Q1 2024 Aviat Networks Inc Earnings Call
Okay.
Good afternoon, welcome to Avi networks first quarter fiscal 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation. Please note. This conference is being recorded I will now turn the conference over to your host Mr. Andrew Fredriksen Director of Investor Relations you may begin.
Thank you and welcome to the Avianca networks first quarter fiscal 2024 results conference call and webcast you can find our press release and updated investor presentation in the IR section of our website at Www Dot Avi networks Dot com.
Along with a replay of today's call.
With me today are Pete Smith.
President and CEO, who will begin with opening remarks on the company's fiscal first quarter, followed by David Gray, Our CFO, who will review the financial results for the quarter Pete.
Pete will then provide closing remarks on Avianca strategy and outlook followed by Q&A.
As a reminder, during today's call and webcast management may make forward looking statements regarding <unk> business.
Including but not limited to statements relating to financial projections business drivers, new products and expansion and economic activity in different regions.
These and other forward looking statements reflect the company's opinions only as of the date of this call and webcast and involve assumptions risks and uncertainties that could cause actual results to differ materially from those statements additional information on factors that could cause actual results to differ materially.
Kelly from statements made on this call can be found in our most recent annual report on Form 10-K filed with the SEC.
The company undertakes no obligation to revise or make public any revisions of these forward looking statements in light of new information or future events.
Additionally, during today's call and webcast management will reference both GAAP and non-GAAP financial measures. Please refer to our press release, which is available in the IR section of our website at Www Dot Avia networks Dot com and financial tables therein, which include a GAAP to non-GAAP reconciliation.
And the other supplemental financial information at this time I would like to turn the call over to <unk>, President and CEO Pete Smith.
Thanks, Andrew and good afternoon, everyone. Thank you for joining us to review Avi networks results for the fiscal first quarter of 2024 I'm pleased to report that <unk> continued its strong execution and achieved revenue and profitability expansion in the quarter highlights.
<unk> from the first quarter include revenue of 87, 6 million, which represents growth of seven 8% versus Q1 of last year.
Adjusted EBITDA of $12 1 million or 13, 1% increase versus Q1 of last year.
non-GAAP EPS increase of 16.0% strong cash generation in the quarter <unk> generated operating cash flows of $14 million and ended the quarter with $35 5 million of cash and <unk>.
Accretable securities at a debt free balance sheet.
<unk> financial and operational results are driven by the continued implementation of <unk> operating system and made possible. Thanks to the effort and execution of the <unk> team and our partners throughout the quarter.
Let's discuss key highlights of the first quarter.
<unk> exposure across different verticals geographies and customers has made our business strong and diverse we continue to see healthy demand in private networks mobile networks and rural broadband networks and private networks, we continue to innovate in North America <unk>.
Operator: Good afternoon.
Operator: Welcome to Aviat Networks' first quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note, this conference is being recorded. This conference call and webcast. You can find our press release an updated investor presentation in the IR section of our website at www. Aviat Networks.com, along with a replay of today's call.
Sales in this region grew 14% in the quarter versus the same period prior year.
Thanks in part to the strong private network demand environment, we have executed well and have grown a robust project backlog, we had a record Q1 private network bookings and remain excited about the outlook of this segment.
Increasingly states are turning directly to avia for our expertise recently, we announced wins of two large state public safety networks, which are examples of this trend.
Operator: With me today, our Pete Smith, Aviat's president and CEO, who will begin with the opening remarks on the company's fiscal first quarter, followed by David Gray, our CFO, who will review the financial results for the quarter. Pete will then provide closing remarks on Aviat's strategy in that look, followed by Q&A.
These projects are made possible by the full breadth of <unk>.
<unk> and services that <unk> offers.
Our microwave radios high availability routers.
Management software along with turnkey services for design installation support and ongoing managed services. This full suite of solutions is why obviously as the leader in private networks.
Operator: As a reminder, during today's call and webcast, management may make forward-looking statements regarding Aviat's business, including but not limited to statements relating to financial projections, business drivers, new products and expansions, and economic activity in different regions. These and other forward-looking statements reflect the company's opinions only as of the date of this call and webcast and involve assumptions, risks, and uncertainties that could cause actual results to differ materially from those statements. The additional information on factors that could cause actual results to differ materially from statements made on this call can be found in our most recent annual report on form 10K filed with the SEC.
We believe that the demand environment and private networks will remain robust in the quarters and years ahead state and city budgets remained strong growing in the current fiscal year stay public safety spending is expected to grow.
Overall budget rates and city police and fire spending is growing faster this year.
Versus the prior two years. Additionally, American rescue plan Act funds, all ARPA, which are now fully distributed to the states are still in the early stages of utilization.
These funds must be spent by the end of calendar year 2026, we expect this will provide a meaningful tailwind to private network expenditures.
Operator: The company undertakes new obligations to revise or make public any revisions of these forward-looking statements in light of new information or future events. Additionally, during today's call and webcast, management will reference both GAP and non-GAP financial measures. Please refer to our press release, which is available in the IR section of our website at www.aviannetworks.com, and financial tables there, which included GAP to non-GAP reconciliation and other supplemental financial information.
We continued our momentum and had a very strong quarter in federal government.
Government projects, our revenue from federal business over the last 12 months has nearly doubled compared to the prior 12 month period.
Our bookings and the long lead time nature of these projects. We expect the recent strength in this segment to continue in the quarters ahead.
We anticipated a short to medium term federal shutdown would have a minimal impact on our federal project business.
Andrew Fredrickson: At this time, I would like to turn the call over to Aviyab's president and CEO, Pete Smith. Pete? Thanks, Andrew, and good afternoon, everyone.
Mobile network operators continue their investment in building the microwave portion.
Peter Smith: Thank you for joining us to review Aviyab Network's results for the fiscal first quarter of 2024. I'm pleased to report that Aviyab continued its strong execution and achieved revenue and profitability expansion in the quarter. Highlights from the first quarter include revenue of 87.6 million, which represents growth of 7.8% versus Q1 of last year. Adjusted EBITDA of 12.1 million, a 13.1% increase versus Q1 of last year, non-GAP EPS increase of 16.0%. Strong cash generation in the quarter, Aviat generated operating cash flows of 14 million and ended the quarter with 35.5 million of cash and marketable securities and a debt free balance sheet. These financial and operational results are driven by the continued implementation of Aviat's operating system and made possible thanks to the effort and execution of the Aviat team and our partners throughout the quarter.
Of their <unk> networks, both in the U S and internationally, obviously unique product portfolio continues to attract operators by lowering their total cost of ownership and improving network performance. We are still early in the adoption of global five G and we expect continued investment in microwave network.
To support growing needs from both customers and business enterprises.
In the U S. The mix shifts to microwave as a mode of backhaul is favorable in this regard a U S. Tier one customer was significant for <unk> in the quarter, we believe that as the <unk> build out extends beyond urban areas. We will continue to see demand for our money.
Products and services internationally operators are planning on growing their <unk> deployments and we are focused on winning new business on projects that are rural broadband business RBI continues with our distinctive.
E Commerce platform and had a strong quarter of Avia store performance wireless Internet service providers and others continue to invest and plan for funding from the rural digital opportunity fund or Argos.
Peter Smith: Let's discuss key highlights of the first quarter. Aviat's exposure across different verticals, geographies, and customers has made our business strong and diverse. We continue to see healthy demand in private networks, mobile networks, and rural broadband networks. In private networks, we continue to innovate in North America. Aviat itself in this region grew 14% in the quarter versus the same period prior year. Thanks, in part, to the strong private network demand environment. We have executed well and have grown a robust project back up.
Broadband equity access and deployment program.
<unk>.
There has been recent commentary from several states or are considering or plan to employ technological neutrality and bead related projects. This was a positive development for the use of wireless backhaul as microwave is typically a more cost effective technology that fiber for rural communities while still.
Providing low latency high reliability and high bandwidth.
This would be a way to win for citizens and states is microwave can be deployed faster than fiber.
Peter Smith: We had a record Q1 private network bookings that are main excited about the outlook of this segment. Increasingly, states are turning directly to Aviat for our expertise. Recently we announced wins of two large state public safety networks, which are examples of this trend. These projects are made possible by the full breadth of products and services that Aviat offers. High power microwave radios, high availability routers, and management software along with turnkey services for design, installation, support, and ongoing management services.
While providing the bandwidth and speed needed. There is also allowed states to stretch their b funding dollars. Further we are well positioned to capture this business as we are already working with states and service providers alike to ensure <unk> is ready to supply. These critical infrastructure projects at the beginning of October.
I'll be unintended whisper pillows and annual wireless ISP and rural broadband Convention, where we were encouraged by the upbeat tone of network operators deployments remain healthy and fixed wireless access continues to grow we believe that the expansion of the six gigahertz.
Peter Smith: This full suite of solutions is why Aviat is the leader in private networks. We believe that demand environment in private networks will remain robust in the quarters and years ahead. State and city budgets remain strong and growing in the current fiscal year. State public safety spending is expected to grow ahead of overall budget rates, and city, police, and fire spending is growing faster this year versus the prior two years. Additionally, American Rescue Plan Act funds or ARPA, which are now fully distributed to the states, are still at the early stages of utilization. These funds must be spent by the end of calendar year 2026. We expect this will provide a meaningful tailwind to private network expenditures.
Frequency for unlicensed broadband services, which should be authorized by the FCC by the end of the year, we will drive further uptick in wireless access.
This is important for <unk> fixed wireless access networks tend to use microwave as their backhaul at a higher rate.
Fiber to the home networks.
Given the recent turbulence in the network equipment space, Let me emphasize why obvious demand environment remains strong and we continue to execute on our growth plans.
First as I opened with <unk> business has diversified between the segments, we serve private networks mobile network operators.
Broadband operators do not follow the same capex cycles. Additionally, avia benefits from our direct to customer channel rather than relying on distributors roughly 90% of our business is direct fits allows us to have intelligence from customers about their needs.
Peter Smith: We continued our momentum and had a very strong quarter in federal government projects. Our revenue from federal business over the last 12 months has nearly doubled compared to the prior 12 month period. Based on our bookings and the long lead time nature of these projects, we expect the recent strength in this segment to continue in the quarters ahead. We anticipate a sure to medium-term federal shutdown would have a minimal impact on our federal project business.
This forecast.
It also eliminates the risk of inventory buildup at distributors, which many companies are currently experience.
This visibility allows us to better serve the customer and keep a pulse on market demand, which feeds into our new product and service development process.
Many network equipment providers, particularly fiber players have struggled with their supply chain over the last couple of years that have recently experienced solid softening demand as a result of the over ordering that occur I spoke at length about this on our last earnings call and these factors remain true today.
Peter Smith: Mobile network operators continue their investment in building the microwave portion, of their 5G networks, both in the US and internationally. Aviat's unique product portfolio continues to attract operators by lowering their total cost of ownership and improving network performance. We are still early in the adoption of Global 5G and we expect continued investment in microwave networks to support growing needs from both customers and business enterprises. In the US, the makeshift to microwave as the mode of backhaul is favorable.
<unk> has been able to avoid this problem and continues to execute favorably because of our supply chain resiliency over the last three years and our direct relationships with our customers our supply chain environment has normalized and we remain committed to constantly improving our performance. We are confident in our ability to me.
Peter Smith: In this regard, a US Tier I customer was significant for Aviat in the quarter. We believe that as the 5G build out extends beyond urban areas, we will continue to see demand for our microwave products and services.
Customer demand and support our growing markets not only has near term demand remains strong, but we also see our total addressable market growing over the long term historically <unk> has been viewed as a microwave business, serving a $3 $2 billion market to better serve our customers.
Peter Smith: Internationally, operators are planning and growing their 5G deployments and we are focused on winning new business and projects. Our rural broadband business, Aviat continues with our distinctive e-commerce platform and had a strong quarter of Aviat's tour performance. Wireless Internet service providers and others continue to invest and plan for funding from the rural digital opportunity fund or ARDOP and broadband equity access and deployment program or BEED. There has been recent commentary from several states for considering or planning to employ technological neutrality in BEED-related projects.
We have added routers managed services and software to our portfolio. Our recent tuck in acquisition of access products expanded the markets. We can serve as a result of the acquisition and our organic investments of our business today is serves a tam.
Greater than $11 billion.
We believe that our current Tam will grow at 7% through 2027 to become a $15 billion market. This growth is driven by increasing data consumption on global networks and significant investments in private LTE.
<unk> networks we.
We expect our Tam to continue to expand as we find new ways to serve our customers.
Peter Smith: This is a positive development for the use of wireless backhaul as microwave is typically a more cost effective technology than fiber for rural communities while still providing low latency, high reliability and high bandwidth. This would be a win-win for citizens and states as microwaves can be deployed faster than fiber while providing the bandwidth and speed needed. This also allows states to stress their BEED funding dollars further. We are well-privileged to capture this business as we are already working with states and service providers alike to ensure Aviat is ready to supply these critical infrastructure projects.
To continue our share gain plans maintain our Tam and respond to recent investor inquiries, we will provide an update on our roadmap and semiconductor modem.
Our roadmap is focused on the following.
Factors capacity distance total cost of ownership.
Today, <unk> delivers industry, leading capacity assistance and our customers enjoy cost of ownership benefits for example, today we provide.
<unk> hundred gigabit per second ratios of 40 plus months.
Peter Smith: At the beginning of October, Aviat attended Whisper, Polusa, an annual wireless ISP and rural broadband convention where we were encouraged by the upbeat tone of network operators. Deployments remain healthy and fixed wireless access continues to grow. We believe that the expansion of the six gigahertz frequency problem license broadband services which should be authorized by the FCC by the end of the year will drive further up taking wireless access. This is a port for Aviat as fixed wireless access. Networks tend to use microwave as their backhaul at a higher rate than fiber to the home networks.
10 gigabit per second radios 20 miles.
And 28 Gigabits per second radios addition to shorter than three miles one of two such review is available in the market. While capacity is on the mindset of many technologists and investors. The 20 gigabit per second radio represents very little of our total demand extending beyond this capacity.
In any meaningful way requires new beds, like GE bed, which I will touch on in a moment.
The principal access of innovation is to deliver customer required capacity had increased distances at the lowest.
Total cost of ownership.
Peter Smith: Given the recent turbulence in the network equipped with its space, let me emphasize why Aviat's demand environment remains strong and we continue to execute on our growth plans. First as I open with Aviat's business is diversified between the segments we serve, private networks, mobile network operators, and rural broadband operators do not follow the same capex cycle. Additionally, Aviat benefits from our directorate the customer channel rather than relying on distributors. Roughly 90% of our businesses direct.
The path to achieve this key innovation requirement is the integration of switch technology modem technology and the microprocessor in our view the best way to achieve integration is with an economical.
Semiconductor technology node or set another way geometries, the better 70 of semiconductor technology node permits increased functionality integration and lower power consumption, we believe our road.
Has advantages here.
On capacity.
Peter Smith: This allows us to have intelligence from customers about their needs and business forecast. This allows us to have intelligence from market demand which feeds into our new product and service development process. Many network equipment providers, particularly fiber players, have struggled with their supply chains over the last couple of years and have recently experienced softening demand as a result of the over-ordering that occurred. I spoke at length about this on our last earnings call and these factors remain true today.
And cost of ownership roadmap discussions often mentioned spectrum frequency ranges our brands, our roadmap will support products, where spectrum is currently available and where spectrum is.
As anticipated to be available in the coming years recently, one of our competitors highlighted D. Var spectrum, just 60 products targeting 2030, we tend to agree and we will be ready with that let me turn the call over to David to review, our financials before coming back for some final comments.
David.
Thank you Pete and good afternoon, everyone.
During my remarks today I'll review some of the key fiscal 2024 first quarter financial highlights, noting our detailed financials can be found in our press release and 10-Q filed this afternoon.
Peter Smith: Aviat has been able to avoid this problem and continues to execute favorably because of our supply chain resiliency over the last three years and our direct relationships with our customers. Our supply chain environment is normalized and we remain committed to constantly improving our performance. We are confident in our ability to meet customer demand and support our growing markets.
As a reminder, all comparisons discussed today are between the first quarter of fiscal 2024, and the first quarter of fiscal 2023 unless noted otherwise.
For the first quarter, we reported total revenues of $87 6 million as compared to $81 3 million for the same period last year, an increase of $6 3 million or seven 8% driven by strong growth in the Americas and Europe North.
Peter Smith: Not only has near-term demand remained strong but we also see our total adjustable market growing over the long term. Historically, Aviat has been viewed as a microwave business serving a $3.2 billion market. To better serve our customers, we have added routers, managed services and software to our portfolio. Our recent tuck-in acquisition of access products expanded the markets we can serve. As a result of the acquisition and our organic investments, our business today serves a tab of greater than $11 billion.
In North America, which comprised 63% of our total revenue for the quarter was $55 5 million, an increase of $6 7 million or 13, 6% in the same period last year, driven by our private networks and tier one business.
International revenue was $32 1 million for the quarter.
A decrease of <unk> 3 million or one 1% from the same period last year.
Strong growth in Latin America, the Middle East and Europe was offset by cyclical cyclical weakness in African mobile operators Capex spending.
Peter Smith: We believe that our current tab will grow at 7% through 2027 to become a $15 billion market. This growth is driven by increasing data consumption on global networks and significant investments in private LTE and 5G networks. We expect our tab to continue to expand as we find new ways to serve our customers.
Our trailing 12 month book to Bill ratio remained above one as it has since fiscal 2018.
Gross margins for the quarter were 36, 4% and 36, 6% on a GAAP and non-GAAP basis as compared to 36, 3% to 36, 5% in the prior year.
Peter Smith: To continue our sharing plans, maintain our tab and respond to recent investor inquiries, we will provide an update on our roadmap and semiconductor modem plans. Our roadmap is focused on the following factors, capacity, distance, total cost of ownership. Today, Aviat delivers industry-leading capacity at distance and our customers enjoy cost of ownership benefits. For example, today we provide 5 gigabits per second radius at 40 plus months, 10 gigabits per second radius at 20 miles, and 28 gigabits per second radius at distance is shorter than 3 miles.
<unk> was driven by strong growth in higher margin North American business.
First quarter GAAP operating expenses were $26 3 million, an increase of <unk> 8 million from the prior year.
First quarter, non-GAAP operating expenses, which exclude the impact of restructuring charges share based compensation and deal costs were $21 3 million an increase of <unk> 9 million.
The increase in both GAAP and non-GAAP operating expenses were driven by higher investment in R&D.
<unk> cost management continues to deliver operating leverage on revenue growth.
First quarter, GAAP and non-GAAP operating income was $5 5 million and $10 7 million compared to prior year gap of $3 9 million non-GAAP of $9 2 million or increases of 41, 8% 17, 7% respectively.
Peter Smith: One of two such radios available in the market. While capacity is on the mindset of many technologists and investors, the 20 gigabits per second radius represents very little of our total demand. The principal access of innovation is to deliver customer-acquired capacity and increased distances at the lowest total cost of ownership. The path to achieve this key innovation requirement is the integration of switch technology, modem technology, and the microprocessor. In our view, the best way to achieve integration is with an economical, advanced semiconductor technology node versus that another way, geometries.
First quarter tax provision was <unk> 6 million compared to $3 9 million last year last.
Last year's figure included a one time discrete charge of $2 6 million related to a legal entity restructuring.
As a reminder, the company has nearly $500 million of Nols that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future.
First quarter GAAP net income was $4 zero million as compared to a loss of $2 7 million last year.
Last year's results included a onetime loss of $1 $7 million on marketable securities and the previously mentioned discrete tax provision charge.
First quarter, non-GAAP, net income, which excludes restructuring charges share based compensation M&A related costs and noncash tax provision was $10 3 million.
Peter Smith: The better semiconductor technology node permits increased functionality, integration, and lower power consumption. We believe our road app has advantages here. The odd capacity, distances, and cost of ownership, road map discussions, often mention spectrum frequency ranges or bands. Our road map will support the products where spectrum is currently available and where spectrum is anticipated to be available in the coming years. Recently, one of our competitors highlighted the demand spectrum as a 60 product targeting 2030. We tend to agree and we will be ready.
Compared to $8 8 million for the same period last year, an increase of $1 5 million or 17, 6% driven by revenue growth and margin expansion.
First quarter non-GAAP EPS came in at 87 per share on a fully diluted basis compared to <unk> 70, <unk> per share for the same period last year, an increase of $16 or 16%.
Adjusted EBITDA for the first quarter was $12 1 million, an increase of $1 4 million or 13, 1% from the prior year.
David Gray: With that, let me turn the call over to David to review our financials before coming back for some final comments. David, thank you, Pete, and good afternoon, everyone. During my remarks today, I'll review some of the key fiscal 2024 first quarter financial highlights, noting our detailed financials can be found in our fresh release and 10Q filed this afternoon.
Adjusted EBITDA margins were 13, 8% for the quarter.
Moving onto the balance sheet our.
Our cash and marketable securities at the end of the first quarter increased to $35 5 million from $22 1 million in the prior quarter with no debt.
The $13 $3 million increase in cash for the quarter was driven by solid profitability, coupled with improvements in accounts receivable and inventory balances.
David Gray: As a reminder, all comparisons discussed today are between the first quarter of fiscal 2024 and the first quarter of fiscal 2023 and less noted otherwise. For the first quarter, we reported total revenues of 87.6 million, as compared to 81.3 million for the same period last year, an increase of 6.3 million or 7.8 percent driven by strong growth in the Americas and Europe. North America, which comprises 63 percent of our total revenue for the quarter, was 55.5 million, an increase of 6.7 million or 13.6 percent in the same period last year, driven by our private networks and GER1 business.
Our balance sheet remains very solid providing us with flexibility to continue executing our long term plans.
That I will turn it back to Pete for some final comments.
Thanks, David before opening up for Q&A I'll provide a few updates and closing commentary.
First I would like to thank Jim Stoffel for his years of service as an RV outboard and effort. Jim served on our board of directors for over 16 years during that time, he helped navigate albeit from the merger that created the company through to the exciting position. We're in today as the leading wireless transport company his leadership and knowledge have done a tremendous.
David Gray: International revenue was 32.1 million for the quarter, a decrease of 0.3 million or 1.1 percent from the same period last year. Strong growth in Latin America, the Middle East in Europe was offset by cyclical weakness in African mobile operators cap-ex spending. Our trailing 12-month book to bill ratio remained above one as it has since fiscal 2018. Gross margins for the quarter were 36.4 percent and 36.6 percent on a gap in non-gap basis, as compared to 36.3 percent and 36.5 percent in the prior year.
Indus asset and we thank him for all his contributions to the company second we currently expect the EDC transaction to close in December 2023, we continue to progress on regulatory approvals and the exact date remains subject to customary closing conditions.
We can add some qualitative updates the integration planning is progressing smoothly based on our learnings today, we now believe that the transaction will be accretive in the fourth quarter after close.
Compared to the fifth quarter previously stated based on the company's outlook. We are affirming our fiscal year 2024 guidance exclusive of the <unk> business, we will update our guidance to include the <unk> business. After the closure of the transaction.
David Gray: The improvement was driven by strong growth in higher margin North America business. First quarter gap operating expenses were 26.3 million, an increase of 0.8 million from the prior year. First quarter non-gap operating expenses, which exclude the impact of restructuring charges, share-based compensation, and deal costs were 21.3 million, an increase of 0.9 million. The increase in both gap and non-gap operating expenses were driven by higher investment in the same period last year, and a increase of 0.9 million from the prior year.
Note that our guidance is on a full year basis and reflects the project basis of our deployment in Q1, we had a few projects that were accelerated and positively impacted the quarter based on the current project pipeline. We expect Q2 to be sequentially up from Q1 to reiterate our fiscal year 2024 guidance is as follows.
Revenue to be in the range of $367 million to $374 million and adjusted EBITDA to be in the range of $51 million to $56 million.
David Gray: D. Our discipline cost management continues to deliver operating leverage on revenue growth. First quarter gap and non-gap operating income were 5.5 million and 10.7 million compared to prior year gap of 3.9 million and non-gap of 9.2 million or increases of 41.8% to 17.7% respectively. First quarter tax provision was 0.6 million compared to 3.9 million last year. Last year's figure included a one-time discrete charge of 2.6 million related to legal energy restructuring.
With that operator, let's open up for questions.
Thank you.
To ask a question you will need to press star one on your telephone.
Please wait for your name to be announced please standby will be compile the Q&A roster when waldman for your first question.
Our first question comes from the line.
The line of Scott Searle with Ross Your line is now open.
David Gray: As a reminder the company has nearly 500 million of NOLs that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future. First quarter gap net income was 4.0 million as compared to a loss of 2.7 million last year. Last year's result included a one-time loss of 1.7 million marketable securities and the previously mentioned discrete tax provision charge. First quarter non-gap net income which excludes restructuring charges, share-based compensation, having a related cost and non-cash tax provision was 10.3 million compared to 8.8 million for the same period last year.
Hey, good afternoon, Thanks for taking my questions great job on the quarter.
Maybe just to start it sounds like you've got a high degree of confidence in terms of the near term and intermediate term outlook, which is really divergent from what's going on in the rest of the world I Didnt hear India as part of your commentary I was wondering if you could give an update there and then looking at the private networks business. It seems like there continues to be a lot of strength there.
Do you have visibility on that front and looking at your fiscal 'twenty for guidance I was wondering what are the swing factors to the upside you've been pretty conservative I think in terms of how you.
Look to the outer quarters and guide for the year I am wondering what the factors are that would help you out to the upside.
David Gray: An increase of 1.5 million or 17.6% driven by revenue growth and margin expansion. First quarter non-gap EPS came in at 87 cents per share on a fully diluted basis compared to 75 cents per share of the same period last year. An increase of 16.16%. Adjusted EBITDA for the first quarter was 12.1 million and increase of 1.4 million or 13.1% from the prior year. Adjusted EBITDA margins were 13.8% for the quarter.
The range that you've provided.
Yeah, I think just.
Thinking about <unk>.
India, we see probably.
30, 30%.
Year over year growth.
<unk> that.
Got it didn't hit in this quarter.
It's probably more likely to be in.
January two.
June.
Timeframe. So we see we see India as being solid with respect to visibility and the.
David Gray: Moving on to the balance sheet. Our cash and marketable securities at the end of the first quarter increased to 35.5 million from 22.1 million in the prior quarter with no debt. The 13.3 million increase in cash for the quarter was driven by solid profitability coupled with improvements in accounts receivable and inventory balances. Our balance sheet remains very solid providing us with flexibility to continue executing our long-term plans.
The private network space, we came in with a.
Tremendous growth in backlog.
Our July one to June fiscal year.
Again this quarter.
Quarter, we were pleasantly surprised that our our bookings of North America private networks were the highest they've ever been in.
Our first quarter for.
And does.
Peter Smith: With that, I'll turn it back to Pete for some final comments. Pete? Thanks, David.
That gives us.
Sure.
Our confidence in the business.
Peter Smith: Before we're opening up for Q&A, I'll provide two updates and closing comments. First, I would like to thank Jim Skolful for his years of service as an Avion board member. Jim served on our board of directors for over 16 years. During that time, he helped navigate Avion from the merger that creates a company through to the exciting position we were in today as the leading wireless transport company. His leadership and knowledge have been a tremendous asset and we thank applause contributions to the company.
In the medium to long term because those projects typically.
If we get a booking right now.
We go into a design phase and revenue could start.
One quarter or two to three quarters later, so we think that.
That is going to play out in our backlog or is it mostly would cover the next 12 months.
The next 24 months and very little goes past.
Peter Smith: Second, we currently expect the NAC transaction to close in December of 2023. We continue to progress on regulatory approvals, and the exact date remains subject to customary closing conditions. We can add some qualitative updates. The integration planning is progressing smoothly. Based on our learning today, we now believe that the transaction will be accredited in the fourth quarter after close as compared to the fifth quarter previously stated. Based on the company's outlook, we are affirming our fiscal year 2024 guidance exclusive of the NEC business.
The 24 month period so.
I think you might asked three questions that I hit on two of them. So yes.
Factors to the upside piece what are you seeing it seems like we're early days in terms of ARPA contribution and ordered off I don't know if there is a.
Number of percentage of the mix.
You could quantify now, but it seems like its early stages on that front, but looking to fiscal 'twenty four where do you see the swing factors to the upside.
So we've seen.
Some small design.
Peter Smith: We will update our guidance to include the NEC business after the closure of the transaction. Note that our guidance is out of full-year basis and reflects the project basis of our deployment. In Q1, we had a few projects that were accelerated and positively impacted the quarter. Based on the current project pipeline, we expect Q2 to be sequentially up from Q1.
Orders with respect to the art off and we would say that the <unk> funding looks like we'll get.
So more of it in the January two.
June timeframe.
In the quarter, we announced two large.
<unk> safety.
Peter Smith: To reiterate, our fiscal year 2024 guidance is as follows, to be in the range of 367 to 374 million and to be in the range of 51 to 56 million. Thank you.
<unk> wins.
We think some of that came from ARPA.
We see a lot of the ARPA money is being spent and stretching out as needing to be spent by the end of 2026. So we think that thats.
Going to be good and.
The more immediate.
Operator: To ask a question, you'll need to press start 1-1 on your telephone. Please wait for your name to be announced. Please stand by. We'll be part of the Q&A roster. One moment for our first question.
Data.
We really didn't expect to have record.
Bookings in North America, and our first quarter and we did so we think.
We're starting to see ARPA impact the demand environment, and we think it will grow going forward.
Scott Searle: Our first question comes from the line of Scott Searle with Roth. Your line is now open. Good afternoon. Thanks for taking my questions. Pete Dave, great job on the quarter. Maybe just to start Pete, it sounds like you've got a high degree of confidence in terms of the near-term and intermediate-term outlook, which is really divergent from what you're on the rest of the world. I didn't hear India as part of your commentary.
Great and lastly, if I could just to follow up on NBC, It's nice to see that youre comfortable enough to move up the timeline of expected accretion but.
It sounds like the integration.
How does the deal closing is progressing in line to better, but I'm wondering what the responses that youre getting from customers.
Are you feeling about revenue attrition, how the customers like the deal in terms of the expectations on that front going forward. Thanks.
Scott Searle: I was wondering if you've given up there. And then looking at the private networks business, seems like there continues to be a lot of strength there. How far out do you have visibility on that front? And looking at your fiscal 24 guidance, I was wondering what are the swing factors to the upside? You've been pretty conservative, I think, in terms of how you look to the outer quarters and guide for the year.
So we gave that.
In the past, we've said that we.
We expect there to be.
$150 million in revenue the first year after close we're still comfortable with that so we did model in some attrition.
Scott Searle: I'm wondering what the factors are that would help you out to the upside of the range that you've provided. Yeah, I think just thinking about India, we see probably 30% year-over-year growth. What quarter that it didn't hit in this quarter, and it's probably more likely to be in the January to June timeframe, so we see India as being solid. With respect to visibility in the private network space, we came in with tremendous growth and backlog to I want to June fiscal year.
Perhaps some.
Sure.
Global tier one operators softness so we factored that into the <unk>.
Price, we paid for the transaction the deal done with respect to the customer.
Engagement I think the customers see a.
Broadened portfolio from the combined entities.
No.
NAC has an incredible slip out architecture.
And obviously brings routers some stand alone.
Software and access products, so we haven't factored that into the model what.
What we learned from the Red line transaction to get revenue synergies is probably 12 months after close.
Scott Searle: Again, this quarter, we were pleasantly surprised that our bookings of North America private networks were the highest they've ever been in a first quarter for Avias. And that gives us confidence in the business in the medium to long term because those projects typically, if we get up looking like now, we go into a design phase and revenue can start one quarter to three quarters later. We think that that is going to play out in our backlog mostly would cover the next 12 months, the next 24 months, and very little goes past the 24 months period.
Initial conversations with.
Customers would indicate that that's a real possibility.
Great. Thanks, so much and nice job on the quarter and I'll get back in the queue.
Thank you one moment for our next question. Please.
Our next question comes from the line of Jason Smith with Lake Street. Your line is now open.
Hey, guys. Thanks for taking my questions. Just curious if you could provide an update on what youre seeing from that Huawei final I think last quarter. You mentioned the current funnel was over $80 million has there been any change.
I would say the.
Route change, we'd like to report as we.
Increased our bookings.
From the Huawei share getting funnel by a little bit under 10.
10%, so our bookings went up.
3.3.
So that continues to be a fruitful area for us.
Scott Searle: I think you might ask three questions and I hit on two of them. Just bring factors to the upside, Pete. It seems like we're early days in terms of ARPA contribution in ARDOF. I don't know if there's a number of percentage of the mix that you could quantify now, but it seems like it's a really staged on that front. But looking to fiscal 24, where do you see the swing factors to the upside?
Okay. That's helpful. And then just with your commentary on India being more of a kind of January June.
<unk> would it be fair to expect gross margin to remain relatively flat here in the December quarter, just given your mix expectations.
Scott Searle: Yeah, so we've seen some small design orders with respect to the ARDOF, and we would say that the ARDOF funding looks like we'll get some more of it in the January to June time frame. In the quarter, we announced to large public safety wins. We think some of that came from ARPA. We see a lot of the ARPA money as being unspent and stretching out, needing to be spent by the end of 2026.
Yes so.
Our gross margin.
<unk>.
<unk> made progress versus the prior quarter and prior year as we said, it's the highest in six quarters.
We expect.
The.
Continued improvement and like we said.
Alluded to last quarter, we expect a 100 basis points roughly improvement for the full year.
Project based nature of it it's not going to be a straight line, but we expect for the full year to be about 100 basis points above.
Yes, so so Jason that'll depend on.
Kind of the India project timing.
The quarter. It comes it will be a little bit lower quarter. It doesn't come in it will be.
Scott Searle: So we think that that's going to be good, and more immediate Data. We really didn't expect to have record private network bookings in North America in our first quarter and we did. So we think we're starting to see our impact the demand environment and we think it'll grow going forward. Great. And lastly, if I could just to follow up on any see, it's nice to see that you're comfortable enough to move up the timeline of expected accretion.
<unk>.
Gross margins will be a little higher.
Okay perfect.
And then just the last one from me and I know you guys have sort of outlined it in the past, but just wanted to get another confirmation that youre not seeing any sort of pockets of excess inventory pop up in any.
The segments that you play in.
Absolutely.
<unk>.
My comment in the script was that we.
<unk> covered.
Scott Searle: But it sounds like the integration I have, you know, how the deal closing is progressing in line to better, but I'm wondering what the responses that you're getting from customers, you know, how are you feeling about revenue attrition, how the customers like the deal and come to the expectations on that front going forward. Thanks. So, so we gave that in the past we said that we we expect there to be 150 million in revenue, the first year after close, we're still comfortable with that.
Cover that.
AD nauseum.
The last session everything that we said about the ability to get paid for the likelihood of having double orders, it's not in the microwave play place and that's why we emphasize this quarter that we're 90%.
Direct we we do installs on our biggest customers. So we would know if there was an inventory problem. So I want to say unequivocally.
We do not have that problem.
Scott Searle: So we did model in some attrition and perhaps some. Global zero one operator softness. So we factor that into the price we paid for the transaction and the deal then with respect to the customer engagement. I think the customer see a broad and portfolio from the combined entities. You know, any see has an incredible footnote architecture and Aviyah brings routers some standalone software and access products. So, you know, we have been factored that into the model what we've learned from the red line transaction to get revenue synergies is probably 12 months after close.
No I appreciate the color I'll jump back into queue. Thanks, a lot guys.
Thank you one moment our next question please.
Our next question comes from the line of Erik <unk> with JMP Securities. Your line is now open.
Yes, thanks for thanks for taking the questions.
First off.
You said that you had record bookings.
Q1 for North America, I think you also had record revenues can we assume that you had a healthy backlog on top of the top of the revenues that you had.
How does a healthy addition to the backlog.
On top of having record revenues and then secondly, you.
Talked about some of the technology development can you give us an update on the modem chip that you've been developing with with Maxim linear.
Yeah.
Scott Searle: And the initial conversations with customers would indicate that that's a real possibility. Great. Thanks so much. Nice job on the quarter and I'll get back in the queue. Thank you. One moment for our next question please.
No.
We had a record North America private network bookings our book to Bill is over one.
We know.
Coming.
End of the year.
Hi.
Record.
Backlog, so we think our backlog is in.
Jason Smith: Our next question comes from the line of Jason Smith with late street.
Great shape, our chip development.
Peter Smith: The line is not open. Hey guys, thanks for your taking my questions. Just curious if you could provide an update on what you're seeing from that Huawei funnel. I think last quarter you mentioned the current funnel was over 80 million. Has there been any change? I would say the route change we'd like to report is we increase our bookings from the Huawei share game funnel by a little bit under 10%. So our bookings went up 3.3 million.
It continues.
<unk>.
<unk> continues in a timely way, we're ready we will be ready to meet our.
Customers' needs in terms of.
Capacity frequency spectrum and total cost of ownership.
One thing that I would add Max linear is.
The partnership remains solid.
Productive and from.
From a risk perspective.
What has transpired is chips of quote unquote T globalized.
Peter Smith: So that continues to be a fruitful area for us.
We've become aware of additional.
Modem development in Europe and in Asia.
David Gray: Okay, that's helpful. And then just with your commentary on India being more of a kind of January June impact, would it be fair to expect gross margin to remain relatively flat here in the December quarter just given your mix expectations? Yeah, so your gross margin was May Progress versus the prior quarter and prior years, we've had the highest in six quarters. We expect the continued improvement, and like we said, alluded to last quarter, we expect a 100 basis point roughly improvement for the full year.
As investors have.
Express some.
Concerned about any one semiconductor chip.
Company dependency, we see the.
The modem environment of what's being less risky but with that.
Excellent here remains a.
A great partner and we're jointly executing on the technology development.
Okay, and then you had mentioned speed.
Is there any change in terms of your timing I believe.
Funding for projects is probably a 2025.
Timeframe is that still the expected timeframe or is there any update in terms of your expectations for timing.
David Gray: Project base nature is not going to be a straight line, but we expect for the full year to be about 100 basis points above. So Jaeson, that'll depend on the Indian project timing, as the quarter income did, it'll be a little bit lower, the quarter doesn't come in, it'll grow as far as it will be a little higher.
There's a little bit in the press.
Say.
Some of it might happen in.
Calendar year 2024, we think the beat impact is going to be in the January to March quarter.
The year 2025, so we're unchanged on that and I just thought I would.
Talk about what you're reading in the press we think it's.
David Gray: Perfect. And then just the last one for me, and I know you guys have outlined it in the past, but I just want to get another confirmation that, I mean, you're not seeing any sort of pockets of excess inventory pop-up in any of the segments that you're playing. Absolutely, and my comment in the script was that we covered that ad nauseam in the last session, everything that we said about the ability to get for the likelihood of having double orders, it's not in the microwave place, and that's why we emphasize this quarter that we're 90% direct. We do installs on our biggest customers, so we would know if there was an inventory problem, so I want to say unequivocally, we do not have that problem.
In early 2025 impact.
So I would add one more item.
45 of the 50 states have submitted initial draft to the.
The CIA which is the first step in unlocking.
The b funds so.
I talked about the overall timing.
There is a bunch of precursor steps that need to happen for fees.
Yes.
They have 45 of the 50 states submitting the initial draft.
It is progressing and that's encouraging to meet the early.
Early 2025 impact.
Thank you one moment for our next question.
David Gray: No, I appreciate the caller.
Operator: I'll jump back into queue.
Our next question comes from the line of Ken.
Operator: Thanks a lot, guys.
Operator: Thank you.
Operator: One moment for our next question, please.
Tim <unk> with Northland capital markets. Your line is now open.
Eric Supiger: Our next question comes from the line of Eric Supiger with the AMP Securities, the line is now open. Yeah, thanks for taking the questions. First off, you said that you had record bookings for North America. I think you also had record revenues.
Hey, good afternoon, and congrats on the results.
First just a real quick question any 10% customers in the quarter.
Like given your commentary around U S tier one strength, that's at least a possibility.
Yeah, Hey, Jim there was one around 10%.
Peter Smith: Can we assume that you had a healthy backlog on top of the revenues that you had in a healthy addition to the backlog on top of having record revenues? And then secondly, you talked about some of the technology development. Can you give us an update on the modem chip that you've been developing with Max Linear? Yeah, so we had record North America private network bookings. Our book to build is over one and we, you know, coming into the year we had record backlogs.
But.
We don't expect that to continue.
Okay great.
Can you say, whether that was U S or international or North America or international.
It was U S. Okay great.
And Pete I think youre, 30% growth comment.
For India.
For the fiscal year the type of growth you're.
Looking forward I Wonder if you might have a similar metric.
For U S Rural broadband you referenced the West show.
Peter Smith: So we think our backlog is in great shape. Our chip development continues in a timely way. We're ready. We will be ready to meet our customers' needs in terms of capacity, frequency, spectrum, and total cost of ownership. One thing that I would add, Max Linear, is the partnership remains solid and productive and from a risk perspective, what is transpired as chips have quote unquote decobilized. We've become aware of additional modem developments in Europe and in Asia that, you know, as investors have expressed some concern about any one semiconductor chip company dependency, we see the modem environment as well as being less risky, but with that, Max Linear remains a great partner of YAHR and we're jointly executing on the technology development.
I thought there was some kind of accelerating.
Momentum in evidence around fixed wireless after some.
Period.
The last really couple of years, but.
Yeah, and I think you've told us from time to time, how fast your rural broadband business is growing in the U S. I'm not sure you did this quarter, but.
Any chance of getting a comparable type metric for U S broadband growth.
To the one you gave data.
But two it might be greater much greater potential.
So you know.
The reason I answered the India question is because I have that prepared.
You're off.
So I don't have the specificity that you're perhaps looking forward, but let me give a little bit of flavor or our rural broadband business continues to be about.
9%.
We would say it's probably growing.
On the higher end or exceeding our fiscal 'twenty four.
Growth rate, but to be more specific I don't have those answers in front of us with accelerated would be.
<unk> dot funding kicking in and we're also encouraged by the expansion of the six gigahertz frequency from licensed beds, which because we think.
Peter Smith: Okay, and then you had mentioned bead. Is there any change in terms of your timing? I believe funding for projects is probably at 2025. Time frame, is that still the expected time frame? Or is there any update in terms of your expectations for timing? You know, there's a little bit in the press that will say some of it might happen in calendar year 2024. We think the bead impact is going to be in the January to March quarter in the year 2025. So we're unchanged on that and I just thought I would talk about what you reading in the press. We think it's an early 2025 impact.
That fixed wireless opportunity drives more for for backhaul. So we we would qualitatively agree with you we were not ready to put a number to it.
Okay. Thanks.
Last question for me I think you noted a pretty strong backlog.
Your poor once a year coming out of last quarter.
And I think.
Sort of U S. Private networks was the key driver there.
And you mentioned you hadn't expected this order strength to continue but.
Am I right in thinking you had I.
I guess two quarters in a row here I don't know if you would consider above trend type.
Type growth and can you talk about market growth versus share gain I guess, probably versus Nokia principally as a growth driver in private networks.
Peter Smith: So, I would add one more item. 45 of the 50 states have submitted initial draft to the NTIA, which is the first step in unlocking the bead fund. So, you know, I talked about the overall timing. There's a bunch of precursor steps that need to happen for bead and this 45 of the 50 states submitting the initial draft is progressing and that's encouraging to meet the early 2025 impact. Thank you.
We would say it's hard to say who were taking the.
Sure.
We are growing above market trend in our private network business.
It's.
So we would say no.
It's principally due to <unk>.
Okay. So.
I wouldn't break out who who were were beating but we know that we are taking share.
Jim: One moment for our next question. The next question comes from the line of 10th Avenue with Newfound Capital Markets. Your line is now open. Okay, good afternoon and congrats on the results. First, just a real quick question. Any 10% customers in the quarter seems like giving your commentary around US tier 1 strength. That's at least the possibility. Yeah, hey, Jim, there was one around 10%. But, you know, we don't expect that to continue.
Okay. Thanks very much.
Thank you.
One moment our next question please.
Our next question comes from the line of Theodore O'neill with Litchfield Hills Research. Your line is now open thank.
Thank you very much and congratulations on good quarter.
Hum.
Mike My first question is if you could talk about your international revenue on a constant currency basis.
Yeah sure. Thanks Teo, yes.
So given the strength of the U S dollar and some some devaluation.
On a constant currency basis, our total revenue for Q1 would have been up by eight 9% versus seven 8%.
That's not something we've typically.
Jim: Okay, great. Can you say whether that was US or international or North America or North America? That was US. Okay, great. And, Pete, I think you're 30% growth comment. For India, gather that for the fiscal year, the type of growth you're looking for. And I wonder if you might have a similar metric for a US rural broadband. You know, you referenced them, the West show. And I thought there was some kind of accelerating momentum and evidence around six wireless after, you know, so so period the last really couple of years.
Discussed or disclosed you framed in that.
<unk>.
Wei previously hadn't had that materials and impact but.
With the advent of any seen we will probably start talking about that in a little bit more detail going forward because it will become a bigger slightly.
Slightly bigger factor into this business why will it become a bigger factor.
Well cause more right now or internationally.
Yeah, Yes, only 10% of our revenue currently is denominated in non USD currencies right.
And most of that is for services, where the cost of goods sold as an incurred in non USD currency.
Jim: But, you know, I think you've told us from time to time how faster rural broadband business is growing in the US. I'm not sure you did this quarter, but any chance of getting a comparable type metric for US broadband growth to the one you gave me. I assume it might be greater, much greater potential.
So that's what I'm asking there with NBC.
They historically have had more revenue in local currency, whether it be for product or services.
Work too.
Migrate that to more of R. R.
But.
Peter Smith: So, you know, the reason I answered the india question is because I had that prepare, so I don't have the specificity that you're perhaps looking for but let me give a little bit of flavor. There are a role brought down business continues to be about 9%, we would say it's probably growing on the higher end or exceeding our, you know, fiscal 24 growth rate but to be more specific, I don't have those answers in front of us of what would accelerate it would be the art of funding kicking in.
For that for.
The near term that might become a bit more of a factor for us.
And on the same subject to do you pick up more.
AD sales force from the <unk> acquisition.
Yeah, absolutely so we will pick.
Pick up on.
About 200.
<unk> with.
A lot of I would say the lion's share of those employees being sales or sales support or.
Network engineers to support sales.
Peter Smith: And we're also encouraged by the expansion of the six gigahertz frequency for unlicensed band which because we think, you know, that fixed wireless opportunity drives more for backhaul so we would qualitatively agree with you, we were now ready to put a number to it. Okay, thanks. And last question for me, I think, you know, you know, you know, you're a pretty strong backlog which you're, you're poor once you're coming out of last quarter.
Okay, Great and you made some great progress in bringing down accounts receivable and I was wondering do you have a target for that for like a DSO target you are trying to hit.
I Hope I said previously that our long term.
Net DSO target. This is net of unearned and advanced payments.
We want it to be around 80 80 days right.
Right.
And I think we can get there in the.
Fairly.
Near term I won't put a specific quarter on it but it shouldn't take us that long.
Peter Smith: And I think, you know, sort of US private numbers was the key driver there. And in mention you had an expected disorder strength to continue but, you know, am I right in thinking you've had, you know, I guess two quarters in a row here of, I don't know if you would consider, you know, above trend type growth and can you talk about market growth versus share gain, I guess probably versus no care principally as a growth driver and private networks.
That range.
Okay. Thanks very much.
Thank you.
A reminder to ask a question you will need to press star one one and wait for your name to be announced.
Our final question comes from the line of Dave.
<unk> with B Riley your line is now open.
Hi, Thank you good afternoon.
First question is on any C. Just wondering if any.
Our financial metrics.
Peter Smith: You know, I, we would say, you know, it's hard to say who we're taking the share from but we, we are growing above market trend in our private network business and it's, you know, we would say that it's, it's principally due to share gain. So, but I wouldn't break out who, who we're, we're beating, but we, we know that we are taking share. Okay, thanks very much. Thank you. One moment for next question, please.
The changes since the date of the transaction that was announced.
Months ago.
No no I mean, we did say in our remarks that we think it'll.
It'll be accretive one quarter earlier and Thats based on the integration collaboration we've done.
To date, so that's a.
An improvement, but the the top line and the margins remain unchanged.
It's kind of surprising it says.
There is sort of like a flip flop of you guys, but they have more exposure to public.
<unk> operators now.
Yes, they have.
Theodore O'Neill: And next question comes from the line of theodore O'Neill with Litchfield Hills research. The line is now open.
Exposure to tier ones, we we modeled it.
David Gray: Thank you very much and congratulations on good quarter. Mike, for, my first question is if you could talk about your international revenue on a constant currency basis. Yeah, sure. Thanks, Theo. Yeah, so given the strength of the US dollar and some some evaluations, you know, you know, on a constant currency basis, our total revenue for q1 would have been up by 8.9% versus 7.8%. That's not something we've typically discussed or disclosed or framed in that way previously it hasn't, hasn't had that material of an impact but with advent of NAC, we'll probably start talking about that in a little bit more detail going forward because it will become a bigger, slightly bigger fact.
Conservatively so.
With the.
Slowdown in tier one capex spending we still are committed to the numbers. We have said previously so so.
We model that accordingly, I guess.
The best way to say that.
Okay.
Follow up is on your long term you'd provided gross margin and EBITDA.
Target of 40% and 50% just wondering what the timeframe for that and what kind of revenue are you assuming and does that include ADC.
Yes, so that the gross margin targets did not include any sea.
David Gray: Why will it become a slightly bigger factor? Well, because more right now, only 10% of our revenue currently is nominated in non-USD currencies, right? And most of that is for services where the cost of consumers is incurred in non-USD currency. So it's well-matched there. With any AC, they historically have had more revenue in local currency, whether it be for product or services. We'll work to migrate that to more of our SOP, but for the near term, that might become a little bit more of a factor of course.
Well as we do.
Disclose previously.
Somewhat dilutive in the near term.
But we.
We expect to be able to approve on those going forward.
Just looking at the core business ex any sea.
I think if we.
We achieved the 100 basis point improvement year over year, that's a good step forward and in reaching that target.
And then on the EBITDA.
EBITDA side.
I.
I think we will.
We'll be pretty close to that.
On a regular basis here as we exit the exit from here just.
Just based on the revenue gains and leveraging the business.
Got it thank you.
David Gray: And on the same subject, do you pick up more, do you add Salesforce from the NEC acquisition? Yeah, absolutely. So we will pick up on about two other employees with a lot of, I would say, lion share of those employees being sales or sales support or network engineers to support sales.
Thank you.
I would now like to turn the conference back over to Mr. Smith for closing remarks.
Okay well.
David Gray: Great.
Thanks to all of.
Investors for your continued interest in avia.
This is being our first quarter, we think we have a foundation for a great.
Fiscal year, we're looking forward to closing the <unk> transaction.
Updating you in 90 days, thanks, everyone for joining the call.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
David Gray: And you made some great progress on bringing down accounts receivable. And I was wondering, do you have a target for that? For like a DSO target? You're trying to hit? Yeah, I think we said previously that our long-term NEC DSO target, this is net of unearned and advanced payments, we want it to be around 80 days, right? And I think we can get there in the in the fairly near term, I won't put a quarter on it, but it shouldn't take us that to that range.
David Gray: Okay, thanks very much. Thank you.
Yeah.
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Okay.
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Operator: As a reminder to ask a question, you'll need to press star 11 and wait for your name to be announced.
Dave Kang: How far no question comes from the line of Dave Kang with B.
Peter Smith: Riley? Your line is now open. Thank you, good afternoon. My first question is on NEC. Just wondering if any of their financial metrics changed since the date of the transaction that was announced several months ago? No, I mean, we did say in our remarks that we think it'll be agreed on one quarter earlier, and that's based on the integration collaboration we've done to date. So that's an improvement, but the top line and the margins remain unchanged.
Peter Smith: That's kind of surprising since there's sort of like a flip-slop of you guys, so they have more exposure to public 5G operators, no? Yeah, they have exposure to tier 1s. We modeled it conservatively, so you know, with the slowdown in tier 1 cap expending, we still are committed to the numbers we've set previously. So we... You know, we modeled it accordingly. That's, I guess, the best way to say that.
David Gray: Okay, and my follow-up is on your long-term, you know, you provide a gross margin and EBITDA target of 40% and 15% just wondering what the time frame for for that and what kind of revenue are you assuming and does it include any see? Yeah, so that the gross margin target of course did not include any see. That will, as we've disclosed previously, be somewhat diluted in the near-term, but we expect to be able to prove on those going forward.
David Gray: You know, just looking at the core Aviat Business X, any see. You know, I think if we achieve the 100 basis point improvement year over year, that's a good step forward in reaching that target. And then on the EBITDA side, you know, I think we'll be pretty close to that, you know, on a regular basis here as we exit the year just based on the revenue gains and leveraging the business.
David Gray: Got it. Thank you.
Peter Smith: I would now like to turn the conference back over to Mr. Pete Smith for closing remarks. Well, thanks to all of the investors for your continued interest in Aviat. This is being our first quarter. We think we have a foundation for a great fiscal year. We're looking forward to closing the NEC transaction and updating you in 90 days. Thanks, everyone, for joining us all.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect and we won't have a wonderful day. Thank you. Thank you for your time, and I'll see you in the next video. Thank you. Peter Smith, Scott Searle, Peter Smith, Scott Searle Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith,[inaudible] Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle, Peter Smith, Scott Searle,[inaudible] . . [inaudible] Peter Smith, Scott Searle, Erik Suppiger, Peter Smith, Scott Searle, Erik Suppiger Peter Smith, Scott Searle, Erik Suppiger, Peter Smith, Scott Searle, Erik Suppiger, Peter Smith[inaudible]
Thank you.
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Thank you.
[music].
Thanks.
[music].
Okay.
[music].
Okay.
Okay.
Yes.
Okay.
Thanks.
Yes.
Okay.
[music].
Okay.
Yes.
[music].
Thank you.
Thank you.
[music].
Yes.
[music].
Sure.
Sure.
[music].
Okay.
[music].