%. During fiscal 2025, contributions from the NEC Transaction and 4RF acquisition totaled $126.8 million and $25.3 million, respectively.
Revenue in North America increased by $1.5 million in fiscal 2025 primarily due to contributions of the 4RF acquisition of $18.8 million, partially offset by lower mobile operator demand, which decreased $17 million.
Revenue in Africa and the Middle East increased by $0.5 million in fiscal 2025 primarily due to increased demand of managed services and software offerings on a larger install base, which increased 36% and 42%, respectively, partially offset by a 12% decrease in equipment sales.
Revenue in Europe increased by $7.1 million in fiscal 2025 primarily due to increased equipment sales to mobile operators in the region.
Revenue in Latin America and Asia Pacific increased by $17.3 million in fiscal 2025 primarily due to higher demand for Pasolink projects and services increasing 37%, higher demand for software which increased 13%, and contributions from the 4RF acquisition of $5.4 million, partially offset by lower equipment sales to mobile operators.
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Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
Revenue from product sales and services increased by 4.9% and 9.8%, respectively in fiscal 2025 primarily due to the same overall factors of revenue growth discussed previously.
Gross Margin
Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
Gross margin for fiscal 2025 decreased by $(5.3) million, while gross margin as a percentage of revenue reduced by 3.4 percentage points due to higher volumes on lower margin sales.
Research and Development Expenses
Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
% of revenue 8.2 % 8.9 %
Research and development expenses decreased by $(0.7) million in fiscal 2025 primarily due to synergies achieved leading to cost optimization from the NEC Transaction.
Selling and Administrative Expenses
Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
Selling and administrative expenses increased by $4.4 million in fiscal 2025 primarily due to merger and acquisition expenses and additional costs resulting from the NEC Transaction and 4RF acquisition.
Restructuring Charges
Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
% of revenue 0.8 % 0.9 %
During fiscal 2025 restructuring charges were $3.6 million, a decrease of $(0.3) million compared to fiscal 2024. Fiscal 2025 restructuring activities were primarily associated with reductions in workforce in certain of the Company’s operations to optimize skill sets and align cost structure. The prior year comparison period includes restructuring charges primarily associated with the NEC Transaction.
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The Company’s success in restructuring initiatives has enabled it to restructure specific groups to optimize skill sets and align its organizational structure to execute on strategic deliverables, in addition to aligning cost structure with the core business.
Interest Expense, Net
Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
Interest expense, net increased by $3.7 million in fiscal 2025 primarily due to interest expense incurred on incremental Term Loan borrowings.
Other Expense, Net
Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
Other expense, net increased by $0.8 million in fiscal 2025 primarily as a result of foreign exchange rate movement.
Income Taxes
Fiscal Year
(In thousands, except percentages) 2025 2024 $ Change % Change
As % of income before income taxes 62.5 % 36.4 %
The Company estimates its annual effective tax rate at the end of each reporting 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.
Tax expense was $2.2 million in fiscal 2025 and $6.1 million in fiscal 2024. Tax expense in fiscal 2025 was primarily attributable to tax expense for the U.S. entity, profitable foreign subsidiaries, and withholding taxes, partially offset by a Canada valuation allowance release. Tax expense in fiscal 2024 was primarily attributable to tax expense related to U.S. and profitable foreign subsidiaries, partially offset by Canada valuation allowance release.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. We continue to analyze the OBBBA and at this time do not expect a material effect on our consolidated financial statements.
Fiscal 2024 Compared to Fiscal 2023
For a comparison of the results of operations for fiscal 2024 and 2023, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Aviat’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024, filed with the SEC on October 4, 2024.
Liquidity, Capital Resources and Financial Strategies
Sources of Cash
As of June 27, 2025, the Company’s total cash and cash equivalents were $59.7 million. Approximately $22.2 million, or 37% was held in the United States. The remaining balance of $37.5 million, or 63% was held outside the United States. Of the amount of cash and cash equivalents held by the Company’s foreign subsidiaries on June 27, 2025, $37.1 million was held in jurisdictions where its undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign withholding taxes.
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Operating Activities
Operating cash flows is presented as net income adjusted for certain non-cash items and changes in operating assets and liabilities. Net cash provided by operating activities was $5.7 million for fiscal 2025, compared with $30.5 million in the prior year. The $(24.8) million decrease is primarily attributable to decreased net income prior to non-cash adjustments and overall decreases in the net changes in operating assets and liabilities compared to the prior year. Net changes in operating assets and liabilities resulted in $(16.8) million of cash used in operating activities for fiscal 2025, compared to $(2.5) million in fiscal 2024. The $(14.3) million increase compared to the prior year is primarily attributable to increases in inventory as well as an increase in accounts receivable which is primarily driven by increased sales in the year and timing of receiving payments. These impacts were partially offset by an increase in accounts payable due to purchasing of increased inventory as well as the timing of payments as compared to the prior year.
Investing Activities
Net cash used in investing activities was $28.5 million for fiscal 2025, compared to $35.2 million in the prior year. The $6.7 million decrease is driven by prior year cash paid for the NEC Transaction of $32.2 million compared to current year net cash paid for the 4RF acquisition of $18.2 million. This is partially offset by an increase in purchases of property, plant, and equipment of $10.3 million compared to the prior 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 $18.7 million for fiscal 2025, compared with $48.7 million in the prior year. The $(30.0) million decrease is primarily due to payment of deferred consideration of $18.6 million related to the NEC acquisition and repayment of $50.6 million in the current year on Term Loan borrowings compared to $1.3 million in the prior year. The decrease is partially offset by increased net borrowings of $15.0 million on the Revolver (as defined below) in the current year.
As of June 27, 2025, the Company’s sources of liquidity consisted of $59.7 million in cash and cash equivalents, $51.3 million of available credit under its Credit Facility, and future collections of receivables from customers. The Company regularly requires letters of credit from certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce its credit and sovereign risk. Historically, the Company’s primary sources of liquidity have been cash flows from operations and credit facilities.
The Company believes that its existing cash and cash equivalents, the available borrowings under its Credit Facility, the availability under its effective shelf registration statement and future cash collections from customers will be sufficient to provide for its anticipated requirements and plans for cash for at least the next 12 months. 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.
Available Credit Facility, Borrowings and Repayment of Debt
The Company entered into a Secured Credit Facility Agreement (the “Credit Facility”), dated May 9, 2023, amended as of November 22, 2023 and October 18, 2024, with Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender and Wells Fargo Securities LLC, Citigroup Global Markets Inc., and Regions Capital Markets as lenders. The Credit Facility provides for a $75.0 million revolving credit facility (the “Revolver”) and a $75.0 million Term Loan Facility (the “Term Loan”) with a maturity date of October 18, 2029. The $75.0 million Revolver can be borrowed with a $10.0 million sub-limit for letters of credit, and a $10.0 million swingline loan sub-limit. 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. Refer to Note 7. Credit Facility and Debt and Note 16. Subsequent Events of the Notes for further information.
In November 2023, the Company borrowed $50.0 million against the Term Loan to primarily settle the cash portion of the consideration associated with the NEC Transaction. Refer to Note 12. Acquisitions of the Notes for further information.
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As of June 27, 2025, the available credit under the Revolver was $51.3 million, reflecting the available limit of $60.0 million less outstanding letters of credit of $8.7 million. The Company borrowed $95.0 million and repaid $80.0 million against the Revolver in fiscal 2025. The Company borrowed $75.0 million and repaid $50.6 million against the Term Loan in fiscal 2025. As of June 27, 2025, the Company had $73.1 million outstanding under its Term Loan and $15.0 million borrowings under its Revolver.
Outstanding borrowings under the Credit Facility bear interest at either: (a) Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus the applicable margin; or (b) the Base Rate plus the applicable margin. The pricing levels for interest rate margins are determined based on the Consolidated Total Leverage Ratio as determined and adjusted quarterly. As of June 27, 2025, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.8% and 1.8%, respectively. The effective rate of interest on the outstanding Term Loan borrowings as of June 27, 2025, was 6.9%.
The Credit Facility requires the Company and its subsidiaries to maintain a fixed charge coverage ratio to be greater than 1.25 to 1.00 as of the last day of any fiscal quarter of the Company. The Credit Facility also requires that the Company maintain a maximum leverage ratio of 3.00 times Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), with a step-down to 2.75 times EBITDA after four full quarters, and 2.50 times EBITDA after eight full quarters. The Credit Facility contains customary affirmative and negative covenants, including, among others, covenants limiting the ability of the Company and its subsidiaries to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to customary exceptions. As of June 27, 2025, the Company was in compliance with all financial covenants contained in the Credit Facility.
Restructuring Payments
The Company had liabilities for restructuring activities totaling $1.8 million as of June 27, 2025, which was classified as current and are expected to be paid in cash within the next 12 months. The Company expects to fund the future payments with available cash and cash provided by operations. Refer to Note 8. Restructuring Activities of the Notes for further information.
Financial Risk Management
In the normal course of doing business, the Company is exposed to the risks associated with foreign currency exchange rates and changes in interest rates. The Company employs established policies and procedures governing the use of financial instruments to manage its exposure to such risks.
Exchange Rate Risk
The Company conducts business globally in numerous currencies and is therefore exposed to foreign currency risks. From time to time, the Company uses derivative instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The Company does not hold or issue derivatives for trading purposes or make speculative investments in foreign currencies.
The Company enters into foreign exchange forward contracts to mitigate the change in fair value of specific non-functional currency assets and liabilities on the balance sheet. All balance sheet hedges are marked to market through earnings every period. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities. The Company did not have any foreign exchange forward contracts outstanding as of June 27, 2025, or June 28, 2024.
Net foreign exchange (gains) losses recorded in the consolidated statements of operations during fiscal 2025, 2024 and 2023 were $(0.8) million, $(0.3) million and $1.0 million, respectively.
Certain of the Company’s international business are transacted in non-U.S. dollar (“USD”) currencies. From time to time, the Company utilizes foreign currency hedging instruments to minimize the currency risk of non-USD transactions. The impact of translating the assets and liabilities of foreign operations to USD is included as a component of stockholders’ equity. As of June 27, 2025, and June 28, 2024, the cumulative translation adjustment decreased stockholders’ equity by $18.8 million and $19.3 million, respectively.
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Interest Rate Risk
The Company’s exposure to market risk for changes in interest rates relates primarily to its cash equivalents and borrowings under its Credit Facility.
Exposure on Cash Equivalents
The Company had $59.7 million in total cash and cash equivalents as of June 27, 2025. Cash equivalents totaled $6.4 million as of June 27, 2025, and were comprised of money market funds and bank certificates of deposit. Cash equivalents have been recorded at fair value. Fair value is measured using inputs that fall into a three-level hierarchy that prioritizes the inputs used to measure fair value based on observability of such inputs. Refer to Note 6. Fair Value Measurements of Assets and Liabilities of the Notes for further information.
The Company’s cash equivalents earn interest at fixed rates; therefore, changes in interest rates will not generate a gain or loss on these investments unless they are sold prior to maturity. The weighted-average days to maturity for cash equivalents held as of June 27, 2025, was approximately 27 days, and these investments had an average yield of approximately 5.0% per annum. A 10% change in interest rates on the Company’s cash equivalents is not expected to have a material impact on its financial position, results of operations, or cash flows.
Exposure on Borrowings
As of June 27, 2025, the Company had $73.1 million outstanding under its Term Loan and $15.0 million outstanding under its Revolver. Refer to Note 7 Credit Facility and Debt of the Notes for further information.
The Company’s borrowings under the current Credit Facility bear interest at either: (a) Adjusted Term SOFR plus the applicable margin; or (b) the Base Rate plus the applicable margin. The pricing levels for interest rate margins are determined based on the Consolidated Total Leverage Ratio as determined and adjusted quarterly. As of June 27, 2025, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.8% and 1.8%, respectively. The effective rate of interest on the Company’s outstanding Term Loan borrowings as of June 27, 2025, was 6.9%.
A 10% change in interest rates is estimated to have a $0.5 million impact on annual interest expense on the Company’s outstanding long-term debt as of June 27, 2025.
Critical Accounting Estimates
The Company’s consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected.
The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
•revenue recognition for estimated costs to complete over-time services;
•inventory valuation and provision for excess and obsolete inventory losses;
•income taxes valuation; and
•business combinations.
In some cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed these critical accounting policies and related disclosures with the Audit Committee of the Board.
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The following is not intended to be a comprehensive list of all of our accounting policies or estimates. Our significant accounting policies are more fully described in Note 1. The Company and Summary of Significant Accounting Policies of the Notes. In preparing our financial statements and accounting for the underlying transactions and balances, we apply those accounting policies. We consider the estimates discussed below as critical to an understanding of our financial statements because their application places the most significant demands on our judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain.
Besides estimates that meet the “critical” accounting estimate criteria, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenue and expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, including for estimates that we do not deem “critical.”
Revenue Recognition
We recognize revenue by applying the following five-step approach: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.
Revenue from services includes certain network planning and design, engineering, installation and commissioning, extended warranty, customer support, consulting, training, and education. Maintenance and support services are generally offered to our customers and recognized over a specified period of time and from sales and subsequent renewals of maintenance and support contracts. The network planning and design, engineering and installation related services noted are recognized based on an over-time recognition model using the cost-input method. Certain judgment is required when estimating total contract costs and progress to completion on the over-time arrangements, as well as whether a loss is expected to be incurred on the contract. The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial professionals. Changes in job performance and job conditions are factors that influence estimates of the total costs to complete those contracts and the Company’s revenue recognition. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made in a timely manner. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which the circumstances that gave rise to the revision become known to us. As of June 27, 2025, favorable and unfavorable changes in contract estimates are not considered material for each period presented. We perform ongoing profitability analysis of our service contracts accounted for under this method to determine whether the latest estimates of revenues, costs, and profits require updating. In rare circumstances if these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately. As of June 27, 2025, contract losses recognized are not considered material during each period presented and there are no material loss contracts for each period presented.
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Inventory Valuation and Provisions for Excess and Obsolete Losses
Our inventories have been valued at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. We balance the need to maintain prudent inventory levels to ensure competitive delivery performance with the risk of excess or obsolete inventory due to changing technology and customer requirements, and new product introductions. The manufacturing of our products is handled primarily by contract manufacturers. Our contract manufacturers procure components and manufacture our products based on our forecast of product demand. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand, the stage of the product life cycle, anticipated end of product life and production requirements. Several factors may influence the sale and use of our inventories, including decisions to exit a product line, technological change, new product development and competing product offerings. These factors could result in a change in the amount of obsolete inventory quantities on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case the provision required for excess and obsolete inventory may be overstated or understated. In the future, if we determine that our inventory is overvalued, we would be required to recognize such costs in cost of product sales and services in our consolidated statements of operations at the time of such determination. In the case of goods which have been written down below cost at the close of a fiscal quarter, such reduced amount is considered the new lower cost basis for subsequent accounting purposes, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. We did not make any material changes in the valuation methodology during the past three fiscal years.
Our customer service inventories are stated at the lower of cost or net realizable value. We carry service parts because we generally provide product warranty for 12 to 36 months and earn revenue by providing enhanced and extended warranty and repair service during and beyond this warranty period. Customer service inventories consist of both component parts, which are primarily used to repair defective units, and finished units, which are provided for customer use permanently or on a temporary basis while the defective unit is being repaired. We record adjustments to reduce the carrying value of customer service inventories to their net realizable value. Factors influencing these adjustments include product life cycles, end of service life plans and volume of enhanced or extended warranty service contracts. Estimates of net realizable value involve significant estimates and judgments about the future, and revisions would be required if these factors differ from our estimates.
Income Taxes Valuation
We record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities of amounts reported in our consolidated balance sheets, as well as operating loss and tax credit carryforwards. Certain judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the opening and closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may result in an increase or decrease to our tax provision in a subsequent period in which such determination is made.
We record deferred taxes by applying enacted statutory tax rates to the respective jurisdictions and follow specific and detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded on the consolidated balance sheets and provide necessary valuation allowances as required. Future realization of deferred tax assets ultimately depends on meeting certain criteria in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“ASC 740”). One of the major criteria is the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carry-back or carry-forward periods available under the tax law. We regularly review our deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. Our judgments regarding future profitability may change due to many factors, including future market conditions and our ability to successfully execute our business plans and/or tax planning strategies. Should there be a change in our ability to recover our deferred tax assets, our tax provision would increase or decrease in the period in which the assessment is changed.
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The accounting estimates related to the liability for uncertain tax position require us to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. It is inherently difficult and subjective to estimate our reserves for the uncertain tax positions. Although we believe our estimates are reasonable, no assurance can be given that the final tax outcome of these matters will be the same as these estimates. These estimates are updated quarterly based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues.
Business Combinations
The Company accounts for acquisitions as required by FASB ASC Topic 805, Business Combinations (“ASC 805”). Under the acquisition method of accounting, the assets and liabilities of acquired businesses are recorded at their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates and assumptions to properly allocate purchase price consideration between the fair value of the assets acquired and liabilities assumed. The Company leverages independent third-party valuations in determining the estimated fair values of acquired tangible assets, identifiable intangible assets, and assumed liabilities. If assumptions or estimates used in determining fair values change based on information that becomes available during the one-year period from the acquisition date, we record measurement period adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Impact of Recently Issued Accounting Pronouncements
Refer to Note 1. The Company and Summary of Significant Accounting Policies of the Notes for a full description of recently issued accounting pronouncements, including the respective expected dates of adoption and effects on the consolidated financial position and results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of doing business, the Company is exposed to the risks associated with foreign currency exchange rates and changes in interest rates. The Company has established policies and procedures governing the use of financial instruments to manage its exposure to such risks. For a discussion of such policies and procedures and the related risks, see “Financial Risk Management” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is incorporated by reference into this Item 7A.
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Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page No.
Report of Independent Registered Public Accounting Firms (PCAOB ID: 34) 50
Consolidated Statements of Operations 52
Consolidated Statements of Comprehensive Income 53
Consolidated Balance Sheets 54
Consolidated Statements of Cash Flows 55
Consolidated Statements of Equity 57
Notes to Consolidated Financial Statements 58
Note 1. The Company and Summary of Significant Accounting Policies 58
Note 2. Net Income per Share of Common Stock 65
Note 3. Revenue Recognition 65
Note 4. Leases 68
Note 5. Balance Sheet Components 69
Note 6. Fair Value Measurements of Assets and Liabilities 71
Note 7. Credit Facility and Debt 72
Note 8. Restructuring Activities 73
Note 9. Stockholders’ Equity 74
Note 10. Segment and Geographic Information 77
Note 11. Income Taxes 78
Note 12. Acquisitions 82
Note 13. Commitments and Contingencies 84
Note 14. Goodwill and Intangibles 86
Note 15. Related Party Transactions 87
Note 16. Subsequent Events 88
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Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of Aviat Networks, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Aviat Networks, Inc. and subsidiaries (the "Company") as of June 27, 2025 and June 28, 2024, the related consolidated statements of operations, comprehensive income, cash flows, and equity, for each of the three fiscal years in the period ended June 27, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 27, 2025 and June 28, 2024, and the results of its operations and its cash flows for each of the three fiscal years in the period ended June 27, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 27, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 10, 2025, expressed an adverse opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition — Service Revenues - Estimated Costs to Complete - Refer to Note 3 to the financial statements
Critical Audit Matter Description
The Company recognizes revenue from two primary sources: products and services. Revenues from services include revenues from network planning and design, engineering and installation-related services. Long term contracts for these services are recognized based on an over-time recognition model using the cost-input method. Judgment is required when estimating total contract costs. The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial professionals. Changes in job performance and job conditions are factors that influence estimates of the total costs to complete those contracts and the Company’s revenue recognition.
We identified estimated costs to complete for open over-time revenue contracts at year end as a critical audit matter. The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions. Changes in these estimates can have a significant impact on the revenue recognized each period. Auditing these elements involved especially challenging and subjective auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the duration of these contracts.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimates of costs to complete for open over-time revenue contracts used to recognize service revenues included the following, among others:
•We selected a sample of revenue contracts and performed the following:
◦Tested the accuracy and completeness of the costs incurred to date
◦Evaluated the estimates of cost to complete for a sample of open over-time contracts by:
▪Comparing costs incurred to date to the costs management estimated to be incurred to date
▪Evaluating the progress to completion by performing inquiries of project managers and assessing the nature of activities required to complete
▪Comparing management’s estimates of gross margin for the selected contracts to the gross margin of similar contracts, when applicable
◦Tested the mathematical accuracy of management’s calculation of revenue for the contract
•We developed an expectation of service revenue by creating an independent estimate of gross margin based on historical margin rates and compared it to the recorded service revenue
•We performed a lookback to evaluate management’s ability to estimate costs accurately by making a selection of changes in estimates during the year and testing whether the change in estimate was properly supported and recorded within the correct period
/s/ Deloitte & Touche LLP
Austin, Texas
September 10, 2025
We have served as the Company's auditor since fiscal year 2023.
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AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended
Revenues:
Cost of revenues:
Operating expenses:
Net income per share of common stock outstanding:
Weighted average shares outstanding:
See accompanying Notes to Consolidated Financial Statements
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AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal Year Ended
Other comprehensive income (loss):
Net change in cumulative translation adjustment 505 (3,316) 25
Other comprehensive income (loss) 505 (3,316) 25
See accompanying Notes to Consolidated Financial Statements
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AVIAT NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts) June 27, 2025 June 28, 2024
ASSETS
Current Assets:
Assets held for sale — 2,720
Property, plant and equipment, net 17,453 9,480
LIABILITIES AND EQUITY
Current Liabilities:
Advance payments and unearned revenue 73,735 58,839
Current portion of long-term debt 18,624 2,396
Long-term operating lease liabilities 2,241 2,823
Other long-term liabilities 430 394
Reserve for uncertain tax positions 3,242 3,485
Commitments and contingencies (Note 13)
Stockholders’ equity
Accumulated other comprehensive loss (18,815) (19,320)
Total liabilities and stockholders’ equity $ 633,296 $ 535,223
See accompanying Notes to Consolidated Financial Statements
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AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended
Operating Activities
Depreciation of property, plant and equipment 5,338 3,991 5,475
Net (gain) loss on marketable securities (103) 41 1,734
Other non-cash operating activities, net 355 128 67
Changes in operating assets and liabilities:
Net cash provided by (used in) operating activities 5,721 30,540 (1,644)
Investing Activities
Purchases of property, plant and equipment (12,970) (2,675) (5,335)
Purchases of marketable securities — (925) —
Proceeds from sale of marketable securities — 538 9,157
Proceeds from sale of assets held for sale 2,589 — —
Financing Activities
Payments of deferred financing costs (529) (79) (753)
Payments of deferred consideration for acquisitions (18,552) — —
Payments for repurchase of common stock — treasury shares (597) (332) —
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Net cash provided by (used in) financing activities 18,680 48,701 (681)
Fiscal Year Ended
Non-cash investing and financing activities:
Unpaid property, plant and equipment $ 3,686 $ 3,574 $ 168
Common stock issued in connection with acquisition — 22,331 —
Supplemental disclosures of cash flow information:
See accompanying Notes to Consolidated Financial Statements
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AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands) Shares $Amount Shares $Amount
Other comprehensive income — — — — — — 25 25
Issuance of common stock under employee stock plans 396 3 — — 1,267 — — 1,270
Stock repurchase — — — — — — — —
Share-based compensation — — — — 6,720 — — 6,720
Other comprehensive loss — — — — — — (3,316) (3,316)
Issuance of common stock under employee stock plans 400 4 — — 1,054 — — 1,058
Share-based compensation — — — — 7,341 — — 7,341
Common stock issued in connection with acquisition 737 7 — — 22,324 — — 22,331
Other comprehensive income — — — — — — 505 505
Issuance of common stock under employee stock plans 208 2 — — 226 — — 228
Share-based compensation — — — — 7,067 — — 7,067
See accompanying Notes to Consolidated Financial Statements
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AVIAT NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Summary of Significant Accounting Policies
The Company
Aviat Networks, Inc. (“Aviat,” the “Company,” “we,” “us,” and “our”) designs, manufactures, and sells wireless networking and access networking solutions and services to mobile and fixed telephone service providers, private network operators, government agencies, transportation and utility companies, public safety agencies and broadcast system operators across the globe. Aviat’s products include broadband wireless access base stations and customer premises equipment for fixed and mobile, point-to-point digital microwave radio systems for access, backhaul, trunking and license-exempt applications, supporting new network deployments, network expansion, and capacity upgrades.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority owned subsidiaries. All intercompany transactions and accounts have been eliminated. Certain amounts in the consolidated financial statements have been reclassified for comparative purposes to conform to the current period consolidated financial statement presentation.
Aviat’s fiscal year includes 52 or 53 weeks and ends on the Friday nearest to June 30. This was June 27, 2025, for fiscal 2025, June 28, 2024, for fiscal 2024 and June 30, 2023, for fiscal 2023. Fiscal 2025, 2024 and 2023 includes 52 weeks. In the notes to consolidated financial statements, we refer to our fiscal years as “fiscal 2025”, “fiscal 2024” and “fiscal 2023.”
Use of Estimates
The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) requires the Company to make estimates, assumptions and judgments affecting the amounts reported and related disclosures. Estimates are based upon historical factors, current circumstances and the experience and judgment of management. The Company evaluates estimates and assumptions on an ongoing basis and may employ outside experts to assist in making these evaluations. Changes in such estimates, based on more accurate information, or different assumptions or conditions, may affect amounts reported in future periods. Such estimates affect significant items, including revenue recognition, provision for uncollectible receivables, inventory valuation, goodwill and identified intangible assets in business combinations, valuation allowances for deferred tax assets and uncertainties in income taxes. Actual results may differ materially from estimates.
Cash, Cash Equivalents and Restricted Cash
All highly liquid investments with an original maturity of three months or less at the date of purchase are considered to be cash equivalents. Cash equivalents are carried at amortized cost, which approximates fair value due to the short-term nature of these investments. Investments with an original maturity of greater than three months are accounted for as short-term investments and are classified as such at the time of purchase.
The Company’s cash and cash equivalents are held at several major financial institutions, which often significantly exceed Federal Deposit Insurance Corporation insured limits. However, a substantial portion of the cash equivalents is invested in prime money market funds which are backed by the securities in the fund.
Cash and cash equivalents that are restricted as to withdrawal or usage under the terms of contractual agreements are recorded as restricted cash. The Company’s restricted cash is included in long-term other assets on the consolidated balance sheets and represents the cash balance on its disability insurance voluntary plan account that cannot be used for any operating purposes other than to pay benefits to the insured employees.
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Significant Concentrations
The Company typically invoices customers for the sales order (or contract) value of the related products delivered at various milestones, including order receipt, shipment, installation and acceptance and for services when rendered. The Company’s trade receivables are derived from sales to customers located in North America, Latin America, Europe, Africa, the Middle East, and Asia-Pacific.
Accounts receivable is presented net of allowance for expected credit losses to reflect any loss anticipated on the collection of the Company’s trade receivable balances. The allowance for expected credit losses is based on historical loss information, customer financial condition, and economic and geopolitical conditions for the locations where the Company’s customers operate. Accounts receivable amounts are written off when attempts to collect outstanding amounts have been exhausted or there are other indicators that the amounts are no longer collectible.
The Company regularly requires letters of credit from certain customers and, from time to time, discounts these letters of credit issued by customers through various financial institutions. The discounting of letters of credit depends on many factors, including the willingness of financial institutions to discount the letters of credit and the cost of such arrangements. Under these arrangements, collection risk is fully transferred to the financial institutions. Financing charges on discounting the letters of credit are recorded as interest expense.
During fiscal 2025, 2024 and 2023, no customer accounted for more than 10% of total revenue. As of June 27, 2025, and June 28, 2024, no customer accounted for more than 10% of accounts receivable.
Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash equivalents, trade accounts receivable and from time to time, financial instruments used in foreign currency hedging activities. The Company invests excess cash primarily in prime money market funds and certificates of deposit. The Company is exposed to credit risks related to such instruments in the event of default or decrease in credit-worthiness of the issuers of the investments. Risks associated with the Company’s cash and cash equivalents are mitigated by banking with creditworthy institutions.
The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable, as the majority of customers are large, well-established companies. However, in certain circumstances, the Company may require letters of credit, additional guarantees or advance payments. The Company maintains allowances for expected credit losses, but historically has not experienced any significant losses related to any particular geographic area. The Company’s customers are primarily in the telecommunications industry, and its accounts receivable is exposed to similar credit risk characteristics as that industry.
Inventories
The Company engages third parties to manufacture its products and procures its raw materials from third-party suppliers. In addition, certain strategic component inventory is consigned to third-party manufacturers. Other components included in the Company’s products are sourced from various suppliers and are principally industry standard parts and components that are available from multiple vendors. The inability of a contract manufacturer or supplier to fulfill the Company’s supply requirements or changes in their financial or business condition could disrupt the Company’s ability to supply quality products to its customers, and thereby may have a material adverse effect on the Company’s business and operating results.
Inventories are valued at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Cost is determined using standard cost, which approximates actual cost on a weighted-average first-in-first-out basis, or in certain circumstances actual cost. The Company regularly reviews inventory quantities on hand and records adjustments to reduce the cost of inventory for excess and obsolete inventory based primarily on estimated forecast of product demand and production requirements. Inventory adjustments are measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
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The Company stocks customer service related inventories such as service parts because the Company provides product warranties for 12 to 36 months and earns revenue by providing enhanced and extended warranty and repair service during and beyond this warranty period. Customer service related inventories consist of both component parts, which are primarily used to repair defective units, and finished units, which are provided for customer use permanently or on a temporary basis while the defective unit is being repaired. The Company records adjustments to reduce the carrying value of customer service inventories to their net realizable value. Factors influencing these adjustments include product life cycles, end of service life plans and volume of enhanced or extended warranty service contracts. Estimates of net realizable value involve significant estimates and judgments about the future, and revisions would be required if these factors differ from estimates. Refer to Note 5. Balance Sheet Components for further information.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost less accumulated depreciation. The Company capitalizes costs of software, consulting services, hardware and other related costs incurred to purchase or develop internal-use software. Costs incurred during preliminary project assessment, re-engineering, training and application maintenance are charged to expense.
Depreciation is charged to expense on a straight-line basis over the estimated useful lives of the respective assets. Leasehold improvements are depreciated on a straight-line basis over the shorter of the remaining lease term or the estimated useful life of the improvements.The useful lives of the assets are generally as follows:
Buildings 40 years
Leasehold improvements 2 to 10 years
Software and equipment 2 to 5 years
Expenditures for maintenance and repairs are charged to expense as incurred and are included in cost of revenues and selling and administrative expenses on the consolidated statements of operations. Cost and accumulated depreciation of assets sold or retired are removed from the respective property accounts, and any gain or loss is reflected on the consolidated statements of operations.
Business Combinations
The Company accounts for acquisitions as required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Under the acquisition method of accounting, the assets and liabilities of acquired businesses are recorded at their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates and assumptions to properly allocate purchase price consideration between the fair value of the assets acquired and liabilities assumed. The Company leverages independent third-party valuations in determining the estimated fair values of acquired tangible assets, identifiable intangible assets, and assumed liabilities. If assumptions or estimates used in determining fair values change based on information that becomes available during the one-year period from the acquisition date, we record measurement period adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Goodwill
The Company accounts for goodwill as required by FASB ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”). The Company tests goodwill for impairment on an annual basis and when events occur that may suggest that the fair value of such assets cannot support the carrying value. ASC 350 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative impairment test is unnecessary. However, if an entity concludes otherwise, then the quantitative impairment test shall be used to identify the impairment and measure the amount of an impairment loss to be recognized (if applicable).
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The Company tests goodwill for impairment on an annual basis on the first day of its fourth fiscal quarter. The Company has one reporting unit. A qualitative assessment was performed for fiscal 2025. This assessment considered changes in the Company’s projected future cash flows and discount rates, recent market transactions and overall macroeconomic conditions. Based on this assessment, the Company concluded that it was more likely than not that the estimated fair value of its reporting unit was higher than its carrying value and that the performance of a quantitative impairment test was not required. Refer to Note 10. Segment and Geographic Information, Note 12. Acquisitions, and Note 14. Goodwill and Intangible Assets for further information.
Valuation of Long-Lived Assets
The Company periodically reviews the carrying value of its long-lived assets, including finite-lived intangibles, and property, plant and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable or that the assigned useful lives may no longer be appropriate. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. If impairment exists, the impairment loss is measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest levels for which there are identifiable cash flows that are largely independent of cash flows from other asset groups. The Company’s estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. The actual cash flows realized from these assets may vary significantly from estimates. There were no impairment losses recorded for fiscal 2025, 2024 and 2023.
The Company amortizes the cost of finite-lived intangible assets on a straight-line basis over their estimated useful lives, which approximates the pattern of economic benefit. Refer to Note 14. Goodwill and Intangible Assets for further information.
Warranties
On product sales, the Company provides for future warranty costs upon product delivery. The specific terms and conditions of those warranties vary depending upon the type of product sold and country of delivery. In the case of products sold by the Company, product warranties generally start from the delivery date and continue for one to three years, depending on the terms.
Many of the Company’s products are manufactured to customer specifications and their acceptance is based on meeting those specifications. Factors that affect our warranty liabilities include the number of product units subject to warranty protection, historical experience and management’s judgment regarding anticipated rates of warranty claims and cost per claim. We assess the adequacy of our recorded warranty liabilities every quarter and make adjustments to the liabilities as necessary. Refer to Note 5. Balance Sheet Components for further information.
Leases
The Company leases office space, assembly facilities, repair and service centers, and warehouses globally under non-cancelable operating lease agreements. The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate based on the remaining lease term at commencement date is used in determining the present value of future payments. The operating lease right-of-use assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Variable lease payments are expensed as incurred and are not included within the right-of-use asset and lease liability calculation. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Certain of the Company’s lease arrangements include non-lease components and the Company accounts for non-lease components together with lease components for all such lease arrangements.
Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets. Lease expense for these leases is recognized on a straight-line basis over the lease term. Refer to Note 4. Leases for further information.
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Foreign Currency Translation
The functional currency of certain of the Company’s international subsidiaries is the United States (“U.S.”) dollar. Determination of the functional currency is dependent upon the economic environment in which an entity operates as well as the customers and suppliers the entity conducts business with. Changes in facts and circumstances may occur which could lead to a change in the functional currency of that entity. Accordingly, all non-functional currency denominated monetary assets and liabilities of these subsidiaries are re-measured into U.S. dollars at the current exchange rate as of the applicable balance sheet date. Non-monetary assets and liabilities are measured at historical rates.
All other international subsidiaries use their respective local currency as their functional currency. Assets and liabilities of these subsidiaries are translated at the current exchange rates in effect at the balance sheet date, and income and expense accounts are translated at average exchange rates during the period. The resulting translation adjustments are included in accumulated other comprehensive loss.
Gains and losses resulting from foreign exchange transactions and re-measurement of monetary assets and liabilities in non-functional currencies are included in other expense (income), net in the accompanying consolidated statements of operations, based on the nature of the transactions. Net foreign exchange (gains) losses recorded in the consolidated statements of operations during fiscal 2025, 2024 and 2023 were $(0.8) million, $(0.3) million and $1.0 million, respectively.
Retirement Benefits
The Company provides retirement benefits to substantially all employees primarily through its defined contribution retirement plans. These plans have matching and savings elements. Contributions by the Company to these retirement plans are based on profits and employees’ savings with no other funding requirements. Contributions to retirement plans are expensed as incurred. Retirement plan expense incurred in fiscal 2025, 2024 and 2023 was $3.3 million, $2.8 million, and $2.1 million, respectively. Retirement plan expenses are included in cost of revenues, research and development, and selling and administrative expenses on the consolidated statements of operations.
Revenue Recognition
The Company recognizes revenue by applying the five-step approach in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”): (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation. Refer to Note 3. Revenue Recognition for further information.
Cost of Product Sales and Services
Cost of sales consists primarily of materials, labor and overhead costs incurred internally and amounts incurred for contract manufacturers to produce the Company’s products, personnel and other implementation costs incurred to install the Company’s products and train customer personnel, and customer service and third party original equipment manufacturer costs to provide continuing support to customers.
Shipping and handling costs are included as a component of costs of product sales in the consolidated statements of operations because they are also included as a component of revenue billed to customers.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were not material during fiscal 2025, 2024 and 2023.
Presentation of Transactional Taxes Collected from Customers and Remitted to Government Authorities
Transactional taxes such as sales and use tax collected from customers and remitted to governmental authorities are presented on a net basis.
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Research and Development Costs
The Company’s research and development costs, which include costs in connection with new product development, improvement of existing products, process improvement, and product use technologies, are generally charged to operations in the period in which they are incurred. For certain software projects under development, development costs are capitalized during the period between determining technological feasibility of the product and commercial release and are included in long-term other assets on the consolidated balance sheets. The amortization of capitalized development costs begins upon commercial release, generally over three years. To date, the amount of development costs capitalized and amortized have not been material.
Share-Based Compensation
The Company has one stock incentive plan for its employees and non-employee directors. The stock incentive plan permits the Company to grant share-based awards in the form of options, restricted stock awards and units and performance share awards and units.
The estimated grant date fair value of share-based awards is amortized over the requisite service period or vesting term. For non-qualified stock options, the Black-Scholes option pricing model is used to estimate the fair value as of the grant date. The determination of the fair value of stock option awards is affected by the Company’s stock price and assumptions regarding a number of variables. These variables include the Company’s expected stock price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, the risk-free interest rate and expected dividend yield. Due to the inherent limitations of option valuation models, including consideration of future events that are unpredictable and the estimation process utilized in determining the valuation of the share-based awards, the ultimate value realized by the Company’s employees may vary significantly from the amounts expensed in its financial statements. For restricted stock awards and units and performance share awards and units with performance conditions, the market price of the Company’s common stock on the date of the grant is used to estimate the fair value. For performance share awards and units with market conditions, the fair value is estimated using a Monte-Carlo simulation model as of the grant date. The Company recognizes forfeitures of share-based awards as they occur.
The Company recognizes compensation cost for share-based payment awards on a straight-line basis over the requisite service period. For an award that has a graded vesting schedule, compensation expense is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. The amount of compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date.
For awards with a performance condition vesting feature, share-based compensation costs are recognized when achievement of the performance conditions is considered probable. Any previously recognized compensation cost is reversed if the performance condition is not satisfied or if it is not probable that the performance conditions will be achieved. For awards with a market condition vesting feature, share-based compensation costs are recognized over the period the requisite service is rendered, regardless of when, and if ever, the market condition is satisfied.
Restructuring Charges
Restructuring charges represent expenses incurred in connection with certain cost reduction programs that the Company has implemented, and consists of the costs of employee termination costs, lease and other contract termination charges and other costs of exiting activities or geographies. A liability for costs associated with an exit or disposal activity is measured at its fair value when the liability is incurred. Expenses for one-time termination benefits are recognized at the date the employee is notified, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period. The Company recognizes severance benefits provided as part of an ongoing benefit arrangement when the payment is probable and the amounts can be reasonably estimated. Liabilities related to termination of an operating lease or contract are measured and recognized at fair value when the contract does not have any future economic benefit to the entity and the fair value of the liability is determined based on the present value of the remaining lease obligations, adjusted for the effects of deferred items recognized under the lease, and reduced by estimated sublease rentals that could be reasonably obtained for the property. The assumptions in determining such estimates include anticipated timing of sublease rentals and estimates of sublease rental receipts and related costs based on market conditions. All other costs related to an exit or disposal activity are expensed as incurred. Refer to Note 8. Restructuring Activities for further information.
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Income Taxes and Related Uncertainties
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement and tax basis of assets and liabilities, as measured by tax rates at which temporary differences are expected to reverse as well as operating loss and tax credit carry forwards. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. A valuation allowance is established to offset any deferred tax assets if, based upon the available information, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company is required to compute its income taxes in each federal, state, and foreign jurisdiction the Company operates. This process requires that the Company estimate the current tax exposure as well as assess temporary differences between the accounting and tax treatment of assets and liabilities, including items such as accruals and allowances not currently deductible for tax purposes as well as operating loss and tax credit carry forwards. The income tax effects of the differences identified are classified as long-term deferred tax assets and liabilities on the consolidated balance sheets. The Company’s judgments, assumptions, and estimates relative to the current provision for income taxes take into account current tax laws, the Company’s interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. Changes in tax laws or the Company’s interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in the consolidated balance sheets and consolidated statements of operations. The Company must also assess the likelihood that deferred tax assets will be realized from future taxable income and, based on this assessment, establish a valuation allowance, if required. The Company’s determination of its valuation allowance is based upon a number of assumptions, judgments, and estimates, including forecasted earnings, future taxable income, and the relative proportions of revenue and income before taxes in the various domestic and international jurisdictions in which the Company operates. To the extent the Company establishes a valuation allowance or change the valuation allowance in a period, the change is reflected with a corresponding increase or decrease to the Company’s tax provision on the consolidated statements of operations.
The Company uses a two-step process to determine the amount of tax benefit to be recognized for uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires the Company to determine the probability of various possible outcomes. Uncertain tax positions are re-evaluated by the Company on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period. Refer to Note 11. Income Taxes for further information.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly presented to the chief operating decision maker. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. ASU 2023-07 is effective for the Company’s annual reporting beginning in fiscal 2025 and for interim periods beginning in fiscal 2026. The Company adopted ASU 2023-07 for the year ended June 27, 2025. The adoption of this standard does not have a material impact on the Company’s consolidated financial statements.
Accounting Standards Not Yet Adopted
In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU enhances the transparency and usefulness of income tax information through improvements to disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company’s annual reporting beginning in fiscal 2026. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined at this time that all other ASUs issued but not yet adopted are either not applicable or are expected to have a minimal impact on its financial position and results of operations.
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Note 2. Net Income per Share of Common Stock
Net income per share is computed by dividing net income attributable to the Company by the weighted average number of shares of its outstanding common stock.
The following table presents the computation of basic and diluted net income per share:
Fiscal Year
Numerator:
Denominator:
Effect of potentially dilutive equivalent shares 145 274 497
Net income per share:
The following table summarizes the weighted-average equity awards that were excluded from the diluted net income per share calculations since they were anti-dilutive:
Fiscal Year
Restricted stock units and performance stock units 135 23 21
Total shares of common stock excluded 449 342 215
Note 3. Revenue Recognition
We recognize revenue by applying the following five-step approach: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.
Contracts and customer purchase orders are used to determine the existence of an arrangement.
Many of the Company’s arrangements with customers contain multiple performance obligations and therefore promises to provide multiple goods and services. The Company evaluates each promised good and service in a contract to determine whether it represents a distinct performance obligation or should be accounted for as a combined performance obligation. For goods and services determined to be distinct we have concluded that they provide a benefit to the customer either on their own or together with other resources that are readily available to the customer, without having the need for significant integration or customization.
Revenue from product sales, recognized at a point-in-time, is generated predominately from the sales of products manufactured by third-party manufacturers to whom we have outsourced our manufacturing processes. Printed circuit assemblies, mechanical housings, and packaged modules are manufactured by contract manufacturing partners, with periodic business reviews of material levels and obsolescence. Product assembly, product testing, complete system integration, and system testing may either be performed within our own facilities or at the locations of our third-party manufacturers.
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Revenue from services includes certain network planning and design, engineering, installation and commissioning (“field services”), extended warranty, hosted software-as-a-service (“SaaS”), customer support, consulting, training, and education. Maintenance and support services are generally offered to our customers and recognized over a specified period of time and from sales and subsequent renewals of maintenance and support contracts. The network planning and design, engineering and installation related services noted are recognized based on an over-time recognition model using the cost-input method. Certain judgment is required when estimating total contract costs and progress to completion on the over-time arrangements, as well as whether a loss is expected to be incurred on the contract. The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers, and financial professionals. Changes in job performance and job conditions are factors that influence estimates of the total costs to complete those contracts and the Company’s revenue recognition. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made in a timely manner. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which the circumstances that gave rise to the revision become known to us. We perform ongoing profitability analysis of our service contracts accounted for under this method to determine whether the latest estimates of revenues, costs, and profits require updating. In rare circumstances if these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately. We establish billing terms at the time project deliverables and milestones are agreed. Revenues recognized in excess of the amounts invoiced to clients are classified as unbilled receivables and if invoicing is ahead of revenue recognized it is classified as an unearned liability on the consolidated balance sheets.
In addition, shipping documents and customer acceptances, when applicable, are used to verify delivery and transfer of control. We typically satisfy our performance obligations upon shipment or delivery of product depending on the contractual terms. Payment terms to customers generally range from net 30 to 120 days from invoice, which are considered to be standard payment terms. Revenue recognition does not necessarily follow payment terms as there are a number of scenarios where they would be different. Recognition follows contractual terms and those vary depending on the nature of the performance obligation being satisfied. These timing differences result in contract assets and liabilities as discussed below. We assess our ability to collect from our customers based primarily on the creditworthiness and past payment history of the customer.
While our customers do not have the right of return, we reserve for estimated product returns as an offset to revenue based primarily on historical trends. Actual product returns may be different than what was estimated. These factors and unanticipated changes in economic and industry condition could make actual results differ from our return estimates.
We present transactional taxes such as sales and use tax collected from customers and remitted to government authorities on a net basis.
Bill-and-Hold Sales
Certain customer arrangements consist of bill-and-hold characteristics under which control has been transferred to the customer, while we retain physical possession of the product. We evaluate bill-and-hold arrangement criteria to determine when the customer has obtained control. Once control has been obtained by the customer, they can direct or determine the use of the bill-and-hold inventory while we retain physical possession of the product until it is installed at a customer site at a point in time in the future.
Termination Rights
The contract term is determined on the basis of the period over which the parties to the contract have present enforceable rights and obligations. Certain customer contracts include a termination for convenience clause that allows the customer to terminate services without penalty, upon advance notification. We concluded that the duration of support contracts does not extend beyond the non-cancellable portion of the contract.
Variable Consideration
The consideration associated with customer contracts is generally fixed. Variable consideration includes discounts, rebates, refunds, credits, incentives, penalties, or other similar items. The amount of consideration that can vary is not a substantial portion of total consideration.
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Variable consideration estimates are re-assessed at each reporting period until a final outcome is determined. The changes to the original transaction price due to a change in estimated variable consideration are applied on a retrospective basis, with the adjustment recorded in the period in which the change occurs. Changes to variable consideration are tracked and material changes disclosed.
Stand-alone Selling Price
Stand-alone selling price is the price at which an entity would sell a good or service on a stand-alone (or separate) basis at contract inception. Under the model, the observable price of a good or service sold separately provides the best evidence of stand-alone selling price. However, in certain situations, stand-alone selling prices will not be readily observable and the entity must estimate the stand-alone selling price.
When allocating on a relative stand-alone selling price basis, any discount provided in the contract is allocated proportionately to all of the performance obligations in the contract.
The majority of products and services that we offer have readily observable selling prices. For products and services that do not, we estimate stand-alone selling price using the market assessment approach based on expected selling price and adjust those prices as necessary to reflect our costs and margins. As part of our stand-alone selling price policy, we review product pricing on a periodic basis to identify any significant changes and revise our expected selling price assumptions as appropriate.
Shipping and Handling
Shipping and handling costs are included as a component of costs of product sales in our consolidated statements of operations because they are also included in revenue that we bill our customers.
Costs to Obtain a Contract
We have assessed the treatment of costs to obtain or fulfill a contract with a customer. We capitalize sales commissions related to multi-year service contracts, and amortize the asset over the period of benefit, which is the estimated service period. Sales commissions paid on contract renewals, including service contract renewals, is commensurate with the sales commissions paid on the initial contracts. The capitalized sales commissions are included in other current assets and other assets on the consolidated balance sheets. We have not identified any impairments during the periods presented.
We elected the practical expedient to expense sales commissions as incurred when the amortization period of the related asset is one year or less. These costs are recorded as selling and administrative expense and included in the consolidated balance sheet as accrued expenses until paid. Amortization expense was not material for fiscal 2025, 2024 and 2023.
Contract Balances, Performance Obligations, and Backlog
The following table provides information about receivables and liabilities from contracts with customers:
Contract Assets
Contract Liabilities
Advance payments and unearned revenue $ 73,735 $ 58,839
Significant changes in contract balances may arise as a result of recognition over time for services, transfer of control for equipment, and periodic payments (both in arrears and in advance).
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From time to time, the Company may experience unforeseen events that could result in a change to the scope or price associated with an arrangement. When such events occur, the transaction price and measurement of progress for the performance obligation are updated and this change is recognized as a cumulative catch-up to revenue. Because of the nature and type of contracts, the timeframe to completion and satisfaction of current and future performance obligations can shift; however, this will have no impact on the Company’s future obligation to bill and collect.
As of June 27, 2025, the Company reported $81.8 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 90% is expected to be recognized as revenue in the next twelve months and the remainder thereafter. Approximately $49.3 million and $34.1 million respectively, of revenue was recognized during fiscal 2025 and 2024 that was included in advance payments and unearned revenue at the beginning of each reporting period.
Remaining Performance Obligations
We elect the practical consideration to exclude performance obligations that relate to contracts with original expected durations of one year or less. As our product purchase orders are generally delivered within one year or less and our maintenance and support service contracts can be terminated without substantive termination penalties resulting in contracts with less than one year of duration, these performance obligations have been excluded from the remaining performance obligation amounts. The aggregate amount of transaction price allocated to the remaining unsatisfied performance obligations (or partially unsatisfied) was approximately $153.5 million at June 27, 2025, relating to our long-term field service projects. Of this amount, we expect to recognize approximately 50% as revenue during fiscal 2026, with the remaining amount to be recognized as revenue beyond 12 months.
Note 4. Leases
The Company leases office space, assembly facilities, repair and service centers, and warehouses globally. Operating lease right-of-use assets and lease liabilities are recognized with initial lease terms greater than one year. Leases with an initial term of 12 months or less are not recognized on the consolidated balance sheets. Lease expense is recognized on a straight-line basis over the lease term.
Supplemental lease information is as follows:
Fiscal
Variable lease cost 83 249
Fiscal
(In thousands, except for weighted-average) 2025 2024
Weighted-average remaining lease term 4.8 years 5.7 years
Weighted-average discount rate 5.0 % 5.2 %
Cash paid for operating lease liabilities $ 1,731 $ 1,044
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As of June 27, 2025, future minimum lease payments under all non-cancelable operating leases with an initial term greater than one year are as follows (in thousands):
Total lease payments 3,910
Less: interest (579)
Present value of lease liabilities $ 3,331
Note 5. Balance Sheet Components
Cash, cash equivalents, and restricted cash
The following table provides a summary of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that reconciles to the corresponding amount in the consolidated statements of cash flows:
Restricted cash included in long-term other assets 2,323 312
Total cash, cash equivalents, and restricted cash $ 62,013 $ 64,934
Accounts receivable, net
Less: allowances for credit losses (3,583) (1,854)
Changes to the Company’s allowance for expected credit losses was as follows:
Fiscal Year
Charges to (credits from) cost and expense 1,729 1,300 467
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Inventories
Consigned inventories included within raw materials $ 21,047 $ 11,456
The Company records charges to adjust inventories due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance. The charges incurred during fiscal 2025, 2024 and 2023 were classified in cost of product sales as follows:
Fiscal Year
Excess and obsolete inventory charges $ 1,515 $ 3,042 $ 1,109
Customer service inventory write-downs 915 910 1,029
Other current assets
Prepaids and other current assets $ 14,423 $ 13,559
Contract manufacturing assets 9,164 4,894
Assets held for sale
During fiscal 2024, management initiated the sale of the Company’s property located in New Zealand. The Company completed the sale of the property in August 2024.
Property, plant and equipment, net
Buildings and leasehold improvements $ 2,086 $ 1,302
Total property, plant and equipment, gross 79,652 71,200
Total property, plant and equipment, net $ 17,453 $ 9,480
Included in the total plant, property and equipment above were $10.3 million and $4.1 million of assets in progress which have not been placed in service as of June 27, 2025, and June 28, 2024, respectively.
Depreciation expense related to property, plant and equipment was $5.3 million, $4.0 million and $5.5 million in fiscal 2025, 2024 and 2023, respectively.
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Accrued expenses
The Company accrues for the estimated cost to repair or replace products under warranty. Changes in the accrued warranty liability were as follows:
Fiscal Year
Advance payments and unearned revenue
Total advanced payments and unearned revenue $ 73,735 $ 58,839
Excluded from the balances above are $8.1 million and $7.4 million in long-term unearned revenue as of June 27, 2025, and June 28, 2024, respectively.
Note 6. Fair Value Measurements of Assets and Liabilities
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market in the absence of a principal market) for the asset or liability in an orderly transaction between market participants as of the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs in measuring fair value and established a three-level fair value hierarchy that prioritizes the observable inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:
•Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;
•Level 2 — Observable market-based inputs or observable inputs that are corroborated by market data; and
•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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The estimated fair values and valuation input levels of financial assets and liabilities that are measured at fair value on a recurring basis as of June 27, 2025, and June 28, 2024, were as follows:
Fair Value
Assets:
Cash and cash equivalents:
Bank certificates of deposit 3,660 3,706 Level 2
Items are classified within Level 1 if quoted prices are available in active markets. The Company’s Level 1 items are primarily money market funds. As of June 27, 2025, and June 28, 2024, the money market funds were valued at $1.00 net asset value per share.
Items are classified within Level 2 if the observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources are available with reasonable levels of price transparency. The Company’s bank certificates of deposit are classified as Level 2. The carrying value of bank certificates of deposit approximates their fair value. The Company did not have any recurring assets or liabilities that were valued using significant unobservable inputs.
Note 7. Credit Facility and Debt
The Company entered into a Secured Credit Facility Agreement (the “Credit Facility”), dated May 9, 2023, amended as of November 22, 2023 and October 18, 2024, with Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender and Wells Fargo Securities LLC, Citigroup Global Markets Inc., and Regions Capital Markets as lenders. The Credit Facility provides for a $75.0 million revolving credit facility (the “Revolver”) and a $75.0 million Term Loan Facility (the “Term Loan”) with a maturity date of October 18, 2029. The $75.0 million Revolver can be borrowed with a $10.0 million sub-limit for letters of credit, and a $10.0 million swingline loan sub-limit. 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. Refer to Note 16. Subsequent Events for further information.
In November 2023, the Company borrowed $50.0 million against the Term Loan to primarily settle the cash portion of the consideration associated with the NEC Transaction. Refer to Note 12. Acquisitions for further information.
As of June 27, 2025, the available credit under the Revolver was $51.3 million, reflecting the available limit of $60.0 million less outstanding letters of credit of $8.7 million. The Company borrowed $95.0 million and repaid $80.0 million against the Revolver in fiscal 2025. The Company borrowed $75.0 million and repaid $50.6 million against the Term Loan in fiscal 2025. As of June 27, 2025, the Company had $73.1 million outstanding under its Term Loan and $15.0 million borrowings under its Revolver.
The following summarizes the Company’s outstanding long-term debt as of June 27, 2025:
(In thousands)
Less: unamortized deferred financing costs (535)
Less: current portion of long-term debt (18,624)
Total long-term debt $ 68,966
Outstanding borrowings under the Credit Facility bear interest at either: (a) Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus the applicable margin; or (b) the Base Rate plus the applicable margin. The pricing levels for interest rate margins are determined based on the Consolidated Total Leverage Ratio as determined and adjusted quarterly. As of June 27, 2025, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.75% and 1.75%, respectively. The effective rate of interest on the outstanding Term Loan borrowings as of June 27, 2025, was 6.9%.
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The Credit Facility requires the Company and its subsidiaries to maintain a fixed charge coverage ratio to be greater than 1.25 to 1.00 as of the last day of any fiscal quarter of the Company. The Credit Facility also requires that the Company maintain a maximum leverage ratio of 3.00 times EBITDA, with a step-down to 2.75 times EBITDA after four full quarters, and 2.50 times EBITDA after eight full quarters. The Credit Facility contains customary affirmative and negative covenants, including, among others, covenants limiting the ability of the Company and its subsidiaries to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to customary exceptions. As of June 27, 2025, the Company was in compliance with all financial covenants contained in the Credit Facility.
As of June 27, 2025, scheduled maturities of outstanding long-term debt are as follows:
(In thousands)
Note 8. Restructuring Activities
The following table summarizes restructuring related activities during fiscal 2025, 2024 and 2023:
(In thousands) Employee Severance and Benefits
Cash payments (3,728)
Cash payments (2,783)
Cash payments (3,572)
As of June 27, 2025, the accrued restructuring balance of $1.8 million was included in other current liabilities on the consolidated balance sheets. Included in the above were positions identified for termination that have not been executed from a restructuring perspective. The other activities primarily represent the impact of foreign currency movement.
Fiscal 2025 Plans
During fiscal 2025, the Company’s Board of Directors approved restructuring plans, primarily associated with reductions in workforce in certain of the Company’s operations to optimize skill sets and align cost structure and reductions associated with the NEC Transaction and 4RF acquisition. The fiscal 2025 plans are expected to be completed through the end of fiscal 2026.
Prior Fiscal Years’ Plans
Activities under the prior fiscal years’ plans primarily included reductions in workforce across the Company associated with the NEC Transaction and reductions in workforce in certain of the Company’s operations to optimize skill sets and align cost structure. Payments related to the accrued restructuring balance for the prior fiscal years’ plans are complete.
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Note 9. Stockholders’ Equity
Stock Repurchase Program
In November 2021, the Company’s Board of Directors authorized a stock repurchase program to purchase up to $10.0 million of the Company’s common stock. As of June 27, 2025, $6.3 million remained available for repurchase under the November 2021 stock repurchase program. Repurchased shares are recorded as treasury stock and are not formally retired.
The following table summarizes the Company’s repurchases of its common stock in fiscal 2025, 2024 and 2023:
Shares Purchased Average Price Paid Per Share Aggregate Purchase Amount
(In thousands)
Fiscal 2023 — $ — $ —
Stock Incentive Programs
In March 2018, the Company’s stockholders approved the 2018 Incentive Plan (the “2018 Plan”). The 2018 Plan permits the Company to grant share-based awards in the form of options, stock appreciation rights, restricted stock awards and units (“restricted stock”) and performance share awards and units (“performance shares”) to the Company’s employees and non-employee directors. The 2018 Plan replaced the 2007 Plan as the Company’s primary long-term incentive program. The 2007 Plan was discontinued following stockholder approval of the 2018 Plan, but the outstanding awards under the 2007 Plan will continue to remain in effect in accordance with their terms; provided that, as shares are returned under the 2007 Plan upon cancellation, termination or otherwise of awards outstanding under the 2007 Plan, such shares will be available for grant under the 2018 Plan.
Under the 2018 Plan, option exercise prices are equal to the closing market value of the Company’s common stock on the date of grant. Options granted to employees vest annually over three years and expire seven years from the date of grant. Restricted stock granted to employees vest annually over three years from the date of grant. Restricted stock granted to non-employee directors vest annually on the day before the annual stockholders’ meeting. Performance shares granted to employees are subject to a three-year cliff vesting period from the date of grant, subject to the achievement of predetermined financial performance and market condition criteria. The vesting of share-based awards granted to the Company’s employees and non-employee directors are generally subject to continued service through the vesting date.
New shares of the Company’s common stock are issued to employees upon the exercise of options, vesting of restricted stock, or vesting of performance shares. All awards that are canceled prior to vesting or expire unexercised are returned to the approved pool of reserved shares and made available for future grants under the 2018 Plan. As of June 27, 2025, 414,366 shares remain available for grant under the 2018 Plan.
In March 2020, the Company’s Board of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $0.01 per share, to the Company’s stockholders of record as of the close of business on March 3, 2020 (the “Record Date”). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of the Company at an exercise price of $35.00 per one one-thousandth of a Preferred Share, subject to adjustment. Until the rights become exercisable, they will not be evidenced by separate certificates and will trade automatically with shares of the Company’s common stock. The Rights have a de minimis fair value. The complete terms of the Rights are set forth in the Amended and Restated Tax Benefit Preservation Plan (the “Plan”), dated as of August 27, 2020, and amended as of February 28, 2023, between the Company and Computershare Inc., as rights agent. By adopting the Plan, the Company is helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”), which could be lost in the event of an “ownership change” as defined under Section 382 of the U.S. tax code. The amended Plan was approved at the Company’s Annual Meeting of Stockholders held in November 2023, which extended the final expiration date of the Plan until March 3, 2026.
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In November 2023, the Company’s Board of Directors adopted certain amendments to Aviat’s Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”) The Charter Amendments are designed to preserve the Tax Benefits by restricting certain transfers of the Company’s common stock.
Share-Based Compensation
The following table presents the compensation expense for share-based awards included in the consolidated statements of operations for fiscal 2025, 2024 and 2023:
Fiscal Year
By Expense Category:
Cost of product sales and services $ 233 $ 406 $ 627
Total share-based compensation expense $ 7,067 $ 7,341 $ 6,720
By Type of Award:
Total share-based compensation expense $ 7,067 $ 7,341 $ 6,720
The following table summarizes the unamortized compensation expense and the remaining years over which such expense would be expected to be recognized, on a weighted-average basis, by type of award:
Unamortized Expense Remaining Recognition Period
(In thousands) (Years)
Options
A summary of the option activity during fiscal 2025 is as follows:
(In thousands) (Years) (In thousands)
The aggregate intrinsic value represents the total pre-tax intrinsic value or the aggregate difference between the closing price of the Company’s common stock on June 27, 2025 of $23.94, and the exercise price for in-the-money options that would have been received by the optionees if all options had been exercised on June 27, 2025.
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Additional information related to stock options is summarized below:
Fiscal Year
Intrinsic value of options exercised $ 235 $ 2,057 $ 3,725
The fair value of each option grant was estimated using the Black-Scholes option pricing model on the date of grant for option grants during fiscal 2024 and 2023. No option grants were issued during fiscal 2025. A summary of the weighted-average significant assumptions used in the Black-Scholes valuation model is as follows:
Fiscal Year
Dividend yield — % — %
Expected volatility 60.8 % 62.9 %
Risk-free interest rate 4.7 % 3.5 %
Expected term (in years) 3.6 3.0
The following summarizes options outstanding and exercisable as of June 27, 2025:
Options Outstanding Options Exercisable
(In thousands) (Years) (In thousands)
Restricted Stock
A summary of the restricted stock activity during fiscal 2025 is as follows:
Shares Weighted-AverageGrant DateFair Value
(In thousands)
The fair value of each restricted stock grant is based on the closing price of the Company’s common stock on the date of grant. The total grant date fair value of restricted stock that vested during fiscal 2025, 2024 and 2023 was $4.2 million, $4.1 million and $3.4 million, respectively.
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Performance Shares
A summary of the performance shares activity during fiscal 2025 is as follows:
Shares Weighted-AverageGrant DateFair Value
(In thousands)
Vested and released (53) $ 36.80
The fair value of performance shares with market condition terms was estimated using the Monte-Carlo simulation model. A summary of the significant assumptions is as follows:
Fiscal Year
Dividend yield — % — % — %
Risk-free interest rate 3.8 % 4.7 % 3.5 %
Expected term (in years) 2.7 2.9 2.8
The total grant date fair value of performance shares that vested during fiscal 2025, 2024 and 2023 was $1.9 million, $1.8 million and $1.0 million, respectively.
Note 10. Segment and Geographic Information
Aviat operates in one reportable business segment: the design, manufacturing and sale of a range of wireless networking and access networking products, solutions and services. Aviat conducts business globally and its sales and support activities are managed on a geographic basis. The Company’s Chief Executive Officer (“CEO”) is the Chief Operating Decision Maker (the “CODM”). The CODM manages the business primarily by function globally and reviews financial information on a consolidated basis, accompanied by disaggregated information about revenues by geographic region, for purposes of allocating resources and evaluating financial performance. The profitability of geographic regions is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company. Significant segment expenses are presented in Aviat’s consolidated statement of operations.
The Company reports revenue by region and country based on the location where customers accept delivery of products and services. Revenue by region for fiscal 2025, 2024 and 2023 were as follows:
Fiscal Year
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Revenue by country comprising more than 10% of total revenue for fiscal 2025, 2024 and 2023 was as follows:
(In thousands, except percentages) Revenue % of Total Revenue
Long-lived assets, consisting primarily of net property, plant and equipment and operating lease right-of-use assets, by geographic areas based on physical location as of June 27, 2025, and June 28, 2024, were as follows:
Note 11. Income Taxes
Income before provision for income taxes during fiscal 2025, 2024 and 2023 consisted of the following:
Fiscal Year
Provision for (benefit from) income taxes for fiscal 2025, 2024 and 2023 were summarized as follows:
Fiscal Year
Current:
Deferred:
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The provision for income taxes differed from the amount computed by applying the federal statutory rate of 21% to the Company’s income before provision for income taxes as follows:
Fiscal Year
Permanent differences 66 (20) 19
Effect of flow-through entities 157 (29) 409
State and local taxes, net of U.S. federal tax benefit 341 877 980
Foreign income taxed at rates different than the U.S. statutory rate 805 411 233
Tax credit - generated and expired (88) (125) (140)
Change in uncertain tax positions (77) 869 406
Return-to-provision/Deferred true-up adjustments 599 119 359
Acquisition restructuring and integration — — 3,022
The Company’s provision for income taxes was $2.2 million for fiscal 2025, $6.1 million for fiscal 2024 and $11.1 million for fiscal 2023. The Company’s tax expense for fiscal 2025 was primarily due to tax expense related to U.S. and profitable foreign subsidiaries, partially offset by Canada valuation allowance release. The Company’s tax expense for fiscal 2024 was primarily due to tax expense related to U.S. and profitable foreign subsidiaries, partially offset by Canada valuation allowance release. The Company’s tax expense for fiscal 2023 was primarily due to tax expense related to U.S. and profitable foreign subsidiaries, including deferred tax expense associated with the acquisition of Redline (as defined below) in July 2022 and the subsequent restructuring and integration impact. Refer to Note 12. Acquisitions for further information.
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The components of deferred tax assets and liabilities were as follows:
Deferred tax assets:
Amortization — 628
Share-based compensation 714 719
Unrealized exchange gain/loss 1,700 2,662
Capitalized research expenses 5,543 4,830
Total deferred tax assets before valuation allowance 122,390 118,805
Deferred tax liabilities:
Branch undistributed earnings reserve 35 40
Total deferred tax liabilities 6,685 1,562
As reported on the consolidated balance sheets
Deferred income tax liabilities 4,975 412
Total net deferred income tax assets $ 83,174 $ 82,700