Good afternoon. Welcome to Aviat Networks’ Fourth Quarter Fiscal 2021 Earnings 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. I will now turn the conference over to your host, Mr.

Keith Fanneron, Vice President of Global Finance and Investor Relations. Thank you. You may begin..

Thank you, and welcome to Aviat Networks fourth quarter fiscal 2021 results conference call and webcast. You can find our Form 10-K, press release and updated investor presentation in the IR section of our website at www.aviatnetworks.com, along with a replay of today’s call in approximately two hours.

With me today are Pete Smith, Aviat’s President and CEO, who will begin with opening remarks on the company’s fiscal fourth quarter, followed by Eric Chang, our CFO, who’ll review the financial results for the fourth quarter and fiscal 2021. Pete will then provide closing remarks on Aviat’s strategy and outlook followed by Q&A.

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, the impact of COVID-19 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 these statements.

Additional information on factors that could cause actual results to differ materially from statements made on this call can be found in our annual report on Form10-K filed with the SEC on August 25, 2021.

The company undertakes no obligation to revise or make public any revision 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.aviatnetworks.com and financial tables therein, which include a GAAP to non-GAAP reconciliation and other supplemental financial information. At this time, I’d like to turn the call over to Aviat’s President and CEO, Pete Smith.

Pete?.

Thanks, Keith, and good afternoon, everyone. Thanks for joining us to review a successful quarter. The company continued to execute on our key long-term focus areas of growth, margin expansion, expense reductions and meaningful bottom line improvements.

The Aviat team commitment resulted in fourth quarter and full fiscal year revenue growth of 14.4% and 15.2% compared to the same period last year. Fourth quarter and full fiscal year adjusted EBITDA margins of 9.7% and 11.9%.

Our fiscal year 2021 adjusted EBITDA of $32.8 million and adjusted EBITDA margin of 11.9% more than doubled the fiscal year 2020 adjusted EBITDA of $13.5 million and adjusted EBITDA margin of 5.7%.

A solid balance sheet and liquidity position with net cash at $47.9 million growing by $2.1 million sequentially from the last quarter and $15.3 million for the fiscal year with no loans outstanding. North American fourth quarter revenue increased 21.4% year-over-year.

And for the full fiscal year 2021 North American revenue increased 20.7% compared to the same period last year. International fourth quarter revenue increased 3.5% year-over-year and full fiscal year 2021 international revenue increased 5.6% compared to the same period last year.

Our full fiscal year 2021 revenue of $274.9 million exceeded the top end of our guidance of $265 million. Adjusted EBITDA was $7.0 million for the fourth quarter, representing an improvement of $1.4 million versus the same period last year. Adjusted EBITDA margins improved to 9.7% for the fourth quarter compared to 8.8% for the same period last year.

Our full fiscal year 2021 adjusted EBITDA of $32.8 million exceeded the top end of our guidance of $31 million and more than doubled the fiscal year 2020 adjusted EBITDA of $13.5 million.

The improvement in revenue and adjusted EBITDA for the fourth quarter and the full fiscal year was primarily due to gross margin expansion from higher volume of Private Network business, increased sales through our Aviat Store, which serves primarily the Rural Broadband space, improved international business driven by multi-band wins and also software and license sales.

We want to recognize our suppliers and the Aviat supply chain team for successfully navigating the current environment. Aviat’s team performance has offset the difficult supply environment. On recent calls, I’ve talked extensively about our exciting new capabilities in software, services and e-commerce which continue to drive our success.

Today, I’d like to explain some of the differentiation in our radio products, specifically the WTM 4000 platform, which has played a significant role in our recent growth in 5G and Rural Broadband.

WTM 4000 is an all-outdoor ultra-high capacity microwave, millimeter wave and multi-band radio platform that has important differentiated capabilities compared to other radio platforms and achieves lowest total cost of ownership. We understand that customers buy systems, not chips, so we build what we believe to be the best system.

The WTM 4000 leads the industry in system gain, enabling radio links to go further in distance, have a greater ability to overcome weather effects like rain and use smaller antennas, which is an important element in Aviat’s total cost of ownership value proposition. WTM 4000 also has higher capacity in microwave bands for all practical use cases.

Further, WTM 4000 has a modular platform architecture, designed from the ground up for system flexibility.

Not only has this modularity allowed us to build the industry’s only single-box multi-band radio that also enables us to deliver variance of this quickly as evidenced by our recent announcement of 11 gigahertz and 13 gigahertz multi-band products which we announced in the fourth fiscal quarter.

Being less susceptible to rain than other bands, the 11 gigahertz multi-band variant is particularly attractive, enabling extended distance and increased reliability of multi-band links which grows our addressable market, allowing us to sell more multi-band, in more places around the world.

Platform modularity also allows us to mix and match transceivers, enabling 20 gigabits per second in a single box, which is twice the capacity of our competition.

In addition to the recent wins at DISH, Safaricom, NextLink, LTE broadband and other 5G and Rural Broadband accounts, the WTM 4000 is responsible for some new contracts, new wins in Africell and Union Wireless were driven in part by the differentiated capabilities of the WTM 4000 platform.

We are also seeing positive activity with the platform internationally. In Asia Pacific, we have broken into two new countries with new operator wins based on our radio differentiation and have significant prospects for growth in the region, especially in segments where spectrum is expensive and operators are moving to 5G.

In Africa this quarter, because of our multi-band solutions, we have gone back into the access networks of two major Tier 1 accounts in countries where we were shut out a number of years ago. We will continue to communicate more information about these international wins soon.

We believe the WTM 4000 platform is the most capable radio platform on the market today. We feel confident the platform’s modularity will allow us to address customer economic issues as 5G and Rural Broadband evolves globally.

We believe 5G builds will drive new backhaul upgrades and that our Rural Broadband business will benefit from meaningful government funding, including the $9 billion 5G Fund for Rural America and the $20 billion Rural Digital Opportunity Fund.

On top of this, there is an additional proposed $65 billion for broadband funding included in the $1.2 trillion bipartisan infrastructure framework. In fiscal year 2021, Aviat added 150 new Rural Broadband accounts, growing our business significantly, and we are now the leading wireless backhaul provider to this segment in the USA.

So we are well positioned, that this funding comes to fruition. Being an American company, Aviat is proud to deliver broadband connectivity to Rural America, enabling economic, social, health care and educational opportunities for all Americans. With respect to private networks, our business remains strong and is growing.

Aviat has a highly differentiated offering. Our leading RF performance, along with our software and services capabilities are keys to lowering TCO and delivering value to our customers. In the quarter, we secured a new state government network in the U.S.

and won a significant multiyear design and deployment project for a nationwide Emergency Services Network in Western Europe. These public safety projects are a great business for Aviat and will drive revenue throughout fiscal year 2022. Before turning the call over to Eric, let me provide a couple of additional observations and insights.

First, this was a very good fourth quarter and full fiscal year. We remained focused and continue to execute and those collective efforts are reflected in our financial and operational results. We’ve continued to demonstrate our ability to grow and to take a greater share of demand for the products and services we offer.

Looking forward, we expect to continue to see three significant revenue drivers; 5G, Private Networks and Rural Broadband. And we believe we are well positioned to capture significant opportunities with our differentiated products, software and services offerings.

With that, let me turn the call over to Eric to review our financials before coming back for some final comments.

Eric?.

Thank you, Pete, and good afternoon, everyone. During my remarks today, I will review some of the key fourth quarter and full year fiscal 2021 financial highlights, noting our detailed financials can be found in our Form 10-K and earnings release, both of which were filed this afternoon.

As a reminder, all comparisons discussed today are between the fourth quarter of fiscal 2021 and the fourth quarter of fiscal 2020 and between full year fiscal 2021 and full year fiscal 2020, unless noted otherwise.

For the fourth quarter, we reported total revenues of $71.7 million as compared to $62.7 million for the same period last year, an increase of $9 million or 14.4%. Revenue for the full year fiscal 2021 was $274.9 million compared to $238.6 million for the same period last year, an increase of $36.3 million or 15.2%.

During the quarter, the North American team continued to focus on expanding sales and ceasing Aviat’s unique products and services differentiations.

North America revenue, which comprised 64.7% of total revenue for the fourth quarter was $46.4 million, an increase of $8.2 million or 21.4% from $38.2 million for the same period last year, driven primarily by our Private Networks business, Rural Broadband and software.

For the full year fiscal 2021, our North America revenue was $183.1 million, an increase of $31.4 million or 20.7% from $151.7 million for the same period last year. International revenue for the fourth quarter came in at $25.3 million, an increase of $0.9 million or 3.5% compared to $24.4 million for the same period last year.

For the full year fiscal 2021, our international revenue was $91.8 million, an increase of $4.9 million or 5.6% from $86.9 for the same period last year.

Our book-to-bill ratio for the fourth quarter and full year fiscal 2021 was above 1, and we are pleased that our backlog has grown throughout the year and continues to remain above $200 million upon completion of the fiscal year.

Fourth quarter gross margin remained strong at 36.1% and 36.2% on a GAAP and non-GAAP basis, respectively as compared to 34.9% on both a GAAP and non-GAAP basis for the fourth quarter of last year. Fiscal year 2021 gross margin was 37.3% and 37.5% on a GAAP and non-GAAP basis, respectively as compared to 35.5% and 35.6% for fiscal year 2020.

Key drivers to strong gross margin are higher volume of Private Networks business, increased sales through our Aviat Store, which serves primarily the Rural Broadband space, improved international business driven by multi-band wins and also software and license sales.

Fourth quarter GAAP operating expenses, which exclude the impact of restructuring charges and share-based compensation, were $22.1 million compared to $19.7 million for the same period last year.

Fourth quarter non-GAAP operating expenses, which exclude the impact of restructuring charges and share-based compensation, were $20.4 million compared to $17.5 million for the same period last year.

R&D investments were increased $2 million, given our focus on software and uptick in bookings led to a corresponding increase in overall SG&A expenses of $0.8 million, with the G&A portion of expenses decreased primarily as a result of our previously announced restructuring.

On a full year basis, both GAAP and non-GAAP operating expenses were favorably impacted due to restructuring plans announced in the second half of fiscal 2020 as well as February 2021, and a slowdown in hiring and reduced travel offset by growth-related initiatives. G&A expenses decreased $1.7 million year-over-year.

Moving on, fourth quarter non-GAAP net income was $5.3 million compared to $4.1 million for the same period last year, with fourth quarter non-GAAP EPS coming in at $0.45 per share compared to $0.38 per share for the same period last year.

Full year fiscal 2021 non-GAAP net income was $26.4 million compared to $8.2 million for the same period last year with non-GAAP EPS coming in at $2.26 per share compared to $0.75 per share for the same period last year.

Please note that our prior period’s EPS have been retroactively adjusted to reflect our two-for-one stock split in the form of a stock dividend that was effective in early April 2021.

Adjusted EBITDA for the fourth quarter was $7 million, a $1.4 million improvement from $5.5 million we reported for the same period last year, with adjusted EBITDA margins coming in at 9.7% for the quarter. For the full year of fiscal 2021, our adjusted EBITDA was $32.8 million compared to $13.5 million for the same period last year.

Adjusted EBITDA margins for the full year fiscal 2021 was 11.9% compared to 5.7% for the same period last year. Now moving on to the balance sheet. Our cash and cash equivalents at the end of the fourth quarter were $47.9 million, up $2.1 million from the end of the third quarter.

On a full fiscal year basis, our net cash increased $15.3 million with no loans outstanding. Therefore, our balance sheet remains very solid, leaving us well positioned to execute our long-term plans. Last, during Q4 and fiscal 2021, we repurchased $0.3 million and $0.8 million of our common stock, respectively.

With that, I will turn it back to Pete for some final comments.

Pete?.

Thanks, Eric. Just a few additional comments before opening it up for Q&A. I’m extremely proud of the entire Aviat team for their significant contributions to our results for both the fourth quarter and the full fiscal year 2021. We recognize that there continues to be a lot of work in front of us.

We are on the right path to achieve our long-term objectives. With respect to the financial guidance, we currently anticipate revenues for fiscal 2022 to be in the range of $283 million to $293 million, and adjusted EBITDA to be in the range of $35 million to $38 million. This guidance considers the current supply chain environment.

If the supply chain environment improves, we expect to do better. If the supply chain environment deteriorates the converse is true. Please note that our microwave radio system has greater than 2,000 individual components. Aviat’s supply chain team has successfully managed this complexity thus far. This is one of the key challenges for fiscal year 2022.

With that, operator, let’s open it up for questions..

[Operator Instructions] Your first question is from the line of Scott Searle with ROTH Capital..

Hey, good afternoon. Thanks for taking my questions. Eric, maybe just dive in quickly on the financials. I was wondering if there was any color related to the product mix between mobile backhaul and Private Networks. And also on the gross margin front, a little bit of a weaker quarter, not surprising, given the component headwinds.

I was wondering if you had a little bit more color. I’m sure some of that’s related to mix of Private Networks, software, but component availability as well.

So I was wondering if you could give us an idea about how that kind of parses out the impact in the quarter?.

Right. So high level for us, our Private Networks business still is about 2/3 of our business. So that’s been very consistent throughout the year.

When it comes to the gross margin standpoint, it is a bit lower than per quarter, but it was much higher than a year ago quarter, right? One thing that we’re experiencing is some inflation when it comes to component parts and also freight. I would say, high level that has impacted about 100 basis points to our gross margin.

But on the other hand, we also probably could have a few million dollars more revenue in fiscal 2021, if it wasn’t for the supply chain challenge that we have..

Great. Very helpful. And maybe to dive in a little bit in North America, very, very strong, again, nice quarter.

I was wondering if you could give a little bit of color in terms of strength in Private Networks versus Rural Broadband opportunities? And specifically, with some of the RDOF funding out there and you are working with some customers that you’ve announced who do have RDOF funding.

My understanding is some of that doesn’t really come into play until the end of this year and into next year.

So I just want to clarify that, if you’re actually seeing the benefit of RDOF now or that all comes in the future, as we get into calendar 2022?.

Scott, I would say that the rural – particularly the RDOF funding is just getting going and the effects will be, let’s say, calendar year – next calendar year. So 2022 calendar year. So we’re poised. We’re engaged with the customer base. But the funding is not really flowing.

There’s a couple of exceptions where customers have borrowed against that future funding, and that’s progressing, but the bulk of the customer base are waiting for the appropriations and then to figure out their systems and then the demand to be dispersed to us..

Okay. And Pete, if I could, just shifting quickly to Europe. It hasn’t, in recent history, been a large contributor to the revenue stream, it continues to be that way. But it sounds like, I think you just mentioned something about Western European opportunity that you just won.

I was wondering if you could take us through some of the opportunities there.

Are you starting to gain some more share? Will that become a growth avenue and a larger contributor going forward, particularly as we start to see the competitive landscape with guys like Huawei being marginalized?.

Yes. So we – before I joined, I would say that we didn’t spend enough time working on our sales funnel around our – in our EMEA region. And we highlighted the Western Europe Emergency Services Network win because we think over the last year, we’ve articulated that we have differentiation, the message is getting out, and we’re starting to win.

So that’s – that was kind of an RFP in Western Europe, and Huawei wasn’t a factor. But with respect to the rest of the EMEA region and particularly Europe, we are seeing, both Huawei supply issues and network security issues, starting to grab hold of the operator mindset. And our funnel for Huawei share gains is growing.

Some of our competitors are also probably looking at that. We’re excited. We think we’re going to win our fair share. And the next question that usually comes is about the timing. And the timing is difficult to predict because it’s hard to say what the network operators are kind of being forced into this.

And I think they’re going to hold on to their Huawei inventory until they’re ready and they have their new design. But we see the funnel building, timing is a little bit difficult to say, but we’re excited about the opportunity to win share..

Got you. And lastly, if I could, shift into the guidance. It’s a nice guide in terms of looking to fiscal 2022. It sounds like, I mean, you guys have historically been fairly conservative.

But I think as I look I think as I look at your topline and then the EBITDA guidance, which is above I think, consensus expectations, implies, I think the gross margins start to come back a little bit.

So I was wondering if you could give us kind of your longer-range thoughts, if you will, in terms of how the gross margin plays out over the next several quarters? Thanks and nice quarter..

Thanks, Scott. So gross margins, I think we’re still in the thick of the freight – the chip expedites. So gross margin is may be a little bit lower than what we achieved last year and first half. And we think we have OpEx levers and software to maybe offset some of the headwinds we have on the component supply.

And then we’re hopeful in the back half of the year that starts to moderate. Our guidance – look, our guidance, we could – if we exceed guidance is because the supply environment is better than we thought. And on the low end, the converse is true. Look, if we don’t get chips, then we’ll have a hard time making shipments like everybody else.

So we try to take a balanced approach with respect to the guidance, knowing that there is more demand than what – if you dig through our 10-K, you’ll see that our backlog is up 7%. That’s towards the high end of our guidance. And we think we could do better with share gains and fast turn business if it were available.

But our guidance is what we’re comfortable, given what we know about the supply environment right now..

Great. Thanks so much..

Your next question is from the line of Dave Kang with B. Riley..

Thank you. Good afternoon. My first question is actually a clarification. So I believe you said as far as the supply chain impact was approximately 100 bps on margins and maybe a few million dollars.

Now was it for the fiscal 2021 or fiscal fourth quarter?.

Yes. So the 100 basis point impact to gross margin that’s for the fourth quarter. I was talking on generally in fiscal 2021, when we said we could have shipped probably $2 million or $3 million or more in revenue, if it was not for the supply chain constraint..

Got it.

And then just wondering how much of the impact you’ve factored in for the fiscal 2022 outlook?.

So I think we….

Let me break that, Eric. So look, Dave, we gave the $283 million to $293 million, right? If it’s – if supply is better, we would go above, but I don’t want to tell you the unconstrained number because then it starts to – we do know our unconstrained number, but we’re not going to disclose that. So….

Right. Got it. Okay. My next question is like Cisco and some other folks, they are raising prices to offset higher supply costs.

Is that something you guys are pondering?.

No. We’re doing it..

You are doing it. Okay..

So – and look part of the answer to Scott’s question, why we hope to have some challenges in the front half, but get through the back half is because it’s hard to raise price on backlog or firm orders. So you have to do that going forward. And the chip expedite and freight fees are nearly instantaneous.

So there is a lag, right? So our hope is to catch up. Where we’d be wrong on the catch-up is if there’s more expedite fees, more shortages and the environment worsened.

So what’s behind our ramp-up in gross margin through the – from the first half to the second half is we are pursuing a price to offset the inflationary or an expedite and freight challenges that we’re under..

Got it. And then you talked about a highly differentiated product portfolio.

How will OpenRAN alter the competitive landscape going forward?.

Yes, that’s a great question. OpenRAN does – it allows the specialist competitors to compete on a level playing field. And we think we have the best products. So when the microwave network and the RAN are not bundled, we think we have a better opportunity, right? We can’t wait for OpenRAN to take hold..

And when do you think that will be? Is that something that could happen like next year? Or is it maybe a couple of years out?.

I think it’s two years out or so..

Got it. And then my last question is that the seasonality, and I know the fiscal third quarter, the March quarter is always weak, but what about September quarter? It seems like it’s kind of – it was up last year sequentially.

How should we think about seasonality for the fiscal first quarter?.

So Dave, we’re kind of a project-based business, right? It’s sometimes difficult to predict seasonality. A lot of contracts that we have are long-term in nature, and Dave, we tend to fulfill them for more than a year, basically with big revenue over a one year period. So it’s difficult to predict seasonality..

So here’s a little bit of flavor, right? So when we think about the business, we don’t think about it in terms of seasonality, what really happens is it is project based, as Eric said.

And then the second part, there is some favorability in the October to December quarter, right? Last year, we had some huge projects that really come – that are driven by government end of the year funding.

And – but other than that, we would say that the seasonality effect is flat and what’s most pronounced in our quarter-to-quarter revenue variation is the project basis..

Got it. Thank you..

Your next question is from the line of Tim Savageaux with Northland Capital Markets..

Hi, good afternoon. A couple of questions here. First, as you look at fiscal Q4, just reported here with the stronger-than-expected revenues in the quarter, seemingly and mostly U.S.-based.

And I wonder if you could talk about any particular drivers there, either Private Network or carrier-focused to drive that upside, both to our estimates as well as your guide for the year? And I have a couple of follow-ups..

Yes. So Tim, the private network was – business was strong. We had one state network takeaway and the Rural Broadband business was strong..

Sorry about that. Okay. Well, we kind of have this discussion every quarter, so why not revisit. Considering the magnitude of the upside in the quarter, it is something on your $5 million.

I mean, does should I conclude from that the rural broadband businesses was getting more material or material sooner than you might have expected? Given that commentary about the quarter?.

It’s getting closer to causing some materiality thresholds Tim about that, so it’s getting closer. Yes, but it will..

Okay. I did follow up on I think you mentioned a couple of wins on the carrier side and APAC from countries that you’ve been shut out of, which sounds suspiciously like Huawei-related business. But given your other commentary, maybe it’s not.

I wonder if you could talk a little more about that, and how material a growth driver that could be for fiscal 2022?.

Well, I think, it’s going to contribute to our growth, we won, because of our, multi-band and our at A2C products. And really, what we’ve been doing over the last year and a half is competing on total cost of ownership.

And we won those designs, if you will, in high spectrum cost regions where our multi-band solution is more valued versus the competition. And, I don’t want to pick on any one competitor. But, we think that our value proposition works against all of our competitors.

Is that helpful?.

Absolutely. And as you consider those wins and some of what you mentioned in Western Europe, I think on the Private network side, as well, as we look at fiscal 2022. In general, again, kind of starting in a mid single digit growth level, which you obviously handily exceeded in fiscal 2021. That was last year was pretty U.S.

driven, right? 20% growth plus in the U.S. Can you give us any idea about how you feel in terms of international versus U.S.

growth as you look at fiscal 2022 currently?.

Yes, so coming into fiscal year 2021, the international business was in decline. And, fiscal 2021, we hope it was a turning point where we are no longer in decline we’re in, we grew in the year. And we want to continue on that, right. So I think the international business grew just over 5% in fiscal year 2021. And, the team is doing better.

And if we didn’t have, look if we didn’t have the supply constraints we’d sign up for more growth. But I think that the most important thing is the, our value proposition and our commercial team has focused on our differentiation. And that’s allowing us to win, share and as the supply environment eases, we’ll be able to post more of that.

So we feel good about our international prospects..

Okay, thanks very much. I’ll pass it on..

Thanks..

Your next question is from the line of Alex Henderson with Needham..

Thanks. So I was interested in talking a little bit more about what you said about Africa and particularly, the conditions there relative to competition with Huawei.

My sense of it is that Huawei, while generally receiving on a global basis, particularly in advanced economies, has actually shifted some of their focus into areas where the politics are less in play and where they, they think that they can deliver a differentiated win where they’re not going to be excised out at some later date.

And Africa and Latin America seem to be focus areas.

Is that what you’re seeing, or are you seeing Huawei actually, being pushed out of those geographies as well? And particularly, was that who was the incumbent at the wins that you had in Africa? Or was it somebody else?.

So, let me do my best to answer that. Latin America, I don’t know that we’ve taken any share from Huawei.

I would say that we’re more competitive versus Huawei in Africa overall, so the commentary about the geopolitical impacts on Huawei, we’re starting to see more and more operators independent of their geopolitical meetings be open and putting historical Huawei accounts up for bid? So I believe at least one of those wins was Huawei related in Africa..

So I guess the question really is more about – clearly, everybody is willing to put everything up to bid and hope that everybody gets as aggressive as possible to get the lowest price.

But the question is, has Huawei differentially abandoned Europe and some of the other areas that are politically challenged for more subsidies, more price pressure, and more aggression? In geographies, like Africa and like Latin America, are you seeing any evidence of that are also under pressure, more pressure there than historically the case?.

Yes, so I would say that, look Aviat – long before I got here, Aviat suffered, particularly in Africa, due to Huawei driven price pressure? And I would say that impact is much less and what I can’t deconvolute is the network security or the supply.

So it’s really, but kind of, quite simply, it’s really hard to drive price lower when you can’t deliver. So then the next question might be, was if they get supply return, will the price pressure come back and a lot of our dialogue, even in, regions that you wouldn’t think the politics might favor this.

There’s concern about networks security and we have, we’re getting opportunities that we wouldn’t have gotten before that we think will stick once the supply constraints are released..

On the chip side, any change in Huawei’s outsource versus in-sourcing of chips. Have you seen any evidence that they’ve been able to get a new chip to, market and be able to compete effectively with it? Or are they so far behind the eight ball on that, that they’re not competitive on a chip basis with the U.S.

vendors?.

Yes, so we – so we probably don’t have any more insight than anyone else on this call. So we haven’t seen and when I think about this in the abstract, is Huawei going to focus on, the chip for their microwave network or they going to emphasize the RAN.

So we think, on a theoretical prioritization, that will, we have more time before Huawei can fix their supply, or their access to semiconductor technology, but we don’t have any specific insight..

I’ve heard they have as many as 37 different chip programs in place at 50 million bucks a piece, it gets expensive. Going back to the supply side of it for a second.

Can you talk about whether the breadth of the supply challenges? Is it one or two parts or is it all parts? Is it, has there been any tightening or loosening of that trajectory?.

All right.

So the way I would – look, it’s a sophisticated game of whack-a-mole, I would say, it’s up to 20 different components, but those components change from time-to-time and, this is kind of a game of speculation of when this is going to go away? I would say the most encouraging aspect that we’ve seen is that our lead times haven’t pushed out in the last two months.

So we take that as the first sign of stability. And when are we going to really know that we’re past the peak difficulty is that, some of the lead times will start to get being brought in or some of our expedite requests will be fulfilled. But we’re not there yet.

I would say the most positive sign for the industry is the lead times are – appear to be stabilizing..

That’s encouraging. Good to hear. Okay, I’ll leave the floor. Thanks.

Your next question comes from the line of Theodore O’Neill with Litchfield Research..

Hey, congratulations on the good quarter..

Thanks, Theo..

Yes, so I would just look who is okay and revenue for the year in the Africa and Middle East region rebounded nicely in 2021.

Can you talk about? What drove that turn around?.

That was principally right. So a lot of the regions that we play in Africa are high spectrum costs. And our multi-band radio allows the operator to basically combine our multi-band radio and right, run their high-value traffic on the microwave, and run their low value traffic on a less expensive band.

And, when we talk to the African network operators, and we talk about total cost of ownership, that’s resonating with them, and that’s helping us, start to grow again..

Okay. Next question is about the Aviat Store. I don’t think you’ve disclosed any sort of volume going through the Aviat Store.

But could you – and if you can, can you give us some directional guidance on how that’s going?.

Yes, so what we’ve said in the past is that, we will start to consider breaking it out when it gets to 10%. And this is, I think, kind of what Tim was alluding to, is that we’re getting close. So, three years ago, we were 0% of revenue, and now we’re getting closer and closer to 10%.

So, that’s about as much color as we want to give on the size of the store at this point..

Okay, that that’s encouraging.

Do you hold inventory in the store? And how is that managed?.

We do hold inventory in the store. And, we own the store, though the store inventory, and when we get demand, we ship it out as quickly as possible. So that’s kind of the way the store works..

Yes, but I mean, you must in terms of managing it, you must be looking at, with the contracts and sort of where, as you expect them to be taken off, put them in the store.

So is it sort of just in time?.

So, in a normal supply environment, it’s just in time, and in the current environment, when we have our allotment of supply, it’s just in time and then if we’re short, then we convert to lead times..

Okay. Thanks very much..

Thank you..

[Operator Instructions] And there are no further questions in queue at this time. I’ll turn the call back over to you for closing remarks..

Thanks. So thanks, everyone for joining; it was a good fiscal year 2021. Good fourth quarter, we are like everybody else that uses semiconductors and electronic components; we’re challenged with supply chain. We think our supply chain team is doing the best. The best work in the microwave industry.

We hope for relief, and we look forward to delivering on our guidance and talking to you in 90 days. Thanks, everyone..

This concludes today’s conference call. Thank you for participating. You may now disconnect..