avnw-20240927

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 001-33278

________________________________

AVIAT NETWORKS, INC.

(Exact name of registrant as specified in its charter)

________________________________

Delaware

20-5961564

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

200 Parker Drive, Suite C100A,

Austin,

Texas

78728

(Address of principal executive offices)

(Zip Code)

(408) 941-7100

(Registrant’s telephone number, including area code)

________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which Registered
Common Stock	AVNW	The Nasdaq Stock Market LLC
Preferred Share Purchase Rights		The Nasdaq Stock Market LLC

Indicate by checkmark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of November 1, 2024 was 12,690,353.

AVIAT NETWORKS, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended September 27, 2024

Table of Contents



			Page
Part I. Financial Information			3
Item 1. Financial Statements			3
Condensed Consolidated Statements of Operations (Unaudited)			3
Condensed Consolidated Statements of Comprehensive Income (Unaudited)			4
Condensed Consolidated Balance Sheets (Unaudited)			5
Condensed Consolidated Statements of Cash Flows (Unaudited)			6
Condensed Consolidated Statements of Equity (Unaudited)			7
Notes to Condensed Consolidated Financial Statements (Unaudited)			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			29
Item 4. Controls and Procedures			30
Part II. Other Information			31
Item 1. Legal Proceedings			31
Item 1A. Risk Factors			31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			31
Item 3. Defaults upon Senior Securities			31
Item 4. Mine Safety Disclosures			31
Item 5. Other Information			31
Item 6. Exhibits			32
Signatures			33
Exhibit Index			33

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended
(In thousands, except per share amounts)	September 27, 2024		September 29, 2023
Revenues:
Product sales	$	61,116	$	59,545
Services	27,313		27,364
Total revenues	88,429		86,909
Cost of revenues:
Product sales	52,201		36,313
Services	16,440		19,401
Total cost of revenues	68,641		55,714
Gross margin	19,788		31,195
Operating expenses:
Research and development	10,408		6,424
Selling and administrative	24,948		19,237
Restructuring charges	—		644
Total operating expenses	35,356		26,305
Operating (loss) income	(15,568)		4,890
Interest expense, net	1,115		99
Other expense, net	710		802
(Loss) income before income taxes	(17,393)		3,989
(Benefit from) provision for income taxes	(5,514)		432
Net (loss) income	$	(11,879)	$	3,557

Net (loss) income per share of common stock outstanding:
Basic	$	(0.94)	$	0.31
Diluted	$	(0.94)	$	0.30
Weighted-average shares outstanding:
Basic	12,646		11,574
Diluted	12,646		11,943

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)


	Three Months Ended
(In thousands)	September 27, 2024		September 29, 2023
Net (loss) income	$	(11,879)	$	3,557
Other comprehensive income:
Net change in cumulative translation adjustments	2,153		33
Other comprehensive income	2,153		33
Comprehensive (loss) income	$	(9,726)	$	3,590

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except share and par value amounts)	September 27, 2024		June 28, 2024
ASSETS
Current Assets:
Cash and cash equivalents	$	51,034	$	64,622

Accounts receivable, net of allowances of $2,190 and $1,854	169,002		158,013
Unbilled receivables	94,725		90,525
Inventories	79,559		62,267
Assets held for sale	—		2,720
Other current assets	32,942		27,076
Total current assets	427,262		405,223
Property, plant and equipment, net	11,883		9,480
Goodwill	15,153		8,217
Intangible assets, net	28,754		13,644
Deferred income taxes	91,317		83,112
Right-of-use assets	3,665		3,710
Other assets	12,823		11,837
Total assets	$	590,857	$	535,223
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	104,926	$	92,854
Accrued expenses	39,137		42,148
Operating lease liabilities	1,125		1,006
Advance payments and unearned revenue	79,380		58,839

Other current liabilities	21,234		21,614
Current portion of long-term debt	2,395		2,396
Total current liabilities	248,197		218,857
Long-term debt	80,980		45,954
Unearned revenue	7,522		7,413
Long-term operating lease liabilities	2,782		2,823
Other long-term liabilities	407		394
Reserve for uncertain tax positions	3,445		3,485
Deferred income taxes	412		412
Total liabilities	343,745		279,338
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.01 par value, 50.0 million shares authorized, none issued	—		—
Common stock, $0.01 par value, 300.0 million shares authorized, 12.7 million and 12.6 million shares issued and outstanding as of September 27, 2024 and June 28, 2024, respectively.	127		126
Treasury stock 0.2 million and 0.2 million shares as of September 27, 2024 and June 28, 2024, respectively	(6,479)		(6,479)
Additional paid-in-capital	861,023		860,071
Accumulated deficit	(590,392)		(578,513)
Accumulated other comprehensive loss	(17,167)		(19,320)
Total stockholders’ equity	247,112		255,885
Total liabilities and stockholders’ equity	$	590,857	$	535,223

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
(In thousands)	September 27, 2024		September 29, 2023
Operating Activities
Net (loss) income	$	(11,879)	$	3,557
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation of property, plant and equipment	1,317		1,168
Amortization of intangible assets	513		176
Provision for uncollectible receivables	350		14
Share-based compensation	1,664		1,834
Deferred taxes	(6,826)		(170)
Inventory write-downs	501		547
Non-cash lease expense	325		177

Other non-cash operating activities, net	(37)		17
Changes in operating assets and liabilities:
Accounts receivable	(15,498)		7,043
Unbilled receivables	(2,821)		(1,738)
Inventories	(13,197)		1,955
Accounts payable	8,594		1,787
Accrued expenses	(6,807)		(3,947)
Advance payments and unearned revenue	20,015		1,998
Income taxes payable	1,773		331
Other assets and liabilities	(5,152)		(769)
Net cash (used in) provided by operating activities	(27,165)		13,980
Investing Activities
Purchase of property, plant and equipment	(5,421)		(717)


Proceeds from sale of asset held for sale	2,396		—
Acquisition, net of cash acquired	(18,150)		—
Net cash used in investing activities	(21,175)		(717)
Financing Activities
Proceeds from revolver	35,000		25,200
Repayments of revolver	—		(25,200)




Payments for taxes related to net settlement of equity awards	(711)		(105)
Proceeds from issuance of common stock under employee stock plans	—		285
Net cash provided by financing activities	34,289		180
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	1,293		(223)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(12,758)		13,220
Cash, cash equivalents, and restricted cash, beginning of period	64,934		22,521
Cash, cash equivalents, and restricted cash, end of period	$	52,176	$	35,741

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


	Three Months Ended September 27, 2024
	Common Stock			Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands)	Shares	$ Amount		$ Amount
Balance as of June 28, 2024	12,622	$	126	$	(6,479)	$	860,071	$	(578,513)	$	(19,320)	$	255,885
Net loss	—	—		—		—		(11,879)		—		(11,879)
Other comprehensive income	—	—		—		—		—		2,153		2,153
Issuance of common stock under employee stock plans	80	1		—		(1)		—		—		—
Shares withheld for taxes related to vesting of equity awards	(26)	—		—		(711)		—		—		(711)

Share-based compensation	—	—		—		1,664		—		—		1,664

Balance as of September 27, 2024	12,676	$	127	$	(6,479)	$	861,023	$	(590,392)	$	(17,167)	$	247,112


	Three Months Ended September 29, 2023
	Common Stock			Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands)	Shares	$ Amount		$ Amount
Balance as of June 30, 2023	11,518	$	115	$	(6,147)	$	830,048	$	(589,273)	$	(16,004)	$	218,739
Net income	—	—		—		—		3,557		—		3,557
Other comprehensive income	—	—		—		—		—		33		33
Issuance of common stock under employee stock plans	204	2		—		283		—		—		285
Shares withheld for taxes related to vesting of equity awards	(3)	—		—		(105)		—		—		(105)

Share-based compensation	—	—		—		1,834		—		—		1,834
Balance as of September 29, 2023	11,719	$	117	$	(6,147)	$	832,060	$	(585,716)	$	(15,971)	$	224,343

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

AVIAT NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. The Company and Basis of Presentation

The Company

Aviat Networks, Inc. (“Aviat,” the “Company,” “we,” “us,” and “our”) designs, manufactures, and sells wireless networking and access networking solutions and services to mobile and fixed telephone service providers, private network operators, government agencies, transportation and utility companies, public safety agencies and broadcast system operators across the globe. Aviat’s products include broadband wireless access base stations and customer premises equipment for fixed and mobile, point-to-point digital microwave radio systems for access, backhaul, trunking and license-exempt applications, supporting new network deployments, network expansion, and capacity upgrades.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information, and Aviat has made estimates, assumptions and judgments affecting the amounts reported in its unaudited condensed consolidated financial statements and the accompanying notes, as discussed in greater detail below. Accordingly, the statements do not include all information and footnotes required by U.S. GAAP for annual consolidated financial statements. In the opinion of the Company’s management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of its financial position, results of operations and cash flows for such periods. The results for the three months ended September 27, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in Aviat’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and accounts have been eliminated. Certain amounts in the financial statements have been reclassified for comparative purposes to conform to the current period financial statement presentation.

Aviat’s fiscal year includes 52 or 53 weeks and ends on the Friday nearest to June 30. The three months ended September 27, 2024 and September 29, 2023 both consisted of 13 weeks. Fiscal year 2025 contains 52 weeks and will end on June 27, 2025. Fiscal year 2024 contained 52 weeks and ended on June 28, 2024.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires the Company to make estimates, assumptions and judgments affecting the amounts reported and related disclosures. Estimates are based upon historical factors, current circumstances and the experience and judgment of the Company’s management. The Company evaluates estimates and assumptions on an ongoing basis and may employ outside experts to assist in making these evaluations. Changes in such estimates, based on more accurate information, or different assumptions or conditions, may affect amounts reported in future periods. Such estimates affect significant items, including revenue recognition, provision for uncollectible receivables, inventory valuation, goodwill and identified intangible assets in business combinations, valuation allowances for deferred tax assets, uncertainties in income taxes, contingencies and recoverability of long-lived assets. Actual results may differ materially from estimates.

Revisions to Prior Period Consolidated Financial Statements

Subsequent to the third quarter of fiscal 2024, the Company identified certain errors in the quarterly financial statements for fiscal 2024. In accordance with ASC 250, Accounting Changes and Error Corrections and Staff Accounting Bulletins (“SAB”) No. 99, Materiality and No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the materiality of the errors and determined that the impacts were not material, individually or in the aggregate, to the Company’s previously issued consolidated financial

statements. As a result, the Company has revised the prior period financial statements and related disclosures to correct the errors for comparability across all periods presented herein. Refer to Note 15. Revisions to Prior Period Consolidated Financial Statements of the Notes to this Form 10-Q, and Note 1. The Company and Summary of Significant Accounting Policies and Part II, Item 9B. Other Information of the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024 for further information.

Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies as of and for the three months ended September 27, 2024, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2024.

Accounting Standards Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU enhances the transparency and usefulness of income tax information through improvements to disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company’s annual reporting beginning in fiscal 2026. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly presented to the chief operating decision maker. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. ASU 2023-07 is effective for the Company’s annual reporting beginning in fiscal 2025 and for interim periods beginning in fiscal 2026. The Company is currently evaluating the impact of the ASU on its consolidated financial statements.

The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined at this time that all other ASUs issued but not yet adopted are either not applicable or are expected to have a minimal impact on its financial position and results of operations.

Note 2. Net (Loss) Income Per Share of Common Stock

The following table presents the computation of basic and diluted net (loss) income per share:


	Three Months Ended
(In thousands, except per share amounts)	September 27, 2024		September 29, 2023
Numerator:
Net (loss) income	$	(11,879)	$	3,557

Denominator:
Weighted-average shares outstanding, basic	12,646		11,574
Effect of potentially dilutive equivalent shares	—		369
Weighted-average shares outstanding, diluted	12,646		11,943

Net (loss) income per share of common stock outstanding:
Basic	$	(0.94)	$	0.31
Diluted	$	(0.94)	$	0.30

The following table summarizes the weighted-average equity awards that were excluded from the diluted net (loss) income per share calculations since they were anti-dilutive:


	Three Months Ended
(In thousands)	September 27, 2024	September 29, 2023
Stock options	396	259
Restricted stock units and performance stock units	154	58
Total shares of common stock excluded	550	317

Note 3. Revenue Recognition

Contract Balances, Performance Obligations, and Backlog


(In thousands)	September 27, 2024		June 28, 2024
Contract assets
Accounts receivable, net	$	169,002	$	158,013
Unbilled receivables	94,725		90,525
Capitalized commissions	3,531		3,269
Contract liabilities
Advance payments and unearned revenue	$	79,380	$	58,839
Unearned revenue, long-term	7,522		7,413

Significant changes in contract balances may arise as a result of recognition over time for services, transfer of control for equipment, and periodic payments (both in arrears and in advance).

From time to time, the Company may experience unforeseen events that could result in a change to the scope or price associated with an arrangement. When such events occur, the transaction price and measurement of progress for the performance obligation are updated and this change is recognized as a cumulative catch-up to revenue. Because of the nature and type of contracts, the timeframe to completion and satisfaction of current and future performance obligations can shift; however, this will have no impact on the Company’s future obligation to bill and collect.

As of September 27, 2024, the Company reported $86.9 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 80% is expected to be recognized as revenue in the next twelve months and the remainder thereafter. Approximately $16.6 million of revenue was recognized during the three months ended September 27, 2024, which was included in advance payments and unearned revenue at June 28, 2024.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $144.8 million at September 27, 2024 relating to our long-term field service projects. Of this amount, approximately 50% is expected to be recognized as revenue during the next 12 months, with the remaining amount to be recognized thereafter.

Note 4. Balance Sheet Components

Cash, Cash equivalents, and Restricted cash

The following provides a summary of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that reconciles to the corresponding amount in the unaudited condensed consolidated statement of cash flows:


(In thousands)	September 27, 2024		June 28, 2024
Cash and cash equivalents	$	51,034	$	64,622

Restricted cash included in long-term other assets	1,142		312
Total cash, cash equivalents, and restricted cash	$	52,176	$	64,934

Inventories


(In thousands)	September 27, 2024		June 28, 2024
Finished products	$	55,788	$	44,890
Raw materials and supplies	21,712		15,433
Customer service inventories	2,059		1,944
Total inventories	$	79,559	$	62,267
Consigned inventories included within raw materials and supplies	$	12,105	$	11,456

The Company records charges to adjust inventories due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance. The charges incurred during the three months ended September 27, 2024 and September 29, 2023 were included in cost of product sales as follows:


	Three Months Ended
(In thousands)	September 27, 2024		September 29, 2023
Excess and obsolete inventory	$	310	$	294
Customer service inventory write-downs	191		253
Total charges	$	501	$	547

Other Current Assets


(In thousands)	September 27, 2024		June 28, 2024
Prepaid and other current assets	$	15,076	$	13,559
Taxes	11,256		8,623
Contract manufacturing assets	6,610		4,894

Total other current assets	$	32,942	$	27,076

Property, Plant and Equipment, net


(In thousands)	September 27, 2024		June 28, 2024

Buildings and leasehold improvements	$	1,302	$	1,302
Software and equipment	73,456		69,898
Total property, plant and equipment, gross	74,758		71,200
Less: accumulated depreciation	(62,875)		(61,720)
Total property, plant and equipment, net	$	11,883	$	9,480

Included in the total property, plant and equipment, gross were $4.2 million and $4.1 million of assets in progress which have not been placed in service as of September 27, 2024 and June 28, 2024, respectively.

Depreciation expense related to property, plant and equipment, was as follows:


	Three Months Ended
(In thousands)	September 27, 2024		September 29, 2023
Depreciation	$	1,317	$	1,168

Accrued Expenses


(In thousands)	September 27, 2024		June 28, 2024
Taxes	$	11,718	$	8,827
Compensation and benefits	8,240		9,689
Project costs	7,007		14,305

Other	5,816		3,507
Warranties	3,510		2,996
Commissions	1,533		1,538
Professional fees	1,313		1,286
Total accrued expenses	$	39,137	$	42,148

The Company accrues for the estimated cost to repair or replace products under warranty. Changes in the warranty liability were as follows:


	Three Months Ended
(In thousands)	September 27, 2024		September 29, 2023
Balance as of the beginning of the period	$	2,996	$	2,100
Warranty provision recorded during the period	544		375
Assumed in acquisition	406		—
Consumption during the period	(436)		(375)
Balance as of the end of the period	$	3,510	$	2,100

Advance Payments and Unearned Revenue


(In thousands)	September 27, 2024		June 28, 2024
Advance payments	$	18,989	$	8,517
Unearned revenue	60,391		50,322
Total advance payments and unearned revenue	$	79,380	$	58,839

Excluded from the balances above are $7.5 million and $7.4 million in long-term unearned revenue as of September 27, 2024 and June 28, 2024, respectively.

Note 5. Fair Value Measurements of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market in the absence of a principal market) for the asset or liability in an orderly transaction between market participants as of the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs in measuring fair value and established a three-level fair value hierarchy that prioritizes the observable inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

•Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;

•Level 2 — Observable market-based inputs or observable inputs that are corroborated by market data; and

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The estimated fair values and valuation input levels of assets and liabilities that are measured at fair value on a recurring basis as of September 27, 2024 and June 28, 2024 were as follows:


(In thousands)	September 27, 2024		June 28, 2024		Valuation Inputs
Assets:
Cash and cash equivalents:
Money market funds	$	2,858	$	6,602	Level 1
Bank certificates of deposit	$	3,574	$	3,706	Level 2

Items are classified within Level 1 if quoted prices are available in active markets. The Company’s Level 1 items are primarily money market funds and marketable securities. As of September 27, 2024 and June 28, 2024, the money market funds were valued at $1.00 net asset value per share.

Items are classified within Level 2 if the observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources are available with reasonable levels of price transparency. The Company’s bank certificates of deposit are classified within Level 2. The carrying value of bank certificates of deposit approximates their fair value. The Company did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

Note 6. Credit Facility and Debt

The Company entered into a Secured Credit Facility Agreement (the “Credit Facility”), dated May 9, 2023, amended as of November 22, 2023 and October 18, 2024, with Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender and Wells Fargo Securities LLC, Citigroup Global Markets Inc., and Regions Capital Markets as lenders. The Credit Facility provides for a $40.0 million revolving credit facility (the “Revolver”) and a $50.0 million Delayed Draw Term Loan Facility (the “Term Loan”) with a maturity date of May 8, 2028. The $40.0 million Revolver can be borrowed with a $10.0 million sub-limit for letters of credit, and a $10.0 million swingline loan sub-limit. Refer to Note 16. Subsequent Events for further information.

In November 2023, the Company borrowed $50.0 million against the Term Loan to primarily settle the cash portion of the consideration associated with the NEC Transaction (as defined below). See Note 11. Acquisitions for further information.

As of September 27, 2024, the available credit under the Revolver was $0.7 million, reflecting the available limit of $5.0 million less outstanding letters of credit of $4.3 million. The Company borrowed $35.0 million against the Revolver during the three months ended September 27, 2024. As of September 27, 2024, the Company had $48.8 million outstanding under its Term Loan and $35.0 million outstanding under its Revolver.

The following summarizes the Company’s outstanding long-term debt as of September 27, 2024:


(In thousands)
Revolver	$	35,000
Term loan	48,750
Less: unamortized deferred financing costs	(375)
Total debt	83,375
Less: current portion of long-term debt	(2,395)
Total long-term debt	$	80,980

Outstanding borrowings under the Credit Facility bear interest at either: (a) Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus the applicable margin; or (b) the Base Rate plus the applicable margin. The pricing levels for interest rate margins are determined based on the Consolidated Total Leverage Ratio as determined and adjusted quarterly. As of September 27, 2024, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.50% and 1.50%, respectively. The effective rate of interest on the outstanding Term Loan and Revolver borrowings as of September 27, 2024 was 7.4% and 7.6%, respectively.

The Credit Facility requires the Company and its subsidiaries to maintain a fixed charge coverage ratio to be greater than 1.25 to 1.00 as of the last day of any fiscal quarter of the Company. The Credit Facility also requires that the Company maintain a maximum leverage ratio of 3.00 times EBITDA, with a step-down to 2.75 times EBITDA after four full quarters, and 2.50 times EBITDA after eight full quarters. The Credit Facility contains customary affirmative and negative covenants, including, among others, covenants limiting the ability of the Company and its subsidiaries to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to customary exceptions. As of September 27, 2024, the Company was in compliance with all financial covenants contained in the Credit Facility.

As of September 27, 2024, scheduled maturities of outstanding long-term debt are as follows:

SEC Form 10-Q filed by Aviat Networks Inc.