Thank you and welcome to Aviat Networks Fiscal 2019 Fourth Quarter and Year-End Conference Call. We just filed our Form 10-K and issued our press release and our updated investor presentation has been posted to the Investor Relations section of our Web site.

Speaking from management today will be Michael Pangia, President and Chief Executive Officer; and Stan Gallagher, Chief Operating Officer. Shaun McFall, Senior Vice President of Corporate Development is also with us and will be available during the Q&A portion of this call. With respect to Safe Harbor.

During today’s call, management may make forward-looking statements regarding Aviat's business, including, but not limited to, statements relating to projected revenue, business drivers, the timing and capabilities of new products, network expansion by mobile and private network operators, and economic activity in different regions.

These and other forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements.

Please note, these forward-looking statements reflect the company's opinions only as of the date of this call and the company undertakes no obligation to revise or publicly release the results of any revision or these forward-looking statements in light of new information or future events.

Additionally, during today's call management will reference both GAAP and non-GAAP financial measures. Please refer to our press release and financial tables therein, which include a GAAP to non-GAAP reconciliation and other supplemental financial information.

If anyone has any questions, please feel free to ask during the Q&A portion of the call following management’s remarks. And as always, should you have any follow-up questions, you can reach the Investor Relations department at 212-786-6011.

The company has a lot of momentum moving into fiscal 2020 and we intend to get more active on the IR front with the next event, The MicroCap Rodeo Conference co-sponsored by Northland and Lake Street in Austin, Texas on October 15 and 16. At this time, I’d like to turn the call over to Mike..

Thanks, Glenn.

Fiscal 2019 was a very good year for our company as we added several new accounts, enhanced our technology position bringing innovative and differentiated solutions to market, we established partnerships with market leaders, we further strengthened our position in North America, and we continue to institutionalize operational excellence to further optimize our overall cost structure.

Revenue for fiscal 2019 was up slightly year-over-year, and we generated our third consecutive year of profitability. Bookings were the best we’ve seen since 2016 with exceptionally strong performance in North America.

With a solid backlog of high-quality business heading into fiscal 2020, we are in a stronger position to deliver better margins and much improved bottom line results.

The one major market that fell well short of our expectations in fiscal 2019 was Africa, where network investments did not happen at the level we anticipated with a consequent effect on our topline growth aspirations for the fiscal year. We reported fiscal 2019 revenue of 243.9 million, up 1.4 million year-over-year.

North America revenue grew by approximately 1.8 million and international revenue declined modestly. Revenue in Africa and the Middle East was down over $10 million compared with fiscal 2018 but offset by strong growth in the APAC region and with Globe in particular.

Our book to bill for the fiscal year was well above 1, and bookings in North America were up over 27% with an exceptionally strong fourth quarter, one of the strongest in our company’s history. Stan will cover our financial performance in his remarks, so I’d like to shift to some of the key fiscal 2019 highlights.

While servicing our customers will always remain our top priority, we also set out to expand our reach across new verticals and with new accounts. This was accomplished in fiscal year '19 as we added 50 new customers.

What’s telling is the diversity of the accounts; wireless broadband, utilities, public safety, state and local governments, military, education, transportation, oil and gas, and so forth. Within our private networks business, public safety remained the highest order flow on a dollar basis.

This was followed very closely by the utility vertical which was very strong for us in fiscal '19, and we now have over 100 customers. We set out to add two new states in fiscal '19, and we did.

We announced last November that we had been selected by our partner Motorola Solutions to be their wireless backhaul provider for the State of Florida’s mission critical P25 network. We had anticipated some revenue from this project in our initial fiscal '19 projections, but orders were delayed due to an ongoing appeal process.

I am, however, pleased to announce that we have received our first purchase orders, the project is now moving forward, and we expect positive contributions throughout fiscal 2020.

We also announced in the State of Alaska in January, a new public safety account whereby Aviat will be providing both microwave hardware and software to upgrade police, fire, and emergency communications. Also, in the fourth quarter, we had large awards in other states, Oregon being a prime example.

Oregon is migrating its network to all-IP to support increased capacity driven by growth in advanced public safety applications. This project involves upgrading legacy Aviat radios in a portion of the network to newer technology solutions including our Eclipse and IRU 600 mission critical microwave radio platforms.

We now have more than half of the U.S. state contracts, and we believe we can continue to grow both with states and local governments due to the strength of our technology and enhanced services. We’re also introducing new subscription-based commercial offerings with our installed base customers.

While not a fiscal '19 event, just last week we closed on a 10-year, $13 million contract in the public safety market with a large county in California, a first of its kind. This is a long-term microwave upgrade agreement that provides seamless and regular technology upgrades, full service and support, and a simple OpEx payment model.

This is a nice win for us, and we expect more of this type of business for Aviat in the years ahead as we have other similar projects in the pipeline. On the partnership front, which was another one of our key objectives, we added NEC in June.

As we announced, Aviat has become the exclusive distributor for NEC microwave and millimeter wave products in North America. Aviat will provide NEC radios along with our value-added services and support to their customers in the region. It’s a start of what we believe can be a long-term and higher complementary alliance between our companies.

Note there was no contribution from NEC in our fiscal '19 numbers and this is expected to be incremental business for us in fiscal 2020.

On the service provider side, we announced a new five-year global supplier frame agreement with Ooredoo, an international telecom company in Qatar with 10 operating companies spread throughout the Middle East, North Africa, and Southeast Asia.

This agreement enables all of Ooredoo’s operating entities to purchase our complete portfolio of wireless transport solutions. Another major highlight was our momentum with Globe in the APAC region, the leading provider in the Philippines, which I discussed on our last call.

They continue to be a key customer and we are working with them on other projects which we will discuss later this year. In May, we announced orders from a top-5 U.S. wireless carrier for 5G transport. We’ve all heard about the promise of 5G and we know it is coming. We’re excited about it.

Historically, we have taken the approach that 5G will take time and not overplay this potential. However, we are seeing 5G picking up steam and starting to ramp, which is why we have focused our R&D efforts on accelerating the introduction of new 5G tailored solutions.

We anticipate fiscal 2020 will show a gradual pickup for 5G-related products and services with a bigger impact most likely in the one to three years that follow, which is a great segue to our August 1st announcement regarding the launch of our WTM 4800 E-band and multi-band radio platform specifically designed for 5G transport applications.

WTM 4800 is the industry's only single-box, multi-band solution which substantially lowers cost for 5G transport when compared with competitors’ two, three and even four box solutions. We believe this product is a game changer to address both capacity and reliability needs of 5G transport networks.

Combined with our automation tools, WTM 4800 makes multi-band easy for our customers to deploy further lowering their total cost of ownership. And lastly, the Aviat Store, which was launched last August and is a new self-service online marketplace for our WTM 4000 all-outdoor product family.

The Store is designed to simplify the process of quoting, purchasing, and delivery and part of our solution to grow share in the all-outdoor segment. As I trust you saw from our most recent announcement, our Q4 sales more than doubled the business we have received in the first seven months since this service was launched.

While a small piece of our overall business today, momentum is building and we are generating new accounts in the wireless ISP and rural broadband market segments. Before turning the call over to Stan, I’d like to finish up with a comment about our outlook into the first half of fiscal 2020.

Based on our bookings performance in fiscal 2019 and more specifically in Q4, our strength in North America and other international projects that are underway, we expect strong profitability in fiscal 2020 with the first two quarters both looking exceptionally strong.

We’re not expecting Africa to rebound in the near term, but are offsetting the top line impact with growth in other areas of our business and better margin profiles flowing through to the bottom line. Revenue is anticipated to be down modestly in the first half of fiscal 2020 when compared to fiscal 2019.

Gross margins, however, based on the mix should improve significantly and I believe that we are tracking towards a higher sustainable run rate. We see non-GAAP gross margins trending upwards in the first half of fiscal 2020 and we’re anticipating we will come north of 35% in both quarters.

And we will continue to manage the operating expense side with a bias towards investing more in growth and value-added activities.

For the first half of FY '20, we’re anticipating non-GAAP operating income to roughly double as compared to the prior year, approximately 6 million compared to 3 million in the first half of fiscal 2019 with adjusted EBITDA of approximately 7.5 million compared to 5.4 million over the same timeframe.

Stan will now provide a brief review of our Q4 and full year financial performance, cover our balance sheet and talk about some of the operational excellence programs underway and planned. We would then open up the call for questions.

Stan?.

Thanks, Mike, and good afternoon, everyone. Fiscal 2019 fourth quarter revenue of 64.2 million was up 1.7 million year-over-year and full year revenue of 243.9 million increased 1.4 million compared to fiscal 2018.

While top line results fell a little short of our prior expectations, as Mike noted, the vast majority of the shortfall both for the quarter and year was due to lower revenue in Africa.

To put this in better context, as we group regions in our financial report, the Q4 revenue decline in Africa was 4.6 million and for the full fiscal year was down 5.1 million. Excluding Africa, our business performed in line with our expectations. North America revenue in Q4 was up over 25% and up 1.4% for the fiscal year.

Even more encouraging, our Q4 bookings performance in North America was exceptionally strong and as a result will be a strong source of revenue growth in the coming year. International revenue in Q4 was down approximately 20% year-over-year, mostly attributable to Africa.

While the APAC region was also down in Q4, on a full year basis APAC revenue was up over 46% compared to fiscal 2018. Mike addressed our bookings earlier in his comments, but I will add a few comments. Our book to bill for both the fourth quarter and full year was well above 1 and North America was the number one contributor to this.

For the full year comparisons, North America bookings were up over 27% and Africa bookings were down approximately 37%. On a dollar basis, the North America growth was far more substantial and this bodes well for margin performance in future profitability.

As for gross margins, GAAP gross margin in Q4 was 35.2%, down 190 basis points compared to Q4 in fiscal 2018. And for the full fiscal year, GAAP gross margin of 32.5% was down 70 basis points. On a non-GAAP basis, we reported Q4 gross margin of 35.1%, down 180 basis points and fiscal 2019 non-GAAP gross margin of 32.5% was down 60 basis points.

Margins were mostly in line with our expectations but were curtailed just a bit by a few project delays in North America. These projects will be picked up in the first half of fiscal 2020.

In fact, given the forecasted mix of business and our strong backlog moving into fiscal 2020, we are expecting very strong gross margin performance, as Mike indicated.

On the expense side, GAAP operating expenses declined by 2.1 million or 9.4% year-over-year when comparing the fiscal fourth quarters and for the full year comparisons declined by 1.3 million or 1.6%. On a non-GAAP basis, Q4 operating expenses declined by 1.3% while full year operating expenses were essentially flat.

Coming into the year, we had talked about savings through process excellence programs, most of which would be reinvested in R&D and that was indeed the case.

We continue to see our administrative expenses come down and we invested more on the R&D side to bring new products to market in support of our current customer base to ensure we are positioned for 5G and for the expected expansion into new customer segments in adjacent markets. We also invested more in our U.S. sales and ecommerce initiatives.

Additionally, I’d like to point out that in Q4 we had higher variable expenses related to the sales commissions based on our strong bookings performance.

We have earmarked additional savings through process excellence and other investments in automation with a portion expected to fall directly to the bottom line, while we continue to invest in R&D to differentiate our market offering and support our planned expansion plans.

While bottom line performance was below the prior year due in part to Africa and higher than anticipated expenses for the reasons I just covered, we still had a strong year delivering our third consecutive year of profitability with 10 of the past 11 quarters being profitable on an adjusted EBITDA basis.

Rather than rehash all of the GAAP and non-GAAP figures, which are in our release or Form 10-K, I will note that adjusted EBITDA declined by 0.5 million when compared to the fourth quarters and 1.3 million for the fiscal year comparisons.

As we now leverage our performance momentum beginning with our first half guidance based on the level of booked business we have and very strong momentum in North America and other high margin international projects underway, our confidence in achieving our bottom line expectations is very high. Moving on to the balance sheet.

We exited fiscal 2019 with cash and cash equivalents of 31.9 million compared to 37.4 million at the end of fiscal 2018 and 36.1 million at the end of the third quarter of fiscal 2019.

Note, in fiscal 2019 approximately 2.3 million was used to repurchase shares under our stock repurchase program and approximately 5.2 million was related to capital expenditures, in line with our plan.

Additionally, the biggest variance was in accounts receivable which increased by 6.3 million on a sequential basis and due to timing and cutoffs led to approximately $6 million of cash decline. The good news is that as of today, the vast majority has been collected and our balance sheet and cash position remains strong.

Looking back on the year and the objectives we set out to achieve, we delivered on most of the key initiatives. We continue to improve our cash conversion cycle and at the end of this year achieved another historical best level.

While we did not hit our full year revenue income and EBITDA objectives, we still made great strides and are in a strong position for fiscal 2020. We exceeded our plan on bookings and the mix of business we have should favorably impact gross margins and profitability in the first half of the year.

Our cultural transformation based on operational excellence has reenergized our team and we are fully aligned on our goals and objectives.

We optimized several areas of our business through automation and various process enhancement programs and this too resulted in savings which were reallocated to strengthen our product portfolio and opened up new channels for growth and partnerships.

We accelerated our continuous improvement initiatives and the savings we generated were slightly higher than our initially forecasted for the year. We have additional savings in our fiscal 2020 pipeline and I believe as we execute on our programs, we can generate more.

Some will fall to the bottom line and a portion of the savings will also be allocated to strengthen our infrastructure.

Additionally, as you will see in our Form 10-K under subsequent events, on August 21, 2019, our Board of Directors approved a restructuring plan to further consolidate product development, right-size our resources to support our international business and other support functions.

There will be restructuring charges incurred and we anticipate annualized savings in fiscal 2021 as a result. We set out to generate growth which we did, albeit not at the rate we had targeted again due to the current situation in Africa.

However, going back to Mike’s comments about new customers and achieving our objectives with respect to new states and verticals within the private network side of our business, we definitely delivered on this front, especially in North America. Lastly, we executed on our product and service development programs.

New products were developed and launched on time and on budget. New products are generating new business at improved margins, the Aviat Store is gaining momentum with further growth anticipated in fiscal 2020 and our recently introduced 4800 series solution holds great promise for the future.

To reiterate, the first half of fiscal 2020 is looking very strong and we expect to build upon this momentum throughout the year. Note, we provided guidance for the first half of fiscal 2020 as we continue to evaluate the situation in Africa and the best operating model going forward.

I do, however, want to convey that we are anticipating strong profitability throughout the full fiscal year. There are a lot of initiatives underway that will over time lower our fixed cost, enhance our ability to aggregate data in real time through automation and improve our forecasting and conversion capabilities.

We are making selective investments beyond our product and service capabilities to enhance efficiency and increase profitability. In closing, we remain focused on enhancing shareholder value and intend to be more aggressive in getting out on the road and telling our story this year.

We are exploring avenues to improve liquidity in our shares, our capital structure and overall awareness of Aviat given our strong performance in recent years and our expectations in fiscal 2020. That concludes my remarks. And we are now ready to open up the call for questions..

[Operator Instructions]. Your first question comes from the line of Steve Busch from Everglades Resources. Your line is now open..

Good afternoon, guys. Excellent quarter..

Hi. Thanks..

Thank you..

So, yes, it is amazing that you guys don’t get a lot of respect yet from other investors given the bottom line numbers are improving so well. You covered a couple of my questions, but maybe I’ll just follow up a little more.

Can you go into more depth kind of with revenue opportunity, whether it will cannibalize our own products on the NEC deal?.

Yes. So it’s Mike here. We see the NEC opportunity as being completely incremental. From a product perspective, we are going to continue to service our customers with the solutions that they’re looking for in terms of evolving from the products they have.

But the services will be Aviat services, so we don’t see any cannibalization but incremental growth on both fronts..

That’s awesome.

Is there any kind of number you can wrap around it?.

I think at this point, we’re probably – it’s probably not significant enough for it to be material this fiscal year. It will be part of the other components where we do expect growth in North America pretty significant this year, and it will be part of that and I would expect the business to continue to grow as we move forward..

Okay.

Is there an opportunity to get any other parts of their business or is it just this?.

Well, NEC as we all understand is a massive company that has operations in several elements of their portfolio beyond microwave. Clearly, this partnership and the opportunity starting in the U.S. allows us to explore other opportunities with them either globally or in adjacent product areas..

Okay. Good to know. I’ll hop off for now. Excellent job..

Thank you..

Thanks..

Thank you. Next question coming from the line of Tim Savageaux from Northland Securities, your line is now open..

This is actually Steven [ph] on for Tim. Congrats on the quarter, guys..

Thanks..

I was wondering if you guys can give us a little bit more update on Africa.

Is the downturn trend all due to MTN or is there something else going on there?.

I think the biggest driver is MTN as it relates to their spending profile. The rest of Africa has also been slower than we expected but not to the same extent as the shortfalls that we’ve seen with our largest customer.

Having said that, as we look at our first half, we’re factoring in our outlook basically, a similar run rate that we’re currently experiencing and we would expect as we’re looking at all options to improve how we operate in Africa, we would expect to see – likely to see some improvement in the second half of the year..

Okay, great. Thanks for that. And then I guess my last question going to be the Ooredoo deal that you have, I’m probably mispronouncing that name, but I thought it’s a five-year contract with them. Can you give us any color around that, when you expect to start receiving orders from them or anything like that? Thanks..

Yes, so Ooredoo has got operations across several different areas as I went through in my prepared remarks.

Our agreement allows us the ability to go after all opportunities in all of their op-cos, and we do have a couple of their op-cos that we’re focused on as it relates to building out our 5G – part of our 5G aspirations and also leveraging some of the new products that we introduced, including our multi-band and 4000 solutions..

Thank you. Next question is coming from the line of Richard Greulich from REG Capital Advisors, your line is now open..

Thank you.

Could you tell me what the company policy is regarding share buybacks going forward?.

So the Board approved a couple of years ago obviously a maximum of $7.5 million of share buybacks. We have been executing that since the approval. I would say that our policy is for continued buybacks throughout the fiscal year. So it’s part of our budget going forward..

Thank you very much..

Sure..

Thank you. [Operator Instructions]. Now concludes today’s call. Thank you. You may now disconnect..

Thank you..

Thanks very much..