Washington, D.C. 20549



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

(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.)

~~860 N. McCarthy Blvd.,~~200 Parker Drive, Suite ~~200, Milpitas, California~~C100A,

Austin,

~~95035~~Texas

78728

(Address of principal executive offices)

(Zip Code)

(Registrant’s telephone number, including area code)

~~No changes~~Securities registered pursuant to Section 12(b) of the Act:

~~(Former name, former address and former fiscal year, if changed since last report)~~


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)~~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 x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes x☒ No ¨☐

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

Large accelerated filer

o☐

Accelerated filer

o☒

Non-accelerated filer

x ~~(Do not check if a smaller reporting company)~~

☐

Smaller reporting company

o☐

Emerging growth company

o☐

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 ~~7(a)(2)(B)~~13(a) of the ~~Securities Act .~~ ¨Exchange Act. ☐

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

The number of shares outstanding of the registrant’s Common Stock as of ~~February 1, 2018~~October 30, 2023 was ~~5,340,851 shares.~~

AVIAT NETWORKS, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended ~~December~~September 29, ~~2017~~2023

Table of Contents




	Page
Part I. Financial Information		3
Item 1. Financial Statements		3
~~Condensed Consolidated Balance Sheets (Unaudited)~~		3
Condensed Consolidated Statements of Operations (Unaudited)	43
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)		54
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)		78
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1819
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2624
Item 4. Controls and Procedures		2725
Part II. Other Information		2927
Item 1. Legal Proceedings		2927
Item 1A. Risk Factors		2927
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2927
Item 3. Defaults upon Senior Securities		2927
Item 4. Mine Safety Disclosures		2927
Item 5. Other Information		2927
Item 6. Exhibits		2928
~~Signature~~Signatures		3029
Exhibit Index		3129

PART I. FINANCIAL INFORMATION


~~Item 1.~~	~~Financial Statements~~

~~AVIAT NETWORKS, INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Unaudited)~~

(In thousands, except share and par value amounts) December 29,
2017 June 30,
2017
ASSETS
Current Assets:
Cash and cash equivalents $ 40,352
$ 35,658
Restricted cash 1,772
541
Short-term investments 276
264
Accounts receivable, net 43,098
45,945
Unbilled receivables 9,487
12,110
Inventories 24,556
21,794
Customer service inventories 1,637
1,871
Other current assets 7,065
6,402
Total current assets 128,243
124,585
Property, plant and equipment, net 16,931
16,406
Deferred income taxes 5,705
6,178
Other assets 9,331
5,407
TOTAL ASSETS $ 160,210
$ 152,576
LIABILITIES AND EQUITY
Current Liabilities:
Short-term debt $ 9,000
$ 9,000
Accounts payable 33,098
33,606
Accrued expenses 19,842
21,933
Advanced payments and unearned income 25,273
20,004
Restructuring liabilities 308
1,475
Total current liabilities 87,521
86,018
Unearned income 6,509
7,062
Other long-term liabilities 1,052
1,022
Reserve for uncertain tax positions 2,473
2,453
Deferred income taxes 1,743
1,681
Total liabilities 99,298
98,236
Commitments and contingencies (Note 10)

Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding
—
—
Common stock, $0.01 par value, 300,000,000 shares authorized, 5,340,851 shares issued and outstanding at December 29, 2017; 5,317,766 shares issued and outstanding at June 30, 2017
53
53
Additional paid-in-capital 814,898
813,733
Accumulated deficit (743,790 ) (748,204 )
Accumulated other comprehensive loss (11,164 ) (11,785 )
Noncontrolling interests 915
543
Total equity 60,912
54,340
TOTAL LIABILITIES AND EQUITY $ 160,210
$ 152,576

~~See accompanying Notes to Unaudited Condensed Consolidated~~ Item 1.Financial Statements

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended
(In thousands, except per share amounts)	September 29, 2023		September 30, 2022
Revenues:
Product sales	$	59,545	$	55,101
Services	28,021		26,150
Total revenues	87,566		81,251
Cost of revenues:
Product sales	36,313		35,253
Services	19,401		16,544
Total cost of revenues	55,714		51,797
Gross margin	31,852		29,454
Operating expenses:
Research and development	6,424		6,087
Selling and administrative	19,237		17,504
Restructuring charges	644		1,950
Total operating expenses	26,305		25,541
Operating income	5,547		3,913
Other expense, net	901		2,782
Income before income taxes	4,646		1,131
Provision for income taxes	641		3,877
Net income (loss)	$	4,005	$	(2,746)

Net income (loss) per share of common stock outstanding:
Basic	$	0.35	$	(0.25)
Diluted	$	0.34	$	(0.25)
Weighted-average shares outstanding:
Basic	11,574		11,200
Diluted	11,943		11,200

Three Months Ended Six Months Ended
(In thousands, except per share amounts) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Revenues:
Revenue from product sales $ 37,719
$ 45,958
$ 72,786
$ 80,682
Revenue from services 24,004
22,578
45,119
46,061
Total revenues 61,723
68,536
117,905
126,743
Cost of revenues:
Cost of product sales 23,784
31,003
47,447
55,863
Cost of services 16,049
16,417
31,272
32,399
Total cost of revenues 39,833
47,420
78,719
88,262
Gross margin 21,890
21,116
39,186
38,481
Operating expenses:
Research and development expenses 5,144
4,475
9,942
9,418
Selling and administrative expenses 14,104
14,056
27,826
29,243
Restructuring (recovery) charges (252 ) 72
(250 ) 232
Total operating expenses 18,996
18,603
37,518
38,893
Operating income (loss) 2,894
2,513
1,668
(412 )
Interest income 42
72
100
126
Interest expense (13 ) (3 ) (19 ) (21 )
Other (expense) income (136 ) 5
(166 ) (177 )
Income (loss) before income taxes 2,787
2,587
1,583
(484 )
(Benefit from) provision for income taxes (2,564 ) 865
(3,203 ) (1,605 )
Net income 5,351
1,722
4,786
1,121
Less: Net income attributable to noncontrolling interests, net of tax 280
44
372
72
Net income attributable to Aviat Networks’ common stockholders $ 5,071
$ 1,678
$ 4,414
$ 1,049

Net income per share of common stock outstanding:
Basic $ 0.95
$ 0.32
$ 0.83
$ 0.20
Diluted $ 0.90
$ 0.31
$ 0.79
$ 0.20
Weighted average shares outstanding:
Basic 5,329
5,284
5,323
5,273
Diluted 5,624
5,400
5,616
5,328

See accompanying Notes to Unaudited Condensed Consolidated Financial ~~Statements~~

Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended
(In thousands)	September 29, 2023		September 30, 2022
Net income (loss)	$	4,005	$	(2,746)
Other comprehensive income (loss):
Net change in cumulative translation adjustments	33		(1,113)
Other comprehensive income (loss)	33		(1,113)
Comprehensive income (loss)	$	4,038	$	(3,859)

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Net income $ 5,351
$ 1,722
$ 4,786
$ 1,121
Other comprehensive income (loss):
Net change in cumulative translation adjustments 556
(778 ) 621
(1,148 )
Other comprehensive income (loss) 556
(778 ) 621
(1,148 )
Comprehensive income (loss) 5,907
944
5,407
(27 )
Less: Comprehensive income attributable to noncontrolling interests, net of tax 280
44
372
72
Comprehensive income (loss) attributable to Aviat Networks $ 5,627
$ 900
$ 5,035
$ (99 )

See accompanying Notes to Unaudited Condensed Consolidated Financial ~~Statements~~Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except share and par value amounts)	September 29, 2023		June 30, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	35,465	$	22,242
Accounts receivable, net of allowances of $726 and $719	94,497		101,653
Unbilled receivables	60,975		58,588
Inventories	30,659		33,057
Other current assets	22,814		22,164
Total current assets	244,410		237,704
Property, plant and equipment, net	9,035		9,452
Goodwill	5,112		5,112
Intangible assets, net	8,870		9,046
Deferred income taxes	86,452		86,650
Right of use assets	2,984		2,554
Other assets	13,436		13,978
Total assets	$	370,299	$	364,496
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	61,767	$	60,141
Accrued expenses	20,561		24,442
Short-term lease liabilities	723		610
Advance payments and unearned revenue	46,050		44,268
Restructuring liabilities	112		600
Total current liabilities	129,213		130,061
Unearned revenue	7,627		7,416
Long-term lease liabilities	2,436		2,140
Other long-term liabilities	317		314
Reserve for uncertain tax positions	4,064		3,975
Deferred income taxes	492		492
Total liabilities	144,149		144,398
Commitments and contingencies (Note 13)
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, 11.7 million shares issued and outstanding at September 29, 2023; 11.5 million shares issued and outstanding at June 30, 2023	117		115
Treasury stock	(6,147)		(6,147)
Additional paid-in-capital	832,060		830,048
Accumulated deficit	(583,909)		(587,914)
Accumulated other comprehensive loss	(15,971)		(16,004)
Total stockholders’ equity	226,150		220,098
Total liabilities and stockholders’ equity	$	370,299	$	364,496

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 29, 2023		September 30, 2022
Operating Activities
Net income (loss)	$	4,005	$	(2,746)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of property, plant and equipment	1,168		1,344
Amortization of intangible assets	176		124
Provision for uncollectible receivables	14		182
Share-based compensation	1,834		1,838
Deferred taxes	39		3,338
Charges for inventory write-downs	547		405
Noncash lease expense	177		206
Net loss on marketable securities	—		1,734
Other non-cash operating activities, net	17		—
Changes in operating assets and liabilities:
Accounts receivable	7,043		4,279
Unbilled receivables	(2,395)		(5,570)
Inventories	1,955		(2,727)
Accounts payable	1,787		(346)
Accrued expenses	(3,947)		(2,619)
Advance payments and unearned revenue	1,998		(2,496)
Income taxes	331		91
Other assets and liabilities	(769)		(3,351)
Net cash provided by (used in) operating activities	13,980		(6,314)
Investing Activities
Payments for acquisition of property, plant and equipment	(717)		(474)
Proceeds from sale of marketable securities	—		7,907
Acquisition, net of cash acquired and purchases of intangible assets	—		(15,769)
Net cash used in investing activities	(717)		(8,336)
Financing Activities
Proceeds from borrowings	25,200		15,000
Repayments of borrowings	(25,200)		(15,000)
Payments for taxes related to net settlement of equity awards	(105)		(670)
Proceeds from issuance of common stock under employee stock plans	285		360
Net cash provided by (used in) financing activities	180		(310)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(223)		(347)
Net increase (decrease) in cash, cash equivalents, and restricted cash	13,220		(15,307)
Cash, cash equivalents, and restricted cash, beginning of period	22,521		37,104
Cash, cash equivalents, and restricted cash, end of period	$	35,741	$	21,797

Six Months Ended
(In thousands) December 29,
2017 December 30,
2016
Operating Activities
Net income $ 4,786
$ 1,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment 2,590
3,136
Provision for (recovery from) uncollectible receivables 14
(643 )
Share-based compensation 1,154
946
Deferred tax assets, net (2,737 ) 336
Charges for inventory and customer service inventory write-downs 205
1,097
Loss on disposition of property, plant and equipment 28
137
Changes in operating assets and liabilities:
Accounts receivable 3,490
7,891
Unbilled receivables 2,626
(2,419 )
Inventories (2,098 ) 6,602
Customer service inventories (83 ) (92 )
Accounts payable (381 ) (120 )
Accrued expenses (1,672 ) (1,090 )
Advance payments and unearned income 3,801
(6,394 )
Income taxes payable or receivable (232 ) 968
Other assets and liabilities (2,320 ) (3,154 )
Net cash provided by operating activities 9,171
8,322
Investing Activities
Payments for acquisition of property, plant and equipment (3,342 ) (2,853 )
Net cash used in investing activities (3,342 ) (2,853 )
Financing Activities
Proceeds from borrowings 18,000
16,000
Repayments of borrowings (18,000 ) (17,000 )
Proceeds from issuance of common stock under employee stock plans 11
5
Net cash provided by (used in) financing activities 11
(995 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash 72
(493 )
Net Increase in Cash, Cash Equivalents, and Restricted Cash 5,912
3,981
Cash, Cash Equivalents and Restricted Cash, Beginning of Period 36,569
31,425
Cash, Cash Equivalents and Restricted Cash, End of Period $ 42,481
$ 35,406

See accompanying Notes to Unaudited Condensed Consolidated Financial ~~Statements~~

Statements.

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


	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	$	(587,914)	$	(16,004)	$	220,098
Net income	—	—		—		—		4,005		—		4,005
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	$	(583,909)	$	(15,971)	$	226,150


	Three Months Ended September 30, 2022
	Common Stock			Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands)	Shares	$ Amount		$ Amount
Balance as of July 1, 2022	11,161	$	112	$	(6,147)	$	823,259	$	(599,442)	$	(16,029)	$	201,753
Net loss	—	—		—		—		(2,746)		—		(2,746)
Other comprehensive loss	—	—		—		—		—		(1,113)		(1,113)
Issuance of common stock under employee stock plans	174	2		—		358		—		—		360
Shares withheld for taxes related to vesting of equity awards	(22)	(1)		—		(669)		—		—		(670)

Share-based compensation	—	—		—		1,838		—		—		1,838
Balance as of September 30, 2022	11,313	$	113	$	(6,147)	$	824,786	$	(602,188)	$	(17,142)	$	199,422

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. ~~(the~~(“Aviat,” the “Company,” “we,” “us,” and “our”) designs, manufactures, and sells ~~a range of~~ 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. Due to the volume of our international sales, especially in developing countries, we may be susceptible to a number of political, economic and geographic risks that could harm our business as outlined in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017. OurAviat’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.~~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 ~~our~~the Company’s management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows for such periods. The results for the three ~~and six~~ months ended ~~December~~September 29, ~~2017~~2023 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 ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and~~ the consolidated financial statements and footnotes thereto included in ~~our~~Aviat’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2023.

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 ~~consolidated~~ financial statements ~~of the prior period~~ have been reclassified for comparative purposes to conform to the ~~presentation for the~~ current ~~period.~~period financial statement presentation.

~~We operate on a 52-week~~Aviat’s fiscal year includes 52 or ~~53-week year ending~~53 weeks and ends on the Friday ~~closest~~nearest to June 30. The ~~first two quarters~~three months ended September 29, 2023 and September 30, 2022 both consisted of ~~fiscal 2018 and fiscal 2017 included~~ 13 ~~weeks in each quarter.~~weeks. Fiscal year ~~2018~~2024 will be comprised of 52 weeks and will end on June ~~29, 2018.~~28, 2024. Fiscal year 2023 was comprised of 52 weeks and ended on June 30, 2023.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires usthe 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 ~~our~~the Company’s management. ~~We evaluate our~~The Company evaluates estimates and assumptions on an ongoing basis and may employ outside experts to assist us 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, ~~restructuring obligations, product warranty obligations, share-based awards,~~ contingencies and recoverability of long-lived ~~assets and useful lives of property, plant and equipment.~~assets. Actual results may differ materially from estimates.

Summary of Significant Accounting Policies

There have been no material changes in ~~our~~the Company’s significant accounting policies as of and for the ~~six~~three months ended ~~December~~September 29, ~~2017,~~2023, as compared to the significant accounting policies described in ~~our~~the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2023.

Accounting Standards Not Yet Adopted

~~In October 2016,~~The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). The Company determined at this time that all ASUs issued ~~Accounting Standards Update (“ASU”) 2016-16 (Topic 740),~~ ~~Accounting for Income Taxes: Intra-Entity Transfers of Assets Other than Inventory~~, which requires that an entity recognizes the tax expense from the sale of intra-entity sales of assets, other than inventory, in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transactionbut not yet adopted are ~~eliminate in consolidation. We adopted this update during the first quarter of fiscal 2018.~~ ~~The adoption~~ ~~had no material impact on our unaudited condensed consolidated financial statements.~~

~~In July 2015, the FASB issued ASU 2015-11 (Topic 330),~~ ~~Simplifying the Measurement of Inventory, which provides guidance to companies who account for inventory using~~ either ~~the first-in, first-out~~not applicable or average cost methods. The guidance states that companies should measure inventory at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. We adopted this update prospectively during the first quarter of fiscal 2018. The adoption ~~had no material impact on our unaudited condensed consolidated financial statements.~~

~~Accounting Standards Not Yet Adopted~~

~~In May 2014, the FASB issued ASU 2014-09~~ ~~(ASC Topic 606), Revenue from Contracts with Customers~~ with amendments issued in 2015 and 2016. This standard update will supersede nearly all current U.S. GAAP guidance on this topic and eliminate industry-specific guidance. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures will also be required to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized in retained earnings as of the date of adoption.

We are on schedule in establishing new accounting policies, implementing systems and processes (including more extensive use of estimates), and internal controls necessary to support the requirements of the new standard. We have completed our preliminary assessment of the financial statement impact of the new standard and will continue to update that assessment as more information becomes available. We expect the timing of revenue recognition to change in certain areas, including our services segment’s installation revenue, which upon adoption will be recognized as revenue and costs over a period of time. The performance obligations of certain arrangements are expected to be satisfied at the time of title transfer and risk of loss to the customer which is generally upon shipment, rather than at customer acceptance. Additionally, the analysis of our contracts under the new revenue recognition standard supports the recognition of revenue over time under the cost-to-cost method for some of our contracts, which is consistent with our current revenue recognition model. Revenue on these contracts will continue to be recognized over time because of the continuous transfer of control to the customer. Under the new standard, the cost-to-cost measure of progress continues to best depict the transfer of control of assets to the customer, which occurs as we incur costs. In addition, the number of our performance obligations within our financial accounting and reporting model under the existing standard is not expected to be materially different under the new standard. This preliminary assessment is based on the types and number of revenue arrangements currently in place. The exact impact of the new standard will be dependent on facts and circumstances at adoption and could vary from quarter to quarter.

We currently expense sales commissions as incurred, and the requirement in the new standard is to capitalize certain in-scope sales commissions. This requirement is being evaluated to determine its potentialhave a minimal impact on ~~our~~its financial ~~statements in the year~~position and results of adoption. We expect to adopt the new standard on a modified retrospective basis in the first quarter of fiscal 2019. We are continuing to assess all potential impacts of the guidance on our unaudited condensed ~~consolidated~~ ~~financial statements and given normal ongoing business dynamics, preliminary conclusions are subject to change.~~operations.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. This standard will become effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. We expect that most of our operating lease commitments will be subject to the new standard and recognized as right-of-use assets and operating lease liabilities upon the adoption of ASU 2016-02. We are evaluating the effect the adoption of the standard will have on our unaudited condensed ~~consolidated~~ ~~financial statements.~~

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance retains the current accounting for classifying and~~

measuring investments in debt securities and loans, but requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. The guidance also changes the accounting for investments without a readily determinable fair value and do not qualify for the practical expedient to estimate fair value. A policy election can be made for these investments whereby estimated fair value may be measured at cost and adjusted in subsequent periods for any impairment or changes in observable prices of identical or similar investments. This ASU is effective for fiscal years beginning after December 15, 2017. ~~We do not expect the adoption of this standard to have a material impact on our~~ ~~unaudited condensed~~ ~~consolidated financial statements.~~

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

Net income per share is computed using the two-class method, by dividing net income attributable to us by the weighted-average number of shares of our outstanding common stock and participating securities outstanding. Our restricted shares contain rights to receive non-forfeitable dividends and therefore are considered to be participating securities and included in the calculations of net income per basic and diluted common share. Undistributed losses are not allocated to unvested restricted shares as the unvested restricted shares are not contractually obligated to share our losses. The impact on earnings per share of the participating securities under the two-class method is immaterial.

The following table presents the computation of basic and diluted net income per ~~share attributable to our common stockholders:~~share:


	Three Months Ended				Six Months Ended					Three Months Ended
(In thousands, except per share amounts)	December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016		(In thousands, except per share amounts)	September 29, 2023		September 30, 2022
Numerator:									Numerator:
Net income attributable to Aviat Networks	$	5,071	$	1,678	$	4,414	$	1,049
Net income (loss)									Net income (loss)	$	4,005	$	(2,746)

Denominator:									Denominator:
Weighted average shares outstanding, basic	5,329		5,284		5,323		5,273
Weighted-average shares outstanding, basic									Weighted-average shares outstanding, basic	11,574		11,200
Effect of potentially dilutive equivalent shares	295		116		293		55		Effect of potentially dilutive equivalent shares	369		—
Weighted average shares outstanding, diluted	5,624		5,400		5,616		5,328
Weighted-average shares outstanding, diluted									Weighted-average shares outstanding, diluted	11,943		11,200

Net income per share of common stock outstanding:
Net income (loss) per share of common stock outstanding:									Net income (loss) per share of common stock outstanding:
Basic	$	0.95	$	0.32	$	0.83	$	0.20	Basic	$	0.35	$	(0.25)
Diluted	$	0.90	$	0.31	$	0.79	$	0.20	Diluted	$	0.34	$	(0.25)

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


	Three Months Ended
(In thousands)	September 29, 2023	September 30, 2022
Stock options	259	154
Restricted stock units and performance stock units	58	48
Total shares of common stock excluded	317	202

Note 3. Revenue Recognition

Contract Balances, Performance Obligations, and Backlog


(In thousands)	September 29, 2023		June 30, 2023
Contract assets
Accounts receivable, net	$	94,497	$	101,653
Contract assets	$	60,975	$	58,588
Capitalized commissions	$	3,070	$	3,492
Contract liabilities
Advance payments and unearned revenue	$	46,050	$	44,268
Unearned revenue, long-term	$	7,627	$	7,416

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).

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Stock options 357
427
341
435
Restricted stock units and performance stock units —
6
—
8
Total potential shares of common stock excluded 357
433
341
443

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 29, 2023, the Company reported $53.7 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 40% is expected to be recognized as revenue in the remainder of fiscal 2024 and the remainder thereafter. Approximately $7.4 million of revenue was recognized during the three months ended September 29, 2023, which was included in advance payments and unearned revenue at June 30, 2023.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $152.4 million at September 29, 2023. 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.


	Three Months Ended
	September 29, 2023		September 30, 2022
(In thousands)
Operating lease costs	$	221	$	312
Short-term lease costs	414		551
Variable lease costs	12		35
Total lease costs	$	647	$	898

The weighted average lease term and discount rate for the three months ended September 29, 2023 were as follows:


Weighted average remaining lease term	5.7 years
Weighted average discount rate	5.5	%

As of September 29, 2023, future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):


Remainder of fiscal 2024	$	724
2025	757
2026	632
2027	312
2028	319
Thereafter	1,235
Total lease payments	3,979
Less: interest	(820)
Present value of lease liabilities	$	3,159

Note 3.5. Balance Sheet Components

Cash, Cash ~~Equivalents~~equivalents, and Restricted ~~Cash~~cash

The following ~~table~~ provides a summary of ~~our~~ cash, cash equivalents, and restricted ~~cash:~~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) December 29,
2017 June 30,
2017
Cash and cash equivalents $ 40,352
$ 35,658
Restricted cash 1,772
541
Restricted cash included in Other assets 357
370
Total cash, cash equivalents, and restricted cash $ 42,481
$ 36,569


(In thousands)	September 29, 2023		June 30, 2023
Cash and cash equivalents	$	35,465	$	22,242

Restricted cash included in other assets	276		279
Total cash, cash equivalents, and restricted cash in the Statement of Cash Flows	$	35,741	$	22,521

~~Accounts Receivable, net~~

~~Our net accounts receivable were as follows:~~

(In thousands) December 29,
2017 June 30,
2017
Accounts receivable $ 46,696
$ 49,864
Less allowances for collection losses (3,598 ) (3,919 )
$ 43,098
$ 45,945

~~Our inventories were as follows:~~


(In thousands)	September 29, 2023		June 30, 2023
Finished products	$	17,104	$	18,502
Raw materials and supplies	11,771		12,794
Customer service inventories	$	1,784	$	1,761
Total inventories	$	30,659	$	33,057
Consigned inventories included within raw materials and supplies	$	9,937	$	11,224

(In thousands) December 29,
2017 June 30,
2017
Finished products $ 19,823
$ 16,619
Work in process 2,963
3,088
Raw materials and supplies 1,770
2,087
Total inventories $ 24,556
$ 21,794
Deferred cost of revenue included within finished goods $ 8,354
$ 7,120
Consigned inventories included within raw materials and supplies $ 948
$ 1,268

~~We record recovery or~~The Company records charges to adjust ~~our inventory and customer service inventory~~inventories due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance. During the three and six months ended December 29, 2017, we recorded a net recovery of $0.1 million and $0.1 million, respectively, related to previously reserved inventory due to sell through. During the ~~three and six months ended December 30, 2016, we recorded a net write down charge of $0.1 million and $0.6 million, respectively. Such recovery or~~The charges incurred during the three ~~and six~~ months ended ~~December~~September 29, ~~2017~~2023 and ~~December~~September 30, ~~2016~~2022 were ~~classified~~included in cost of product sales as follows:


	Three Months Ended
(In thousands)	September 29, 2023		September 30, 2022
Excess and obsolete inventory	$	294	$	170
Customer service inventory write-downs	253		235
Total inventory charges	$	547	$	405

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Excess and obsolete inventory (recovery) charges $ 106
$ 94
$ (143 ) $ 568
Customer service inventory write-downs 158
242
348
529
$ 264
$ 336
$ 205
$ 1,097
Other Current Assets


(In thousands)	September 29, 2023		June 30, 2023
Contract manufacturing assets	$	5,782	$	6,487
Prepaid and other current assets	17,032		15,677
Total other current assets	$	22,814	$	22,164

Property, Plant and Equipment, net


(In thousands)	September 29, 2023		June 30, 2023
Land	$	210	$	210
Buildings and leasehold improvements	5,889		5,889
Software	16,998		16,989
Machinery and equipment	47,088		47,150
Total property, plant and equipment, gross	70,185		70,238
Less: Accumulated depreciation	(61,150)		(60,786)
Total property, plant and equipment, net	$	9,035	$	9,452

Included in the total property, plant and equipment, ~~net~~gross were $0.6 million and $0.4 million of assets in progress which have not been placed in service as ~~follows:~~

(In thousands) December 29,
2017 June 30,
2017
Land $ 710
$ 710
Buildings and leasehold improvements 11,391
11,442
Software 15,486
14,803
Machinery and equipment 45,924
43,174
73,511
70,129
Less accumulated depreciation and amortization (56,580 ) (53,723 )
$ 16,931
$ 16,406

~~Depreciation~~of September 29, 2023 and ~~amortization~~June 30, 2023, respectively. Depreciation expense related to property, plant and equipment, was as follows:

~~Our accrued expenses are summarized below:~~


(In thousands)	September 29, 2023		June 30, 2023
Compensation and benefits	$	7,256	$	10,368
Taxes	5,109		4,553
Warranties	2,100		2,100
Commissions	1,339		1,453
Professional fees	944		2,104
Other	3,813		3,864
Total accrued expenses	$	20,561	$	24,442

(In thousands) December 29,
2017 June 30,
2017
Accrued compensation and benefits $ 7,342
$ 8,317
Accrued warranties 3,168
3,056
Other 9,332
10,560
$ 19,842
$ 21,933

~~Accrued Warranties~~

~~We accrue~~The Company accrues for the estimated cost to repair or replace products under ~~warranty at the time of sale.~~warranty. Changes in ~~our~~the warranty liability ~~which is included as a component of accrued expenses in the unaudited condensed consolidated balance sheets~~ were as follows:


	Three Months Ended
(In thousands)	September 29, 2023		September 30, 2022
Balance as of the beginning of the period	$	2,100	$	2,913
Warranty provision recorded during the period	375		175
Assumed in acquisition	—		55
Consumption during the period	(375)		(388)
Balance as of the end of the period	$	2,100	$	2,755

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Balance as of the beginning of the period $ 2,964
$ 3,704
$ 3,056
$ 3,944
Warranty provision recorded during the period 797
480
1,228
817
Consumption during the period (593 ) (625 ) (1,116 ) (1,202 )
Balance as of the end of the period $ 3,168
$ 3,559
$ 3,168
$ 3,559

~~Advanced payments~~Advance Payments and Unearned ~~Income~~Revenue

~~Our advanced payments~~


(In thousands)	September 29, 2023		June 30, 2023
Advance payments	$	2,049	$	1,607
Unearned revenue	44,001		42,661
Total advance payments and unearned revenue	$	46,050	$	44,268

Excluded from the balances above are $7.6 million and $7.4 million in long-term unearned ~~income are summarized below:~~revenue as of September 29, 2023 and June 30, 2023, respectively.

(In thousands) December 29,
2017 June 30,
2017
Advanced payments $ 9,870
$ 8,760
Unearned income 15,403
11,244
$ 25,273
$ 20,004

Note 4.6. Fair Value Measurements of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market in the absence of a principal market) for the asset or liability in an orderly transaction between market participants as of the measurement date. ~~We maximize~~The Company maximizes the use of observable inputs and ~~minimize~~minimizes the use of unobservable inputs in measuring fair value and ~~establish~~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 ~~carrying amounts,~~ estimated fair values and valuation input levels of ~~our~~ assets and liabilities that are measured at fair value on a recurring basis as of ~~December~~September 29, ~~2017~~2023 and June 30, ~~2017~~2023 were as follows:


	September 29, 2023		June 30, 2023		Valuation Inputs
(In thousands)	Fair Value		Fair Value
Assets:
Cash and cash equivalents:
Money market funds	$	8,259	$	571	Level 1
Bank certificates of deposit	$	3,533	$	3,793	Level 2

December 29, 2017 June 30, 2017 Valuation Inputs
(In thousands) Cost Fair Value Cost Fair Value
Assets:
Cash equivalents:
Money market funds $ 22,423
$ 22,423
$ 22,059
$ 22,059
Level 1
Bank certificates of deposit $ —
$ —
$ 66
$ 66
Level 2
Short term investments:
Bank certificates of deposit $ 276
$ 276
$ 264
$ 264
Level 2
Other current assets:
Foreign exchange forward contracts $ 124
$ 124
$ —
$ —
Level 2
Liabilities:
Other accrued expenses:
Foreign exchange forward contracts $ —
$ —
$ 5
$ 5
Level 2

~~We classify items~~Items are classified within Level 1 if quoted prices are available in active markets. ~~Our~~The Company’s Level 1 items ~~mainly~~ are primarily money market funds. As of ~~December~~September 29, ~~2017~~2023 and June 30, ~~2017,~~2023, these money market funds were valued at $1.00 net asset value per share.

~~We classify items in~~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. ~~Our~~The Company’s bank certificates of deposit ~~and foreign exchange forward contracts~~ are classified within Level 2. ~~Foreign currency forward contracts are measured at~~The carrying value of bank certificates of deposit approximates their fair value using observable foreign currency exchange rates. The changes in fair value related to our foreign currency forward contracts were recorded in cost of revenues on our unaudited condensed consolidated statements of operations.value.

As of ~~December~~September 29, ~~2017~~2023 and June 30, ~~2017, we did not have any~~2023, there were no recurring assets or liabilities ~~that were~~ valued using significant unobservable inputs.

~~Our~~The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2, and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the first ~~six~~three months of fiscal ~~2018~~2024 and ~~2017, we had~~2023, there were no transfers of assets or liabilities measured at fair value between levels of the fair value ~~hierarchy of our assets or liabilities measured at fair value.~~hierarchy.

Note 5.7. Credit Facility and Debt

~~On March 28, 2014, we~~In May 2023, the Company entered into a ~~Second Amended and Restated Loan Agreement with Silicon Valley Bank (the “SVB Credit Facility”). The SVB~~Secured Credit Facility ~~expires on June 30, 2018.~~Agreement (the “Credit Facility”) 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 ~~SVB~~ Credit Facility provides for a ~~committed amount of up to $30.0~~$40.0 million revolving credit facility (the “Revolver”) and a $50.0 million Delayed Draw Term Loan Facility (the “Term Loan”) with a ~~$30.0~~maturity date of May 8, 2028. The $40.0 million ~~sublimit that~~Revolver can be borrowed ~~by our Singapore subsidiary. Borrowings may be advanced under the SVB Credit Facility at the lesser of $30.0~~with a $10.0 million or a borrowing base equal to a specified percentage of the value of eligible accounts receivable and U.S. unbilled accounts of the Company, subject to certain reserves and eligibility criteria. The SVB Credit Facility can also be utilized to issuesublimit for letters of credit, ~~with~~and a ~~$12.0~~$10.0 million swingline loan sublimit. ~~If the SVB Credit Facility is terminated by us in certain circumstances~~The Term Loan has a funding date on or prior to ~~its expiration, we are subject to an early termination fee equal to 1%~~the closing date of the ~~revolving line. In September 2017,~~NEC Transaction (as defined below) with the ~~SVB Credit Facility was amended to allow up to 30% of our Singapore subsidiary’s accounts receivable~~proceeds intended to be ~~included in~~used to settle the ~~calculation~~cash portion of the ~~borrowing base~~consideration and any related expenses. See Note 12. Acquisitions for further information. Deferred financing costs of $0.8 million were paid in association with entering into the ~~inclusion of the accounts receivable of certain high credit quality customers that are aged 90 to 120 days to be included in the calculation of the borrowing base.~~Credit Facility.

Our outstanding debt under the SVB Credit Facility was $9.0 million as of December 29, 2017 and June 30, 2017. The SVB Credit Facility carries an interest rate computed at the daily prime rate as published in the Wall Street Journal plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ratio. During the first six months of fiscal year 2018, the weighted average interest rate on our outstanding loan was 4.79%. As of ~~December~~September 29, ~~2017,~~2023, the available credit under the ~~SVB Credit Facility~~Revolver was ~~$11.7~~$38.8 million, reflecting the ~~calculated borrowing base~~available limit of ~~$23.3~~$40.0 million less ~~existing borrowings of $9.0 million and~~ outstanding letters of credit of ~~$2.6~~$1.2 million. The available credit under the Term Loan was $50.0 million. The Company borrowed $25.2 million and repaid $25.2 million against the Revolver during the three months ended September 29, 2023. There was no borrowing outstanding for either the Revolver or Term Loan as of September 29, 2023.

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 29, 2023, the applicable margin on Adjusted Term SOFR and Base Rate borrowings was 2.75% and 1.75%, respectively.

The ~~SVB~~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 ~~quarterly financial~~customary affirmative and negative covenants, including, ~~minimum adjusted quick ratio~~among others, covenants limiting the ability of the Company and minimum profitability (EBITDA) requirements. In the event our adjusted quick ratio falls below a certain level, cash received in our accounts with SVB may be directly applied to reduce outstanding obligations under the SVB Credit Facility. The SVB Credit Facility also imposes certain restrictions on our abilityits 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, under certain circumstances. Certain of our assets, including accounts receivable, inventory, and equipment, are pledged as collateral for the SVB Credit Facility. Upon an event of default, outstanding obligations would be immediately due and payable. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default at a per annum rate of interest equalin each case subject to ~~2% above the applicable interest rate.~~ customary exceptions.

As of ~~December~~September 29, ~~2017, we were~~2023, the Company was in compliance with ~~the quarterly~~all financial covenants ~~as amended,~~ contained in the ~~SVB~~ Credit Facility.

~~In addition, we have an uncommitted short-term line~~

Note 8. Restructuring


	Employee Severance and Benefits
(In thousands)	Fiscal 2024 Plans		Prior Years’ Plans		Total
Accrual balance, June 30, 2023	$	—	$	600	$	600
Charges, net	333		348		681
Cash payments	(221)		(948)		(1,169)
Accrual balance, September 29, 2023	112		—		112

As of ~~credit~~September 29, 2023, the accrual balance of $0.4 million from a bank in New Zealand to support the operations of our subsidiary located there. This line of credit provides for $0.3 million in short-term advances at various interest rates, all of which was available as of December 29, 2017 and June 30, 2017. The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $0.1 million was ~~outstanding~~classified as ~~of December 29, 2017. This facility may be terminated upon notice, is reviewed annually for renewal or modification,~~current and ~~is supported by a corporate guarantee.~~

~~Note 6. Restructuring Activities~~

~~The following table summarizes our restructuring related activities during the first six months of fiscal 2018:~~

Severance and Benefits Facilities and Other Total
(In thousands) Fiscal
2016-2017
Plan Fiscal
2015-2016
Plan Fiscal
2013-2014
Plan
Fiscal
2015-2016
Plan

Fiscal
2014-2015
Plan

Fiscal
2013-2014
Plan

Accrual balance, June 30, 2017 $ 315
$ 99
$ 64
$ 563
$ 168
$ 505
$ 1,714
Charges, net (3 ) —
—
—
1
4
2
Cash payments (253 ) —
—
—
(102 ) (306 ) (661 )
Foreign exchange impact (1 ) 2
—
18
—
—
19
Accrual balance, September 29, 2017 $ 58
$ 101
$ 64
$ 581
$ 67
$ 203
$ 1,074
Charges (recovery), net —
—
—
(252 ) —
—
(252 )
Cash payments (2 ) —
—
—
(67 ) (203 ) (272 )
Foreign exchange impact —
1
—
7
—
—
8
Accrual balance, December 29, 2017 $ 56
$ 102

$ 64

$ 336

$ —

$ —
$ 558

~~As of December 29, 2017, $0.3 million of the accrual balance was in short-term restructuring liabilities while $0.2 million was~~ included in ~~other long-term~~restructuring liabilities on the unaudited condensed consolidated balance sheets. ~~In January 2018, we reached an agreement~~

During fiscal 2024, the Company’s Board of Directors approved restructuring plans, primarily associated with areductions in workforce to optimize skill sets and align cost structure. The fiscal 2024 plans are expected to be completed through the first half of fiscal 2024.

Prior Years’ Plans

Activities under the prior years’ plans primarily included reductions in workforce across the Company, associated with the acquisition of Redline (as defined below) and certain ~~foreign government which allowed us to reduce our estimated payments relating~~of the Company’s operations outside the United States. Payments related to the ~~fiscal 2014-2015~~accrued restructuring ~~plan by $0.3 million. We recorded this reduction in~~balance for these plans are complete.

Note 9. Stockholders’ Equity

Stock Repurchase Program

In November 2021 the ~~second~~Company’s Board of Directors approved a stock repurchase program to purchase up to $10.0 million of the Company’s common stock. As of September 29, 2023, $7.3 million remains available and Aviat may choose to suspend or discontinue the repurchase program at any time. During the first quarter of fiscal ~~2018.~~2024, the Company did not repurchase any shares of common stock.

~~We have completed the restructuring activities under each of the plans referenced in the table above. Remaining payments for these plans will be paid through fiscal year 2020.~~

~~Note 7. Equity~~Stock Incentive Programs

As of ~~December~~September 29, ~~2017, we~~2023, the Company had one stock incentive plan for ~~our~~its employees and ~~nonemployee~~non-employee directors, the ~~2007 Stock Equity~~2018 Incentive Plan ~~as amended and restated effective November 13, 2015~~ (the ~~“2007 Stock~~“2018 Plan”). The 2018 Plan provides for the issuance of share-based awards in the form of stock options, stock appreciation rights, restricted stock awards and units, and performance share awards and units.

Under the 2018 Plan, option exercise prices are equal to the fair market value of Aviat common stock on the date the options are granted using the closing stock price. After vesting, options generally may be exercised within seven years after the date of grant.

Restricted stock units are not transferable until vested and the restrictions lapse upon the achievement of continued employment or service over a specified time period. Restricted stock units issued to employees generally vest three years from the date of grant (three-year cliff or annually over three years). Restricted stock units issued annually to non-executive board members generally vest on the day before the annual stockholders’ meeting.

Vesting of performance share awards and units is subject to the achievement of predetermined financial performance and share price criteria, and continued employment through the end of the applicable period.

During the ~~first six~~three months ~~of fiscal 2018, we issued 524 shares of common~~ended September 29, 2023, the Company granted 63,889 restricted stock ~~under the Employee Stock Purchase Plan (ESPP),~~units, 63,889 performance share awards and ~~191 shares of common~~145,250 stock ~~for options exercised.~~options.

Total compensation expense for share-based awards included in ~~our~~the unaudited condensed consolidated statements of operations was as follows:

As of ~~December~~September 29, ~~2017,~~2023, there was ~~$0.1~~approximately $3.6 million of total unrecognized compensation expense related to ~~nonvested~~non-vested stock options granted ~~under our 2007 Stock Plan. This expense~~which is expected to be recognized over a ~~weighted average~~weighted-average period of ~~0.59~~2.3 years. As of ~~December~~September 29, ~~2017,~~2023, there was ~~$2.5~~$10.7 million of total unrecognized compensation expense related to

~~nonvested~~ non-vested stock awards ~~and units granted under our 2007 Stock Plan. This expense~~which is expected to be recognized over a ~~weighted average~~weighted-average period of ~~1.21~~1.7 years.

Note 8.10. Segment and Geographic Information

~~We operate~~Aviat operates in one reportable business segment: the design, manufacturing, and sale of ~~a range of~~ wireless networking products, solutions, and services. ~~We conduct business globally and our sales and support activities are managed on a geographic basis. Our~~The Company’s financial performance is regularly reviewed by its chief operating decision maker who is its Chief Executive Officer ~~is our Chief Operating Decision Maker.~~(“CEO”).

~~We report~~The Company reports revenue by region and country based on the location where ~~our~~its customers accept delivery of ~~our~~ products and services. Revenue by region for the three ~~and six~~ months ended ~~December~~September 29, ~~2017~~2023 and ~~December~~September 30, ~~2016~~2022 was as follows:

During the three and six months ended December 29, 2017, Mobile Telephone Networks Group (MTN Group) accounted 11% and 13%, respectively, of our total revenue. During the three and six months ended December 30, 2016, MTN Group accounted for 12% and 11%, respectively, of our total revenue. Motorola Solutions, Inc. (Motorola) and MTN Group and T-Mobile accounted for 16%, 11% and 11%, respectively, of our accounts receivable as of December 29, 2017. MTN Group also accounted for 26% of our accounts receivable as of June 30, 2017. We have entered into separate and distinct contracts with MTN Group and Motorola, as well as separate arrangements with their various subsidiaries. The loss of all business from MTN Group, Motorola, or any other significant customers, could adversely affect our results of operations, cash flows and financial position.

Note 9.11. Income Taxes

~~On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”).~~ The Tax Act makes broad and complex changes to the U.S. tax code that will affect our fiscal year ending June 29, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate, (2) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years, and (3) elimination of the corporate Alternative Minimum Tax (“AMT”). The Tax Act reduces the federal corporate tax rate to 21.0% in the fiscal year ending June 29, 2018. Section 15 of the Internal Revenue Code stipulates that our fiscal year ending June 29, 2018 will have a blended corporate tax rate of 28.1%, which is based on the applicable tax rates before and after the Tax Act and the number of days in the year.

~~Our~~Company’s effective tax rate varies from the U.S. federal statutory rate of ~~28.1%~~21% primarily due to ~~results of~~global intangible low-taxed income inclusion (GILTI) in the U.S., state taxes, foreign operations that are subject to income taxes at different statutory rates, and certain jurisdictions where ~~we cannot recognize~~the tax ~~benefits~~benefit on current losses ~~tax benefit from a foreign tax refund and release of valuation allowance.~~cannot be recognized. During interim periods, ~~we accrue~~ tax expenses are accrued for jurisdictions that are anticipated to be profitable for fiscal ~~2018.~~2024.

The determination of ~~our tax benefit~~income taxes for the ~~first six~~three months ~~of fiscal 2018~~ended September 29, 2023 and ~~2017~~September 30, 2022 was based on ~~our~~the Company’s estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized. ~~The tax benefit~~Tax expense for the ~~first six~~three months ~~of fiscal 2018~~ended September 29, 2023 was primarily ~~attributable~~due to the foreign tax refunds received from the Inland Revenue Authority of Singapore (“IRAS”) and release of valuation allowance related to the refundable AMT credit as provided under the Tax Act, offset by tax expense related to U.S. and profitable foreign subsidiaries. ~~The tax benefit~~Tax expense for the ~~first six~~three months ~~of fiscal 2017~~ended September 30, 2022 was

primarily ~~attributable~~due to ~~the foreign tax refund received from the IRAS, offset by the~~ tax expense related to U.S. and profitable ~~subsidiaries.~~foreign subsidiaries, including deferred tax expense associated with the acquisition of Redline in July 2022 and the subsequent multi-step restructuring plan in which two Canadian Redline corporations converted to unlimited liability companies and then amalgamated by the end of September 2022.

During the fiscal year 2014, we received an assessment letter from IRAS related to deductions claimed in prior years and made a payment of $13.2 million related to tax years 2007 through 2010, reflecting all the taxes incrementally assessed by IRAS. Since the initial assessment, we continued to challenge this assessment. During the first quarter of fiscal 2017, we received an initial refund of $3.7 million from IRAS. During the first quarter of fiscal 2018, we received an additional refund of $1.3 million from IRAS which represents a final settlement. These refunds were recorded as a discrete tax benefit during the quarter the respective payment was received. During the second quarter of fiscal 2018, we recorded a valuation allowance release of $3.3 million related to refundable AMT credit under the Tax Act as a discrete benefit and recorded as a long-term receivable in our Other Assets in the unaudited condensed consolidated balance sheet. Under the Tax Act, any carryforward AMT tax credits can be refunded if not fully utilized by fiscal year 2022. We expect to receive the refund of this tax benefit starting in our fiscal year 2020.

~~We have~~Aviat has a number of years with open tax audits which vary from jurisdiction to jurisdiction. ~~Our~~The major tax jurisdictions ~~include the U.S., Singapore, Nigeria and the Ivory Coast. The earliest years~~ that are open and subject to potential audits include the U.S., Singapore, Ghana, Kenya, Nigeria, Saudi Arabia and Tanzania. The earliest years for these jurisdictions are as follows: U.S. —- 2003; Singapore ~~— 2011;~~- 2015; Ghana – 2016; Kenya – 2018; Nigeria ~~— 2011,~~– 2006; Saudi Arabia – 2019 and ~~Ivory Coast — 2016.~~Tanzania - 2017.

~~We account for interest~~Interest and penalties related to unrecognized tax benefits are accounted for as part of ~~our~~the provision for federal, foreign, and state income taxes. Such interest expense was not material for the three ~~and six~~ months ended September 29, 2023 and September 30, 2022.

On March 11, 2021, the US enacted the American Rescue Plan Act of 2021 (“ARPA”) which expands Section 162(m) to cover the next five most highly compensated employees for the taxable year, in addition to the “covered employees” effective for taxable years beginning after December ~~29, 2017~~31, 2026. The Company will continue to examine the elements of the ARPA and the impact it may have on future business.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) which includes a new corporate alternative minimum tax of 15% on adjusted financial statement income of corporations with profits greater than $1 billion, effective for taxable years beginning after December ~~30, 2016.~~31, 2022, and a 1% excise tax on stock repurchases by public corporations after December 31, 2022. The Company will continue to evaluate the applicability and effect of the IRA as more guidance is issued.

NEC’s Wireless Transport Business

On May 9, 2023, the Company entered into a Master Sale of Business Agreement (the “Purchase Agreement”), with NEC Corporation (“NEC”). Pursuant to the Purchase Agreement, the Company will purchase certain assets and liabilities from NEC relating to NEC’s wireless backhaul business (the “NEC Transaction”). Initial consideration due at the closing of the NEC Transaction will be comprised of (i) an amount in cash equal to $45.0 million, subject to certain post-closing adjustments, and (ii) the issuance of $25.0 million in Company common stock. Aggregate consideration will be approximately $70.0 million. The Company has obtained permanent financing to fund the cash portion of the NEC Transaction. See Note 7. Credit Facility and Debt for further information.

The ~~SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118, which provides guidance on accounting for~~Purchase Agreement contains certain customary termination rights, including, among others, (i) the ~~tax effects~~right of the ~~Tax Act. SAB 118 provides~~Company or NEC to terminate if all the conditions to closing have not been either waived or satisfied on or before February 9, 2024 and (ii) there is a ~~measurement period that should not extend beyond one year from~~final non-appealable order of a government entity prohibiting the ~~Tax Act enactment date for companies~~consummation of the NEC Transaction. The NEC Transaction remains subject to, among other things, regulatory approvals and satisfaction of other customary closing conditions.

NEC is a leader in wireless backhaul networks with an extensive installed base of their Pasolink series products. The Company expects to complete the ~~accounting under ASC 740.~~ NEC Transaction in the fourth quarter of calendar year 2023.

Redline Communications Group Inc.

In ~~accordance with SAB 118, a company must reflect~~ the ~~income tax effects~~first quarter of ~~those aspects~~fiscal 2023, the Company acquired all of the ~~Tax Act~~issued and outstanding shares of Redline Communications Group Inc. (“Redline”), for ~~which~~a purchase price of $20.4 million. Redline is a leading provider of mission-critical data infrastructure.

See Note 12. Acquisitions to the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in theconsolidated financial ~~statements. If a company cannot determine a provisional estimate to be~~statements included in the ~~financial statements, it should continue to apply ASC 740~~Company’s Annual Report on ~~the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.~~

In connection with our initial analysis of the impact of the Tax Act, we have recorded a discrete net tax benefit of $3.3 million in the period ended December 29, 2017. This net benefit relates to a valuation allowance release of refundable AMT credit. For various reasons that are discussed more fully below, we have not fully completed our accountingForm 10-K for the income tax effects of certain elements of the Tax Act. If we were able to make reasonable estimates of the effects of elements for which our analysis is not yet complete, we recorded provisional adjustments. If we were not yet able to make reasonable estimates of the impact of certain elements, we have not recorded any adjustments related to those elements and have continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act.

~~Our accounting~~fiscal year ended June 30, 2023 for the ~~following elements of the Tax Act is incomplete. However, we were able to make reasonable estimates of certain effects~~final purchase price allocation, valuation methodology, and ~~therefore, recorded provisional adjustments as follows:~~

~~Reduction of U.S. Federal Corporate Tax Rate:~~ The Tax Act reduces the corporate tax rate to 21.0%, effective January 1, 2018. For certain deferred tax assets and deferred tax liabilities, we have recorded a provisional decrease of $53.8 million, respectively, with a corresponding net adjustment to valuation allowance of $53.8 million for the period ended December 29, 2017. While we are able to make a reasonable estimate of the impact of the reduction in corporate rate, it may be affected by other ~~analyses~~information related to the ~~Tax Act, including, but not limited to, our calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences.~~

~~Deemed Repatriation Transition Tax:~~ The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on previously untaxed accumulated and current earnings and profits (“E&P”) of certain foreign subsidiaries. To determine the amountcompletion of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We are able to make a reasonable estimate of the Transition Tax and currently do not believe we will be charged this tax, due to preliminary calculations of net negative E&P for our foreign subsidiaries subjected to this tax. However, we are continuing to gather additional information to more precisely compute the amount of the Transition Tax.Redline acquisition.

~~Our accounting for the following elements of the Tax Act is incomplete, and we were not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded.~~

~~Global Intangible Low Taxed Income (“GILTI”):~~ The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of, (1) 10.0% of the aggregate of the U.S. shareholder’s pro-rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder, (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.

Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy choice of either, (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or, (2) factoring such amounts into a company’s measurement of its deferred taxed (the “deferred method”). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Because whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on not only our current structure and estimated future results of global operations but also our intent and ability to modify our structure and/or our business, we are not yet able to reasonably estimate the effect of this provision of the Tax Act. Therefore, we have not made any adjustments related to the potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes on GILTI.

~~Valuation Allowances:~~ The company must assess whether valuation allowances assessments are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income, GILTI inclusions, new categories of FTCs, AMT repeal). During the second quarter of fiscal 2018, we recorded a valuation allowance release of $3.3 million related to refundable AMT credit under the Tax Act as a discrete benefit. Under the Tax Act, any carryforward AMT tax credits can be refunded if not fully utilized by fiscal year 2022.

Note ~~10.~~13. Commitments and Contingencies

~~Operating Lease Commitments~~

We lease office and manufacturing facilities under non-cancelable operating leases expiring at various dates through 2024. We lease approximately 19,000 square feet of office space in Milpitas, California as our corporate headquarters.

~~As of December 29, 2017, our future minimum lease payments under all non-cancelable operating leases with an initial lease term in excess of one year were as follows:~~

Fiscal Years Amounts
(In thousands)
2018 (two quarters remaining) $ 1,244
2019 1,692
2020 1,204
2021 962
2022 208
Thereafter 2,022
Total $ 7,332

These commitments do not contain any material rent escalations, rent holidays, contingent rent, rent concessions, leasehold improvement incentives or unusual provisions or conditions. We sublease a portion of our facilities to third parties and the total minimum rents to be received in the future under our non-cancelable subleases were $0.1 million as of December 29, 2017. The future minimum lease payments are not reduced by the minimum sublease rents.

~~Rental expense for operating leases, including rentals on a month-to-month basis, was as follows:~~

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Rent expense $ 959
$ 987
$ 1,898
$ 2,134

Purchase Orders and Other Commitments

From time to time in the normal course of business, wethe Company may enter into purchasing agreements with ~~our~~its suppliers that require usthe Company to accept delivery of, and remit full payment for, finished products that ~~we have~~it has ordered, finished products that weit requested be held as safety stock, and work in process started on ~~our~~its behalf, in the event ~~we cancel~~it cancels or ~~terminate~~terminates the purchasing agreement. Because these agreements do not specify fixed or minimum quantities, do not specify minimum or variable price provisions, and do not specify the approximate timing of the transaction, and ~~we have~~the Company has no present intention to cancel or terminate any of these agreements, wethe Company currently dodoes not believe that ~~we have~~it has any future liability under these agreements. As of ~~December~~September 29, ~~2017, we~~2023, the Company had outstanding purchase obligations with ~~our~~its suppliers or contract manufacturers of ~~$20.4~~$34.1 million. In addition, wethe Company had contractual obligations of approximately ~~$0.7~~$5.7 million associated with software ~~licenses as of December 29, 2017.~~licenses.

Financial Guarantees and Commercial Commitments

Guarantees issued by banks, insurance companies, or other financial institutions are contingent commitments issued to guarantee ~~our~~ performance under borrowing arrangements, such as bank overdraft facilities, tax and customs obligations, and similar transactions, or to ensure ~~our~~ performance under customer or vendor contracts. The terms of the guarantees are generally equal to the remaining term of the related debt or other obligations and are generally limited to two years or less. As of ~~December~~September 29, ~~2017, we~~2023, the Company had no guarantees applicable to ~~our~~its debt arrangements.

~~We have~~The Company has entered into commercial commitments in the normal course of business including surety bonds, standby letters of credit agreements, and other arrangements with financial institutions primarily relating to the guarantee of future performance on certain contracts to provide products and services to customers. As of ~~December~~September 29, ~~2017, we~~2023, the Company had commercial commitments outstanding of ~~$51.9~~$60.5 million, ~~outstanding~~ that were not recorded ~~in our~~on the unaudited condensed consolidated balance sheets. ~~We do~~The Company does not believe, based on historical experience and information currently available, that it is probable that any significant amounts will be required to be paid on ~~the~~these performance guarantees in the future.

The following table presents details of the Company’s commercial commitments:


(In thousands)	September 29, 2023
Letters of credit	$	2,588
Bonds	57,921
	$	60,509

Indemnifications

Under the terms of substantially all of ~~our~~the Company’s license agreements, ~~we have~~it has agreed to defend and pay any final judgment against ~~our~~its customers arising from claims against such customers that ~~our~~the Company’s products infringe the intellectual property rights of a third party. As of ~~December~~September 29, ~~2017, we have~~2023, the Company has not received any ~~notices~~notice that any customer is subject to an infringement claim arising from the use of ~~our~~its products; ~~we have~~the Company has not received any ~~requests~~request to defend any customers from infringement claims arising from the use of ~~our~~its products; and ~~we have~~the Company has not paid any final judgment on behalf of any customer related to an infringement claim arising from the use of ~~our~~its products. Because the outcome of infringement disputes is related to the specific facts of each case and given the lack of previous or current indemnification claims, wethe Company cannot estimate the maximum amount of potential future payments, if any, related to ~~our~~its indemnification provisions. As of ~~December~~September 29, ~~2017, we~~2023, the Company had not recorded any liabilities related to these indemnifications.

Legal Proceedings

~~We are~~The Company is subject from time to time to disputes with customers concerning ~~our~~its products and services. In May 2016, we received notification of a claim for $1.0 million in damages from a customer in Austria alleging that certain of our products were defective. We are continuing to investigate this claim, and at this time an estimate of the reasonably possible loss or range of loss cannot be made. We believe that we have numerous contractual and legal defenses to these disputes, and we intend to dispute them vigorously.

From time to time, wethe Company may be involved in various other legal claims and litigation that arise in the normal course of ~~our~~its operations. ~~We are~~The Company is aggressively defending all current litigation matters. Although there can be no assurances and the outcome of these matters is currently not determinable, wethe Company currently ~~believe~~believes that none of these claims or proceedings are likely to have a material adverse effect on ~~our~~its financial position. ~~We expect to defend each of these disputes vigorously.~~ There are many uncertainties associated with any ~~litigations~~litigation and these actions or other third-party claims against usthe Company may cause usit to incur costly litigation and/or

substantial settlement charges. As a result, ~~our~~the Company’s business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from ~~our~~the Company’s estimates, if any.

~~We record~~The Company records accruals for ~~our~~its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. ~~We evaluate,~~The Company evaluates, at least on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable. ~~We have~~The Company has not recorded any significant accrual for loss contingencies associated with such legal claims or litigation discussed above.

Contingent Liabilities

~~We record~~The Company records a loss contingency as a charge to operations when (i) it is probable that an asset has been impaired or a liability has been incurred at the date of the ~~unaudited condensed consolidated~~ financial statements; and (ii) the amount of the loss can be reasonably estimated. Disclosure in the notes to the ~~unaudited condensed consolidated~~ financial statements is required for loss contingencies that do not meet both ~~those~~ conditions if there is a reasonable possibility that a loss may have been incurred. Gain contingencies are not recorded until realized. ~~We expense~~The Company expenses all legal costs incurred to resolve regulatory, legal and tax matters as incurred.

In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought against Aviat’s subsidiary Aviat Networks (India) Private Limited (“Aviat India”) relating to the non-realization of intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the time frames dictated by the Indian regulations under the Foreign Exchange Management Act. In November 2017, the Indian Department of Revenue, Ministry of Finance also initiated a similar action against Telsima Communications Private Limited (“Telsima India”), a subsidiary of the Company, relating to the non-realization of intercompany receivables and non-payment of intercompany payables which originated from the period prior to our acquisition of Telsima India in February 2009. In September 2019, the Company’s directors of Aviat India appeared before the Ministry of Finance Enforcement Directorate. No settlement offers were discussed at the meeting and the matter is still ongoing with no subsequent hearing date currently scheduled as of September 29, 2023. The Company has accrued an immaterial amount representing the estimated probable loss for which it would settle the matter. The Company currently cannot form an estimate of the range of loss in excess of its amounts already accrued. If the outcome of this matter is greater than the current immaterial amount accrued, the Company intends to dispute it vigorously.

Periodically, ~~we review~~the Company reviews the status of each significant matter to assess the potential financial exposure. If a potential loss is considered probable and the amount can be reasonably estimated, ~~we reflect~~ the estimated loss is reflected in our results of operations. Significant judgment is required to determine the probability that a liability has been incurred or an asset impaired and whether such loss is reasonably estimable. Further, estimates of this nature are highly subjective, and the final outcome of these matters could vary significantly from the amounts that have been included in ~~our unaudited condensed~~the consolidated financial statements. As additional information becomes available, wethe Company will reassess the potential liability related to ~~our~~its pending claims and litigation and may revise estimates accordingly. Such revisions in the estimates of the potential liabilities could have a material impact on ~~our~~the Company’s results of operations and financial position.

Note 14. Goodwill and Intangible Assets

The following presents details of goodwill and intangible assets (in thousands except useful life):


	September 29, 2023		June 30, 2023
Goodwill	$	5,112	$	5,112

The Company performs its annual goodwill impairment test on the first day of its fourth fiscal quarter. No indicators of impairment were identified during the current period that required the Company to perform an interim assessment or recoverability test.


	Useful life in Years	September 29, 2023		June 30, 2023
Intangible assets:
Patents	10	$	690	$	690
Customer relationships	14	7,730		7,730
Trade names	16	1,330		1,330
Total gross intangible assets		$	9,750	$	9,750
Accumulated amortization		(880)		(704)
Total net intangible assets		$	8,870	$	9,046

Amortization of finite-lived intangibles is included in selling and administrative expenses. There were no impairment charges recorded for the three months ended September 29, 2023 and September 30, 2022.

As of September 29, 2023, the estimated future amortization expense of finite-lived intangible assets is as follows (in thousands):


Remainder of 2024	$	528
2025	704
2026	704
2027	704
2028	704
Thereafter	5,526
Total	$	8,870

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, including “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that

could be deemed to be forward-looking statements, including without limitation statements of, about, concerning or regarding: our plans, strategies and objectives for future operations, including with respect to growing our business and sustaining profitability; our restructuring efforts; our research and development efforts and new product releases and services; trends in revenue; drivers of our business and the markets in which we operate; future economic conditions, performance or outlook, and changes in our industry and the markets we serve; the outcome of contingencies; the value of our contract awards; beliefs or expectations; the sufficiency of our cash and our capital needs and expenditures; our intellectual property protection; our compliance with regulatory requirements and the associated expenses; expectations regarding litigation; our intention not to pay cash dividends; seasonality of our business; the impact of foreign exchange and inflation; taxes; and assumptions underlying any of the foregoing. Forward-looking statements may be identified by the use of forward-looking terminology, such as “anticipates,” “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “strategy,” “projects,” “targets,” “goals,” “seeing,” “delivering,” “continues,” “forecasts,” “future,” “predict,” “might,” “could,” “potential,” or the negative of these terms, and similar words or expressions.

These forward-looking statements are based on estimates reflecting the current beliefs of the senior management of ~~the Company.~~Aviat Networks, Inc. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should therefore be considered in light of various important factors, including those set forth in this document. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to, the following:Quarterly Report on Form 10-Q.

~~continued price and margin erosion as a result of increased competition in the microwave transmission industry;~~

~~the impact of the volume, timing and customer, product and geographic mix of our product orders;~~

~~our ability to meet financial covenant requirements which could impact, among other things, our liquidity;~~

~~the timing of our receipt of payment for products or services from our customers;~~

~~our ability to meet projected new product development dates or anticipated cost reductions of new products;~~

~~our suppliers’ inability to perform and deliver on time as a result of their financial condition, component shortages or other supply chain constraints;~~

~~customer acceptance of new products;~~

~~the ability of our subcontractors to timely perform;~~

~~continued weakness in the global economy affecting customer spending;~~

~~retention of our key personnel;~~

~~our ability to manage and maintain key customer relationships;~~

~~uncertain economic conditions in the telecommunications sector combined with operator and supplier consolidation;~~

~~our failure to protect our intellectual property rights or defend against intellectual property infringement claims by others;~~

~~the results of our restructuring efforts;~~

~~the ability to preserve and use our net operating loss carryforwards;~~

~~the effects of currency and interest rate risks;~~

~~the conduct of unethical business practices in developing countries; and~~

~~the impact of political turmoil in countries where we have significant business.~~

~~Other factors besides those listed here also could adversely affect us.~~ See “Item 1A. Risk Factors” in ~~our~~the Company’s fiscal ~~2017~~2023 Annual Report on Form 10-K filed with the SEC on ~~September 6, 2017~~August 30, 2023 for more information regarding factors that may cause ~~our~~its results to differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q.

You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only as of the date of the filing of this Quarterly Report on Form 10-Q. Forward-looking statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), along with provisions of the Private Securities Litigation Reform Act of 1995, and we ~~undertake no~~expressly disclaim any obligation, other than as ~~imposed~~required by law, to update any forward-looking statements to

reflect further developments or information obtained after the date of filing of this Quarterly Report on Form 10-Q or, in the case of any document incorporated by reference, the date of that document.

Overview of Business; Operating Environment and Key Factors Impacting Fiscal ~~2018~~2024 and ~~2017~~2023 Results

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand ~~our~~Aviat’s results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, ~~our~~the Company’s unaudited condensed consolidated financial statements and ~~the~~ accompanying notes. In the discussion herein, ~~our~~the fiscal year ending June ~~29, 2018~~28, 2024 is referred to as “fiscal ~~2018”~~2024” or ~~“2018”~~“2024” and ~~our~~the fiscal year ended June 30, ~~2017~~2023 is referred to as “fiscal ~~2017”~~2023” or ~~“2017”.~~“2023.”

~~We design, manufacture~~Overview

Aviat is a global supplier of microwave networking and ~~sell a range of wireless~~access networking ~~products,~~ solutions, and services to mobile and fixed public network operators, federal, state and local government agencies, transportation, energy and utility companies, public safety agencies and broadcast network operations around the world. Our products utilize microwave and millimeter wave technologies to create point to point wireless links for short, medium and long distance interconnections. Our wireless systems deliver urban, suburban, regional and country-wide communication links as the primary alternative to fiber optic connections. In dense urban and suburban areas, short range wireless solutions are faster to deploy and lower cost per mile than new fiber deployments. In developing nations, fiber infrastructure is scarce and wireless systems are used for both long and short distance connections. Wireless systems are easier to implement than optical fiber in areas with rugged terrain, and are able to provide connections over bodies of water, such as between islands or between oil and gas production platforms. We also provide network management software solutions to enable operators to deploy, monitor and manage our systems, third party equipment such as antennas, routers, optical transmission equipment and other equipment necessary to build and deploy a complete telecommunications transmission network. We provide a fullbacked by an extensive suite of professional services and support. Aviat sells radios, routers, software and services integral to the functioning of data transport networks. Aviat has more than 3,000 customers and significant relationships with global service providers and private network operators. Aviat’s North America manufacturing base consists of a combination of contract manufacturing and assembly and testing operated in Austin, Texas by Aviat. Additionally, Aviat utilizes a contract manufacturer based in Asia for ~~planning, deployment, operations~~much of its international equipment demand. Aviat’s technology is underpinned by more than 500 patents. Aviat competes on the basis of total cost of ownership, microwave radio expertise and ~~maintenance~~solutions for mission critical communications. Aviat has a global presence.

Acquisitions

NEC’s Wireless Transport Business

On May 9, 2023, the Company entered into the Purchase Agreement with NEC. Pursuant to the Purchase Agreement, the Company will purchase certain assets and liabilities from NEC relating to NEC’s wireless backhaul business. Initial consideration due at the closing of ~~our customers’ networks.~~the NEC Transaction will be comprised of (i) an amount in cash equal to $45.0 million, subject to certain post-closing adjustments, and (ii) the issuance of $25.0 million in Company common stock. Aggregate consideration will be approximately $70.0 million. The Company has obtained permanent financing to fund the cash portion of the NEC Transaction. See Note 7. Credit Facility and Debt for further information.

~~We work continuously~~The Purchase Agreement contains certain customary termination rights, including, among others, (i) the right of the Company or NEC to ~~improve our established brands~~terminate if all the conditions to closing have not been either waived or satisfied on or before February 9, 2024 and (ii) there is a final non-appealable order of a government entity prohibiting the consummation of the NEC Transaction. The NEC Transaction remains subject to, ~~create new products that meet our customers’ evolving needs~~among other things, regulatory approvals and ~~preferences. Our fundamental business goal~~satisfaction of other customary closing conditions.

NEC is a leader in wireless backhaul networks with an extensive installed base of their Pasolink series products. The Company expects to ~~generate superior returns for our stockholders over~~complete the long term. We believe that increases in revenue, operating profits and earnings per share are the key measures of financial performance for our business. However, within the industry there continues to be strong price competition for new business and periodic large customer consolidations that intensify competition in all regions.

Our strategic focus is to continue to accelerate innovation and optimize our product portfolio, improve costs and operational efficiencies, grow our revenue and create a sustainable, profitable business model. To do this, we continue to examine our products, markets, facilities, development programs, and operational flows to ensure we are focused on what we do well and what will differentiate usNEC Transaction in the ~~future. We will continue working to streamline management processes to attain the efficiency levels required by the markets in which we do business.~~

~~Although the general trend~~fourth quarter of increasing demand for bandwidth to support mobile networks applies in all markets and creates demand for our solutions, we expect to see quarter-to-quarter fluctuations within markets and with individual customers based on customers’ past purchasing patterns. Seasonality is also a factor that impacts our business. Our fiscal third quarter revenue and orders have historically been lower than the revenue and orders in our second fiscal quarter because many of our customers utilize a significant portion of their capital budgets at the end of their fiscal years, which is typically the calendar year ~~end and coincides with our second fiscal quarter. The majority of our customers begin a new fiscal year on January 1, and capital expenditures tend to be lower in an organization’s~~2023.

Redline Communications Group Inc.

In the first quarter ~~than in its fourth quarter. We anticipate that this seasonality will continue. The seasonality between~~of fiscal 2023, the ~~second quarter~~Company acquired all of the issued and ~~third quarter may be affected by~~outstanding shares of Redline, for a ~~variety~~purchase price of ~~additional factors, including changes in the global economy.~~$20.4 million. Redline is a leading provider of mission-critical data infrastructure.

In line with industry trends, we expect to provide increased managed services, including network design, inventory management, final configuration and warehousing services, to certain customers in certain geographies. Our operating results may be impacted by providing these services to the extent that we may need to postpone the recognition of revenue and incur upfront and ongoing expenses that are not offset with additional revenue from product sales associated with these services until a future period.

We continue to explore strategic alternatives to improve the market position and profitability of our product offerings in the marketplace, generate additional liquidity and enhance our valuation. We may pursue our goals during the next twelve months through organic growth and through strategic alternatives. Some of these alternatives have included, and could continue to include, selective acquisitions of business segments or entire businesses, divestitures, the sale of assets or securities, a sale or merger of our company or a restructuring of our company. We have also provided, and may from time to time in the future provide, information to interested parties.

Operations Review

The market for mobile backhaul ~~continues~~continued to be ~~our~~the Company’s primary addressable market segment ~~and, over~~globally in the ~~long term, the demand for increasing the backhaul capacity in our customers’ networks continues to grow.~~first three months of fiscal 2024. In North America, wethe Company supported 5G and long-term evolution (“LTE”) deployments of ~~our~~its mobile operator customers, public safety network deployments for state and local governments, and private network implementations for utilities and other customers. In international markets, ~~our~~the Company’s business continued to rely on a combination of customers increasing their capacity to handle subscriber growth and the ongoing build-out of some large ~~3G deployments,~~LTE and ~~the emergence of early stage LTE~~5G deployments. Our international business continues to be adversely affected by constrained availability of U.S. dollars in countries with economies highly dependent on resource exports, particularly oil. This condition, along with decline in local purchasing power because of currency devaluations relative to the U.S. dollar, limits capital spending and slows payments from customers in those locations. OurAviat’s position continues to be to support ~~our~~its customers for 5G and LTE readiness and ensure that ~~our~~its technology roadmap is well aligned with evolving market requirements. ~~We continue to find that our~~Aviat’s strength in turnkey and after-sale support services is a differentiating factor that wins business for usthe Company and enables usit to expand ~~our~~its business with existing ~~customers in all markets.~~customers. Additionally, Aviat operates an e-commerce platform that provides low-cost services, simple experience, and fast delivery to mobile operators and private network customers. However, as disclosed above and in the “Risk Factors” section in Item 1A of ~~our fiscal 2017~~its Annual Report on Form 10-K filed with the SEC on August 30, 2023, a number of factors could prevent usthe Company from achieving ~~our~~its objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that ~~we service.~~it serves.

Revenue

~~We manage our~~The Company manages its sales activities primarily on a geographic basis in North America and three international geographic regions: (1) Africa and the Middle East, (2) Europe, and ~~Russia, and~~ (3) Latin America and Asia Pacific. Revenue by region for the three ~~and six~~ months ended ~~December~~September 29, ~~2017~~2023 and ~~December~~September 30, ~~2016~~2022 and the related changes were ~~shown in the table below:~~as follows:


	Three Months Ended
(In thousands, except percentages)	September 29, 2023		September 30, 2022		$ Change		% Change
North America	$	55,508	$	48,848	$	6,660	13.6	%
Africa and the Middle East	9,953		10,984		(1,031)		(9.4)	%
Europe	5,252		4,500		752		16.7	%
Latin America and Asia Pacific	16,853		16,919		(66)		(0.4)	%
Total revenue	$	87,566	$	81,251	$	6,315	7.8	%

Three Months Ended Six Months Ended
(In thousands, except percentages) December 29, 2017 December 30, 2016 $ Change % Change December 29, 2017 December 30, 2016 $ Change % Change
North America $ 36,985
$ 39,353
$ (2,368 ) (6.0 )% $ 67,987
$ 67,937
$ 50
0.1 %
Africa and Middle East 12,682
16,770
(4,088 ) (24.4 )% 26,144
31,119
(4,975 ) (16.0 )%
Europe and Russia 3,814
2,810
1,004
35.7 % 8,260
7,317
943
12.9 %
Latin America and Asia Pacific 8,242
9,603
(1,361 ) (14.2 )% 15,514
20,370
(4,856 ) (23.8 )%
Total Revenue $ 61,723
$ 68,536
$ (6,813 ) (9.9 )% $ 117,905
$ 126,743
$ (8,838 ) (7.0 )%

~~Our revenue~~Revenue in North America ~~decreased $2.4~~increased by $6.7 million ~~or 6.0%,~~ during the ~~second~~first quarter of fiscal ~~2018~~2024 compared with the same period of fiscal ~~2017. The volume of~~2023, primarily due to strong private network projects coming to completion decreased year-to-year but that was partially offset by a year-to-year increase in revenue with mobile operator customers in the sector. On a year-to-date basis, North America revenue increased slightly by $0.1 million, or 0.1%, compared with the same period in fiscal 2017.and tier 1 demand.

~~Our revenue~~

Revenue in Africa and the Middle East decreased ~~$4.1~~by $(1.0) million ~~or 24.4%, for~~during the ~~second~~first quarter of fiscal ~~2018~~2024 compared with the same period of fiscal ~~2017. The decrease in revenue was~~2023, primarily due to ~~lower sales volume to our~~cyclical softness in the capital expenditure plans of large ~~operator customers~~mobile operators in ~~Africa. On a year-to-date basis, Africa and~~ the ~~Middle East revenue decreased $5.0~~region.

Revenue in Europe increased by $0.8 million ~~or 16.0%,~~for the first quarter of fiscal 2024 compared with the same period inof fiscal ~~2017. The year-to-date decrease in the region was also from lower~~2023, primarily due to increased sales to mobile ~~operator customers in Africa.~~

Revenue in Europe and Russia increased $1.0 million, or 35.7%, for the second quarter of fiscal 2018 compared with the same quarter of fiscal 2017. The increase was from sales to a new mobile operator customer in the region. On a year-to-date basis, revenue in Europe and Russia was up $0.9 million, or 12.9%, from the same period in fiscal 2017. The increase was from sales to a new mobile operator customeroperators in the region.

Revenue in Latin America and Asia Pacific decreased ~~$1.4~~by $0.1 million ~~or 14.2%,~~ during the ~~second~~first quarter of fiscal ~~2018~~2024 compared with the same period of fiscal 2023, primarily due to timing of projects with mobile operators.


	Three Months Ended
(In thousands, except percentages)	September 29, 2023		September 30, 2022		$ Change		% Change
Product sales	$	59,545	$	55,101	$	4,444	8.1	%
Services	28,021		26,150		1,871		7.2	%
Total revenue	$	87,566	$	81,251	$	6,315	7.8	%

Revenue from product sales and services increased by 8.1% and 7.2%, respectively for the first quarter of fiscal 2024 compared with the same quarter of fiscal 2023. The relatively proportionate increases were driven by the same overall factors of revenue growth discussed previously.

Gross Margin


	Three Months Ended
(In thousands, except percentages)	September 29, 2023			September 30, 2022			$ Change		% Change
Revenue	$	87,566		$	81,251		$	6,315	7.8	%
Cost of revenue	55,714			51,797			3,917		7.6	%
Gross margin	$	31,852		$	29,454		$	2,398	8.1	%
% of revenue	36.4		%	36.3		%
Product margin %	39.0		%	36.0		%
Service margin %	30.8		%	36.7		%

Gross margin for the first quarter of fiscal 2024 increased by $2.4 million compared with the same quarter of fiscal 2023, primarily due to a higher proportion of sales to North American customers where the Company’s margins are historically strongest.

Research and Development


	Three Months Ended
(In thousands, except percentages)	September 29, 2023			September 30, 2022			$ Change		% Change
Research and development	$	6,424		$	6,087		$	337	5.5	%
% of revenue	7.3		%	7.5		%

Research and development expenses increased by $0.3 million in the first quarter of fiscal 2024 compared with the same period of fiscal 2023, primarily due to increased product development activities.

Selling and Administrative


	Three Months Ended
(In thousands, except percentages)	September 29, 2023			September 30, 2022			$ Change		% Change
Selling and administrative	$	19,237		$	17,504		$	1,733	9.9	%
% of revenue	22.0		%	21.5		%

Selling and administrative expenses increased by $1.7 million in the first quarter of fiscal 2024 compared with the same period in fiscal ~~2017. The decrease was~~2023, primarily due to ~~decreased deliveries~~variable compensation and merger and acquisition related expenses.

Restructuring


	Three Months Ended
(In thousands, except percentages)	September 29, 2023		September 30, 2022		$ Change		% Change
Restructuring charges	$	644	$	1,950	$	(1,306)	(67.0)	%

In the first quarter of fiscal 2024, restructuring charges were $0.6 million, a decrease of $(1.3) million compared to ~~our larger customers in Latin America. On a year-to-date basis, revenue in Latin America and Asia Pacific decreased $4.9 million, or 23.8%, from~~ the same period in fiscal ~~2017 mainly due to decreased sales to large mobile operator customers~~2023. The prior year includes non-recurring restructuring charges primarily associated with the Redline acquisition completed in ~~Asia Pacific.~~

Three Months Ended Six Months Ended
(In thousands, except percentages) December 29, 2017 December 30, 2016 $ Change % Change December 29, 2017 December 30, 2016 $ Change % Change
Product sales $ 37,719
$ 45,958
$ (8,239 ) (17.9 )% $ 72,786
$ 80,682
$ (7,896 ) (9.8 )%
Services 24,004
22,578
1,426
6.3 % 45,119
46,061
(942 ) (2.0 )%
Total Revenue $ 61,723
$ 68,536
$ (6,813 ) (9.9 )% $ 117,905
$ 126,743
$ (8,838 ) (7.0 )%

~~Our revenue from product sales decreased $8.2 million, or 17.9%, for~~ the ~~second~~first quarter of fiscal ~~2018 compared~~2023.

The Company’s successfully executed restructuring initiatives have enabled it to restructure specific groups to optimize skill sets and align its organizational structure to execute on strategic deliverables, in addition to aligning cost structure with the ~~same period~~core of the business.

Other Expense, net


	Three Months Ended
(In thousands, except percentages)	September 29, 2023		September 30, 2022		$ Change		% Change
Other expense, net	$	901	$	2,782	$	(1,881)	(67.6)	%

Other expense, net decreased by $(1.9) million in ~~fiscal 2017. Product volumes were $2.5 million lower in North America and $5.7 million lower in other regions. Our services revenue increased by $1.4 million, or 6.3%, during~~ the ~~second~~first quarter of fiscal ~~2018~~2024, compared with the same period of fiscal ~~2017, due to increased service activities in all regions except for Latin America.~~

Our revenue from product sales decreased by $7.9 million, or 9.8%, for the first six months of fiscal 2018 compared with the same period in fiscal 2017. The decrease came primarily from weaker product sales in Africa, the Middle East, Latin America and Asia Pacific, offset in part by stronger sales in North America and Europe. Our services revenue decreased by $0.9 million, or 2.0%, during the first six months of fiscal 2018 compared with the same period of fiscal 2017, due to reduced service activities in most regions, except for the Middle East Africa and Europe where we had a small increase in service sales.

~~Gross Margin~~

Three Months Ended Six Months Ended
(In thousands, except percentages) December 29, 2017 December 30, 2016 $ Change % Change December 29, 2017 December 30, 2016 $ Change % Change
Revenue $ 61,723
$ 68,536
$ (6,813 ) (9.9 )% $ 117,905
$ 126,743
$ (8,838 ) (7.0 )%
Cost of revenue 39,833
47,420
(7,587 ) (16.0 )% 78,719
88,262
(9,543 ) (10.8 )%
Gross margin $ 21,890
$ 21,116
$ 774
3.7 % $ 39,186
$ 38,481
$ 705
1.8 %
% of revenue 35.5 % 30.8 % 33.2 % 30.4 %
Product margin % 36.9 % 32.5 % 34.8 % 30.8 %
Service margin % 33.1 % 27.3 % 30.7 % 29.7 %

Gross margin for the three and six months ended December 29, 2017 increased by $0.8 million, or 3.7%, and $0.7 million, or 1.8%, respectively, compared with the three and six months ended December 30, 2016. The margin increase resulted from improved product margins primarily in Africa and improved profitability of service projects in Africa, as well as an increase share of business in the North America market.

Gross margin as a percentage of revenue increased in the second quarter of fiscal 2018 compared with the same period in fiscal 2017 due to improved product and service margins, as well as an increase in the share of business in North America. Product margin as a percentage of product revenue increased from the prior year quarter2023, primarily due to ~~improvements~~non-recurring losses of ~~product margins in Africa facilitated by relative stability in exchange rates as well as~~$1.7 million recognized on the ~~increased share~~sale of ~~business in North America. Service margin as a percentage of service revenue increased due to continued efforts to improve execution of our field services projects, primarily in Africa.~~

On a year-to-date basis, gross margin as a percentage of revenue increased due to lower supply chain costs and higher margin on both product and service. Gross margin rates in our services businesses in most international sectors improved compared with the same period in fiscal 2017. Product margin as a percentage of product revenue increasedmarketable securities included in the first six months of fiscal 2018 over the same period in fiscal 2017 primarily due to reduced supply chain costs as well as the above-mentioned shift in the portion of our business coming from North America relative to international markets, and from improved product margins in Africa and Asia-Pacific.

~~Research and Development Expenses~~

Our research and development expenses increased $0.7 million, or 14.9%, in the second quarter of fiscal 2018 compared with the same period in fiscal 2017. The increase was due to a $0.5 million increase in professional service expense and a $0.2 million increase in compensation and related employee expenses.

Our research and development expenses increased $0.5 million, or 5.6%, in the first six months of fiscal 2018 compared with the same period in fiscal 2017. The increase was primarily due to a $0.5 million increase in compensation and related employee expenses and $0.2 million additional spending in professional service expense. The increase was offset by $0.1 million due to a higher economic incentive grant credit in the first six months of fiscal 2018.

~~Selling and Administrative Expenses~~

Three Months Ended Six Months Ended
(In thousands, except percentages) December 29, 2017 December 30, 2016 $ Change % Change December 29, 2017 December 30, 2016 $ Change % Change
Selling and administrative $ 14,104
$ 14,056
$ 48
0.3 % $ 27,826
$ 29,243
$ (1,417 ) (4.8 )%
% of revenue 22.9 % 20.5 % 23.6 % 23.1 %

Our selling and administrative expenses increased $48.0 thousand, or 0.3%, in the second quarter of fiscal 2018 compared with the same periods in fiscal 2017. The increase for the second quarter of fiscal 2018 compared with the same quarter in fiscal 2017 was primarily due to a $0.8 million bad debt recovery in the second quarter of fiscal 2017 that was not repeated in the current quarter and was offset by $0.2 million in savings in professional services expense and a $0.6 million savings in facilities costs due to our relocation to a new facility in fiscal 2017.

The decrease for the first six months of fiscal 2018 compared with the same period in fiscal 2017 was primarily due to a $1.0 million decrease in facility costs, a $0.4 million decrease in professional fees, a $0.3 million decrease in personnel costs and a $0.3 million decrease in depreciation expenses. The decrease was offset by a $0.7 million bad debt recovery in the first six months of fiscal 2017 that was not repeated in the first six months of fiscal 2018.

~~Restructuring Charges~~

Our restructuring expenses in the three and six months ended December 30, 2016 consisted primarily of the facility costs related to our previous headquarters in Santa Clara. During the second quarter of fiscal 2018, based on communications with certain foreign government, we reduced our estimated payments relating to the fiscal 2014-2015 restructuring plan by $0.3 million.

~~Interest Income, Interest Expense and Other (Expense) Income~~

Three Months Ended Six Months Ended
(In thousands, except percentages) December 29, 2017 December 30, 2016 $ Change % Change December 29, 2017 December 30, 2016 $ Change % Change
Interest income $ 42
$ 72
$ (30 ) (41.7 )% $ 100
$ 126
$ (26 ) (20.6 )%
Interest expense $ (13 ) $ (3 ) $ (10 ) 333.3 % $ (19 ) $ (21 ) $ 2
(9.5 )%
Other (expense) income $ (136 ) $ 5
$ (141 ) N/A
$ (166 ) $ (177 ) $ 11
N/A

~~Interest income reflected interest earned on our cash equivalents which were comprised of money market funds and certificates of deposit.~~

~~Interest expense was primarily related to interest associated with borrowings under the SVB Credit Facility and discounts on customer letters of credit.~~

~~Other (expense) income were primarily comprised of a foreign exchange loss related to a dividend declared by our Nigeria entity (a partnership for U.S. tax purposes) to our Aviat U.S. entity.~~prior year.

Income Taxes


	Three Months Ended
(In thousands, except percentages)	September 29, 2023		September 30, 2022		$ Change		% Change
Income before income taxes	$	4,646	$	1,131	$	3,515	310.8	%
Provision for income taxes	$	641	$	3,877	$	(3,236)	(83.5)	%

Three Months Ended Six Months Ended
(In thousands, except percentages) December 29, 2017 December 30, 2016 $ Change % Change December 29, 2017 December 30, 2016 $ Change % Change
Income (loss) before income taxes $ 2,787
$ 2,587
$ 200
7.7 % $ 1,583
$ (484 ) $ 2,067
(427.1 )%
(Benefit from) provision for income taxes $ (2,564 ) $ 865
$ (3,429 ) N/A
$ (3,203 ) $ (1,605 ) $ (1,598 ) 99.6 %

~~We estimate our~~The Company estimates its annual effective tax rate at the end of each quarterly period, and ~~we record~~records the tax effect of certain discrete items in the interim period in which they occur, including changes in judgment about uncertain tax positions and deferred tax valuation allowances. ~~During~~

Tax expense for the first quarter of fiscal ~~2017, we received a~~2024 was primarily attributable to tax ~~refund of $3.7 million from~~expense for the ~~IRAS related to an assessment we paid in fiscal year 2014 related to deductions claimed in tax years 2007 through 2010. During~~U.S. entity and profitable foreign subsidiaries. Tax expense for the first quarter of fiscal 2018, we received an additional refund of $1.3 million from IRAS which represents a final settlement. Both tax refunds were recorded as a discrete tax benefit during the quarter the respective payment2023 was ~~received. During the second quarter of fiscal 2018, we recorded a valuation allowance release of $3.3 million related~~primarily attributable to refundable AMT credit under the Tax Act as a discrete benefit. We expect to receive the refund of this tax benefit starting in our fiscal year 2020. The determination of the effective tax rate reflects tax expense for the U.S. entity and ~~benefit generated in certain jurisdictions. However, jurisdictions with a year-to-date loss where no tax benefit can be recognized are excluded from the annual effective tax rate.~~

~~Due to the uncertainty regarding the timing and extent of our future profitability, we continue to record a full valuation allowance to offset our U.S.~~profitable foreign subsidiaries, including deferred tax ~~assets which primarily represent future income tax benefits~~expense associated with ~~our operating losses because we do not currently believe that it is more likely than not that these assets will be realized. In~~ the ~~future, if we conclude that sufficient positive evidence (including our estimate~~acquisition of ~~future taxable income) exists~~Redline in July 2022 and the subsequent multi-step restructuring, in which two Canadian Redline corporations converted to ~~support a reversal~~unlimited liability companies and then amalgamated by the end of ~~all or a portion of the valuation allowance, we expect that a significant portion of any release of the valuation allowance will be recorded as an income tax benefit at the time of release.~~September 2022.

Liquidity, Capital Resources, and Financial Strategies

Sources of Cash

As of ~~December~~September 29, ~~2017, our~~2023, the Company’s total cash and cash equivalents ~~restricted cash, and short-term investments~~ were ~~$42.8~~$35.5 million. Approximately ~~$19.2~~$19.0 million ~~or 44.9%~~ was held in the United States. The remaining balance of ~~$23.5~~$16.5 million ~~or 55.1%,~~ was held by entities outside the United States. AsOf the amount of ~~December 29, 2017, $1.0 million was classified as restricted~~ cash ~~as it was being~~and cash equivalents held by the ~~bank under forward contracts specifically for the repayment of a dividend declared by our Nigeria entity (a partnership for U.S. tax purposes)~~Company’s foreign subsidiaries on September 29, 2023, $15.6 million was held in jurisdictions where its undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to ~~our Aviat U.S. entity. These forward contracts were settled in January 2018.~~foreign withholding taxes.

~~Cash provided by operating activities was $9.2 million in the first six months of fiscal 2018 as compared to~~Operating Activities

Operating cash ~~provided by operating activities of $8.3 million in the first six months of fiscal 2017. Cash provided by operating activities~~flows is presented as net income adjusted for certain non-cash items and changes in operating assets and liabilities. Net ~~contribution of non-cash items to~~ cash provided by (used in) operating activities ~~decreased by $3.8 million and net contribution of changes in operating assets and liabilities to cash provided by operating activities increased by $0.9~~was $14.0 million for the first ~~six~~three months of fiscal ~~2018 as~~2024, compared with $(6.3) million in the prior year. The $20.3 million increase is primarily attributable to improvements in working capital and increased net income prior to non-cash adjustments compared to the ~~same period~~prior year.

Investing Activities

Net cash used in investing activities was $0.7 million for the first three months of fiscal ~~2017.~~

2024, compared to $8.3 million in the prior year. The ~~$3.8~~$7.6 million decrease is primarily due to non-recurring activity included in the ~~net contribution~~prior year associated with the Redline acquisition partially offset by proceeds received on the sale of ~~non-cash items to~~marketable securities.

Financing Activities

Financing cash flows consist primarily of borrowings and repayments under the Company’s Credit Facility and proceeds from the exercise of employee stock options. Net cash provided by ~~operating~~(used in) financing activities was $0.2 million for the first three months of fiscal 2024, compared with $(0.3) million in the prior year. The $0.5 million change is primarily due to ~~a $3.1 million net decrease in deferred tax expense of which $3.3 million was~~less payments for taxes related to the ~~release~~net settlement of a valuation allowance for Alternative Minimum Tax, a $0.9 million decrease in charges for inventory write-downs, a $0.5 million decrease in depreciation and amortization of property, plant and equipment,equity awards, partially offset by ~~a $0.7 million decrease in bad debt recovery, and a $0.2 million increase in share-based compensation expense.~~

Changes in operating assets and liabilities resulted in a net increase of $0.9 million to cash provided by operating activities for the first six months of fiscal 2018 as compared to the same period in 2017. Accounts receivable and unbilled costs fluctuate from period to period, dependinglower proceeds on the ~~amount, timing~~exercise of sales and billing activities as well as cash collections. The fluctuations in accounts payable and accrued expenses were primarily due to the timing of liabilities incurred and vendor payments. The change in inventories and in customer service inventories were primarily due to demand and our focus on improving our inventory management. The decrease in customer advance payments and unearned income was due to the timing of payment from customers and revenue recognition. We used $0.9 million in cash during the first six months of fiscal 2018 on expenses related to restructuring liabilities.

During the remainder of fiscal year 2018, we expect to spend approximately $2.3 million for capital expenditures, primarily on equipment for development and manufacturing of new products and to support customer managed services.employee stock options.

As of ~~December~~September 29, ~~2017, our~~2023, the Company’s principal sources of liquidity consisted of ~~the $40.6~~$35.5 million in cash and cash equivalents, ~~and short-term investments, $11.7~~$38.8 million of available credit under ~~our $30.0 million SVB~~its Credit Facility, ~~which expires on June 30, 2018~~ and future collections of receivables from customers. WeThe Company regularly ~~require~~requires letters of credit from ~~some~~certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce ~~our~~its credit and sovereign risk. Historically, ~~our~~the Company’s primary sources of liquidity have been cash flows from operations and credit facilities. Additionally, the Company has an effective shelf registration statement on Form S-3 allowing it to offer and sell, either individually or in combination, in one or more offerings, up to a total dollar amount of $200.0 million of any combination of the securities described in the shelf registration statement or a related prospectus supplement.

~~We believe~~The Company believes that ~~our~~its existing cash and cash equivalents, the available ~~line of credit~~borrowings under ~~the SVB~~its Credit Facility, the availability under its effective shelf registration statement and future cash collections from customers will be sufficient to provide for ~~our~~its anticipated requirements and plans for ~~working capital and capital expenditures~~cash for at least the next 12 months. ~~Our SVB~~In addition, the Company believes these sources of liquidity will be sufficient to provide for its anticipated requirements and plans for cash beyond the next 12 months.

The Company borrowed and repaid $25.2 million against the Credit Facility ~~expires on June 30, 2018. While we intend to renew~~during the ~~SVB Credit Facility~~first three months of fiscal 2024. As of September 29, 2023, the Company had no borrowings outstanding and expect the SVB Credit Facility to be renewed, there can be no assurance that the SVB Credit Facility will be renewed. In addition, there can be no assurance that our business will generate cash flow from operations, we will bewas in compliance with ~~the quarterly~~all financial covenants contained in the ~~SVB~~ Credit Facility, or that we will have a sufficient borrowing base under such facility, or that anticipated operational improvements will be achieved. If we are not in compliance with the financial covenants or do not have sufficient eligible accounts receivable to support our borrowing base, the availability of our credit facility is not certain or may be diminished. Over the longer term, if we are unable to maintain cash balances or generate sufficient cash flow from operations to service our obligations that may arise in the future, we may be required to sell assets, reduce capital expenditures, or obtain financing. If we need to obtain additional financing, we cannot be assured that it will be available on favorable terms, or at all. Our ability to make scheduled principal payments or pay interest on or refinance any future indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the microwave communications market and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.Facility.

~~Restructuring Payments~~

We had liabilities for restructuring activities totaling $0.6 million as of December 29, 2017, $0.3 million of which was classified as current liabilities and expected to be paid out in cash over the next 12 months. We expect to fund these future payments with available cash and cash provided by operations.

~~Contractual Obligations and Commercial Commitments~~

The amounts disclosed in our fiscal 2017 Annual Report on Form 10-K filed with the SEC on September 6, 2017 include our commercial commitments and contractual obligations. During the first six months of fiscal 2018, no material changes occurred in our contractual obligations to purchase goods and services and to make payments under operating leases or our contingent liabilities on outstanding letters of credit, guarantees and other arrangements as disclosed in our fiscal 2017 Annual Report on Form 10-K. As of ~~December~~September 29, ~~2017, we~~2023, the Company had commercial commitments outstanding of ~~$51.9~~$60.5 million, ~~outstanding~~ that were not recorded ~~in our~~on the unaudited condensed consolidated balance sheets. ~~This~~The Company does not believe, based on historical experience and information currently available, that it is ~~an increase of $17.1 million from~~probable that any significant amounts will be required to be paid on these performance guarantees in the amount disclosed in our fiscal 2017 Annual Report on Form 10-K. Please refer to Note 10 Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements (Unaudited) in this Quarterly Report on Form 10-Q.future.

Critical Accounting Estimates

For information about ~~our~~the Company’s critical accounting estimates, see the “Critical Accounting Estimates” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in ~~our~~its fiscal ~~2017~~2023 Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures ~~about~~about Market ~~Risk.~~Risk

In the normal course of doing business, ~~we are~~the Company is exposed to ~~the~~ risks associated with foreign currency exchange rates and changes in interest rates. ~~We employ~~The Company employs established policies and procedures governing the use of financial instruments to manage ~~our~~its exposure to such risks. Information about the Company’s market risk is presented in Part II, Item 7A in its fiscal 2023 Annual Report on Form 10-K. There have been no material changes to the Company’s market risk during the first three months of fiscal 2024.

Exchange Rate Risk

~~We conduct~~The Company conducts business globally in numerous currencies and are therefore exposed to foreign currency risks. ~~We use~~From time to time, the Company uses derivative instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. ~~We do~~The Company does not hold or issue derivatives for trading purposes or make speculative investments in foreign currencies.

We use foreign exchange forward contracts to hedge forecasted foreign currency transactions relating to forecasted sales and purchase transactions. Beginning the fourth quarter of fiscal 2015, we no longer prepared contemporaneous documentation of hedges for the new foreign exchange forward contracts we entered into. As a result, the foreign exchange hedges no longer qualified as cash flow hedges.

The ~~changes in fair value related to the hedges were recorded in income or expenses line items on our statements of operations.~~

~~We also enter~~Company enters into foreign exchange forward contracts to mitigate the change in fair value of specific non-functional currency assets and liabilities on the balance sheet. All balance sheet hedges are marked to market through earnings every period. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities.

~~As of December 29, 2017, we had~~ The Company did not have any foreign ~~currency~~exchange forward contracts outstanding ~~with a total notional amount of $4.7 million consisting of two currencies as follows:~~

Currency
Notional Contract
Amount
(Local Currency)

Notional
Contract
Amount
(USD)
(In thousands)
New Zealand dollar 5,400
$ 3,702
Nigeria Naira 331,200
1,000
Total of all currency forward contracts $ 4,702

~~Net foreign exchange income (loss) recorded in our unaudited condensed consolidated statements of operations during the~~ ~~first six months~~ ~~of fiscal 2018 and 2017 was as follows:~~

Three Months Ended Six Months Ended
(In thousands) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Amount included in costs of revenues $ (107 ) $ (64 ) $ (98 ) $ (280 )
Amount included in other expense (136 ) 2
(137 ) (208 )
Total foreign exchange loss, net $ (243 ) $ (62 ) $ (235 ) $ (488 )

~~A 10% adverse change in currency exchange rates for our foreign currency derivatives held~~ as of ~~December~~September 29, ~~2017 would have an impact of approximately $0.4 million on the fair value of such instruments.~~2023.

Certain of ~~our~~the Company’s international business are transacted in non-U.S. dollar ~~currency. As discussed above, we utilize~~(“USD”) currencies. From time to time, the Company utilizes foreign currency hedging instruments to minimize the currency risk of ~~international~~non-USD transactions. The impact of translating the assets and liabilities of foreign operations to ~~U.S. dollars for the first six months of fiscal 2018 was $0.6 million and was~~USD is included as a component of stockholders’ equity. As of ~~December~~September 29, ~~2017~~2023 and June 30, ~~2017,~~2023, the cumulative translation adjustment decreased ~~our~~stockholders’ equity by ~~$11.2~~$16.0 million and ~~$11.8~~$16.0 million, respectively.

Interest Rate Risk

~~Our~~The Company’s exposure to market risk for changes in interest rates relates primarily to ~~our~~its cash equivalents and borrowings under ~~our credit facility.~~its Credit Facility.

Exposure on Cash Equivalents ~~and Short-term Investments~~

WeThe Company had ~~$42.8~~$35.5 million in total cash and cash equivalents ~~and short-term investments~~ as of ~~December~~September 29, ~~2017.~~2023. Cash equivalents ~~and short-term investments~~ totaled ~~$22.7~~$11.8 million as of ~~December~~September 29, ~~2017~~2023 and were comprised of money market funds and bank certificates of deposit. Cash equivalents ~~and short-term investments~~ have been recorded at fair value. Fair value is measured using inputs that fall into a three-level hierarchy that prioritizes the inputs used to measure fair value based on ~~our balance sheet.~~

~~Our~~observability of such inputs. For more information on the fair value measurements of cash equivalents, please refer to Note 6. Fair Value Measurements of Assets and ~~short-term investments~~Liabilities of the Notes to unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

The Company’s cash equivalents earn interest at fixed rates; therefore, changes in interest rates will not generate a gain or loss on these investments unless they are sold prior to maturity. ~~Actual gains and losses due to the sale of our investments prior to maturity have been immaterial.~~ The ~~weighted average~~weighted-average days to maturity for cash equivalents ~~and short-term investments~~ held as of ~~December~~September 29, ~~2017~~2023 was ~~156~~35 days, and these investments had an average yield of ~~7.18%~~approximately 4.3% per annum. A 10% change in interest rates on ~~our~~the Company’s cash equivalents ~~and short-term investments~~ is not expected to have a material impact on ~~our~~its financial position, results of operations, or cash flows.

Exposure on Borrowings

~~During the first six months of fiscal 2018, we had $9.0 million of~~The Company’s borrowings ~~outstanding~~ under the ~~SVB~~current Credit Facility ~~that incurred~~bear interest at either: (a) Adjusted Term SOFR plus the ~~prime~~applicable margin; or (b) the Base Rate plus the applicable margin. The pricing levels for interest rate ~~plus a spread of 0.50% to 1.50% with such spread~~margins are determined based on ~~our~~the Consolidated Total Leverage Ratio as determined and adjusted ~~quick ratio. During~~quarterly. As of September 29, 2023, the ~~first six months of fiscal 2018, our weighted average interest rate was 4.79%~~applicable margin on Adjusted Term SOFR and ~~the interest expense on these~~Base Rate borrowings was ~~insignificant.~~2.75% and 1.75%, respectively.

A 10% change in interest rates on ~~the current borrowings or on future~~ borrowings is not expected to have a material impact on ~~our~~the Company’s financial position, results of operations, or cash ~~flows since interest on our borrowings is not material to our overall financial position.~~flows.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on management’s evaluation, with the participation of our ~~Chief Executive Officer (CEO)~~President and CEO, and Chief Financial Officer ~~(CFO)~~(“CFO”), as of ~~the end of the period covered by this report,~~September 29, 2023, our CEO and CFO have concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”), as of December 29, 2017,~~ are effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our CEO and CFO, in a manner that allows for timely decisions regarding required disclosures and is recorded, processed, summarized, and reported within the time periods specified in the ~~Securities and Exchange Commission~~SEC’s rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.forms.

Changes in Internal Controls ~~Over~~over Financial Reporting

There were no changes to our internal ~~control~~controls over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) that occurred during ~~our first six months of fiscal 2018~~the quarter ended September 29, 2023 that have materially affected, or are reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including ~~the~~our CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks.

Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~Please~~For a discussion of legal proceedings as of September 29, 2023, please refer to ~~Legal Proceedings~~“Legal Proceedings” and “Contingent Liabilities” under Note 1013. Commitments and Contingencies of the Notes to ~~Condensed Consolidated Financial Statements (Unaudited)~~the unaudited condensed consolidated financial statements in this Quarterly Report on Form ~~10-Q.~~10-Q, which are incorporated into this item by reference.

Item 1A. Risk Factors

Investors should carefully review and consider the information regarding certain factors which could materially affect our business, operating results, cash flows, and financial condition set forth under Item 1A, Risk Factors, in our fiscal ~~2017~~2023 Annual Report on Form 10-K filed with the SEC on ~~September 6, 2017.~~August 30, 2023.

~~We do not believe that there~~There have been ~~any other~~no material ~~additions or~~ changes tofrom the risk factors ~~previously disclosed~~described in our ~~fiscal 2017~~ Annual Report, ~~on Form 10-K,~~ although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Not applicable.~~In November 2021, the Company’s Board of Directors approved a stock repurchase program to purchase up to $10.0 million of the Company’s common stock. As of September 29, 2023, $7.3 million remains available under the stock repurchase program, and Aviat may choose to suspend or discontinue the repurchase program at any time. During the first quarter of fiscal 2024, the Company did not repurchase any shares of common stock.

Item 3. Defaults ~~upon~~Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Not applicable.~~None.

Item 6. Exhibits

The ~~information required by this Item is set forth on the Exhibit Index (following the Signature section of this report) and is included,~~following exhibits are filed or furnished herewith or are incorporated by reference ~~in this Form 10-Q.~~to exhibits previously filed with the SEC:


Exhibit Number						Descriptions
3.1						Amended and Restated Certificate of Incorporation of Aviat Networks, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Current Report on Form 10-Q filed with the SEC on February 10, 2017, File No. 001-33278)
3.2						Amended and Restated Bylaws of Aviat Networks, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on August 24, 2023, File No. 001-33278)
31.1*						Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer
31.2*						Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1**						Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*						Filed herewith.
**						Furnished herewith.

~~SIGNATURE~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




AVIAT NETWORKS, INC. (Registrant)

Date: ~~February 8, 2018~~

November 1, 2023



By:
~~By:~~	/s/ ~~Eric Chang~~
	~~Eric Chang~~ ~~Vice President, Corporate Controller and Principal Accounting Officer~~ ~~(Principal accounting officer and duly authorized officer)~~

~~EXHIBIT INDEX~~

~~The following exhibits are filed herewith or incorporated by reference to exhibits previously filed with the SEC:~~

David M. Gray

~~Exhibit Number~~		~~Descriptions~~
~~3.1~~		Amended and Restated Certificate of Incorporation of Aviat Networks, Inc., as amended (incorporate by reference to Exhibit 3.1 to the Current Report on Form 10-Q filed with the SEC on February 10, 2017, File No. 001-33278)
~~3.2~~		~~Amended and Restated Bylaws of Aviat Networks, Inc. (incorporate by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on October 2, 2015, File No. 001-33278)~~
~~4.1~~		Tax Benefit Preservation Plan, dated as of September 6, 2016, by and between Aviat Networks, Inc. and Computershare Inc., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on September 7, 2016, File No. 011-33278)
~~31.1~~		~~Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer~~
~~31.2~~		~~Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer~~
~~32.1~~		~~Section 1350 Certification of Chief Executive Officer~~David M. Gray Senior Vice President and Chief Financial Officer
~~101.INS~~		~~XBRL Instance Document~~
~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~ (duly authorized officer)



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



(In thousands, except share and par value amounts)	December 29, 2017			June 30, 2017
ASSETS
Current Assets:
Cash and cash equivalents	$	40,352		$	35,658
Restricted cash	1,772			541
Short-term investments	276			264
Accounts receivable, net	43,098			45,945
Unbilled receivables	9,487			12,110
Inventories	24,556			21,794
Customer service inventories	1,637			1,871
Other current assets	7,065			6,402
Total current assets	128,243			124,585
Property, plant and equipment, net	16,931			16,406
Deferred income taxes	5,705			6,178
Other assets	9,331			5,407
TOTAL ASSETS	$	160,210		$	152,576
LIABILITIES AND EQUITY
Current Liabilities:
Short-term debt	$	9,000		$	9,000
Accounts payable	33,098			33,606
Accrued expenses	19,842			21,933
Advanced payments and unearned income	25,273			20,004
Restructuring liabilities	308			1,475
Total current liabilities	87,521			86,018
Unearned income	6,509			7,062
Other long-term liabilities	1,052			1,022
Reserve for uncertain tax positions	2,473			2,453
Deferred income taxes	1,743			1,681
Total liabilities	99,298			98,236
Commitments and contingencies (Note 10)
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding	—			—
Common stock, $0.01 par value, 300,000,000 shares authorized, 5,340,851 shares issued and outstanding at December 29, 2017; 5,317,766 shares issued and outstanding at June 30, 2017	53			53
Additional paid-in-capital	814,898			813,733
Accumulated deficit	(743,790		)	(748,204		)
Accumulated other comprehensive loss	(11,164		)	(11,785		)
Noncontrolling interests	915			543
Total equity	60,912			54,340
TOTAL LIABILITIES AND EQUITY	$	160,210		$	152,576



	December 29, 2017				June 30, 2017				Valuation Inputs
(In thousands)	Cost		Fair Value		Cost		Fair Value		Valuation Inputs
Assets:
Cash equivalents:
Money market funds	$	22,423	$	22,423	$	22,059	$	22,059	Level 1
Bank certificates of deposit	$	—	$	—	$	66	$	66	Level 2
Short term investments:
Bank certificates of deposit	$	276	$	276	$	264	$	264	Level 2
Other current assets:
Foreign exchange forward contracts	$	124	$	124	$	—	$	—	Level 2
Liabilities:
Other accrued expenses:
Foreign exchange forward contracts	$	—	$	—	$	5	$	5	Level 2



	Severance and Benefits							Facilities and Other									Total
(In thousands)	Fiscal 2016-2017 Plan			Fiscal 2015-2016 Plan		Fiscal 2013-2014 Plan		Fiscal 2015-2016 Plan			Fiscal 2014-2015 Plan			Fiscal 2013-2014 Plan
Accrual balance, June 30, 2017	$	315		$	99	$	64	$	563		$	168		$	505		$	1,714
Charges, net	(3		)	—		—		—			1			4			2
Cash payments	(253		)	—		—		—			(102		)	(306		)	(661		)
Foreign exchange impact	(1		)	2		—		18			—			—			19
Accrual balance, September 29, 2017	$	58		$	101	$	64	$	581		$	67		$	203		$	1,074
Charges (recovery), net	—			—		—		(252		)	—			—			(252		)
Cash payments	(2		)	—		—		—			(67		)	(203		)	(272		)
Foreign exchange impact	—			1		—		7			—			—			8
Accrual balance, December 29, 2017	$	56		$	102	$	64	$	336		$	—		$	—		$	558



Fiscal Years	Amounts
	(In thousands)
2018 (two quarters remaining)	$	1,244
2019	1,692
2020	1,204
2021	962
2022	208
Thereafter	2,022
Total	$	7,332



Currency	Notional Contract Amount (Local Currency)	Notional Contract Amount (USD)
	(In thousands)
New Zealand dollar	5,400	$	3,702
Nigeria Naira	331,200	1,000
Total of all currency forward contracts		$	4,702