202
2
Proxy Statement
& Annual Report
Aviat Networks, Inc.
AVIAT NETWORKS, INC.
Fiscal Year 2022 Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE
To supplement the consolidated financial statements presented in accordance with accounting principles generally
accepted in the United States (GAAP), we provide additional measures of gross margin, research and development
expenses, selling and administrative expenses, operating income, provision for or benefit from income taxes, net
income, diluted net income per share and adjusted income before interest, tax, depreciation and amortization (Adjusted
EBITDA), adjusted to exclude certain costs, charges, gains and losses, as set forth below. We believe that these non-
GAAP financial measures, when considered together with the GAAP financial measures, provide information that is
useful to investors in understanding period-over-period operating results separate and apart from items that may, or
could, have a disproportionate positive or negative impact on results in any particular period. We also believe these
non-GAAP measures enhance the ability of investors to analyze trends in our business and to understand our
performance. In addition, we may utilize non-GAAP financial measures as a guide in our forecasting, budgeting and
long-term planning process and to measure operating performance for some management compensation purposes.
Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance
with GAAP. Reconciliations of these non-GAAP financial measures with the most directly comparable financial
measures calculated in accordance with GAAP follow.
Table 3
AVIAT NETWORKS, INC.
Fiscal Year 2022 Summary
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES1
Consolidated Statements of Operations
(Unaudited)
GAAP gross margin
Share-based compensation
Non-GAAP gross margin
Twelve Months Ended
July 1, 2022
% of
Revenue
July 2, 2021
% of
Revenue
(In thousands, except percentages and per share amounts)
$
109,235
440
109,675
36.1 %
$
36.2 %
102,615
372
102,987
37.3 %
37.5 %
1 The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by Aviat Networks. Aviat monitors the
non-GAAP financial measures included above, and our management believes they are helpful to investors because they provide an additional tool
to use in evaluating Aviat’s financial and business trends and operating results. In addition, Aviat’s management uses these non-GAAP measures to
compare Aviat’s performance to that of prior periods for trend analysis and for budgeting and planning purposes. Our non-GAAP net income
excludes share-based compensation, and other non-recurring charges (recovery) and Adjusted EBITDA is determined by excluding depreciation
and amortization on property, plant and equipment, interest, provision for or benefit from income taxes, and non-GAAP pre-tax adjustments, as set
forth above, from the GAAP net income. We believe that the presentation of these non-GAAP items provides meaningful supplemental information
to investors, when viewed in conjunction with, and not in lieu of, our GAAP results. However, the non-GAAP financial measures have not been
prepared under a comprehensive set of accounting rules or principles. Non-GAAP information should not be considered in isolation from, or as a
substitute for, information prepared in accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAP
financial measures.
Aviat Networks, Inc.
Reconciliation of Non-GAAP Financial Measures
and Regulation G Disclosure
GAAP research and development expenses
Share-based compensation
Non-GAAP research and development expenses
GAAP selling and administrative expenses
Share-based compensation
Merger and acquisition related expense
Non-GAAP selling and administrative expenses
GAAP operating income
Share-based compensation
Merger and acquisition related expense
Restructuring charges
Non-GAAP operating income
GAAP income tax provision (benefit)
Adjustment to reflect pro forma tax rate
Non-GAAP income tax provision
GAAP net income
Share-based compensation
Merger and acquisition related expense
Restructuring charges
Other income, net
Adjustment to reflect pro forma tax rate
Non-GAAP net income
Diluted net income per share:
GAAP
Non-GAAP
Shares used in computing diluted net income per share
GAAP/Non-GAAP
Adjusted EBITDA:
GAAP net income
Twelve Months Ended
July 1, 2022
% of
Revenue
July 2, 2021
% of
Revenue
(In thousands, except percentages and per share amounts)
7.9 %
7.8 %
20.5 %
19.7 %
8.1 %
10.0 %
(31.9) %
0.4 %
40.1 %
9.5 %
$
$
$
$
$
$
$
$
22,596
(246)
22,350
57,656
(3,148)
(1,061)
53,447
28,745
3,834
1,061
238
33,878
9,275
(8,075)
1,200
21,160
3,834
1,061
238
(1,690)
8,075
32,678
1.79
2.76
11,820
7.5 %
$
7.4 %
19.0 %
$
17.6 %
9.5 %
$
11.2 %
3.1 %
$
0.4 %
7.0 %
$
10.8 %
$
$
$
21,810
(250)
21,560
56,324
(2,299)
—
54,025
22,210
2,921
—
2,271
27,402
(87,699)
88,899
1,200
110,139
2,921
—
2,271
(230)
(88,899)
26,202
9.42
2.23
11,688
$
21,160
7.0 %
$
110,139
40.1 %
Depreciation and amortization of property, plant, and
equipment
Other income, net
4,463
(1,690)
5,383
(230)
Aviat Networks, Inc.
Reconciliation of Non-GAAP Financial Measures
and Regulation G Disclosure
Twelve Months Ended
July 1, 2022
% of
Revenue
July 2, 2021
% of
Revenue
(In thousands, except percentages and per share amounts)
3,834
1,061
238
9,275
38,341
2,921
—
2,271
(87,699)
32,785
12.7 %
$
11.9 %
Share-based compensation
Merger and acquisition related expense
Restructuring charges
Provision for (benefit from) income taxes
Adjusted EBITDA
$
Aviat Networks, Inc.
Reconciliation of Non-GAAP Financial Measures
and Regulation G Disclosure
AVIAT NETWORKS, INC.
200 Parker Drive, Suite C100A
Austin, TX 78728
Notice of Annual Meeting of Stockholders for Fiscal Year 2022
to be held on November 9, 2022
TO THE HOLDERS OF COMMON STOCK OF AVIAT NETWORKS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders for fiscal year 2022 (the “Annual Meeting”)
of Aviat Networks, Inc. (the “Company”) will be held online only on November 9, 2022, at 12:30 p.m. Central
Time. You may attend the Annual Meeting online via webcast by visiting www.virtualshareholdermeeting.com/
AVNW2022 and entering your 16-digit control number included with the Notice of Internet Availability of Proxy
Materials or proxy card. You will be able to vote your shares and submit questions while attending the Annual
Meeting online for the following purposes:
1.
2.
3.
4.
To elect six directors to serve until the Company’s 2023 Annual Meeting of Stockholders or until their
successors have been elected and qualified;
To vote on the ratification of the appointment by our Audit Committee of Deloitte & Touche LLP
(“Deloitte”) as the Company’s independent registered public accounting firm for fiscal year 2023;
To hold an advisory, non-binding vote to approve the Company’s named executive officer compensation
(“Say-on-Pay”); and
To transact such other business as may properly come before the Annual Meeting or any adjournment or
postponement or other delay thereof.
Only holders of common stock at the close of business on September 13, 2022 are entitled to notice of and to vote at
the Annual Meeting or any adjournment, postponement or other delay thereof.
Whether or not you expect to attend the Annual Meeting online, we urge you to submit a proxy to vote your shares.
This will help ensure the presence of a quorum at the Annual Meeting.
September 26, 2022
By Order of the Board of Directors
/s/ Peter A. Smith
President and Chief Executive Officer
Aviat Networks, Inc.
Notice of Annual Meeting
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON NOVEMBER 9, 2022
This Proxy Statement for the 2022 Annual Meeting of Stockholders and our Annual Report to Stockholders
for the Fiscal Year Ended July 1, 2022 are available at www.proxyvote.com
Your vote is important regardless of the number of shares you own. The Board of Directors urges you to sign, date
and return the enclosed proxy card by mail (using the enclosed postage-paid envelope) as promptly as possible, or
vote electronically or by telephone as described in the attached proxy statement. If you have any questions or need
assistance in voting your shares, please contact Broadridge toll-free at 1-800-690-6903.
Aviat Networks, Inc.
Notice of Materials Availability
TABLE OF CONTENTS
ABOUT THE ANNUAL MEETING
What is the purpose of the Annual Meeting?
What is the record date, and who is entitled to vote at the Annual Meeting?
What are the voting rights of the holders of common stock at the Annual Meeting?
Who may attend the Annual Meeting?
How do I vote?
1
1
1
2
2
2
Why did I receive a one-page notice in the mail regarding the internet availability of proxy materials this year
2
instead of a full set of proxy materials?
How can I access the proxy materials and annual report on the internet?
Why is Aviat soliciting proxies?
How do I revoke my proxy?
What vote is required to approve each item?
What happens if a director does not receive a sufficient number of votes?
What constitutes a quorum, abstention and broker “non-vote”?
Who pays for the cost of solicitation?
What is the deadline for submitting proposals and director nominations for the 2023 Annual Meeting?
Who will count the votes?
CORPORATE GOVERNANCE
Board Members
Director Selection Process
Recently Appointed Directors
Director Nominees
Board and Committee Meetings and Attendance
Board Member Qualifications
Directors’ Biographies
Board Leadership
The Board’s Role in Risk Oversight
Principles of Corporate Governance, Bylaws and Other Governance Documents
Environmental, Social and Governance
Board Committees
Audit Committee
Compensation Committee
Governance and Nominating Committee
Stockholder Communications with the Board
Code of Conduct
TRANSACTIONS WITH RELATED PERSONS
DIRECTOR COMPENSATION AND BENEFITS
Fiscal Year 2022 Compensation of Non-Employee Directors
Indemnification
Aviat Networks, Inc.
Proxy Statement
i
3
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5
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10
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
Audit Committee Pre-Approval Policy
Change in Accountants
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview and Summary
Compensation Governance Best Practices
Compensation Philosophy and Objectives
Executive Compensation Process
Independent Compensation Consultant for Compensation Committee
Compensation Committee Advisor Independence
Consideration of Say-on-Pay Results
Competitive Positioning
Total Compensation Elements
Base Salary
Annual Incentive Plan
Fiscal Year 2022 Annual Incentive Plan – Minimum, Target and Maximum Thresholds
Long Term Incentive Compensation
Perquisites
Generally Available Benefit Programs
Post-Termination Compensation
Recovery of Executive Compensation
Tax and Accounting Considerations
Hedging and Pledging Prohibition
Stock Ownership Guidelines
Risk Considerations in Our Compensation Program
Compensation Committee Report
Summary Compensation Table
Fiscal Year 2022 Grants of Plan-Based Awards
Fiscal Year 2022 Outstanding Equity Awards
Fiscal Year 2022 Option Exercised and Stock Vested Table
Potential Payments Upon Termination or Change of Control
Employment Agreement Terms
Post Termination Guidelines
Mr. Chang Employment Agreement
CEO Pay Ratio
Equity Compensation Plan Summary
Aviat Networks, Inc.
Proxy Statement
ii
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PROPOSAL NO. 1
PROPOSAL NO. 2
PROPOSAL NO. 3
OTHER MATTERS
2022 Annual Report
Form 10-K
Other Business
Householding of Proxy Materials
38
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Aviat Networks, Inc.
Proxy Statement
iii
[This page intentionally left blank]
AVIAT NETWORKS, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON November 9, 2022
This proxy statement (this “Proxy Statement”) applies to the solicitation of proxies by the Board of Directors (the
“Board”) of Aviat Networks, Inc. (which we refer to as “Aviat,” the “Company,” “we,” “our,” and “ours”) for use at
the Annual Meeting of Stockholders for fiscal year 2022 and any adjournment, postponement or other delay thereof
(the “Annual Meeting”), to be held at 12:30 p.m., Central Time, on November 9, 2022. The Annual Meeting will be
held online via webcast, at www.virtualshareholdermeeting.com/AVNW2022 (“Meeting Website”). Stockholders
attending the meeting online via webcast will be able to submit questions and vote their shares electronically at the
meeting. These proxy materials are being made available on or about September 26, 2022, to our stockholders
entitled to notice of and to vote at the Annual Meeting.
To participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card, voting
instruction form or notice of internet availability. The Annual Meeting will begin promptly at 12:30 p.m., Central
Time. Online access and check-in will begin at 12:15 p.m., Central Time. We encourage you to access the Meeting
Website prior to the start time to allow ample time for login procedures and so you may address any technical
difficulties before the Annual Meeting begins. If you encounter any difficulties accessing the webcast Annual
Meeting during login or in the course of the meeting, please contact the phone number found on the login page at
www.virtualshareholdermeeting.com/AVNW2022.
You may vote and ask questions during the Annual Meeting by following the instructions available on the Meeting
Website at the time of the Annual Meeting. Stockholders may submit questions electronically, in real-time during
the meeting. A list of stockholders entitled to vote at the Annual Meeting will be available for ten days prior to the
Annual Meeting for examination by any stockholder for any purpose germane to the Annual Meeting by emailing
our Investor Relations team at investorinfo@aviatnet.com. This list will also be available for such purposes during
the Annual Meeting at the link to be provided upon your registration for the Annual Meeting.
What is the purpose of the Annual Meeting?
ABOUT THE ANNUAL MEETING
The purpose of the Annual Meeting is to obtain stockholder action on the matters outlined in the notice of meeting
included with this Proxy Statement. All holders of shares of common stock at the close of business on September 13,
2022, are entitled to notice of and to vote at the Annual Meeting. At the Annual Meeting, our stockholders will vote
(i) to elect six directors, (ii) on the ratification of the appointment by our Audit Committee of Deloitte & Touche
LLP (“Deloitte”) as the Company’s independent registered public accounting firm for fiscal year 2023, (iii) on an
advisory, non-binding resolution to approve the Company’s named executive officer compensation (“Say-on-Pay”),
and (iv) to transact such other business as may properly come before the Annual Meeting or any adjournment or
postponement or other delay thereof.
What is the record date, and who is entitled to vote at the Annual Meeting?
The record date for the stockholders entitled to vote at the Annual Meeting is September 13, 2022 (the “Record
Date”). The Record Date was established by the Board as required by the Delaware General Corporation Law and
the Amended and Restated Bylaws of the Company (the “Bylaws”). Owners of shares of our common stock at the
close of business on the Record Date are entitled to receive notice of the Annual Meeting and to vote at the Annual
Meeting. You may vote all shares that you owned as of the Record Date.
Aviat Networks, Inc.
Proxy Statement
1
What are the voting rights of the holders of common stock at the Annual Meeting?
Each outstanding share of our common stock is entitled to one vote on each matter considered at the Annual
Meeting. As of the Record Date, there were 11,202,669 shares of our common stock outstanding.
Who may attend the Annual Meeting?
All stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting.
Stockholders will be able
the Annual Meeting online via webcast by visiting
www.virtualshareholdermeeting.com/AVNW2022 and entering the 16-digit control number included in your Notice
of Internet Availability of Proxy Materials, or on your proxy card or in the instructions that accompanied your proxy
materials.
to participate
in
The Annual Meeting will begin promptly at 12:30 p.m. Central time. Online check-in will be available beginning at
12:15 p.m. Central time. Please allow ample time for online check-in procedures. If you encounter any difficulties
accessing the webcast Annual Meeting during login or in the course of the meeting, please contact the phone number
found on the login page at www.virtualshareholdermeeting.com/AVNW2022.
If your shares are held in “street name” (that is, through a bank, broker or other holder of record) and you wish to
attend the Annual Meeting but did not receive a 16-digit control number from your bank or brokerage firm, please
follow the instructions from your bank or brokerage firm, including any requirement to obtain a legal proxy. Most
banks or brokerage firms allow a shareholder to obtain a legal proxy either online or by mail.
You may contact us by calling 512-265-3680 for more information or directions on how to attend the Annual
Meeting online.
How do I vote?
Stockholders of record can vote by proxy as follows:
•
•
•
•
Via the Internet: Stockholders may submit voting instructions through the Internet by following the
instructions included with the proxy card.
By Telephone: Stockholders may submit voting instructions by telephone by following the instructions
included with the proxy card.
By Mail: Stockholders may sign, date and return their proxy card in the pre-addressed, postage-paid
envelope provided.
At the Annual Meeting: You may attend the Annual Meeting online via webcast, vote, and submit a
question during the Annual Meeting online by visiting www.virtualshareholdermeeting.com/AVNW2022
and using your 16-digit control number to enter the meeting even if you have previously returned a proxy
card.
Why did I receive a one-page notice in the mail regarding the internet availability of proxy materials this year
instead of a full set of proxy materials?
Pursuant to SEC rules, we have provided access to our proxy materials over the Internet. Accordingly, we are
sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders of record and
beneficial owners of shares held in “street name.” All stockholders entitled to vote at the Annual Meeting will have
the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy
materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be
found in the Notice. In addition, the Notice contains information on how stockholders of record may request
delivery of proxy materials in printed form by mail or electronically by email on an ongoing basis. Please note that,
Aviat Networks, Inc.
Proxy Statement
2
while our proxy materials are available at the website referenced in the Notice and on our website, no other
information contained on either website is incorporated by reference into or considered to be a part of this document.
How can I access the proxy materials and annual report on the internet?
This Proxy Statement, the form of proxy card, the Notice and our annual report on Form 10-K for the fiscal year
ended July 1, 2022 are available at www.Proxyvote.com.
Why is Aviat soliciting proxies?
In lieu of personally attending and voting at the Annual Meeting, you may appoint a proxy to vote on your behalf.
The Board has designated proxy holders to whom you may submit your voting instructions. The proxy holders for
the Annual Meeting are John Mutch, Chairman of the Board, and Peter A. Smith, Director, President and Chief
Executive Officer (“CEO”).
How do I revoke my proxy?
If you are a stockholder of record, you may revoke your proxy at any time before your shares are voted at the
Annual Meeting by:
•
•
•
•
delivering a written notice of revocation to the Company’s Secretary, at 200 Parker Drive, Suite C100A,
Austin, TX 78728;
signing, dating and returning a proxy card bearing a later date;
submitting another proxy by Internet or telephone (the latest dated proxy will control); or
attending the Annual Meeting and voting online by ballot.
If you hold your shares in “street name,” you should follow the directions provided by the bank, broker or other
holder of record to revoke your proxy. Regardless of how you hold your shares, your online attendance at the
Annual Meeting after having executed and delivered a valid proxy card will not in and of itself constitute a
revocation of your proxy.
What vote is required to approve each item?
•
•
•
Proposal No. 1 (election of directors): the director nominees will be elected by a majority of the votes cast.
Stockholders may not cumulate votes in the election of directors. The Board recommends a vote “FOR”
all nominees.
Proposal No. 2 (ratification of appointment of independent registered public accounting firm): the
affirmative vote by the holders of a majority of the voting power of the common stock present online or
represented by proxy at the Annual Meeting and entitled to vote on the proposal is necessary for approval
of Proposal No. 2. The Board recommends a vote “FOR” Proposal No. 2.
Proposal No. 3 (advisory, non-binding vote on named executive officer compensation): the affirmative
vote by the holders of a majority of the voting power of the common stock present online or represented by
proxy at the Annual Meeting and entitled to vote on the proposal is necessary for approval of Proposal
No. 3. The Board recommends a vote “FOR” Proposal No. 3.
What happens if a director does not receive a sufficient number of votes?
Aviat’s Corporate Governance Guidelines provide that a director nominee who receives a greater number of votes
“AGAINST” his or her election than votes “FOR” his or her election must promptly offer his or her resignation to
Aviat Networks, Inc.
Proxy Statement
3
the Board. The Board will determine whether to accept the nominee’s resignation. See “Policy on Majority Voting
for Directors” for additional information.
What constitutes a quorum, abstention and broker “non-vote”?
The presence at the Annual Meeting virtually through the webcast, or by proxy of the holders of common stock
entitled to cast a majority of the voting power of all of the common stock issued and outstanding and entitled to vote
at the Annual Meeting constitutes a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker “non-votes” are counted as present and are, therefore, included for purposes of determining
whether a quorum is present at the Annual Meeting. An abstention occurs when a stockholder does not vote for or
against a proposal but specifically abstains from voting. A broker “non-vote” occurs when a bank, broker or other
holder of record holding shares in street name for a beneficial owner signs and submits a proxy or votes with respect
to shares of common stock held in a fiduciary capacity, but does not vote on a particular matter because the bank,
broker or other holder of record does not have discretionary voting power with respect to that matter and has not
received instructions from the beneficial owner or because the bank, broker or other holder of record elects not to
vote on a matter as to which it does have discretionary voting power. Under the rules governing banks, brokers and
other holders of record who are voting with respect to shares held in street name, such entities have the discretion to
vote such shares on routine matters but not on non-routine matters. Only Proposal No. 2 is a routine matter.
For Proposal No. 1, abstentions and broker “non-votes”, if any, will be disregarded and have no effect on the
outcome of the vote. For Proposals No. 2 and No. 3, abstentions will have the same effect as voting against the
proposal, and broker “non-votes”, if any, will be disregarded and have no effect on the outcome of the vote.
Who pays for the cost of solicitation?
We will bear the entire cost of solicitation, including the preparation, assembly, printing, and mailing of this Proxy
Statement, the proxy card, the Notice and any additional solicitation materials that may be furnished to our
stockholders and the maintenance and operation of the website providing Internet access to these proxy materials.
We will reimburse banks, brokers and other holders of record for reasonable expenses incurred in sending proxy
materials to beneficial owners of our common stock and maintaining Internet access for such materials and the
submission of proxies. We may supplement the original solicitation of proxies by mail through solicitation by
telephone, email, over the Internet or by other means by our directors, officers and other employees. No additional
compensation will be paid to these individuals for any such services.
What is the deadline for submitting proposals and director nominations for the 2023 Annual Meeting?
For stockholder proposals that are not intended to be included in next year’s proxy statement and for director
nominations that are intended to be included in next year’s proxy statement, a stockholder of record must submit a
written notice thereof, which notice must be received by our Corporate Secretary at our principal executive offices
not earlier than August 11, 2023, or later than September 10, 2023. The full requirements for the submission of
proposals of business not intended to be included in the Company’s proxy and of nominations of directors are
contained in Article II, Sections 13 and 14, respectively, of our Bylaws, which are available for review at our
website, www.aviatnetworks.com.
Stockholder proposals intended for inclusion in next year’s proxy statement pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 (the “Exchange Act”) must be directed to the Corporate Secretary, Aviat Networks,
Inc., at our principal executive offices, and must be received by May 29, 2023.
In accordance with the rules of the SEC, the proxies solicited by the Board for the 2023 Annual Meeting will confer
discretionary authority on the proxy holders to vote on any director nomination or stockholder proposal properly
presented at the 2023 Annual Meeting if the Company fails to receive notice of such matter in accordance with the
periods specified above.
Aviat Networks, Inc.
Proxy Statement
4
Who will count the votes?
Broadridge will tabulate the votes cast by proxy. The Company has retained an independent inspector of elections in
connection with Aviat’s solicitation of proxies for the Annual Meeting. Aviat intends to notify stockholders of the
results of the Annual Meeting by filing a Form 8-K with the SEC.
CORPORATE GOVERNANCE
We believe in and are committed to sound corporate governance principles. Consistent with our commitment to and
continuing evolution of corporate governance principles, we adopted a Code of Conduct, Corporate Governance
Guidelines and written charters for the Governance and Nominating Committee, Audit Committee and
Compensation Committee which are available in the Governance subsection of the Investors page of our website at
https://aviatnetworks.com. Each of our Board committees is required to conduct an annual review of its charter and
applicable guidelines.
Board Members
The authorized size of the Board is currently up to seven. Our Bylaws require that the Board have a minimum of
three directors. Directors are nominated by the Governance and Nominating Committee of the Board. The following
are the members of the Board as of the date of this Proxy Statement.
Name
John Mutch
Bryan Ingram
Michele Klein
Somesh Singh
Peter A. Smith
Dr. James C. Stoffel
Bruce Taten
Title and Positions
Director, Chairman of the Board
Director
Director
Director
Director, President and Chief Executive Officer
Director
Director
The Board has determined that each of our current directors other than Mr. Smith has no relationship that would
interfere with the exercise of independent judgment in carrying out the responsibilities of a director and is otherwise
independent in accordance with listing rules of the NASDAQ Stock Market (the “NASDAQ Listing Rules”). Our
independent directors regularly meet in executive session without members of management present.
All of our directors are requested to attend our annual meetings of stockholders. Six of our seven directors,
representing all of our current directors who were directors (or nominees to become directors) at the time of the
2021 Annual Meeting, attended our 2021 Annual Meeting either in-person or via telephone.
Aviat Networks, Inc.
Proxy Statement
5
Board Diversity Matrix (as of September 26, 2022)
Board Size:
Total Number of Directors
7
Female
Male
Non-Binary
Did not Disclose Gender
Part I: Gender:
Directors
1
Part II: Demographic Background
African American or Black
Alaskan Native
Asian
Hispanic or Latinx
Native American
Native Hawaiian or Pacific
Islander
White
Two or More Races or Ethnicities
LGBTQ+
Director Selection Process
-
-
-
-
-
-
1
-
-
6
-
-
1
-
-
-
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Governance and Nominating Committee is responsible for leading the search for qualified individuals for
election as directors to ensure the Board has an optimal mix of skills, expertise and diversity of background. The
Governance and Nominating Committee recommends candidates to the full Board for election. Any formal
invitation to a director candidate is authorized by the full Board. The Governance and Nominating Committee
identifies candidates through a variety of means, including recommendations from members of the Board,
suggestions from Company management and, from time to time, a third-party search firm. The Governance and
Nominating Committee also considers candidates recommended by stockholders. Stockholders wishing to
recommend director candidates for consideration by the Governance and Nominating Committee may do so by
writing to the Secretary of the Company, giving the recommended candidate’s name, biographical data and
qualifications.
Recently Appointed Directors
Bruce Taten was recommended to the Governance and Nominating Committee by a current Board member and
through an independent, third-party executive search firm retained by the Company to identify and assist in
identifying or evaluating potential nominees in fiscal year 2021. Mr. Taten brings expertise in a wide variety of
matters, including mergers and acquisitions, compliance, financial, tax, and environmental, social and corporate
governance.
Aviat Networks, Inc.
Proxy Statement
6
Director Nominees
We expect each nominee standing for election as a director to be able to serve if elected. If any nominee is not able
to serve, proxies will be voted in favor of the remainder of those nominated. There are no family relationships
between or among any of our executive officers, directors, or director nominees.
There are no material legal proceedings in which any director, director nominee, officer, or affiliate of the Company
or any owner of record or beneficial owner of more than five percent of any class of voting securities of the
Company or any, associate of such director, officer, affiliate of the Company or security holder, is a party adverse to
us or has a material interest adverse to us.
Board and Committee Meetings and Attendance
In fiscal year 2022, the Board held five regularly scheduled meetings and nine special meetings. Each of the Board
members attended 100% of the Board meetings and 100% of the total number of meetings of the committee or
committees on which the member served, in each case, with respect to Board and committee meetings that took
place while such director was a member of the Board.
Board Member Qualifications
Our Board believes that its members should encompass a range of talents, skills and expertise, which enables the
Board to provide sound guidance with respect to the Company’s operations and interest. Each director shall have the
ability to apply good business judgement and must be able to exercise his or her duties of loyalty and care.
Candidates for the position of director should exhibit proven leadership capabilities, high integrity, exercise high
level responsibilities within their chosen careers, and have an ability to quickly grasp complex principles of
business, finance, international transactions, and communication technologies. Our Board prefers a variety of
professional experiences and backgrounds among its members. The Board has chosen not to impose term limits or
mandatory retirement age with regard to service on the Board in the belief that continuity of service and the past
contributions of the members of the Board who have developed an in-depth understanding of the Company and its
business over time bring a seasoned approach to the Company’s governance. In addition to considering a candidate’s
experiences and background, candidates are reviewed in the context of the current composition of the Board and
evolving needs of our businesses. In particular, the Board has sought to include members that have experience in
establishing, growing and leading communications companies in senior management positions and serving on the
board of directors of other companies. In determining that each of the members of the Board is qualified to be a
director, the Board has relied on the attributes listed below and, where applicable, on the direct personal knowledge
of each of the members’ prior service on the Board.
The Board, as part of its focus on Environmental, Social and Governance matters (“ESG”), has encouraged the
Governance and Nominating Committee to search for two or more diverse director nominees from traditionally
under-represented minority groups to be nominated as directors in the future.
Directors’ Biographies
The following is a brief description of the business experience and background of each nominee for director,
including the capacities in which each has served during at least the past five years:
Mr. John Mutch, age 66, currently serves as Chairman of the Board and has served on the Board since January 2015.
He served on the Board of Directors of Steel Excel Inc., a provider of drilling and production services to the oil and
gas industry and a provider of event-based sports services and other health-related services, from 2007 to 2016.
From December 2008 to January 2014, he served as Chairman of the board of directors and Chief Executive Officer
of Beyondtrust Software, a privately-held security software company. Mr. Mutch has been the founder and
managing partner of MV Advisors LLC, a strategic block investment firm that provides focused investment and
strategic guidance to small and mid-cap technology companies, since December 2005. Prior to founding MV
Advisors LLC, in March 2003, Mr. Mutch was appointed by the U.S. Bankruptcy court to the board of directors of
Aviat Networks, Inc.
Proxy Statement
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Peregrine Systems, Inc., a provider of enterprise asset and service management solutions. He assisted that company
in a bankruptcy work-out proceeding and was named President and Chief Executive Officer in July 2003. Previous
to running Peregrine Systems, Inc., Mr. Mutch served as President, Chief Executive Officer and a director of HNC
Software, an enterprise analytics software provider. Before HNC Software, Mr. Mutch spent seven years at
Microsoft Corporation in a variety of executive sales and marketing positions. Mr. Mutch previously served on the
boards of directors of Phoenix Technologies Ltd., a leader in core systems software products, services and
embedded technologies, Edgar Online, Inc., a provider of financial data, analytics and disclosure management
solutions, Aspyra, Inc., a provider of clinical and diagnostic information systems for the healthcare industry,
Overland Storage, Inc., a provider of unified data management and data protection solutions, and Brio Software,
Inc., a provider of business intelligence software. He has served as a director at Agilysys, Inc., a provider of
information technology solutions, since March 2009. From April 2017 to May 2019, Mr. Mutch served as a director
at Maxwell Technologies, Inc., a manufacturer of energy storage and power delivery solutions for automotive, heavy
transportation, renewable energy, backup power, wireless communications and industrial and consumer electronics
applications. From July 2017 to March 2018, he served as a director at YuMe, Inc., a provider of digital video brand
advertising solutions, at which time YuMe was acquired by RhythmOne plc, a technology-enabled digital media
company, and Mr. Mutch continued serving as a director on the RhythmOne board until January 2019. Mr. Mutch
holds a Bachelor of Science in Economics from Cornell University and a Master of Business Administration from
the University of Chicago.
Mr. Mutch brings to the Board extensive experience as an executive in the technology sector. He also has experience
as a director at several public companies in the technology sector. He is or has been a member of the audit
committee of various public and private companies and brings valuable financial expertise to the Board. For these
reasons, we believe Mr. Mutch is qualified to continue serving on the Board.
Mr. Bryan Ingram, age 58, currently serves on the Board and is a senior corporate executive and advisor whose
technology career spans 35 years in executive management roles with industry leaders Broadcom, Avago, Agilent,
HP, and Westinghouse. He has a proven record in the global semiconductor industry for delivering highly
differentiated product performance, cost improvements, resilient supply chains, and driving growth through the
wireless ecosystem. Mr. Ingram presently serves as a director for SGH (formerly Smart Global Holdings), where he
was elected in October 2018 and serves on the nominating and governance committee as well as the compensation
committee. Mr. Ingram has also been a director for Anokiwave since June 2020. Most recently, from November
2019 to March 2020, Mr. Ingram served as a consultant for Broadcom, and he previously served as senior vice
president and general manager of Broadcom’s Wireless Semiconductor Division, from November 2015 to October
2019, where he oversaw the development, production, and marketing of RF components for handsets and other
wireless devices. Prior to Broadcom, Mr. Ingram served as the Chief Operating Officer for Avago Technologies
from April 2013 to October 2015. From October of 2015 until May 2016, Mr. Ingram served as the Senior Vice
President and General Manager of the Wireless Semiconductor Division of Avago Technologies. Mr. Ingram holds a
Bachelor of Science in Electrical Engineering from the University of Illinois and a Master of Science in Electrical
Engineering from Johns Hopkins University. We believe Mr. Ingram’s experience and success in the semiconductor
industry, as well as supply chain expertise, qualify him to serve as a member of the Board.
Ms. Michele Klein, age 73, was appointed to the Board in May 2021. She is an experienced public company director,
venture capital investor and CEO. Ms. Klein chairs our Governance and Nominating committee and serves on the
Compensation committee. In 2021 she was also elected a director of Rockley Photonics, a chipset developer and
module supplier, where she chairs the Nominating and Governance committee and serves on Compensation. In 2019
Michele Klein was elected a director of Intevac, a manufacturer of vacuum deposition systems, where she serves on
the Compensation and Nominating and Governance Committees. In 2017 she was elected a director of Photon
Control, a provider of optical sensors and systems to the semiconductor industry, where she served on Audit and
chaired the M&A Committee until the Company’s acquisition in July 2021. She is also a director of Gridtential
Energy, a private energy storage company. From 2005 until 2010 Ms. Klein served as Sr. Director of Applied
Ventures LLC, the venture capital arm of Applied Materials, where she recommended and managed investments in
energy storage and solar energy, and represented Applied Materials on the boards of energy technology companies.
Ms. Klein co-founded Boxer Cross, a semiconductor equipment manufacturer, and served as Chief Executive
Officer and Director from 1997 until its acquisition by Applied Materials in 2003. She previously co-founded and
Aviat Networks, Inc.
Proxy Statement
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led High Yield Technology, a semiconductor metrology company, from 1986 until its acquisition by public Pacific
Scientific in 1996. Ms. Klein earned a BS degree from the University of Illinois and an MBA from the Stanford
Graduate School of Business. We believe Ms. Klein’s investment and capital markets experience, and leadership
roles in both public and private manufacturing companies in semiconductor, communications infrastructure, wireless
and tech-enabled services, qualifies her to continue to serve as a director of the Company.
Mr. Peter A. Smith, age 56, has been our President and CEO since January 2020 and a member of the Board since
February 2020. Mr. Smith has more than 25 years of leadership experience in business management and a proven
track record of creating value for companies. He most recently served as Senior Vice President, US Windows and
Canada for Jeld-Wen from March 2017 to December 2019, where he had full profit and loss responsibility for Jeld-
Wen’s $1B+ windows business, implementing lean manufacturing principles and strategic development programs to
deliver growth and improved profitability. Prior to Jeld-Wen, from October 2013 to March 2017, he served as
President of Polypore International’s Transportation and Industrial segment and oversaw transformative initiatives
that helped prepare the former public company for sale to the Asahi Kasei Group. Previously, he served as Chief
Executive Officer and a director of Voltaix Inc., until its sale to Air Liquide.
Earlier in his career, Mr. Smith held various executive leadership positions at Fortune 100 and Fortune 500
companies, including Cooper Industries, Dover Knowles Electronics and Honeywell Specialty Materials. In these
roles, his responsibilities ran the gamut of operations, sales and marketing, business development, and mergers and
acquisitions. Mr. Smith also served on the boards of Adaptive 3D from 2020 to 2021 and Soleras Advanced
Coatings from 2015 to 2018. He has both a Bachelor of Science degree in Material (Ceramics) Engineering and PhD
in Material Science and Engineering from Rutgers University, and holds a Master of Business Administration degree
from Arizona State University. We believe Mr. Smith’s executive leadership experience and position as the
Company’s CEO qualify him to continue serving on the Board.
Dr. James C. Stoffel, age 76, has served as a member of the Board since January 2007 and was the lead independent
director for Aviat from July 2010 to February 2015. In addition, Dr. Stoffel currently serves on the board of directors
of PAR Technology Corporation, a NYSE listed company which provides software as a service (SaaS) and related
solutions to the hospitality industry. He has been on the PAR board of directors since November 2017 and is
currently the Lead Independent Director of PAR and chairman of the Compensation Committee. From June 1, 2020
to February 2022, Dr. Stoffel served as a director on the board of EZAccess MD. Dr. Stoffel retired from the board
of directors of Harris Corporation in October 2018, having served since August 2003. He also retired in December
2018 from Trillium International, LLC, a private equity company, where he served as co-founding General Partner
since 2006. He continues to be an advisor to multiple private equity firms. Prior to his private equity work, Dr.
Stoffel was Senior Vice President, Chief Technical Officer and Director of Research and Development of Eastman
Kodak Company (“Kodak”). He held this position from 2000 to April 2005. He joined Kodak in 1997 as Vice
President and Director, Electronic Imaging Products Research and Development, and became Director of Research
and Engineering in 1998. Prior to joining Kodak, he was with Xerox Corporation, where he began his career in
1972. His most recent position with Xerox Corporation was Vice President, Corporate Research and Technology.
Dr. Stoffel holds a Bachelor of Science in Electrical Engineering from the University of Notre Dame and received
his Master of Science and PhD from Syracuse University.
Mr. Bruce Taten, age 66, was appointed to the Board on March 9, 2022. Mr. Taten served as Senior Vice President,
General Counsel and Chief Compliance Officer for Cooper Industries, plc from 2008 until its merger with Eaton
Corporation in October 2012. Previously, Mr. Taten was Vice President and General Counsel at Nabors Industries
from 2003 until 2008 and earlier practiced law with Simpson Thacher & Bartlett LLP and Sutherland Asbill &
Brennan LLP. Before attending law school, he practiced as a C.P.A. with Peat Marwick Mitchell & Co., which is
now KPMG, in New York. From 2015 to date, Mr. Taten is a practicing attorney through his firm, the Law Office of
Bruce M. Taten, and private investor. He is admitted to practice law in the states of Texas and New York. Mr. Taten
earned his FSA Credential from the Sustainability Accounting Standards Board (SASB) in 2020. Mr. Taten holds a
B.S. and Masters degree from Georgetown University and a J.D. from Vanderbilt University. Mr. Taten has served
on board of directors of Jeld-Wen Holdings, Inc. (NYSE: JELD), since 2014 and currently serves as chair of the
compensation committee and on the governance and nominating committee. The Board believes Mr. Taten’s
qualifications to sit on our Board include his environmental, social and governance knowledge, and his experience in
Aviat Networks, Inc.
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9
mergers and acquisitions, compliance, financial, tax and corporate governance expertise working on other
companies’ boards of directors and as a general counsel and chief compliance officer.
Board Leadership
The Board does not have a policy regarding the separation of the roles of CEO and Chairman of the Board as the
Board believes that it is in the best interests of the Company for the Board to make that determination based on the
position and direction of the Company and the membership of the Board. The members of the Board possess
considerable experience and unique knowledge of the challenges and opportunities that the Company faces and are
in the best position to evaluate the needs of the Company and how to best organize the capabilities of the directors
and management to meet those needs.
When the CEO also serves as Chairman of the Board, our Corporate Governance Guidelines provide for the
appointment of a lead independent director.
The Board has determined that having Mr. Mutch serve as Chairman is in the best interest of the Company at this
time. This structure ensures a greater role for the independent directors in the oversight of the Company and active
participation of the independent directors in setting agendas and establishing Board priorities and procedures and is
useful in establishing a system of corporate checks and balances. Separating the Chairman position from the CEO
position allows the CEO to focus on setting the strategic direction of the Company and the day-to-day leadership and
performance of the Company, while the Chairman leads the Board in its role of, among other things, providing
advice to, and overseeing the performance of, the CEO. In addition, managing the Board can be a time-intensive
responsibility, and this structure permits our CEO to focus on the management of the Company’s day-to-day
operations.
The Board’s Role in Risk Oversight
Assessing and managing risk is the responsibility of the management of the Company. The Board’s oversight of
major risks occurs at both the full Board level and at the Board committee level. The Board oversees and reviews
certain aspects of the Company’s risk management efforts, focusing on the adequacy of the Company’s risk
management and risk mitigation processes. Management is responsible for establishing the Company’s business
strategy, identifying and assessing the related risks and implementing appropriate risk management practices. At the
Board’s request, management proposed a process for identifying, evaluating and monitoring material risks and such
process has been approved by the Board and is currently in effect. This risk management program is overseen by
senior management who, in connection with their regular review of the overall business, identify and prioritize a
broad range of material risks (e.g., financial, strategic, compliance and operational). Senior management also
discusses mitigation plans to address such material risks. Prioritized risks and management’s plans for mitigating
such risks are regularly presented to the full Board for discussion and in order to ensure monitoring. In addition to
the risk management program, the Board encourages management to promote a corporate culture that incorporates
risk management into the Company’s corporate strategy and day-to-day business operations.
In addition, each of our Board committees also oversees the management of risks that fall within the committee’s
areas of responsibility. In performing this function, each committee has full access to management, as well as the
ability to engage advisors. The Audit Committee oversees the Company’s compliance with legal and regulatory
requirements. The Governance and Nominating Committee assists the Board in shaping the corporate governance of
the Company. The Compensation Committee oversees the management of risks relating to the Company’s executive
compensation plans, incentive structure and succession planning.
A discussion of risk factors in the Company’s compensation design can be found below under the heading “Risk
Considerations in Our Compensation Program.”
Principles of Corporate Governance, Bylaws and Other Governance Documents
The Board has adopted Corporate Governance Guidelines and other corporate governance documents that
supplement certain provisions of our Bylaws and relate to, among other things, the composition, structure,
interaction and operation of the Board. Some of the key governance features of our Corporate Governance
Guidelines, Bylaws and other governance documents are summarized below.
Majority Voting in Director Elections. In an uncontested election of directors, to be elected to the Board,
each nominee must receive the affirmative vote of shares representing a majority of the votes cast, meaning
that the number of votes “FOR” a director nominee must exceed the number of votes “AGAINST” that
director nominee.
Aviat Networks, Inc.
Proxy Statement
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Aviat’s Corporate Governance Guidelines provide that any director nominee in an uncontested election
who does not receive a greater number of votes “FOR” his or her election than votes “AGAINST” such
election must, promptly following certification of the stockholder vote, offer his or resignation to the Board
for consideration in accordance with the following procedures.
The Board will evaluate the best interests of the Company and its stockholders and decide the action to be
taken with respect to such offered resignation. In reaching their decision, the Board will consider all factors
they deem relevant. Following the Board’s determination, the Company will, within four business days,
disclose publicly in a document furnished or filed with the SEC the Board’s decision as to whether or not to
accept the resignation offer. The disclosure will also include a description of the process by which the
decision was reached, including, if applicable, the reason or reasons for rejecting the offered resignation.
All nominees for election as a director in an uncontested election are deemed to have agreed to abide by
this policy and will offer to resign and will resign if requested to do so in accordance with this policy (and
will if requested submit an irrevocable resignation letter, subject to this majority voting policy, as a
condition to being nominated for election).
Prohibition Against Pledging Aviat Securities and Hedging Transactions. In accordance with Aviat’s
Insider Trading Policy, directors and executive officers are prohibited from short sales of Aviat securities,
entering into puts, calls or other derivative securities, pledging Aviat securities and engaging in hedging
transactions with respect to Aviat securities. Aviat specifically prohibits directors and executive officers
from holding Aviat securities in any margin account for investment purposes or otherwise using Aviat
securities as collateral for a loan. An exception to this prohibition may be granted where a person wishes to
pledge Company securities as collateral for a loan (not including margin debt) and clearly demonstrates the
financial capacity to repay the loan without resort to the pledged securities. Insiders are also prohibited
from purchasing certain instruments (including prepaid variable forward contracts, equity swaps, and
collars) and engaging in transactions designed to hedge or offset any decrease in the value of Aviat
securities.
Environmental, Social and Governance
In fiscal year 2022, the Board adopted an ESG framework that the Company will continue to implement and report
out on in more details in the upcoming years. The ESG framework identifies the Company’s corporate values and
links them to ESG factors and Key Performance Indicators (“KPIs”), such as board diversity, safety and employee
equity ownership. On the environmental side of the framework, the Company began analyzing its energy resource
consumption and separately, monitoring and ensuring its compliance with the Company’s Global Environmental
Policy which can be found at https://aviatnetworks.com/about-us/responsible-sourcing. Also in fiscal year 2022, the
Company obtained International Organization for Standardization (“ISO”) 14001 certification, which relates to the
Company’s environmental management system, for its corporate office in Austin, Texas. The Company is also a
member of the Responsible Business Alliance and EcoVadis which helps Aviat seek to maintain the best practices in
its global supply chain as well as provides a rating of our compliance. In fiscal year 2022, there have been zero
work-related fatalities and only one work-related injury.
In furtherance of its engagement with employees, the Company is committed to a safe and welcoming workplace.
The Company expanded its tracking of work-related injuries and fatalities throughout its global workforce and will
report that information to the Board of Directors annually.
The Company also worked to incorporate greater employee engagement in fiscal year 2022 through a variety of
processes and the implementation of a Diversity and Inclusion Policy globally. In certain locations, the Company
granted each employee Aviat stock as part of an “Employee Ownership” program. In other locations, where local
laws or regulations made granting equity untenable, the Company provided those employees with an additional cash
bonus equal in value to the granted Restricted Stock Units. Restricted Stock Units were granted with a ratable
vesting period of one third per year over three years. This program resulted in approximately 97% of all employees
holding equity in the Company in fiscal year 2022.
Many of the Company’s products may assist Aviat customers with their own sustainability goals and initiatives. For
example, the Company offers products that can reduce diesel consumption and thus the carbon dioxide emissions of
Aviat customers over time. We estimate Aviat solutions when compared with our competitors can reduce diesel fuel
consumption by five million liters annually which results in 13,000 metric tons of avoided carbon dioxide emissions
annually1. Aviat also assists its customers in closing the digital divide around the globe. The Company provides
communication equipment which may easily be deployed in rural or hard to reach locations.
1 Estimate based on Aviat’s internal calculations of power savings compared with competitive wireless transport solutions.
Aviat Networks, Inc.
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11
Board Committees
The Board maintains an Audit Committee, a Compensation Committee and a Governance and Nominating
Committee as its regular committees. Copies of the charters for the Audit Committee, the Compensation Committee
and the Governance and Nominating Committee are available on our website at https://investors.aviatnetworks.com/
corporate-governance/documents-charters.
The following table shows, at the conclusion of fiscal year 2022, the Chairman and members of each committee, the
number of committee meetings held, and the principal functions performed by each committee as described in such
committee’s charter:
Committee
Number of
Meetings in Fiscal
Year 2022
Members
Audit
4
John Mutch (Chairperson)
Bryan Ingram
Dr. James C. Stoffel
Compensation
4
Dr. James C. Stoffel (Chairperson)
Bryan Ingram
Michele Klein
Somesh Singh
Aviat Networks, Inc.
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12
Principal Functions
• Selects our independent registered public accounting
firm
• Reviews reports of our independent registered public
accounting firm
• Reviews and pre-approves the scope and cost of all
services, including all non-audit services, provided by
the firm selected to conduct the audit
• Monitors the effectiveness of the audit process
• Reviews independent registered public accounting
firm’s and management’s assessment of the adequacy
of financial reporting and operating controls
• Monitors corporate compliance program
• Monitors corporate data and information security
• Reviews the process by which management identifies
and mitigates key areas of risk
• Reviews the Company’s audited and unaudited
financial results in the Company’s annual and
quarterly reports on Form 10-K, Form 10-Q and
earnings releases
• Reviews the scope and responsibilities of the internal
audit program and on the appointment of the
individual or firm serving in such capacity
• Reviews and approves all related party transactions
• Reviews our executive compensation policies and
strategies
• Oversees and evaluates our overall compensation
structure and programs
• Ensures that an executive performance evaluation is
in place
• Reviews and overseas management’s continuity
planning processes
• Annually reviews incentive compensation
arrangements and their contribution to the desired risk
management policy and practices
Committee
Number of
Meetings in Fiscal
Year 2022
Members
Governance and
Nominating
4
Michele Klein (Chairperson)
John Mutch
Dr. James C. Stoffel
Principal Functions
• Develops and implements policies and practices
relating to corporate governance and ESG initiatives
• Reviews and monitors implementation of our
governance policies and procedures
• Establish, implement, and monitor the processes for
(a) effective communication with stockholders and
(b) consideration of stockholder proposals
• Assists in developing criteria for open positions on
the Board
• Reviews and recommends nominees for election of
directors to the Board
• Reviews and recommends policies, if needed, for
selection of candidates for directors
• Develops, recommends, and oversees an annual self-
evaluation process of the Board and its committees
Audit Committee
The Audit Committee is primarily responsible for selecting and approving the services performed by our
independent registered public accounting firm, as well as reviewing our accounting practices, internal audit
program, related party transactions, corporate financial reporting, data and information security, and system
of internal controls over financial reporting. No material amendments to the Audit Committee Charter were
made during fiscal year 2022. During fiscal year 2022, the Audit Committee was comprised of
independent, non-employee members of our Board who were “financially sophisticated” under the
NASDAQ Listing Rules.
The Board has determined that Mr. Mutch qualifies as “audit committee financial experts,” as defined
under Item 407(d)(5)(i) of Regulation S-K under the Securities Act of 1933 and the Exchange Act. Such
status does not impose on any director duties, liabilities or obligations that are greater than the duties,
liabilities or obligations otherwise imposed on a director as members of our Audit Committee and the
Board.
Following the Annual Meeting, it is expected that Messrs. Mutch, Ingram, and Stoffel will serve on the
Audit Committee for fiscal year 2023 with Mr. Mutch remaining as chair. Each of Messrs. Mutch, Ingram
and Stoffel are independent under NASDAQ listing standards and Rule 10A-3(b)(1) of the Exchange Act.
Compensation Committee
The Compensation Committee has the authority and responsibility to approve our overall executive
compensation strategy, to ensure that performance evaluation processes are in place for the Company’s
executives, to administer our annual and long-term compensation plans, to annually review the incentive
compensation arrangements and their contribution to desired risk management policy and practices, and to
review and make recommendations to the Board regarding executive compensation. The Compensation
Committee is comprised of independent, non-employee members of the Board in accordance with
NASDAQ Listing Rules. During fiscal year 2022, the Compensation Committee utilized Compensia, Inc.
(“Compensia”) as independent, third-party consulting firms.
Following the Annual Meeting, it is expected that Messrs. Ingram, Klein, Stoffel and Taten, and will serve
on the Compensation Committee for fiscal year 2023 with Mr. Stoffel remaining as chair. All the expected
members of the Compensation Committee for fiscal year 2023 are independent under the NASDAQ Listing
Rules.
Compensation Committee Interlocks and Insider Participation
Aviat Networks, Inc.
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No member or nominee of the Compensation Committee was an officer or employee or former
officer of the Company. None of our executive officers currently serves or in the past year has
served as a member of the Board of Directors or Compensation Committee of any entity that has
one or more executive officers serving on our Board or Compensation Committee. For a
description of transactions between us and members of our Compensation Committee and
affiliates of such members, if any, please see “Transactions with Related Persons.”
Governance and Nominating Committee
Each member of the Governance and Nominating Committee met the independence requirements of the
NASDAQ Listing Rules.
The Governance and Nominating Committee develops and implements policies and practices related to
corporate governance consistent with sound corporate governance principles. The Governance and
Nominating Committee also has oversight to the Company’s ESG initiatives. The Governance and
the processes for (a) effective
Nominating Committee establishes,
communication with stockholders and (b) consideration of stockholder proposals. The Governance and
Nominating Committee also reviews the process by which management identifies and mitigates key areas
of risk and reviews and oversees management’s continuity planning processes.
implements, and monitors
The Governance and Nominating Committee also recommends candidates to the Board and periodically
reviews whether a more formal selection policy should be adopted. The Governance and Nominating
Committee does not have a specific policy with regard to the consideration of any director candidates
recommended by security holders, and there is no difference in the manner in which the committee
members evaluate nominees for director based on whether the nominee is recommended by a stockholder.
We utilized an executive search firm to identify and assist in identifying or evaluating potential nominees.
In reviewing potential candidates for the Board, the Governance and Nominating Committee considers the
individual’s experience and background. Candidates for the position of director should exhibit proven
leadership capabilities, high integrity, exercise high level responsibilities within their chosen career, and
possess an ability to quickly grasp complex principles of business, finance, international transactions and
communications technologies. In general, candidates who have held an established executive level position
in business, finance, law, education, research, government or civic activity will be preferred.
Although the Governance and Nominating Committee has not adopted a formal diversity policy with regard
to the selection of director nominees, diversity is one of the factors that the committee considers in
identifying director nominees. When identifying and recommending director nominees, the Governance
and Nominating Committee views diversity expansively to include, without limitation, concepts such as
race, gender, national origin, traditionally under-represented minority groups, differences of viewpoint,
professional experience, education, skill and other qualities or attributes that contribute to board diversity.
As part of this process, the Governance and Nominating Committee evaluates how a particular candidate
would strengthen and increase the diversity of the Board in terms of how that candidate may contribute to
the Board’s overall balance of perspectives, backgrounds, knowledge, experience, skill sets and expertise in
substantive matters pertaining to the Company’s business.
In making its recommendations, the Governance and Nominating Committee bears in mind that the
foremost responsibility of a director of a corporation is to represent the interests of the stockholders as a
whole. The Governance and Nominating Committee intends to continue to evaluate candidates for election
to the Board on the basis of the foregoing criteria.
Following the Annual Meeting, it is expected that Messrs. Klein, Mutch, and Taten will serve on the
Governance and Nominating Committee for fiscal year 2023 with Ms. Klein remaining as chair. All the
expected members of the Governance and Nominating Committee for fiscal year 2023 are independent
under the NASDAQ Listing Rules.
Stockholder Communications with the Board
Stockholders who wish to communicate directly with the Board may do so by submitting a comment via the
Company’s website at https://investors.aviatnetworks.com/investor-resources/contact-us or by sending a letter
addressed to: Aviat Networks, Inc., c/o Corporate Secretary, 200 Parker Drive, Suite C100A, Austin, TX 78728.
The Corporate Secretary monitors these communications and provides a summary of all received messages to the
Board at its regularly scheduled meetings. When warranted by the nature of communications, the Corporate
Aviat Networks, Inc.
Proxy Statement
14
Secretary will request prompt attention by the appropriate committee or independent director of the Board,
independent advisors or management. The Corporate Secretary may decide in her judgment whether a response to
any stockholder communication is appropriate.
Code of Conduct
We implemented our Code of Conduct effective January 26, 2007 and as amended May 13, 2022. All of our
employees, including the CEO and CFO, are required to abide by the Code of Conduct to help ensure that our
business is conducted in a consistently ethical and legal manner. The Company has adopted a written policy, and
management has implemented a reporting system, intended to encourage our employees to bring to the attention of
management and the Audit Committee any complaints regarding the integrity of our internal system of controls over
financial reporting, or the accuracy or completeness of financial or other information related to our financial
statements.
TRANSACTIONS WITH RELATED PERSONS
During fiscal year 2022 and 2021, we believe there were no transactions, or series of similar transactions, to which
we were or are to be a party in which the amount exceeded $120,000, and in which any of our directors, director
nominees, or executive officers, any holders of more than 5% of our common stock or any members of any such
person’s immediate family, had or will have a direct or indirect material interest, other than compensation described
in the sections titled “Director Compensation and Benefits” and “Executive Compensation.”
The Company does not have a formal written policy with respect to the review, approval, or ratification of
transactions with related persons other than the Audit Committee’s responsibility to review such transactions as
described in its charter. The Company has established procedures to identify these transactions, if any, and bring
them to the attention of the Audit Committee of the Board for consideration. These procedures include a quarterly
assessment in connection with our quarterly financial risk assessments. The Audit Committee of the Board considers
the following regulatory guidance: (i) Item 404(a) of Regulation S-K of the Securities Act of 1933, as amended
(Transactions with Related Persons); (ii) Accounting Standards Codification Topic 850 (Related Party Disclosures);
(iii) Public Company Accounting Oversight Board Auditing Standard No. 18 (Related Parties); and (iv) the
NASDAQ’s governance standards related to independence determinations.
Our Code of Conduct prohibits all employees, including our executive officers, from benefiting personally from any
transactions with us other than approved compensation benefits.
DIRECTOR COMPENSATION AND BENEFITS
The Board has delegated responsibility to the Compensation Committee to determine the form and amount of
director compensation, which reviewed and assessed from time to time by the Compensation Committee with
changes, if any, recommended to the Board for action. Director compensation may take the form of cash, equity, and
other benefits ordinarily available to directors.
Directors who are not employees of ours received the following fees, as applicable, for their services on our Board
during fiscal year 2022:
•
•
•
•
•
•
$60,000 basic annual cash retainer, payable on a quarterly basis, which a director may elect to receive in the
form of shares of common stock;
$40,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Board;
$20,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Audit Committee;
$10,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Governance and
Nominating Committee;
$15,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Compensation
Committee; and
Annual grant of restricted stock units (“RSUs”) under our Amended and Restated 2018 Incentive Plan (the
“2018 Plan”) valued at $100,000, with 100% vesting at the earlier of (1) the day before the date of the
Aviat Networks, Inc.
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15
Annual Meeting, or (2) the first anniversary of the 2022 annual stockholders’ meeting, subject to
continuing service as a director through such earlier date.
We reimburse each non-employee director for reasonable travel expenses incurred and in connection with
attendance at Board and committee meetings on our behalf, and for expenses such as supplies and continuing
director education costs, including travel for one course per year. Employee directors are not compensated for
service as a director.
As adopted by the Company’s Board of Directors in November 2019, members of the Board shall achieve
ownership of three times (3x) such director’s annual cash retainer (exclusive of chairperson or committee fees). A
director is required to achieve compliance with the foregoing ownership requirement by the later of (a) five years
from the date of adoption of the guidelines, or (b) five years from the start of such director’s directorship with the
Company. All vested RSUs or Company shares purchased by a director in the open market shall be counted toward a
director’s ownership requirement.
Fiscal Year 2022 Compensation of Non-Employee Directors
Our non-employee directors received the following aggregate amounts of compensation in respect of fiscal year
2022:
Name
Fees Earned in Cash
Stock Awards(2)
($)
($)
Bryan Ingram
Michele Klein
John Mutch
Somesh Singh
Dr. James C. Stoffel
Bruce Taten (1)
45,000
67,500
120,000
45,000
75,000
15,000
$
$
$
$
$
$
102,718
102,718
102,718
102,718
102,718
38,715
Total
($)
147,718
167,500
220,000
145,000
175,000
52,500
(1) Mr. Taten was appointed by the Board as a non-employee director, effective March 9, 2022. He received a pro-rated annual cash retainer and equity award for his service on the Board during
the third quarter of fiscal year 2022.
(2) The amounts shown in this column reflect the aggregate grant date fair value of RSUs granted to our non-employee directors computed in accordance with FASB ASC Topic 718, determined
without regard to estimated forfeitures. The assumptions made in determining the fair values of our stock awards and option awards are set forth in Notes 1 and 9 to our fiscal year 2022
Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 1, 2022, as filed with the SEC on September 14, 2022.
Our non-employee directors are also reimbursed for all reasonable travel and expenses occurred as a result of their
work as a director.
As of July 1, 2022, our non-employee directors held the following numbers of unvested RSUs, all of which were
granted under the 2018 Plan:
Name
Bryan Ingram
Michele Klein
John Mutch
Somesh Singh
Dr. James C. Stoffel
Bruce Taten
Indemnification
Unvested Stock Awards
3,219
3,219
3,219
3,219
3,219
1,335
Our Bylaws require us to indemnify each of our directors and officers with respect to their activities as a director,
officer, or employee of ours, or when serving at our request as a director, officer, or trustee of another corporation,
trust, or other enterprise, against losses and expenses (including attorney fees, judgments, fines, and amounts paid in
settlement) incurred by them in any threatened, pending, or completed action, suit, or proceeding, whether civil,
Aviat Networks, Inc.
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16
criminal, administrative, or investigative, to which they are, or are threatened to be made, a party(ies) as a result of
their service to us. In addition, we carry directors’ and officers’ liability insurance, which includes similar coverage
for our directors and executive officers. We will indemnify each such director or officer for any one or a
combination of the following, whichever is most advantageous to such director or officer:
•
•
•
•
The benefits provided by our Bylaws in effect on the date of the indemnification agreement or at the time
expenses are incurred by the director or officer;
The benefits allowable under Delaware law in effect on the date the indemnification bylaw was adopted, or
as such law may be amended;
The benefits available under liability insurance obtained by us; and
Such benefits as may otherwise be available to the director or officer under our existing practices.
Under our Bylaws, each director or officer will continue to be indemnified even after ceasing to occupy a position as
an officer, director, employee or agent of ours with respect to suits or proceedings arising from his or her service
with us.
In addition, the Company has entered into indemnification agreement with each director and officer.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, the following table sets forth information with respect to the beneficial ownership of our
common stock as of September 13, 2022, by each person or entity known by us to beneficially own more than five
percent of our common stock, by our directors, by our nominees for director, by our named executive officers and by
all our directors, nominees for director and executive officers as a group. Except as indicated in the footnotes to this
table, and subject to applicable community property laws, the persons listed in the table below have sole voting and
investment power with respect to all shares of our common stock shown as beneficially owned by them. Unless
otherwise indicated, the address of each of the beneficial owners identified is c/o Aviat Networks, Inc., 200 Parker
Drive. Suite C100A. Austin, TX 78728. As of September 13, 2022, there were 11,202,669 shares of our common
stock outstanding.
Name and Address of Beneficial Owner
Royce and Associates, LP
745 Fifth Avenue, New York, NY 10015
Topline Capital Management, LLC
544 Euclid Street, Santa Monica, CA 90402
Shares Beneficially Owned as of
September 13, 2022(1)
Number of Shares of
Common Stock
Percentage of Voting
Power of Common
Stock
636,087(2)
590,107(3)
5.7%
5.3%
(1) Beneficial ownership is determined under the rules and regulations of the SEC, and generally includes voting or dispositive power with respect to such shares.
(2) Based solely on a review of Form 13F-HR filed with the SEC on August 4, 2022 by Royce and Associates LP.
(3) Based solely on a review of Schedule 13G filed with the SEC on February 2, 2022 by Topline Capital Management, LLC.
Named Executive Officers and
Directors
Erin Boase
Common Shares
Currently Held
10,088
Eric Chang
Gary Croke
David Gray
Bryan Ingram
Michele Klein
John Mutch
Somesh Singh
Peter A. Smith
Dr. James C. Stoffel
Aviat Networks, Inc.
Proxy Statement
16,956
7,811
7,568
—
1329
70456
2,000
65,884
79,777
17
Common Shares that May be
Acquired within 60 Days of the
Record Date(1)
Total Beneficial
Ownership
Percentage
Beneficially
Owned
4,872
—
27,818
2,190
3,219
3,219
3,219
3,219
37,400
3,219
14,960
16,956
35,629
9,758
3,219
4,548
73,675
5,219
103,284
82,996
*
*
*
*
*
*
*
*
*
*
Named Executive Officers and
Directors
Bruce Taten
Bryan Tucker
All directors, nominees for director, and
executive officers as a group (12 persons)
Common Shares
Currently Held
Common Shares that May be
Acquired within 60 Days of the
Record Date(1)
Total Beneficial
Ownership
Percentage
Beneficially
Owned
—
3,263
265,132
1,335
47,257
1,335
50,520
*
*
136,967
402,099
3.6 %
* Less than 1 %
(1) Shares of common stock that a person has the right to acquire within 60 days are deemed to be outstanding and beneficially owned by that person for the purpose of computing the total
number of shares beneficially owned by that person and the percentage ownership of that person, but are not deemed to be outstanding for the purpose of computing the percentage ownership of
any other person or group. Accordingly, the amounts in the table include shares of common stock that such person has the right to acquire within 60 days of September 13, 2022 by the exercise of
stock options.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
For fiscal year 2022, the Audit Committee consisted of three members of the Board, each of whom was independent
of the Company and its management, as defined in the NASDAQ Listing Rules. The Board has adopted, and
periodically reviews, the Audit Committee charter. The charter specifies the scope of the Audit Committee’s
responsibilities and how it carries out those responsibilities.
The Audit Committee reviews management’s procedures for the design, implementation, and maintenance of a
comprehensive system of internal controls over financial reporting and disclosure controls and procedures focused
on the accuracy of our financial statements and the integrity of our financial reporting systems. The Audit
Committee provides the Board with the results of its examinations and recommendations, and reports to the Board as
it may deem necessary to make the Board aware of significant financial matters requiring the attention of the Board.
The Audit Committee does not conduct auditing reviews or procedures. The Audit Committee monitors
management’s activities and discusses with management the appropriateness and sufficiency of our financial
statements and system of internal control over financial reporting. Management has primary responsibility for the
Company’s financial statements, the overall reporting process and our system of internal control over financial
reporting. Our independent registered public accounting firm audits the financial statements prepared by
management and the effectiveness of our internal control over financial reporting, expresses an opinion as to
whether those financial statements fairly present our financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States (“GAAP”) and discusses with the
Audit Committee any issues they believe should be raised with us.
The Audit Committee reviews reports from our independent registered public accounting firm with respect to their
annual audit and the effectiveness of our internal control over financial reporting and approves in advance all audit
and non-audit services provided by our independent auditors in accordance with applicable regulatory requirements.
The Audit Committee also considers, in advance of the provision of any non-audit services by our independent
registered public accounting firm, whether the provision of such services is compatible with maintaining their
independence.
In accordance with its responsibilities, the Audit Committee has reviewed and discussed with management the
audited financial statements for the year ended July 1, 2022 and the process designed to achieve compliance with
Section 404 of the Sarbanes-Oxley Act of 2002. The Audit Committee has also discussed with our independent
registered public accounting firm for such financial statements, BDO USA, LLP (“BDO”), the matters required to be
discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the
SEC. The Audit Committee has received the written disclosures and letter from BDO required by applicable
requirements of the PCAOB regarding the communications of BDO with the Audit Committee concerning
independence, and has discussed with BDO its independence, including whether the provision by BDO of non-audit
services, as applicable, is compatible with its independence.
Based on these reviews and discussions, the Audit Committee recommended to the Board that the Company’s
audited financial statements for the year ended July 1, 2022 be included in Company’s Annual Report on Form 10-
K.
Audit Committee Board of Directors
John Mutch, Chairman
Bryan Ingram
Dr. James C. Stoffel
Aviat Networks, Inc.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
BDO was our independent registered public accounting firm for the fiscal years ended July 1, 2022, July 2, 2021 and
July 3, 2020. Representatives of BDO will be present at the Annual Meeting, will have an opportunity to make a
statement should they so desire and will be available to respond to appropriate questions.
The following table sets forth the fees billed for services rendered by our auditors, BDO, for each of our last two
fiscal years:
Audit Fees (2)
Audit Related Fees
Tax Fees (3)
All Other Fees
Total Fees for Services Provided
Fiscal Year 2022 (1)
Fiscal Year 2021 (1)
$
$
1,333,000.00 $
1,387,000.00
—
—
319,000.00
248,000.00
—
—
1,652,000.00 $
1,635,000.00
(1) Includes fees to be billed to us by BDO and BDO’s international affiliates for fiscal 2021 and 2020 financial statement audits, internal control over financial reporting, quarterly reviews and
statutory audits.
(2) Audit fees include fees associated with the annual audit of our consolidated financial statements, internal control over financial reporting, as well as reviews of our quarterly reports on Form
10-Q, SEC registration statements, accounting and reporting consultations and statutory audits required internationally for our subsidiaries.
(3) Tax fees were for services related to tax compliance, tax advice, tax planning services and transfer pricing.
BDO did not perform any professional services related to financial information systems design and implementation
for us in fiscal year 2022, fiscal year 2021 or fiscal year 2020.
The Audit Committee has determined in its business judgment that the provision of non-audit services described
above is compatible with maintaining BDO’s independence.
Audit Committee Pre-Approval Policy
Section 10A(i)(1) of the Exchange Act and related SEC rules require that all auditing and permissible non-audit
services to be performed by a company’s principal accountants be approved in advance by the Audit Committee of
the Board, subject to a “de minimis” exception set forth in the SEC rules (the “De Minimis Exception”). Pursuant to
Section 10A(i)(3) of the Exchange Act and related SEC rules, the Audit Committee has established procedures by
which the Chairperson of the Audit Committee may pre-approve such services provided the pre-approval is detailed
as to the particular service or category of services to be rendered and the Chairperson reports the details of the
services to the full Audit Committee at its next regularly scheduled meeting. All audit-related and non-audit services
in fiscal years 2022, 2021 and 2020, if any, were pre-approved by the Audit Committee at regularly scheduled
meetings of the Audit Committee, or through the process described in this paragraph, and none of such services was
performed pursuant to the De Minimis Exception.
Change in Accountants
On September 22, 2022, the Audit Committee approved dismissal of BDO as the Company’s independent registered
public accounting firm, effective on and as of September 22, 2022, and appointed Deloitte as the Company’s
independent registered public accounting firm for the fiscal year ending June 30, 2023.
This change was not a result of any disagreement between the Company and BDO and was a result of the
geographic change in the Company’s corporate headquarters in 2019 and the Company’s desire to have an
independent registered public accounting firm in Austin, Texas.
BDO’s report on Company’s financial statements for each of the fiscal years ended July 1, 2022, and July 2, 2021,
did not contain an adverse opinion, disclaimer of opinion, nor was it qualified, modified as to uncertainty, audit
scope, or accounting principles. In connection with the audits of the Company's financial statements for each of the
fiscal years ended July 1, 2022, and July 2, 2021, and in the subsequent interim period through September 22, 2022,
there were no disagreements with BDO on any matters of accounting principles or practices, financial statement
Aviat Networks, Inc.
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disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of BDO, would have caused
BDO to make reference to the matter in their reports.
During the fiscal years ended July 1, 2022, and July 2, 2021, and in the subsequent interim period through
September 22, 2022, there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation
S-K.
During the fiscal years ended July 1, 2022, and July 2, 2021, and in the subsequent interim period through
September 22, 2022, neither the Company, nor anyone acting on its behalf, consulted with Deloitte with respect to
(1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of
audit opinion that would have been rendered on the Company’s financial statements, and neither a written report nor
oral advice was provided that Deloitte concluded was an important factor considered by the Company in reaching a
decision as to the accounting, auditing, or financial reporting issue; or (2) any matter that was either the subject of a
“disagreement” (as that term is used in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304
of Regulation S-K) or a “reportable event” (as described in Item 304(a)(1)(v) of Regulation S-K).
The Company provided BDO with a copy of this disclosure and requested that BDO furnish the Company with a
letter addressed to the US Securities and Exchange Commission stating whether it agrees with the statements
contained herein. A copy of BDO’s letter was filed as Exhibit 16.1 to the Company’s Current Report on Form 8-K.
At the Annual Meeting, the shareholders are being asked to ratify the appointment of Deloitte on September 22,
2022 as the Company’s independent registered public accounting firm for fiscal year 2023. In the event of a negative
vote on such ratification, the Audit Committee will reconsider its selection. Even if the appointment is ratified, the
Audit Committee, in its discretion, may direct the appointment of a different independent registered public
accounting firm at any time during the year if the Audit Committee determines that such a change would be in the
best interest of the Company and its shareholders. Representatives of Deloitte are expected to be present at the
Annual Meeting, will have an opportunity to make a statement should they so desire, and will be available to
respond to questions.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview and Summary
This Compensation Discussion and Analysis, which has been prepared by management, is intended to help
our stockholders understand our executive compensation philosophy, objectives, policies, practices, and
decisions. It is also intended to provide context for the compensation awarded to, earned by, or paid to each
of our named executive officers (our “named executive officers”) during fiscal 2022 (defined as July 3,
2021 – July 1, 2022) as detailed in the Summary Compensation Table below and in the other tables and
narrative discussion that follow.
Named Executive Officer
Peter A. Smith
David Gray
Bryan Tucker
Erin Bose
Gary Croke
Eric Chang
Position
President and Chief Executive Officer
Senior Vice President and Chief Financial Officer
Senior Vice President, Americas Sales and Services
General Counsel, Vice President Legal Affairs
Vice President, Marketing and Product Line Management
Former Senior Vice President and Chief Financial Officer
Over the past year our Company has gone through one leadership change. Mr. Chang, our Senior Vice
President and Chief Financial Officer at the beginning of the 2022 fiscal year, stepped down on October 18,
Aviat Networks, Inc.
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2021. On October 18, 2021, the Company appointed David Gray as Senior Vice President and Chief
Financial Officer (“CFO”).
The executive team successfully led the Company to achieve 10.2% revenue growth and record profitability
with adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) margin at 12.6%.
The executive team’s accomplishments during fiscal year 2022 led to the second consecutive year of
meaningful topline growth in and operating margin expansion despite significant pandemic led supply
chain and inflationary challenges. The executive team also continued to develop and implement an
operating model that serves as the basis for continuous improvement and organic and acquisition led
growth enablement.
To understand our approach to executive compensation, you should read the entire Compensation
Discussion and Analysis that follows. The following brief summary introduces the major topics covered:
•
•
•
•
•
•
•
The cornerstone of our executive compensation program is pay for performance. Accordingly,
while we pay competitive compensation and other benefits, our named executive officers’
compensation opportunity is weighted toward variable pay.
The objectives of our executive compensation program are to reward superior performance,
motivate our executives to achieve our goals and attract and retain a strong management team. We
believe that our emphasis on long term stockholder value creation results in an executive
compensation program structure that is beneficial to our Company and our stockholders.
The Compensation Committee is made up of independent, non-employee members of the Board
and oversees the executive compensation program for our named executive officers. The
Compensation Committee works closely with its independent compensation consultant and
management to evaluate the effectiveness of the Company’s executive compensation program
throughout the year. The Compensation Committee’s specific responsibilities are set forth in its
charter, which can be found on the Company’s website at http://investors.aviatnetworks.com/
committee-details/compensation-committee. In reviewing
the elements of our executive
compensation program - base salary, annual cash incentives, long-term incentives and post-
termination compensation - our Compensation Committee reviews market data from similar
companies.
Our competitive positioning philosophy is to set compensation fairly, as compared to the
compensation of our peer group companies, with allowances for internal factors such as tenure,
individual performance and the nature of the relative scope and complexity of the role.
Our annual incentive program is based on specific Company financial performance goals for the
fiscal year and includes provisions to “clawback” any excess amounts paid in the event of a later
correction or restatement of our financial statements.
We conducted our annual pay review of executive compensation in August of 2021. Our CEO had
a performance-based pay adjustment in July 2021, therefore his base pay was not increased in
connection with the August modifications that were made to other named executive officers’ base
salaries in connection with that annual review.
We believe the compensation program for the named executive officers supported our strategic
priorities and aligned compensation earned with the Company’s financial performance in fiscal
year 2022.
Compensation Governance Best Practices
The Compensation Committee believes that a demonstrated commitment to best practices in compensation
governance is itself an essential component of our approach to executive compensation. The following
practices are some examples of this commitment:
•
Pay for performance: A substantial portion of our executives’ compensation opportunity is tied to
achieving specified corporate objectives. In fiscal year 2022, 100% of the annual cash bonuses
granted pursuant to the Annual Incentive Plan (the “AIP”) was performance-based and at-risk,
subject to the Company’s achievement of certain financial objectives. Under the 2018 Plan, one-
third of the equity awards value granted to the named executive officers during the fiscal year
Aviat Networks, Inc.
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2022 were performance-based restricted stock units (which, if based on the Company’s stock price
are referred to herein as market share units (“MSUs”) and if based on other performance criteria as
described herein are referred to as performance share units (“PSUs”)), the vesting of which is
subject to achievement of a targeted financial measure. In past years we made the distinction
between MSUs and PSUs, however, we decided that going forward it is appropriate to simplify
discussion for all awards that vest based on any type of performance measure as PSUs. With
respect to the remaining discussions, references to PSUs include references to MSUs, where
applicable. All equity grants are subject to the 2018 Plan.
Mix of short-term and long-term compensation: Short-term compensation for our named
executive officers is comprised of base salaries and bonuses payable pursuant to the AIP, which
pays out only to the extent that the Company achieves its financial targets. Long-term
compensation, granted under the 2018 Plan was comprised of PSUs, stock options and time-based
RSUs for fiscal year 2022. PSUs are earned, if the performance or market-based criteria, as
applicable, are met, at the end of a three-year plan cycle, while stock options and RSUs vest
annually 1/3 at the end of each successive anniversary of the date of grant.
Independent compensation consultant: The Compensation Committee directly retains the services
of Compensia, an independent compensation consultant, to advise it in determining reasonable and
market-based compensation policies and practices.
Prohibition on hedging and pledging: Our named executive officers, together with all other
employees, are prohibited from engaging in hedging, pledging or similar transactions with respect
to our securities.
No perquisites: Our named executive officers are not provided any perquisites other than our
occasional provision of relocation expense reimbursement.
No single trigger change of control acceleration: Change of control arrangements in the
employment agreements with applicable named executive officers include “double trigger” vesting
provisions providing for acceleration of vesting of outstanding unvested equity awards only in the
event that both a change of control occurs, and the named executive officer’s employment
terminates thereafter for reasons specified in the employment agreements. The executive officers
without employment agreements are generally subject to the Company’s post-termination
compensation policies that the Compensation Committee has historically applied to executive
officers that are not otherwise subject to individual arrangements (the “Post Termination
Guidelines”). While the Post Termination Guidelines are not a formally adopted policy,
historically the Compensation Committee has considered it to be appropriate to apply only “double
trigger” vesting provisions to executive officers, which means that acceleration of vesting of
outstanding unvested equity awards occur only in the event that both a change of control occurs,
and the executive officer incurs an involuntary termination. The Post Termination Guidelines are
described in more detail below.
No tax gross-ups: We do not provide gross-up payments to cover our named executive officers’
personal income taxes that may pertain to any of the compensation or benefits paid or provided by
the Company, other than the limited circumstances of required relocation.
Clawback: We have a clawback policy that entitles us to recover all or a portion of any
performance-based compensation, including cash and equity components, if our financial
statements are restated as a result of errors, omissions or fraud.
Compensation risk management: The Compensation Committee reviews and analyzes the risk
profile of our compensation programs and practices on an annual basis.
•
•
•
•
•
•
•
•
Compensation Philosophy and Objectives
The primary objectives of our total executive compensation program are to use compensation as a tool to
recruit and retain outstanding executives and incentivize them to create longer-term value for our
stockholders. The following principles guide our overall compensation program:
•
reward superior performance;
Aviat Networks, Inc.
Proxy Statement
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•
•
•
motivate our executives to achieve strategic, operational, and financial goals;
enable us to attract and retain a world-class management team; and
align outcomes and rewards with stockholder expectations.
Each year, the Compensation Committee reviews the executive compensation program to ensure its design
and policies remain appropriately aligned with our evolving business needs and to consider best
compensation practices. Our executive compensation program is also reviewed to ensure that it achieves a
balance between providing meaningful retention and performance incentives to our executives while
managing both the Company’s share burn rate and the dilutive effects of equity awards to the Company’s
stockholders.
Executive Compensation Process
The Compensation Committee is responsible for establishing and implementing executive compensation
policies in a manner consistent with our compensation objectives and principles. The Compensation
Committee reviews and approves the features and design of our executive compensation program, and
approves the compensation levels, individual AIP objectives and total compensation targets for our named
executive officers other than our CEO. The independent members of the full Board approve the
targets for our CEO, based on
compensation
recommendations from the Compensation Committee. The Compensation Committee also monitors
executive succession planning and monitors our performance as it relates to overall compensation policies
for employees, including benefit and savings plans.
individual AIP objectives, and financial
level,
In discharging its responsibilities, the Compensation Committee may engage outside consultants and
consult with our Human Resources Department, as well as internal and external legal or accounting
advisors, as the Compensation Committee determines to be appropriate. The Compensation Committee
considers recommendations from our CEO and senior management when making decisions regarding our
executive compensation program and compensation of our named executive officers. Following each fiscal
year end, our CEO, assisted by our Human Resources Department, assesses the performance of all
executives other than the CEO. Following this annual performance review process, our CEO recommends
base salary and incentive awards for executives (other than himself) to the Compensation Committee. The
CEO, with the help of management and the independent consultant, makes recommendations to the
Compensation Committee regarding the plan design of the overall executive compensation program for
review, discussion and approval. The Compensation Committee is also responsible for developing pay
recommendations for the CEO and in securing the full Board’s approval of these recommendations
annually.
Independent Compensation Consultant for Compensation Committee
The Compensation Committee has the authority under its charter to engage the services of outside advisors,
experts and others for assistance. Accordingly, the Compensation Committee retained Compensia as an
independent consultant to advise the Compensation Committee on matters related to the compensation of
the Company’s executive officers. All services that Compensia provided to Aviat in fiscal year 2022 were
approved by the Compensation Committee and were related to executive or Board compensation.
Compensia provides an annual review of the Company’s compensation practices, reviews and makes
recommendations regarding Aviat’s compensation peer groups and provides independent input to the
Compensation Committee on programs and practices.
Compensation Committee Advisor Independence
The Compensation Committee has considered the independence of Compensia pursuant to NASDAQ
Listing Rules and related SEC rules and found no conflict of interest in Compensia providing advice to the
Compensation Committee during fiscal year 2022. The Compensation Committee is also regularly advised
by the Company’s primary outside counsel, Vinson & Elkins LLP (“V&E”). Pursuant to the NASDAQ
Listing Rules and related SEC rules, the Compensation Committee has found no conflict of interest in V&E
continuing to provide advice to the Compensation Committee. The Compensation Committee reassesses the
independence of its advisors annually.
Consideration of Say-on-Pay Results
Aviat Networks, Inc.
Proxy Statement
23
Each year at our annual meeting, we conduct an advisory vote of our stockholders on our executive
compensation program. Although this vote is not binding on the Board or us, we believe that it is important
for our stockholders to have an opportunity to express their views regarding our executive compensation
philosophy, program and practices as disclosed in our proxy statement on an annual basis. The Board and
our Compensation Committee value stockholders’ opinions and, to the extent there is any significant vote
against the compensation of our named executive officers, the Compensation Committee evaluates whether
any actions are warranted or appropriate.
At our 2021 Annual Meeting, 97.1% of the votes cast on the advisory vote on executive compensation
supported our named executive officers’ compensation as disclosed in the proxy statement. Our
Compensation Committee evaluated these results and took into account many other factors in evaluating
our executive compensation programs as discussed in the Compensation Discussion and Analysis.
Although none of our Compensation Committee’s subsequent actions or decisions with respect to the
compensation of our named executive officers were directly attributable to the results of the vote, our
Compensation Committee took the vote outcome into consideration in the course of its deliberations. Our
Compensation Committee believes that concerns on executive compensation matters should be considered
as part of its deliberations and intends to consider the results of future advisory votes in its compensation
review process.
Competitive Positioning
Our management and Compensation Committee consider external data to assist in evaluating and setting
target total direct compensation. Our compensation policy and practice is to target total compensation levels
for all executive officers, including our named executive officers, at competitive levels for similar positions
as derived from the market composite data, factoring in experience in the position and competent
performance. The Compensation Committee may decide to target total direct compensation above or below
the 50th percentile of the market data for similar positions in unique circumstances based on an individual’s
background, experience, and relative complexity and scope of the applicable role. Though compensation
levels may differ among our named executive officers based upon competitive factors and the role,
responsibilities and performance of each named executive officer, there are no material differences in our
compensation policies or in the way target total direct compensation opportunity is determined for any of
our executive officers.
For fiscal year 2022, targets for total cash and cash-based compensation (base salary and short-term
incentive compensation pursuant to the AIP), long-term incentives and total direct compensation (base
salary, and short- and long-term incentive compensation) for our named executive officers were set based
on data collected by Compensia from our proxy peer group companies and from a proprietary survey
source, using results for technology companies with median annual revenue of $290 million. The peer
group companies selected and used for compensation comparisons are reflective of our market for
executive talent and business line competitors. Also, the overall composition of the peer group reflects
companies of similar complexity and size to us.
For fiscal year 2022, these peer group companies included:
ADTRAN, Inc.
Applied Optoelectronics, Inc.
Bel Fuse, Inc.
Cambium Networks Corporation
Comtech Telecommunications Corp.
EMCORE Corp.
PCTEL, Inc.
Casa Systems, Inc.
DZS, Inc.
Harmonic, Inc.
Clearfield, Inc.
Digi International, Inc.
Inseego Corp.
Ribbon Communications, Inc.
Richardson Electronics, Ltd.
Each year, the Compensation Committee with the compensation consultant reviews the appropriateness of
the comparison group used for assessing the compensation of our CEO and other named executive officers.
For fiscal year 2022, we removed Calix, Inc due to their increased market cap. We added Cambium
Networks as they met our size and industry criteria for inclusion and their business description fit in our
peer group.
The fiscal year 2022 peer group consists of 15 companies located throughout the U.S. with Aviat positioned
at or near the medial revenue and other financial metrics.
Total Compensation Elements
Aviat Networks, Inc.
Proxy Statement
24
Our executive compensation program includes four primary elements:
•
•
•
•
base salary
annual incentive compensation pursuant to the AIP
long-term compensation (equity incentives)
post-termination compensation
Each named executive officer’s performance is measured against factors such as short- and long-term
strategic goals and financial measures of our performance, including revenue, total shareholder return
(“TSR”), AIP expenses and other non-GAAP items namely non-GAAP gross adjusted earnings before
interest, taxes, depreciation and amortization (“Gross Adjusted EBITDA”). Details regarding the applicable
financial targets for incentive awards are described below.
Base Salary
Base salaries are provided as compensation for day-to-day responsibilities and services. Executive salaries
are reviewed annually. Our CEO generally makes recommendations to the Compensation Committee in
August of each year regarding the base salary of each named executive officer, other than himself. The
Compensation Committee considers each named executive officer’s responsibilities, as well as the
Company’s performance and recommended increases in base salary for select named executive officers and
other officers. For the beginning of fiscal year 2022, the CEO recommended, and the Compensation
Committee approved, base salary increases for our named executive officers (other than the CEO) as part of
our annual compensation review. Effective October 2, 2021, Mr. Chang’s base salary was increased from
$300,000 to $309,000, Mr. Tucker’s base salary was increased from $315,000 to $324,000, Ms. Boase’s
base salary was increased from $224,700 to $231,441 and Mr. Croke’s base salary was increased from
$230,000 to $236,900. Mr. Gray was hired in the position of CFO on October 18, 2021 at a base salary of
$340,000. Mr. Smith received a base pay increase from $500,000 to $650,000 on July 1, 2021 in
recognition of performance, therefore he did not receive a base salary increase during the 2022 fiscal year.
Annual Incentive Plan
Our AIP is designed to motivate our executives to focus on achievement of our short-term financial goals.
The CEO reviews his recommendations for each named executive officer with the Compensation
Committee, taking into account market data obtained from its independent compensation consultant. Based
on recommendations by the CEO, and as specified in any applicable employment agreement, the
Compensation Committee recommends to the Board an annual incentive compensation target, expressed as
a percentage of base salary, for each named executive officer.
The Compensation Committee also recommends to the Board specific Company financial performance
measures and targets including the relative weighting and payout thresholds for the AIP. The financial
targets are aligned with our Board-approved annual operating plan, and during the year periodic reports are
made to the Board about our performance compared with the targets. Under the AIP, a significant portion
of the executive’s annual compensation is tied directly to our financial performance. The target amount of
annual incentive compensation under our AIP, expressed as a percentage of base salary or, solely with
respect to our CEO, a target dollar amount, generally increases with an executive’s level of management
responsibility and is paid in the form of cash. For fiscal year 2022, individual AIP target incentives were set
at $925,000 for Mr. Smith, 50% of base salary for Messrs. Chang, Gray and Tucker, and 40% for Ms.
Boase and Mr. Croke in each case prorated for the number of days employed by the Company and salary
adjustments during fiscal year 2022. Executives can earn more or less than target if minimum or maximum
performance levels are achieved. No incentive can be earned if the Company does not achieve the
minimum performance thresholds.
For fiscal year 2022, the AIP provided for an all-cash payout. The performance metric was 75% based on
Gross Adjusted EBITDA and 25% based on revenue. The following table outlines the minimum, target and
maximum performance and payout levels approved by the Compensation Committee for fiscal year 2022.
Fiscal Year 2022 Annual Incentive Plan – Minimum, Target and Maximum Thresholds
Aviat Networks, Inc.
Proxy Statement
25
Minimum
Target
Maximum
Fiscal Year 2022 AIP (75%)
Earn 80%
Earn 100%
Earn 200%
Gross Adjusted EBITDA
$30,500,000
$38,100,000
$57,200,000
Fiscal Year 2022 AIP (25%)
Earn 90%
Earn 100%
Earn 200%
Revenue
$258,400,000
$287,100,000
$344,500,000
In fiscal year 2022, the AIP met the Gross Adjusted EBITDA target at 118% and the Revenue target at
128%. During fiscal year 2022, the Company experienced significant events that could have impacted
achievement of the targeted Gross Adjusted EBITDA metric and revenue metric including the ongoing
COVID-19 pandemic which continues to impact worldwide economic conditions, supply chain shortages
and inflationary pressures. No adjustments were made to the performance objectives, the target
performance or the actual results for these significant events. During the 2022 fiscal year, partially as a
result of management’s swift actions to counter the aforementioned events, we achieved above target
performance for both the Gross Adjusted EBITDA metric and the revenue metric. All named executive
officers earned a payout as shown in the Summary Compensation Table below.
Long Term Incentive Compensation
Our equity awards under our 2018 Plan are designed to motivate our executives to focus on achievement of
our long-term financial goals. Equity awards motivate our executives to achieve our long-term goals and to
the extent our results affect our stock price, link such results with the performance of our stock over a
longer period. Using equity awards helps us to retain executives, encourage share ownership and maintain a
direct link between our executive compensation program and stockholder value creation. The Company
utilizes stock options as a component of executive compensation because they have value only if the
Company’s share price increases and, therefore, motivate our executives to drive sustained, long-term
stockholder value creation. Time-vesting RSUs are a component of executive compensation to further align
our executives’ interests with those of stockholders. Because these awards typically vest after a specified
period following the date of grant, they also incentivize our executives to remain in our employ. PSUs are a
component of executive compensation to ensure our executives’ incentives are tied directly to key drivers
of stockholder value growth. PSUs also play a role in executive retention, as a named executive officer is
required to remain employed through the applicable vesting date in order to receive the shares underlying
the PSUs as applicable.
For fiscal year 2022, the named executive officers were eligible to receive equity incentive awards. As has
historically been the Company’s practice, these equity incentive awards were granted in September 2021
following the filing of the Annual Report on Form 10-K using a combination of PSUs, stock options, and
RSUs. Performance metrics and payout levels for the three-year performance period applicable to the PSUs
granted during fiscal year 2022 were established at the beginning of fiscal year 2022.
Equity Vehicle Weighting
Purpose / Description
PSUs
1/3
The PSUs are subject to three-year cliff vesting from the issuance date assuming
achievement of TSR and revenue growth targets over a three-year performance period
starting fiscal year 2022 and continued employment through the vesting date in September
2024.
Stock Options
1/3
Strike price: Determined based on the closing stock price on the date of grant.
Vesting: One-third annually for a three-year period from the issuance date assuming
continued employment through the vesting date.
Expiration: Seven years from date of grant if not exercised.
RSUs
1/3
One-third annually for a three-year period from the issuance date assuming continued
employment through the vesting date.
The table below shows the equity incentive award values granted for fiscal 2022 for each of the named
executive officers. The total value amounts in the table were determined by reviewing peer group data and
Aviat Networks, Inc.
Proxy Statement
26
the Company’s historical performance. The total value amounts were calculated based on similar cash
compensation percentages available to the named executive officers and a specified target award value for
Mr. Smith.
Named Executive
Officer
PSUs (at target)(1)
Stock Options(2)
RSUs(3)
Peter Smith
$873,816
$31,574
David Gray(4)
-
-
Bryan Tucker
$146,070
$116,741
Erin Boase
Gary Croke
$47,035
$58,782
Eric Chang
-
$40,594
$50,742
-
$766,682
$200,193
$67,660
$40,610
$50,754
-
Total Value
$1,672,072
$200,193
$330,470
$128,239
$160,278
-
(1) The grant date fair value of the PSUs were determined under FASB ASC Topic 718 excluding the effect of estimated forfeitures.
(2) Individual award amounts were calculated based on Black-Scholes values.
(3) The grant date fair value of the RSUs was determined under FASB ASC Topic 718 and was calculated using the closing market price of our common stock on the respective
grant dates.
(4) Mr. Gray received a sign-on equity of RSUs upon joining the Company on October 18, 2021. Per the terms of his award, he will receive one-third annually for a three-year
period from the issuance date assuming continued employment through the vesting date.
Perquisites
Our named executive officers participate in the same group insurance and employee benefit plans as our
other full-time U.S. employees. We do not provide special benefits or other perquisites to our executive
officers other than occasional relocation expense reimbursement.
Generally Available Benefit Programs
In fiscal year 2022, our named executive officers were eligible to participate in the health and welfare
programs that are generally available to all full-time U.S.-based employees, including medical, dental,
vision, life, short-term and long-term disability insurance, employee counseling assistance, flexible
spending accounts and accidental death and dismemberment insurance.
The named executive officers and all other eligible U.S.-based employees participate in our tax-qualified
401(k) Plan. Under the 401(k) Plan, all eligible employees can receive matching contributions from the
Company of 2.5% of eligible compensation contributed. Each employee under the age of 50 can contribute
a maximum of $20,500 during each calendar year, and each employee over the age of 50 can contribute a
maximum of $27,000.
The named executive officers and all other eligible U.S.-based employees can elect, on a quarterly basis, to
apply a portion of their cash compensation to purchase shares of our common stock at a 5% discount under
our employee stock purchase plan. An employee’s total purchases in any year cannot exceed $25,000 in
value or 15% of his or her salary, whichever is less. Furthermore, an employee may not purchase more than
48 shares of common stock annually under the employee stock purchase plan.
The 401(k) Plan, employee stock purchase plan and the other benefits generally available to all other U.S.-
based employees allow us to remain competitive and enhance employee loyalty and productivity. These
benefit programs are primarily intended to provide all eligible employees with competitive and quality
healthcare, financial contributions for retirement and to enhance hiring and retention.
Post-Termination Compensation
Employment agreements have been established with certain of our named executive officers. The executive
officers without contracts are generally subject to the Company’s Post Termination Guidelines noted above.
The Post Termination Guidelines are currently being reviewed and formalized by the Compensation
Committee, and the description of the Guidelines within this document solely reflect the current historical
practices followed by the Compensation Committee with respect to executive officers that are not otherwise
subject to an individual severance or change in control arrangement. These terms are subject to change
prospectively as the Compensation Committee finalizes these guidelines.
Aviat Networks, Inc.
Proxy Statement
27
The employment agreements and the Company’s Post Termination Guidelines provide for certain payments
and benefits to the employee if his or her employment is terminated, but neither arrangement provides for
change in control benefits without an accompanying involuntary termination. We have determined that
such payments and benefits are an integral part of a competitive compensation package for our named
executive officers.
Neither the employment agreements nor the Post Termination Guidelines provide any tax-related gross-up
payments to our named executive officers in connection with a termination or a “Change in Control”
transaction. For a detailed discussion of the amounts and benefits that could become payable to the named
executive officers upon a termination and/or a “Change in Control” transaction, please see the section
below titled “Potential Payments Upon Termination or Change of Control.”
Recovery of Executive Compensation
Our executive compensation program permits us to recover or “clawback” all or a portion of any
performance-based compensation, including equity awards, if our financial statements are restated as a
result of errors, omissions, or fraud. The amount which may be recovered will be the amount by which the
affected compensation exceeded the amount that would have been payable had the financial statements
been initially filed as restated, or any greater or lesser amount that the Compensation Committee or our
Board shall determine. In no case will the amount to be recovered by us be less than the amount required to
be repaid or recovered as a matter of law. Recovery of such amounts by us would be in addition to any
actions imposed by law, enforcement agencies, regulators, or other authorities.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally imposes a $1 million limit on
the amount of compensation paid to “covered employees” (as defined in Section 162(m)) that a public
corporation may deduct for federal income tax purposes in any year. Compensation paid to certain of our
named executive officers will be subject to the $1 million per year deduction limitation imposed by
Section 162(m). While we will continue to monitor our compensation programs in light of the deduction
limitation imposed by Section 162(m), our Compensation Committee considers it important to retain the
flexibility to design compensation programs that are in the best long-term interests of the Company and our
stockholders. As a result, we have not adopted a policy requiring that all compensation be fully deductible.
The Compensation Committee has concluded that paying compensation at levels in excess of the limits
under Section 162(m) is in the best interests of the Company and our stockholders in certain circumstances.
Hedging and Pledging Prohibition
Our named executive officers, as well as all other employees, directors and their designees are prohibited
from engaging in hedging, pledging or similar transactions with respect to our securities where the
transaction is designed or intended to decrease the risks associated with holding our securities. This
prohibition includes transactions involving puts, calls, collars or other derivative securities, whether granted
pursuant to the 2018 Plan, or held directly or indirectly by the covered individual.
Stock Ownership Guidelines
To encourage the alignment between the Board, Management and shareholders, the Board adopted stock
ownership guidelines for named executive officers in November 2021. Each named executive officer is
expected to acquire and continue to hold company stock during his or her employment with the Company
at the following multiples of base salary: five times for the CEO and one time for executive officers. The
executive officers have five years to satisfy these guidelines after the date of adoption of these guidelines or
the date of being designated an executive leader, whichever is later.
Risk Considerations in Our Compensation Program
The Compensation Committee, pursuant to its charter, is responsible for reviewing and overseeing the
compensation and benefits structure applicable to our employees, generally. We do not believe that our
compensation policies and practices for our employees encourage excessive risk-taking or create risks that
are reasonably likely to have a material adverse effect on our company. In reaching this conclusion, we
considered the following factors:
Aviat Networks, Inc.
Proxy Statement
28
•
•
•
•
•
•
Our compensation program is designed to provide a mix of both fixed and “at risk” incentive
compensation.
Our Compensation Committee and management team have responsibility for managing the
administration, determination and approval of total and, in the case of the named executive
officers, the Compensation Committee is responsible for individual approval of payouts under the
incentive plans.
The incentive elements of our compensation program (annual incentives and multi-year equity
awards) are designed to reward both annual performance (under the AIP) and longer-term
performance (under the 2018 Plan). We believe this design mitigates any incentive for short-term
risk-taking that could be detrimental to our company’s long-term best interests.
The performance periods for our PSUs overlap, and our time-vested RSUs vest one-third annually
for a three-year period from the issuance date. This mitigates the motivation to maximize
performance in any one period at the expense of others.
Maximum payouts under our AIP are currently capped at no more than 200% for all applicable
employees of the target award opportunity set by the Compensation Committee. We believe these
limits mitigate excessive risk-taking, since the maximum amount that can be earned is limited.
Finally, our AIP and our 2018 Plan both contain provisions under which awards may be recouped
or forfeited if the recipient has not complied with our policies. In addition, our performance-based
plans (cash incentive and performance shares) both contain provisions under which awards may be
recouped or forfeited if the financial results for a period affecting the calculation of an award are
later restated.
•
The Compensation Committee retains an independent compensation consultant.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion
and Analysis included in this Proxy Statement. Based on this review and discussion, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis be included in this
Proxy Statement.
Compensation Committee of the Board of Directors
Dr. James C. Stoffel, Chairman,
Bryan Ingram,
Michele Klein,
Somesh Singh
Summary Compensation Table
The following table summarizes the total compensation for each of our fiscal years ended July 1, 2022, July 2, 2021,
July 3, 2020, of our named executive officers for the applicable years, consisting of our CEO, CFO and Senior Vice
President Americas Sales and Services. With respect to fiscal year 2022, there were two additions to the named
executive officers, consisting of General Counsel, Vice President Legal Affairs and Vice President Marketing and
Product Line Management. Although Mr. Chang was no longer CFO at the end of the 2022 year, he is still required
to be disclosed within the table for the portion of the year in which he was performing CFO services.
Name,
Principal
Position
Fiscal
Year
Salary(3)
Stock
Awards(4)
Option
Awards(5)
($)
($)
($)
Non-Equity
Incentive Plan
Compensation(6)
($)
All Other
Compensation(7)
($)
Total
($)
Peter A. Smith,
Director,
President and
Chief Executive
Officer
2022
2021
2020
650,000
1,640,498
444,231
1,202,160
187,692
664,485
31,574
94,715
-
1,113,168
19,509
2,454,749
458,325
138,113
16,761
2,216,192
3,996
994,286
Aviat Networks, Inc.
Proxy Statement
29
Fiscal
Year
Salary(3)
Stock
Awards(4)
Option
Awards(5)
($)
($)
($)
Non-Equity
Incentive Plan
Compensation(6)
($)
All Other
Compensation(7)
($)
Total
($)
2022
235,385
200,193
-
153,437
108,937
697,952
2022
2021
324,450
213,729
116,740
315,000
140,360
70,191
193,804
229,163
16,402
850,125
19,328
774,042
2022
231,441
87,645
40,593
110,598
9,435
479,712
2022
236,900
109,535
50,742
113,206
10,466
520,849
Name,
Principal
Position
David Gray,(1)
Senior Vice
President and
Chief Financial
Officer
Bryan Tucker,
Senior Vice
President
Americas Sales
and Services
Erin Boase, (2)
General
Counsel, Vice
President Legal
Affairs
Gary Croke,(2)
Vice President
Marketing and
Product Line
Management
Eric Chang,
Former Senior
Vice President
and Chief
Financial Officer
2022
2021
2020
93,842
-
299,616
101,464
270,231
88,752
-
50,742
87,748
-
27,202
121,044
268,250
137,736
10,862
730,934
5,929
590,396
(1) Mr. Gray was appointed as our Senior Vice President and Chief Financial Officer on October 18, 2021.
(2) Mr. Croke and Ms. Boase were appointed as executive officers in fiscal year 2022.
(3) Base salary amounts reflect a combination of the salary levels set at different times during the year. With respect to the 2022 year, the amounts reflect increases effective October 2, 2021 in
connection with the annual merit review process discussed within the Compensation Discussion and Analysis.
(4) The “Stock Awards” column shows the full grant date fair value of the equity-based awards granted in fiscal 2022, 2021, and 2020.
The grant date fair value of the PSUs, MSUs, and RSUs was determined under FASB ASC Topic 718 and represents the amount we would expense in our financial statements over the entire
vesting schedule for the awards. The grant date fair value of MSUs was estimated using a Monte-Carlo simulation model. The grant date fair value for PSUs and RSUs was based on the closing
market price of our common stock on the respective grant dates. The assumptions used for determining values are set forth in Notes 1 and 9 to our audited consolidated financial statements in
Part II, Item 8 of our Annual Report on Form 10-K for fiscal year 2022. These amounts reflect our accounting for these grants and do not correspond to the actual values that may be recognized
by the named executive officers.
(5) The “Option Awards” column shows the aggregate grant date fair value of the stock options granted in fiscal 2022 and other applicable years was determined under FASB ASC Topic 718
(using Black-Scholes values). The assumptions used for determining values are set forth in Notes 1 and 9 to our audited consolidated financial statements in Part II, Item 8 of our Annual Report
on Form 10-K for fiscal year 2022.
(6) The “Non-Equity Incentive Plan Compensation” column shows the cash bonus earned under the fiscal year 2022, 2021 and 2020 annual incentive plan.
(7) The following table describes the components of the “All Other Compensation” column.
Name
Year
Life Insurance(a)
Peter A. Smith
2022
David Gray
2022
Bryan Tucker
2022
Erin Boase
Gary Croke
Eric Chang
2022
2022
2022
($)
3,890
879
1,765
366
898
279
Company
Matching
Contributions
Under 401(k)
Plan(b)
($)
5,500
8,058
7,368
7,433
2,641
3,500
Vacation
Payout(c)
Sign-on Bonus
Total All Other
Compensation
($)
($)
($)
10,119
19,509
-
100,000
108,937
7,269
1,636
6,927
23,423
16,402
9,435
10,466
27,202
(a) Represents premiums paid for life insurance that represent taxable income for the named executive officer.
(b) Represents matching contributions made by us to the 401(k) account of the respective named executive.
(c) Represents vacation payout for unused vacation days due to policy change for US-based employees to flexible Paid Time Off.
Aviat Networks, Inc.
Proxy Statement
30
Fiscal Year 2022 Grants of Plan-Based Awards
The following table lists our grants and incentives made to the named executive officers during our fiscal year ended
July 1, 2022, of plan-based awards, both equity and non-equity based under our AIP and 2018 Plan. There is no
assurance that the grant date fair value of stock and option awards will ever be realized. Mr. Chang was no longer
employed on the grant dates for our plan-based awards, therefore he is not reflected in the table for the 2022 year.
Estimated Possible Payouts Under Non-
Equity Incentive Plan Awards(1)
Estimated Future Payments Under
Equity Incentive Plan Awards(2)
All Other
Stock
Awards:
Number
or Shares
of Stock or
Units(3)
All Other
Option
Awards:
Number of
Securities
Underlyin
g
Options(4)
Grant
Date, Fair
Value of
Stock and
Option
Awards(5)
Name
Peter A.
Smith
Type of
Award
Options
RSU
PSU
AIP
David Gray
Grant Date
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
(#)
7/3/2021
7/3/2021
7/3/2021
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,024
24,049
48,098
-
462,500
925,000
1,850,000
(#)
($)
-
59,422
766,639
24,049
-
-
6,568
-
-
1,881
-
-
-
1,129
-
-
-
1,411
-
-
-
-
-
-
-
766,682
873,816
-
200,193
-
4,567
67,661
-
-
-
67,660
78,357
-
2,740
40,594
-
-
-
40,610
47,035
-
3,425
50,742
-
-
-
50,754
58,752
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
940
1,881
3,762
-
-
-
-
-
-
-
-
-
565
1,129
2,258
-
-
-
706
-
-
-
-
-
-
-
1,411
2,822
-
-
RSU
10/18/2021
-
-
-
AIP
-
63,750
127,500
255,000
Bryan
Tucker
Options
9/1/2021
Erin Boase
Options
9/1/2021
-
80,522
161,044
322,088
9/1/2021
9/1/2021
9/1/2021
9/1/2021
9/1/2021
9/1/2021
RSU
PSU
AIP
RSU
PSU
AIP
RSU
PSU
AIP
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,035
94,070
188,140
Gary Croke
Options
9/1/2021
-
45,951
91,902
183,804
(1) The amounts shown under Estimated Possible Payouts Under Short-Term Non-Equity Incentive Plan Awards reflect possible payouts under our fiscal 2022 AIP. For Mr. Gray these columns
represent the pro-rata portion of his AIP award following his hire date in October 2021. Actual amounts earned for the year are reflected above within the Summary Compensation Table.
(2) PSUs vest 100% on the third anniversary of the grant date based on the achievement of performance criteria.
(3) These amounts represent the number of RSUs granted to the named executive officers during fiscal year 2022, which vest annually over three years from the data of grant, subject to the
named executive officer’s continued employment through such vesting date.
(4) These amounts represent the number of stock options granted to the named executive officers during fiscal year 2022, which vest annually over three years from the date of grant, subject to
the named executive officer’s continued employment through such vesting date.
(5) The “Fair Value of Stock and Option Awards” column shows the full grant date fair value of the stock options and other equity-based awards granted in fiscal year 2022. The grant date fair
value of the was awards were determined under FASB ASC Topic 718 and represents the amount we would expense in our financial statements over the entire vesting schedule for the awards in
the event the vesting provisions are achieved.
The assumptions used for determining values are set forth in Notes 1 and 9 to our audited consolidated financial
statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal 2022. These amounts reflect our
accounting for these grants and do not correspond to the actual values that may be recognized by the named
executive officers.
Aviat Networks, Inc.
Proxy Statement
31
Fiscal Year 2022 Outstanding Equity Awards
The following table provides information regarding outstanding unexercised stock options and unvested stock
awards held by each of our named executive officers as of July 1, 2022. Each grant of options or unvested stock
awards is shown separately for each named executive officer. The vesting schedule for each award of options and
unvested stock awards is shown in the footnotes following this table based on the grant date. The material terms of
the awards, other than exercise price and vesting schedules described below, are generally described in the 2018
Plan.
Option Awards
Stock Awards
Equity Incentive Plan
Awards
Name
Grant Date
Number of
Securities
Underlying
Unexercised
Options
Exercisable
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
Option
Exercise
Price
Option
Expiration
Date
Number of
Shares or
Units of
Stock that
have not
Vested
Market
Value of
Shares or
Units of
Stock that
have not
Vested(7)
Number of
Unearned
Shares,
Units or
Other
Rights that
have not
Vested
(#)
(#)
($)
(#)
($)
(#)
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights that
have not
Vested(8)
($)
Peter A.
Smith
7/3/2021
1/20/2021
1/20/2021
-
-
-
59,422(2)
31.88
7/3/2028
24,049(4)
603,389
24,049(9)
603,389
-
-
-
-
-
-
30,000(1)
752,700
42,000(1)
1,053,780
-
-
-
-
9/1/2020
8,796
17,590(2)
11.00
9/1/2027
-
-
-
8,610(4)
6,568(10)
216,025
164,791
8,610(7)
216,025
-
-
4,567(2)
35.97
9/1/2028
1,881(10)
47,194
1,881(9)
47,194
David Gray
10/18/2021
Bryan
Tucker
9/1/2021
-
-
9/1/2020
6,518
13,036(2)
11.00
9/1/2027
6,380(4)
160,074
6,380(7)
160,074
9/20/2019
-
16,710(3)
7.23
9/20/2026
6,852(4)
171,917
6,852(5)
171,917
Erin Boase
9/7/2018
9/1/2021
Gary Croke
9/1/2021
Eric Chang
(11)
-
17,264
-
-
-
-
2,740(2)
8.90
35.97
9/7/2025
9/1/2028
-
-
1,129(10)
28,327
4,315(6)
1,129(9)
108,263
28,327
3,156(2)
35.97
9/1/2028
1,411(10)
35,402
1,411(9)
35,402
-
-
-
-
-
-
-
(1) Market-based conditions applicable to the MSUs granted to Mr. Smith in January 2021 were achieved in fiscal 2021 and will vest on December 31, 2022 and December 31, 2023, subject to
the named executive officer’s continued employment through such vesting date. In accordance with SEC rules, because such market-based conditions have been achieved and the MSUs only
remain subject to time-based vesting conditions, the number of MSUs earned are reported in the “Number of Shares or Units of Stock that have not Vested” column.
(2) Stock options that vest annually over three years from date of grant.
(3) Stock options that cliff vest three years from date of grant.
(4) RSUs that cliff vest three years from date of grant.
(5) PSUs eligible to vest based on the Company’s non-GAAP net income. From 50% to 150% of the target PSUs will vest in September 2022 following the end of the fiscal year July 1, 2022,
that the Compensation Committee certifies achievement of the performance measure. Vesting of these PSUs is dependent on continuous employment with us through the vesting date. The
number of PSUs reported in the table above reflects 100% of the target number of granted PSUs based on the Company’s annual non-GAAP net income for the performance periods.
(6) PSUs eligible to vest based on the Company’s non-GAAP net income. From 50% to 100% of the target PSUs will vest after the Compensation Committee certifies the achievement of the
performance measure.
(7) PSUs eligible to vest based on the Company’s annual average return on invested capital (“ROIC”) from fiscal 2021 to fiscal 2023 and revenue growth for fiscal 2023. From 50% to 200% of
the target PSUs will vest after the Compensation Committee certifies the achievement of the performance measure. Vesting of these PSUs is dependent on continuous employment with us
through the vesting date in September 2023.
(8) Market value is based on the $25.09 closing price of a share of our common stock on July 1, 2022, as reported on the NASDAQ Global Select Market.
(9) PSUs eligible to three-year cliff vesting from grant date assuming achievement of TSR and revenue growth targets over a three-year performance period starting fiscal year 2022 to fiscal
2024. From 50% to 200% of the target PSUs will vest after the Compensation Committee certifies the achievement of the performance measure. Vesting of these PSUs is dependent on
continuous employment with us through the vesting date in September 2024.
(10) RSUs that vest annually over three years from date of grant.
(11) Mr. Chang forfeited all outstanding and unvested equity awards as of his resignation date.
Fiscal Year 2022 Option Exercised and Stock Vested Table
The following table provides information for each of our named executive officers regarding the number of shares of
our common stock acquired upon exercising vested options or release of stock awards during fiscal year 2022.
Aviat Networks, Inc.
Proxy Statement
32
Name
Peter A. Smith
David Gray
Bryan Tucker
Erin Boase
Gary Croke
Eric Chang
Options Awards
Stock Awards
Number of Shares
Acquired on Exercise
(#)
Value Realized on
Exercise
($)
Number of Shares
Acquired on Vesting(1)
(#)
Value Received on
Vesting
($)
-
-
18,072
-
832
-
-
-
421,577
-
20,634
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Vested number of shares of PSUs.
Potential Payments Upon Termination or Change of Control
Employment agreements and the Company’s Post Termination Guidelines provide for such executive officers to
receive certain payments and benefits if their employment with us is terminated. These arrangements are set forth in
more detail below and assume an applicable termination event (and Change of Control event, as defined in the
corresponding employment agreements) on July 1, 2022 and refer to our stock price on that date. The Board has
determined that such payments and benefits are an integral part of a competitive compensation package for our
executive officers.
The table below reflects the compensation and benefits due to each of Messrs. Smith, Gray and Tucker in the event
of termination of employment by us without Cause (as defined below) or termination by the executive for good
reason (other than within 12 or 18 months after a Change of Control, as defined below ) and in the event of disability
and in the event of termination of employment by us without cause or termination by the executive for good reason
within 12 months after a Change of Control (depending on individual employment agreements). The amounts shown
in the table are estimates of the amounts that would be paid upon termination of employment. There are currently no
compensation and benefits due to any named executive officer under his employment agreement in the event of a
termination of employment by us for cause or voluntary termination. In the event of a death of an executive, there
are no severance benefits payable pursuant to the employment agreements that should be reflected in the table
below, but the executive’s estate would receive the pro-rata portion of the executive’s annual bonus for the year in
which the death occurred. The actual amounts would be determined only at the time of the termination of
employment.
Name
Conditions for
Payouts
Base Salary
Component(1)
Cash
Incentive
Component(2)
Accelerated
Equity
Vesting(3)
Insurance
Benefit(4)
Out-
Placement
Services(5)
Total
Peter A. Smith
David Gray
Termination
without cause
or for good
reason, or due
to disability.
Within 12
months after
Change of
Control
Termination
without cause
or for good
reason, or due
to disability.
Within 18
months after
Change of
Control
$650,000
$1,113,168
$3,157,275
$34,866
$30,000
$4,985,309
$1,300,000
$925,000
$3,477,127
$52,299
$30,000
$5,752,608
$340,000
$153,437
-
$15,464
$30,000
$593,848
$340,000
$170,000
$164,791
$23,196
$30,000
$727,987
Aviat Networks, Inc.
Proxy Statement
33
Name
Conditions for
Payouts
Base Salary
Component(1)
Cash
Incentive
Component(2)
Accelerated
Equity
Vesting(3)
Insurance
Benefit(4)
Out-
Placement
Services(5)
Total
Bryan Tucker
Termination
without cause
or for good
reason, or due
to disability.
Within 18
months after
Change of
Control
$324,450
$193,804
$748,990
$27,998
$30,000
$1,616,406
$648,900
$162,225
$1,080,414
$41,997
$30,000
$2,226,906
(1) The base salary component represents the total gross monthly payments to each named executive officer at the base salary in effect as of the last day of fiscal 2022.
(2) The cash incentive component represents the cash bonus due under the fiscal year 2022 AIP.
(3) Reflects acceleration of outstanding equity awards, including pro-rata vesting of the equity awards granted during fiscal year 2021, 2020 and 2019 and outstanding as of July 2, 2022.
(4) The insurance benefit provided is paid directly to the insurer benefit provider and includes amounts for COBRA.
(5) The estimated dollar amounts for outplacement services would be paid directly to an outplacement provider selected by us.
Employment Agreement Terms
We currently maintain individual employment agreements with Messrs. Smith, Gray and Tucker. The employment
agreements with our applicable named executive officers generally define a “Change of Control” as follows:
•
•
•
•
•
•
any merger, consolidation, share exchange or acquisition, unless immediately following such merger,
consolidation, share exchange or acquisition, at least 50% of the total voting power (in respect of the
election of directors, or similar officials in the case of an entity other than a corporation) of (i) the entity
resulting from such merger, consolidation or share exchange, or the entity which has acquired all or
substantially all of our assets (in the case of an asset sale that satisfies the criteria of an acquisition) (in
either case, the “Surviving Entity”) or (ii) if applicable, the ultimate parent entity that directly or indirectly
has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, (“Rule
13d-3”)) of 50% or more of the total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of the Surviving Entity is represented by our
securities that were outstanding immediately prior to such merger, consolidation, share exchange or
acquisition (or, if applicable, is represented by shares into which such Company securities were converted
pursuant to such merger, consolidation, share exchange or acquisition);
any person or group of persons (within the meaning of Rule 13d-3) directly or indirectly acquires beneficial
ownership (determined pursuant to Rule 13d-3) of securities possessing more than 30% of the total
combined voting power of our outstanding securities other than: (i) an employee benefit plan of ours or
any of our affiliates; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of
our or any of our affiliates; or (iii) an underwriter temporarily holding securities pursuant to an offering of
such securities;
Mr. Tucker’s contract also provides for a change of control in the event of over a period of 36 consecutive
months or less, there is a change in the composition of the Board such that a majority of the Board
members (rounded up to the next whole number, if a fraction) ceases, by reason of one or more proxy
contests for the election of Board members, to be composed of individuals each of whom meet one of the
following criteria: (i) have been a Board member continuously since the adoption of this plan or the
beginning of such 36-month period; or (ii) have been elected or nominated during such 36-month period by
at least a majority of the Board members and satisfied the criteria of this bullet when they were elected or
nominated;
Mr. Gray’s contract also provides for a change of control in the event a majority of the Board are replaced
during any twelve-month period by directors whose appointment or election is not endorsed by a majority
of the Board before the date of appointment or election;
a majority of the Board determines that a Change of Control has occurred; or
the complete liquidation or dissolution of the Company.
The employment agreements for Messrs. Smith and Tucker define “Cause” as follows:
•
theft, dishonesty, misconduct or falsification of any employment or Company records;
Aviat Networks, Inc.
Proxy Statement
34
•
•
•
•
•
•
improper disclosure of the Company’s confidential or proprietary information;
any action which as material detrimental effect on the Company’s reputation or business;
refusal or inability to perform any assigned duties (other than as a result of disability) after written notice
and a 30-day opportunity to cure such refusal or inability;
material breach of an employment agreement or of the proprietary information, confidentiality, assignment
of inventions agreement, after written notice and a 30-day opportunity to cure such breach;
violation of the Company’s Code of Conduct or other written policies; or
conviction (including any plea of guilty or no contest) for any criminal act that impairs the ability to
perform duties under an employment agreement.
The employment agreement for Mr. Gray defines a “Cause” termination as follows:
•
•
•
•
willful failure to perform duties (other than from incapacity from physical or mental illness);
willful engagement in dishonesty, illegal conduct, or misconduct, which injures the Company
violation of Company’s written policies or codes of conduct;
breach of material obligation under employment or other agreement between Gray and the Company.
The employment agreement with Mr. Smith generally defines a “Good Reason” termination as follows:
•
•
a reduction in base salary, other than a reduction that is similarly applicable to all members of the
Company’s executive staff;
a material adverse change to in his authority, duties and responsibilities (including a dismissal from the
board of directors if the termination is not in connection with a Change of Control);
•.
a relocation of his workplace more than 75 miles from Austin, TX.
If Mr. Smith’s “Good Reason” termination occurs in connection with a Change of Control, it would be modified to
include a material reduction in his employee benefits, other than a reduction that is similarly applicable to all
members of the Company’s executive staff.
The employment agreement with Mr. Tucker generally defines a “Good Reason” termination as follows:
•
•
•
•
a reduction of at least 20% to the base salary in effect at the start date of the employment agreement, other
than a reduction that is similarly applicable to all members of the Company’s executive staff;
a material reduction in employee benefits, other than a reduction that is similarly applicable to all members
of the Company’s executive staff;
a material breach of the employment agreement by the Company; or
a relocation of his workplace more than 75 miles from San Antonio, TX.
If Mr. Tucker’s “Good Reason” occurs following a Change of Control” the definition is modified slightly to include
any reduction of salary against the base salary in effect prior to the Change of Control, and to add a material
reduction in his position, duties or responsibilities.
The employment agreements generally provide that if they are terminated without cause or should they resign for
good reason or become disabled and they sign a general release they will be entitled to receive the following
severance benefits:
•
severance payments at their final base salary for a period of 12 months;
Aviat Networks, Inc.
Proxy Statement
35
•
•
•
payment of premiums necessary to continue their group health insurance under COBRA when applicable
(or to purchase other comparable health coverage on an individual basis if the employee is no longer
eligible for COBRA coverage) until the earlier of (i) 12 months (depending on individual employment
agreements), or (ii) the date on which they first became eligible to participate in another employer’s group
health insurance plan;
the prorated portion of any incentive bonus they would have earned during the incentive bonus period in
which their employment was terminated;
for Messrs. Smith and Tucker any equity compensation subject to service-based vesting granted to the
executive officer will stop vesting as of their termination date; however, they will be entitled to exercise
any vested stock options until the earlier of: (i) 12 months; or (ii) the date on which the applicable
option(s) expire; and for Mr. Gray, time-based equity will accelerate up to 12 months and unvested
performance share units will be forfeited, and;
•
outplacement assistance up to $30,000.
In addition, these agreements provide that if there is a Change of Control, and the executive’s employment is
terminated by us without cause or by the employee for good reason within a specific period after the Change of
Control (12 months for Messrs. Smith and Tucker or 18 months for Mr. Gray), and they sign a general release of
known and unknown claims in a form satisfactory to us, they will receive the following:
•
•
•
•
•
Messrs. Smith and Tucker’s base salary payment will be increased to 24 months;
Mr. Smith’s COBRA coverage will be extended to the earlier of 18 months and the date that he becomes
eligible to participate in another employer’s group health insurance plan, and Mr. Tucker’s COBRA
coverage period will be extended to the earlier of 24 months and the date that he becomes eligible to
participate in another employer’s group health insurance plan;
Mr. Tucker will receive (i) rather than a pro-rata bonus for the year, he will receive a payment equal to the
greater of (a) the average of the annual actual incentive bonus payments received by him, if any, for the
previous three years, or (b) his target incentive bonus for the year in which his employment terminates, and
(ii) accelerated vesting of all unvested stock option(s), RSUs, and PSUs (assuming performance criteria
previously met or pro rata vesting at target) for the period of time worked during the performance period
based on individual guidelines under the 2018 Plan;
Mr. Smith will receive accelerated vesting for all time-based equity awards granted under the second
amendment to his employment agreement and for all other grants, accelerated vesting of all unvested stock
option(s), RSUs, and PSUs (assuming performance criteria previously met or pro rata vesting at target) for
the period of time worked during the performance period based on individual guidelines under the 2018
Plan; and
Mr. Gray will receive (i) a prorated annual incentive bonus payment, and (ii) accelerated vesting of all
time-based unvested equity, with performance-based equity awards based at target.
The acceleration provisions within the individual awards agreements may differ from the terms set forth within the
employment agreements.
Post Termination Guidelines
Ms. Boase and Mr. Croke have not been included within the table above, as the potential severance payments and
benefits that they could receive upon an applicable termination of employment are not currently finalized or
quantifiable. Pursuant to the Post Termination Guidelines that have historically been applied by the Company to
executive officers, they could each receive the following benefits upon an involuntary termination without cause
under the Post Termination Guidelines: (i) one year of base salary; (ii) a pro-rata bonus for the year in which the
termination occurred; (iii) payment of premiums necessary to continue their group health insurance under COBRA
when applicable (or to purchase other comparable health coverage on an individual basis if the employee is no
longer eligible for COBRA coverage) until the earlier of (a) 12 months (depending on individual employment
agreements), or (b) the date on which they first became eligible to participate in another employer’s group health
insurance plan; and (iv) time-based equity awards could receive accelerated vesting solely for the portion of the
equity awards that would have vested within the twelve month period immediately following the termination,
although all performance-based awards would be forfeited. In the event that the involuntary termination occurred
Aviat Networks, Inc.
Proxy Statement
36
within the 12-month period following a change in control event, the COBRA benefits continuation period could be
increased to an 18 month period, and all outstanding equity-based compensation awards would receive full vesting
acceleration, with performance-based awards accelerated at target levels.
Mr. Chang Employment Agreement
Mr. Chang was subject to an individual employment agreement during his employment with us, but that agreement
was terminated in connection with his departure in the 2022 year. Mr. Chang did not receive severance benefits
pursuant to that agreement in connection with his departure during the 2022 fiscal year.
CEO Pay Ratio
Pursuant to Item 402(u) of Regulation S-K, the Company is required to provide the following information with
respect to the year ended July 1, 2022:
•
•
•
The median of the annual total compensation of all employees of the Company (other than Mr. Smith’s the
Company’s Chief Executive Officer) was $68,428.
The annualized total compensation of Mr. Smith, the Company’s Chief Executive Officer, was $3,570,803.
Based on this information, the ratio of the annual total compensation of the Company’s Chief Executive
Officer to the median of the annual total compensation of all employees was 52.18 to 1.
To identify the median paid employee and determine such employee’s annual total compensation in the last fiscal
year, the Company assessed its employee population as of July 1, 2022, and determined employee compensation
using the 12-month period ending July 1, 2022. On this date, the Company’s employee population consisted of 634
individuals. The Company does not feel that there have been any material changes to the employee population or
compensation arrangements to necessitate needing to recalculate this number.
The Company determined its median employee by: (i) calculating total target cash compensation as the sum of
salary and target variable compensation, including target sales bonus, for each of the Company’s employees;
(ii) ranking the total target cash compensation of all employees except for the Chief Executive Officer from lowest
to highest; and (iii) picking the employee who was in the middle of the list.
Equity Compensation Plan Summary
The following table provides information as of July 1, 2022, relating to our equity compensation plan:
Plan Category
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average Exercise
Price of Outstanding Options
Number of Securities
Remaining Available for
Further Issuance Under Equity
Compensation Plans
(Excluding Securities Reflected
in the First Column)
Equity Compensation plans
approved by security holders(1)
Equity Compensation plans not
approved by security holders
Total
1,078,076(2)
-
1,078,076
$15.15(3)
$ -
$15.15
437,556(4)
-
437,556
(1) Consists of the 2007 Plan, the 2018 Plan and our employee stock purchase plan.
(2) The number includes 469,716, shares to be issued upon exercise of options, 383,257 shares to be issued upon vesting of RSUs, 208,059 shares to be issued upon vesting of MSUs (based on
achievement of target market-based metrics) and 17,044 shares to be issued upon vesting of PSUs (based on achievement of target performance metrics).
(3) Excludes weighted average fair value of RSUs, MSUs and PSUs.
(4) Includes 110,123 shares reserved for future issuances under the employee stock purchase plan.
(Proposals Follow.)
Aviat Networks, Inc.
Proxy Statement
37
PROPOSAL NO. 1
Election of Directors
At the Annual Meeting, directors are being nominated for election to serve until the 2023 Annual Meeting or until
their successors are elected and qualified.
In the unanticipated event that a nominee is unable or declines to serve as a director at the time of the Annual
Meeting, all proxies received by the proxy holders will be voted for any subsequent nominee named by the Board to
fill the vacancy created by the earlier nominee’s withdrawal from the election. As of the date of this Proxy
Statement, the Board is not aware of any director nominee who is unable or will decline to serve as a director. Each
of the nominees has consented to being named in this Proxy Statement and to serve as a director if elected. Ages are
as of the date of this Proxy Statement.
Director Nominees
Name
John Mutch
Bryan Ingram
Michele Klein
Peter A. Smith
James C. Stoffel
Bruce Taten
Title
Chairman of the Board
Director
Director
Director
Director
Director
Age
66
58
73
56
76
66
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously approved the election of each of the Director Nominees and
unanimously recommends a vote “For” each of the Director Nominees.
(Proposals Continue on Next Page.)
Aviat Networks, Inc.
Proxy Statement
38
PROPOSAL NO. 2
Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee has appointed Deloitte as our independent registered public accounting firm to audit our
consolidated financial statements for the fiscal year ending June 30, 2023, and our Board has ratified such
appointment. See “Independent Registered Public Accounting Firm Fees.”
Notwithstanding its selection, the Audit Committee, in its discretion, may appoint another independent registered
public accounting firm at any time during the year if the Audit Committee believes that such a change would be in
the best interests of the Company and its stockholders. If the appointment is not ratified by our stockholders, the
Audit Committee may reconsider whether it should appoint another independent registered public accounting firm.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote “For” the ratification of the Audit Committee’s
appointment of Deloitte as the Company’s Independent Registered Public Accounting Firm for Fiscal Year
2023.
(Proposals Continue on Next Page.)
Aviat Networks, Inc.
Proxy Statement
39
PROPOSAL NO. 3
Advisory, Non-Binding Vote on Named Executive Officer Compensation
A “say-on-pay” advisory vote is required for all U.S. public companies under Section 14A of the Exchange Act
which we request annually during our Annual Meeting of Stockholders. We are asking stockholders to approve, on
an advisory, non-binding basis, the compensation of the Company’s named executive officers disclosed in the
Compensation Discussion and Analysis section, and the related compensation tables, notes and narrative, in this
Proxy Statement.
The Board recommends that you vote “FOR” approval of the advisory, non-binding vote on executive compensation
because it believes that the policies and practices described in the Compensation Discussion and Analysis section are
effective in achieving the Company’s goals of rewarding sustained financial and operating performance and
leadership excellence, aligning the executives’ long-term interests with those of the stockholders and motivating the
executives to remain with the Company for long and productive careers. Named executive officer compensation of
the past three years reflects amounts of cash and long-term equity awards consistent with periods of economic stress
and lower earnings, and equity incentives aligning with our actions to stabilize the Company and to position it for a
continued recovery.
We urge stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as
the Summary Compensation Table and related compensation tables, notes and narrative, which provide detailed
information on the Company’s compensation policies and practices and the compensation of our named executive
officers.
As this vote is advisory, it will not be binding on our Board or our Compensation Committee, and neither our Board
nor our Compensation Committee will be required to take any action as a result of the outcome of the vote.
However, our Compensation Committee will carefully consider the outcome of this vote when considering future
executive compensation policies and decisions.
Based on the voting results at the Company’s 2018 Annual Meeting of Stockholders with respect to the frequency
(the “Frequency Vote”) of future stockholder advisory votes to approve the compensation of the Company’s named
executive officers, the Company includes an advisory, non-binding vote to approve the compensation of its named
executive officers in its proxy materials on an annual basis. The next required Frequency Vote is scheduled for the
Company’s 2024 Annual Meeting of Shareholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote “For” the approval of the advisory, non-binding
vote on Named Executive Officer compensation.
(Proxy Statement Continues on Next Page.)
Aviat Networks, Inc.
Proxy Statement
40
2022 Annual Report
OTHER MATTERS
Our annual report for the fiscal year ended July 1, 2022, including audited financial statements, will be available
over the Internet through our website at www.aviatnetworks.com and is being mailed with this Proxy Statement.
Form 10-K
We filed an annual report on Form 10-K for the fiscal year ended July 1, 2022 with the SEC on September 14,
2022. Stockholders may obtain a copy of the annual report on Form 10-K, without charge, by writing to our
Corporate Secretary, at the address of our offices located at 200 Parker Drive, Suite C100A, Austin, TX
78728, or through our website at www.aviatnetworks.com.
Other Business
The Board is not aware of any other matter that may be presented for consideration at the Annual Meeting or any
adjournment thereof. Should any other matter properly come before the Annual Meeting, your shares of common
stock will be voted in accordance with the discretion of the proxy holders.
Householding of Proxy Materials
To reduce costs and the environmental impact of the Annual Meeting, a single proxy statement and annual report,
along with individual proxy cards, will be delivered in one envelope to certain stockholders having the same last
name and address, and to individuals with more than one account registered with our transfer agent with the same
address, unless contrary instructions have been received from an affected stockholder. Stockholders participating in
householding will continue to receive separate proxy cards. If you are a registered stockholder and would like to
enroll in this service or receive individual copies of this year's and/or future proxy materials, please contact
Broadridge Financial Solutions, Inc. 51 Mercedes Way, Edgewood, New York 11717; or contact our Corporate
Secretary at 512-265-3680 or at our headquarters at 200 Parker Drive, Suite C100A, Austin, TX 78728. If you are a
beneficial stockholder, you may contact the broker or bank where you hold the account.
Aviat Networks, Inc.
Proxy Statement
41
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 1, 2022 or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-33278
______________________________
AVIAT NETWORKS, INC.
(Exact name of registrant as specified in its charter)
______________________________
Delaware
(State or other jurisdiction of incorporation or organization)
20-5961564
(I.R.S. Employer Identification No.)
200 Parker Drive, Suite C100A, Austin
(Address of principal executive offices)
,
Texas
78728
(Zip Code)
Registrant’s telephone number, including area code: (408) 941-7100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
Preferred Share Purchase Rights
Trading Symbol(s)
AVNW
Name of Each Exchange on Which Registered
NASDAQ Stock Market LLC
NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
_____________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
☐
☐
☐
Accelerated filer
Smaller reporting company
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of December 31, 2021, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately
$349.7 million. For purposes of this calculation, the registrant has assumed that its directors, executive officers and holders of 10% or more of
the outstanding common stock are affiliates.
As of September 2, 2022, there were 11,186,477 shares of the registrant’s common stock outstanding.
_________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its fiscal 2022 Annual Meeting of Stockholders (“Proxy Statement”), which will
be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended July 1, 2022, are
incorporated by reference into Part III of this Annual Report on Form 10-K.
AVIAT NETWORKS, INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended July 1, 2022
Table of Contents
PART I
..............................................................................................................................................................................................
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business
.................................................................................................................................................................
Risk Factors
.................................................................................................................................................................
Unresolved Staff Comments
.................................................................................................................................................................
Properties
.................................................................................................................................................................
Legal Proceedings
.................................................................................................................................................................
Mine Safety Disclosures
.................................................................................................................................................................
Item 6.
Item 5.
Item 7.
PART II
..............................................................................................................................................................................................
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
.................................................................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations
.................................................................................................................................................................
Quantitative and Qualitative Disclosures About Market Risk
.................................................................................................................................................................
Financial Statements and Supplementary Data
.................................................................................................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
.................................................................................................................................................................
Controls and Procedures
.................................................................................................................................................................
Other Information
.................................................................................................................................................................
Item 7A.
Item 9A.
Item 9B.
Item 8.
Item 9.
PART III
..............................................................................................................................................................................................
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
.................................................................................................................................................................
Executive Compensation
.................................................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
.................................................................................................................................................................
Certain Relationships and Related Transactions, and Director Independence
.................................................................................................................................................................
Principal Accountant Fees and Services
.................................................................................................................................................................
Item 15.
PART IV
..............................................................................................................................................................................................
Exhibits and Financial Statement Schedules
.................................................................................................................................................................
Signatures
.......................................................................................................................................................................................
Schedule II
.......................................................................................................................................................................................
Exhibit Index
.......................................................................................................................................................................................
3
6
6
16
39
39
39
40
41
41
43
44
55
56
97
97
98
99
99
99
99
99
99
100
100
101
102
103
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including “Item 7. 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
forward-looking statements, including 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 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 Annual Report on Form 10-K. 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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the impact of COVID-19 on our business, operations and cash flows;
continued price and margin erosion as a result of increased competition in the microwave transmission industry;
our ability to realize the anticipated benefits of any proposed or recent acquisitions, including our proposed
transaction with Ceragon, within the anticipated timeframe or at all, including the risk that proposed or recent
acquisitions will not be integrated successfully;
the results of the extraordinary general meeting of Ceragon’s shareholders;
the impact of the volume, timing, and customer, product, and geographic mix of our product orders;
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,
the effects of COVID-19 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;
4
•
•
•
•
•
•
•
•
•
the ability to preserve and use our net operating loss carryforwards;
the effects of currency and interest rate risks;
the effects of current and future government regulations, including the effects of current restrictions on various
commercial and economic activities in response to the COVID-19 pandemic;
general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery
in the United States and other countries where we conduct business;
the conduct of unethical business practices in developing countries;
the impact of political turmoil in countries where we have significant business;
the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States
withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of
border crossings, and other changes in trade regulations or relationships; and
our ability to implement our stock repurchase program or that it will enhance long-term stockholder value.
our ability to meet financial covenant requirements which could impact, among other things, our liquidity;
Other factors besides those listed here also could adversely affect us. See “Item 1A. Risk Factors” in this Annual Report
on Form 10-K for more information regarding factors that may cause our results to differ materially from those expressed or
implied by the forward-looking statements contained in this Annual Report on Form 10-K.
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 Annual Report on Form 10-K. 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, along with provisions of the Private Securities Litigation Reform Act of 1995, and we expressly
disclaim any obligation, other than as required by law, to update any forward-looking statements to reflect further developments
or information obtained after the date of filing of this Annual Report on Form 10-K or, in the case of any document incorporated
by reference, the date of that document.
5
Item 1. Business
PART I
Aviat Networks, Inc., together with its subsidiaries, is a global supplier of microwave networking solutions, backed
by an extensive suite of professional services and support. Aviat Networks, Inc. may be referred to as “the Company,”
“AVNW,” “Aviat Networks,” “Aviat,” “we,” “us” and “our” in this Annual Report on Form 10-K.
We were incorporated in Delaware in 2006 to combine the businesses of Harris Corporation’s Microwave
Communications Division (“MCD”) and Stratex Networks, Inc. (“Stratex”). On January 28, 2010, we changed our
corporate name from Harris Stratex Networks, Inc. to Aviat Networks, Inc.
Our principal executive offices are located at 200 Parker Dr., Suite C100A, Austin, Texas 78728, and our telephone
number is (408) 941-7100. Our common stock is listed on the NASDAQ Global Select Market under the symbol AVNW.
As of July 1, 2022, we had 712 employees compared with 687 employees as of July 2, 2021.
Overview and Description of the Business
We design, manufacture and sell a range of wireless networking products, solutions and services to two principal
customer types.
1. Communications Service Providers (“CSPs”): These include mobile and fixed telecommunications
network operators, broadband and internet service providers and network operators which generate revenues
from the communications services that they provide.
2. Private network operators: These are customers which do not resell communications services but build
networks for reasons of economics, autonomy, and/or security to support a wide variety of mission critical
performance applications. Examples include federal, state and local government agencies, transportation
agencies, energy and utility companies, public safety agencies and broadcast network operators around the
world.
We sell products and services directly to our customers, and, to a lesser extent, agents and resellers.
Our products utilize microwave and millimeter wave technologies to create point to point wireless links for short,
medium and long-distance interconnections. In addition to our wireless products, we also provide routers and a range of
software tools and applications to enable deployment, monitoring, network management and optimization of our systems
as well as to automate network design and procurement. We also source, qualify, supply and support third party equipment
such as antennas, optical transmission equipment and other equipment necessary to build and deploy a complete
telecommunications transmission network. We provide a full suite of professional services for planning, deployment,
operations, optimization and maintenance of our customers’ networks.
Our wireless systems deliver urban, suburban, regional and country-wide communications links as the primary
alternative to fiber optic, low earth orbit satellite and copper connections. Fiber optic connections are the primary
alternative. 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 also have advantages over optical fiber in areas with rugged terrain,
and to provide connections over bodies of water such as between islands or to offshore oil and gas production platforms.
Through the air wireless transmission is also inherently lower in latency than transmission through optical cables and can
be leveraged in time sensitive networking applications.
6
Revenue from our North America and international regions represented approximately 66% and 34% of our revenue
in fiscal 2022, respectively, 67% and 33% of our revenue in fiscal 2021, respectively, and 64% and 36% of our revenue in
fiscal 2020, respectively. Information about our revenue attributable to our geographic regions is set forth in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Note 10. Segment and
Geographic Information” of the accompanying consolidated financial statements in this Annual Report on Form 10-K.
Market Overview
We believe that future demand for microwave and millimeter wave transmission systems will be influenced by a
number of factors across several market segments.
Mobile/5G Networks
As mobile networks expand, add subscribers and increase the number of wirelessly connected devices, sensors and
machines, they require ongoing investment in backhaul infrastructure. Whether mobile network operators choose to self-
build this backhaul infrastructure or lease backhaul services from other network providers, the evolution of the network
drives demand for transmission technologies such as microwave and millimeter wave wireless backhaul. Within this
overall scope there are multiple individual drivers for investment in backhaul infrastructure.
•
5G Deployments. Mobile Radio Access Network (“RAN”) technologies are evolving. With the evolution from 4G
(HSPA+ and LTE) to 5G, technology is advancing and providing subscribers with higher speed access to the Internet,
social media, and video streaming services. The rapid increases in data to be transported through the RAN and across
the backhaul infrastructure drives requirements for higher data transport links necessitating upgrades to or replacement
of the existing backhaul infrastructure.
•
Subscriber Growth. Traffic on the backhaul infrastructure increases as the number of unique subscribers grows.
• Connected Devices. The number of devices such as smart phones and tablets connected to the mobile network is far
greater than the number of unique subscribers and is continuing to grow as consumers adopt multiple mobile device
types. There is also rapid growth in the number and type of wireless enabled sensors and machines being connected
to the mobile network creating new revenue streams for network operators in healthcare, agriculture, transportation
and education. As a result, the data traffic crossing the backhaul infrastructure continues to grow.
•
IoT. The Internet of Things (“IoT”) brings the potential of massive deployment of wireless end points for sensing and
reporting data and remotely controlling machines and devices. The increase of data volume drives investment in
network infrastructure.
• Network Densification. RAN frequency spectrum is a limited resource and shared between all of the devices and users
within the coverage area of each base station. Meeting the combined demand of increasing subscribers and devices
will require the deployment of much higher densities of base stations with smaller and smaller range (small cells) each
requiring interconnection and proportionally driving increased demand for wireless backhaul and or fronthaul
solutions as the primary alternative to optical fiber connectivity.
• Geographic Coverage. Expanding the geographic area covered by a mobile network requires the deployment of
additional cellular base station sites. Each additional base station site also needs to be connected to the core of the
mobile network through expansion of the backhaul system.
•
License Mandates. Mobile Operators are licensed telecommunications service providers. Licenses will typically
mandate a minimum geographic footprint within a specific period of time and/or a minimum proportion of a national
or regional population served. This can pace backhaul infrastructure investment and cause periodic spikes in demand.
Rural Broadband
• Middle Mile. Aviat transport equipment is used to deliver broadband connectivity to rural and suburban communities
as an alternative to costly fiber. There are significant investments being made to improve rural household and
enterprise connectivity and many of these investments target middle mile infrastructure builds.
7
• Expansion of Offered Services. Internet service providers, especially those in emerging markets, now own and operate
the most modern communications networks within their respective regions. These network assets can be further
leveraged to provide high speed broadband services to fixed locations such as small, medium and large business
enterprises, airports, hotels, hospitals, and educational institutions. Microwave and millimeter wave backhaul is ideally
suited to providing high speed broadband connections to these end points due to the lack of fiber infrastructure.
Private Networks
In addition to mobile backhaul, we see demand for microwave technology in other vertical markets, including utility,
public safety, financial institutions and broadcast.
• Many utility companies around the world are actively investing in “Smart Grid” solutions and energy demand
management, which drive the need for network modernization and increased capacity of networks.
• The investments in network modernization in the public safety market can significantly enhance the capabilities of
security agencies. Improving border patrol effectiveness, enabling inter-operable emergency communications services
for local or state police, providing access to timely information from centralized databases, or utilizing video and
imaging devices at the scene of an incident requires a high bandwidth and reliable network. The mission critical nature
of public safety and national security networks can require that these networks are built, operated and maintained
independently of other network infrastructure. Microwave is well suited to this environment because it is a cost-
effective alternative to fiber.
• Microwave technology can be used to engineer long distance and more direct connections than optical cable.
Microwave signals also travel through the air much faster than light through glass and the combined effect of shorter
distance and higher speed reduces latency, which is valued for trading applications in the financial industry. Our
products have already been used to create low latency connections between major centers in the United States (“U.S.”),
Europe and Asia and we see long-term interest in the creation of further low latency routes in various geographies
around the world.
• Evolution to IP. Network Infrastructure capacity, efficiency and flexibility is greatly enhanced by transitioning from
legacy SDH (synchronous digital hierarchy) / SONET (synchronous optical network) / TDM (time division
multiplexing) to IP (internet protocol) infrastructure. Our products offer integrated IP transport and routing
functionality increasing the value they bring in the backhaul network.
• The enhancement of border security and surveillance networks to counter terrorism and insurgency is aided by the use
of wireless technologies including microwave backhaul.
These factors are combining to create a range of opportunities for continued investment in backhaul and transport
networks favoring microwave and millimeter wave technologies. As we focus on executing future generations of our
technology, our goal is to make wireless technology a viable choice for an ever-broadening range of network types.
Strategy
We are engaging with customers on the evolution of use cases and applications as 5G mobile and broadband
networks edge closer to implementation and begin to factor more strongly in the vendor selection process. We are confident
in our ability to address current and future 5G market needs.
We are focused on building a sustainable and profitable business with growth potential. We have invested in our
people and processes to create a platform for operational excellence across sales, services, product development and supply
chain areas while continuing to make investments in strengthening our product and services portfolio and expanding our
reach into targeted market areas.
Our strategy has three main elements aligned to deliver a compelling Total Cost of Ownership (“TCO”) value
proposition. The first is our portfolio of wireless transport products allowing our customers increased capacity and
8
flexibility with a much better total cost solution. We are expanding the data-carrying capacity of our wireless products to
address the increasing data demand in networks of all types. Further, energy consumption is emerging as a key component
of TCO. Our research and development contemplates innovations in capacity, energy efficiency and overall TCO.
Second, to address the operational complexity of planning, deploying, owning and operating microwave networks,
we are investing in a combination of software applications, tools and services where simplification, process automation
and our unique expertise in wireless technology can make a significant difference for our customers and partners.
Finally, Aviat is investing in e-commerce through our online platform, the “Aviat Store” and supporting supply chain
capabilities. Aviat can better service customers buying through the Aviat Store with lower costs, faster lead times and a
simpler purchasing experience. The Aviat Store, together with our supply chain, enables customers (including Tier 2 and
mobile 5G operators) to purchase products as needed, thus avoiding lengthy and variable lead times that come with other
vendor solutions and allowing those customers to lower warehousing costs, reduce obsolete equipment, and lower the cost
of capital by paying only when equipment is needed.
We continue to develop our professional services portfolio as key to our long-term strategy and differentiation. We
offer a portfolio of hosted expert services and we continue to offer training and accreditation programs for microwave and
IP network design, deployment and maintenance.
We expect to continue to serve and expand upon our existing customer base and develop business with new
customers. We intend to leverage our customer base, our longstanding presence in many countries, our distribution
channels, our comprehensive product line, our superior customer service and our turnkey solution capability to continue
to sell existing and new products and services to current and future customers.
Products and Solutions
Our product and solutions portfolio is key to building and maintaining our base of customers. We offer a
comprehensive product and solutions portfolio that meets the needs of service providers and network operators and that
addresses a broad range of applications, frequencies, capacities and network topologies.
• Broad product and solution portfolio. We offer a comprehensive suite of wireless transmission systems for microwave
and millimeter wave networking applications. These solutions utilize a wide range of transmission frequencies,
ranging from 5 GHz to 90 GHz, and can deliver a wide range of transmission capacities, ranging up to 20 Gigabits
per second (Gbps). The major product families included in these solutions are CTR 8000, WTM 4000 and AviatCloud.
Our CTR 8000 platform is a range of routers purpose-built for transport applications, especially those that require high
level of reliability and security. The newest addition to our product portfolio is the WTM 4000, the highest capacity
microwave radio ever produced to date, and purpose built for software-defined networks (“SDN.”) SDN technology
is an approach to networking management that enables dynamic, programmatically efficient networking configuration
to improve networking performance and monitoring, making it more like cloud computing than traditional networking
management. We introduced multiple important variants to the WTM 4000 platform; WTM4100 & 4200 providing
single and dual frequency microwave links with advanced XPIC and MIMO capabilities; WTM4500 for multi-channel
aggregation of microwave channels in long distance applications; WTM4800 is the latest addition to address 5G
network requirements and is capable of operating in the 80GHz E Band at up to 20Gbps capacity, with a unique Multi-
Band capability which simultaneously uses microwave and E Band frequencies for maximum robustness. WTM 4800
is the only single box multi-band solution for lowest total cost of ownership deployments. To address the issues of
operational complexity in our customers’ networks, AviatCloud is a platform with secure hosted software and services
to automate networks and their operations.
•
Low total cost of ownership. Our wireless-based solutions focus on achieving a low total cost of ownership, including
savings on the combined costs of initial acquisition, installation and ongoing operation and maintenance. Our latest
generation system designs reduce rack space requirements, require less power, are software-configurable to reduce
9
spare parts requirements, and are simple to install, operate, upgrade and maintain. Our advanced wireless features also
enable operators to save on related costs, including spectrum fees and tower rental fees.
•
Futureproof network. Our solutions are designed to protect the network operator’s investment by incorporating
software-configurable capacity upgrades and plug-in modules that provide a smooth migration path to Carrier Ethernet
and IP/MPLS (multiprotocol label switching) and segment routing based networking, without the need for costly
equipment substitutions and additions. Our products include key technologies we believe will be needed by operators
for their network evolution to support new broadband services.
• Flexible, easily configurable products. We use flexible architectures with a high level of software configurable
features. This design approach produces high-performance products with reusable components while at the same time
allowing for a manufacturing strategy with a high degree of flexibility, improved cost and reduced time-to-market.
The software features of our products offer our customers a greater degree of flexibility in installing, operating and
maintaining their networks.
• Comprehensive network management. We offer a range of flexible network management solutions, from element
management to enterprise-wide network management and service assurance that we can optimize to work with our
wireless systems.
• Complete professional services. In addition to our product offerings, we provide network planning and design, site
surveys and builds, systems integration, installation, maintenance, network monitoring, training, customer service and
many other professional services. Our services cover the entire evaluation, purchase, deployment and operational cycle
and enable us to be one of the few complete, turnkey solution providers in the industry.
Business Operations
Sales and Service
Our primary route to market is through our own direct sales, service and support organization. This provides us with
the best opportunity to leverage our role as a technology specialist and differentiate ourselves from competitors. Our focus
on key customers and geographies allows us to consistently achieve a high level of customer retention and repeat business.
Our highest concentrations of sales and service resources are in the United States, Western and Southern Africa, the
Philippines, and the European Union. We maintain a presence in a number of other countries, some of which are based in
customer locations and include, but not limited to, Canada, Mexico, Kenya, India, Saudi Arabia, Australia, New Zealand,
and Singapore.
In addition to our direct channel to market, we have relationships with original equipment manufacturers (“OEMs”)
and system integrators especially focused towards large and complex projects in national security and government-related
applications. Our role in these relationships ranges from equipment supply only to being a sub-contractor for a portion of
the project scope where we will supply equipment and a variety of design, deployment and maintenance services.
We also use indirect sales channels, including dealers, resellers and sales representatives, in the marketing and sale
of some lines of products and equipment on a global basis. These independent representatives may buy for resale or, in
some cases, solicit orders from commercial or governmental customers for direct sales by us. Prices to the ultimate
customer in many instances may be recommended or established by the independent representative and may be above or
below our list prices. These independent representatives generally receive a discount from our list prices and are free to
set the final sales prices paid by the customer.
We have a direct online sales option through our online “Aviat Store.” The Aviat Store targets customers with a
traditional high cost to serve via traditional channels. We provide online design tools for radio link planning and on-line
ordering tools, which we fulfill directly from our Aviat Store with multiple options of product available for next day
shipment. Shipments from Aviat Store commenced late in 2018.
10
We have repair and service centers in the Philippines and the United States. We have customer service and support
personnel who provide customers with training, installation, technical support, maintenance and other services on systems
under contract. We install and maintain customer equipment directly, in some cases, and contract with third-party service
providers in other cases.
The specific terms and conditions of our product warranties vary depending upon the product sold and country in
which we do business. On direct sales, warranty periods generally start on the delivery date and continue for one to three
years.
Manufacturing
Our global manufacturing strategy follows an outsourced manufacturing model using contract manufacturing
partners in North America and Asia. Our strategy is based on balancing cost and supplier performance as well as taking
into account qualification for localization requirements of certain market segments, such as the Buy American Act.
In accordance with our global logistics requirements and customer geographic distribution, we are engaged with
contract manufacturing partners in Asia and the United States. All manufacturing operations have been certified to
International Standards Organization 9001, a recognized international quality standard. We have also been certified to the
TL 9000 standard, a telecommunication industry-specific quality system standard.
Backlog
Our backlog was approximately $245 million at July 1, 2022 and $225 million at July 2, 2021 consisting primarily
of contracts or purchase orders for both product and service deliveries and extended service warranties. Services include
management’s initial estimate of the value of a customer’s commitment under a services contract. The calculation used by
management involves estimates and judgments to gauge the extent of a customer’s commitment, including the type and
duration of the agreement, and the presence of termination charges or wind down costs. Contract extensions and increases
in scope are treated as backlog only to the extent of the new incremental value. We regularly review our backlog to ensure
that our customers continue to honor their purchase commitments and have the financial means to purchase and deploy
our products and services in accordance with the terms of their purchase contracts. Backlog estimates are subject to change
and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidation,
adjustments for revenue not materialized and adjustments for currency.
We expect to substantially deliver against the backlog as of July 1, 2022 during fiscal 2023, but we cannot be assured
that this will occur. Product orders in our current backlog are subject to changes in delivery schedules or to cancellation at
the option of the purchaser without significant penalty as well as long-term projects that could take more than a year to
complete. Accordingly, although useful for scheduling production, backlog as of any particular date may not be a reliable
measure of sales for any future period because of the timing of orders, delivery intervals, customer and product mix and
the possibility of changes in delivery schedules and additions or cancellations of orders.
Customers
Although we have a large customer base, during any given fiscal year or quarter, a small number of customers may
account for a significant portion of our revenue.
During fiscal 2022, Motorola accounted for 13% of our total revenue. Motorola integrates a wide variety of network
and the revenue consists of more than 70 active projects. During fiscal 2021 and 2020 there were no customers that
accounted for more than 10% of our total revenue.
11
Competition
The microwave and millimeter wave wireless networking business is a specialized segment of the
telecommunications industry that is sensitive to technological advancements and is competitive. Our principal competitors
include business units of large mobile and IP network infrastructure manufacturers such as Ericsson, Huawei, NEC
Corporation and Nokia Corporation, as well as a number of smaller microwave specialist companies such as Ceragon
Networks Ltd. and SIAE Microelectronica S.p.A. We also compete with fiber optic cable and low earth orbit satellites for
networking connections.
Some of our larger competitors may have greater name recognition, broader product lines (some including non-
wireless telecommunications equipment and managed services), a larger installed base of products and longer-standing
customer relationships. They may from time to time leverage their extensive overall portfolios into completely outsourced
and managed network offerings restricting opportunities for specialist suppliers. In addition, some competitors may offer
seller financing, which can be a competitive advantage under certain economic climates.
Some of our larger competitors may also act as systems integrators through which we sometimes distribute and sell
products and services to end users.
The smaller independent private and public specialist competitors typically leverage new technologies and low
product costs but are generally less capable of offering a complete solution including professional services, especially in
the North America and Africa regions which form the majority of our addressed market.
We concentrate on market opportunities that we believe are compatible with our resources, overall technological
capabilities and objectives. Principal competitive factors are cost-effectiveness, product quality and reliability,
technological capabilities, service, ability to meet delivery schedules and the effectiveness of dealers in international areas.
We believe that the combination of our network and systems engineering support and service, global reach, technological
innovation, agility and close collaborative relationships with our customers are the key competitive strengths for us.
However, customers may still make decisions based primarily on factors such as price, financing terms and/or past or
existing relationships, where it may be difficult for us to compete effectively or profitably.
Research and Development
We believe that our ability to enhance our current products, develop and introduce new products on a timely basis,
maintain technological competitiveness and meet customer requirements is essential to our success. Accordingly, we
allocate, and intend to continue to allocate, a significant portion of our resources to research and development efforts in
key technology areas and innovation to differentiate our overall portfolio from our competition. The majority of such
research and development resources will be focused on technologies in microwave and millimeter wave RF, digital signal
processing, networking protocols and software applications.
Our research and development expenditures totaled $22.6 million, or 7.5% of revenue, in fiscal 2022, $21.8 million,
or 7.9% of revenue, in fiscal 2021, and $19.3 million, or 8.1% of revenue, in fiscal 2020.
Research and development are primarily directed to the development of new products and to build technological
capability. We are an industry innovator and intend to continue to focus significant resources on product development in
an effort to maintain our competitiveness and support our entry into new markets.
Our product development teams totaled 147 employees as of July 1, 2022, and were located primarily in New
Zealand and Slovenia.
12
Raw Materials and Supplies
Because of our range of products and services, as well as the wide geographic dispersion of our facilities, we use
numerous sources of raw materials needed for our operations and for our products, such as electronic components, printed
circuit boards, metals and plastics. We are dependent upon suppliers and subcontractors for a large number of components
and subsystems and upon the ability of our suppliers and subcontractors to adhere to customers’ requirements or regulatory
restrictions and to meet performance and quality specifications and delivery schedules.
Our strategy for procuring raw material and supplies includes dual sourcing (where possible) on strategic assemblies
and components. In general, we believe this reduces our risk with regard to the potential financial difficulties in our supply
base. In some instances, we are dependent upon one or a few sources, either because of the specialized nature of a particular
item or because of local content preference requirements pursuant to which we operate on a given project. Examples of
sole or limited source categories include metal fabrications and castings, for which we own the tooling and therefore limit
our supplier relationships, and ASIC’s and MMICs (types of integrated circuit used in manufacturing microwave radios),
which we procure at volume discount from a single source. Our supply chain plan includes mitigation plans for alternative
manufacturing sites which would also mitigate COVID-19 and other disruption risks.
Although we have been affected by performance issues of some of our suppliers and subcontractors, we have not
been materially adversely affected by the inability to obtain raw materials or products. In general, any performance issues
causing short-term material shortages are within the normal frequency and impact range currently experienced by high-
tech manufacturing companies and are due primarily to the highly technical nature of many of our purchased components.
Patents and Other Intellectual Property
We consider our patents, trademarks and other intellectual property rights, in the aggregate, to constitute an
important asset. We own a portfolio of patents, trade secrets, know-how, confidential information, trademarks, copyrights
and other intellectual property. As of July 1, 2022, we (collectively with our subsidiaries) own approximately 184 U.S.
patents and 188 international patents and had 5 U.S. patent applications pending and 15 international patent applications
pending. The United States Patent and Trademark Office and international equivalent bodies have not yet concluded
substantive examination of our pending patent applications. Therefore, it is unclear what scope of additional patent
coverage, if any, will eventually be provided as a result of those pending applications. Failure to obtain comprehensive
patent coverage could impair our ability to prevent competitors from replicating some portions or all of our products. We
also license intellectual property to and from third parties. The costs we pay or revenue we receive from such licenses may
be dependent on certain factors, such as the market for such licenses and whether such licenses can be negotiated on
commercially acceptable terms. However, we do not consider our business to be materially dependent upon any single
patent, license or other intellectual property right.
From time to time, we might engage in litigation to enforce our patents or other intellectual property rights or defend
against claims of alleged infringement asserted by third parties. Any of our patents, trade secrets, trademarks, copyrights
and other intellectual property rights could be challenged, invalidated or circumvented, or may not provide competitive
advantages. Additionally, policing unauthorized use of our intellectual property and proprietary rights can be difficult,
costly and time consuming. The enforcement of our intellectual property and proprietary rights also depends on any legal
actions we may bring against any such parties being successful, but these actions are costly, time-consuming, and may not
be successful, even when our rights have been infringed, misappropriated, or otherwise violated.
In addition, to protect our confidential information, including our trade secrets, we require our employees and
contractors to sign confidentiality and invention assignment agreements. We also enter into non-disclosure agreements
with our suppliers and appropriate customers to limit their access to and disclosure of our proprietary information.
Although our ability to compete may be affected by our ability to protect our intellectual property rights and
proprietary information, we believe that, because of the rapid pace of technological change in the wireless
13
telecommunications industry, our innovative skills, technical expertise and ability to introduce new products on a timely
basis is just as important in maintaining our competitive position as protecting our intellectual property . Trade secret,
trademark, copyright and patent protections are important but must be supported by other factors such as the expanding
knowledge, ability and experience of our personnel, new product introductions and product enhancements. Although we
have and will continue to implement protective measures and intend to vigorously defend our intellectual property rights,
there can be no assurance that these measures will be successful.
Environmental and Other Regulations
Our facilities and operations, in common with those of our industry in general, are subject to numerous domestic
and international laws and regulations designed to protect the environment, particularly with regard to wastes and
emissions. We believe that we have complied with these requirements and that such compliance has not had a material
adverse effect on our results of operations, financial condition or cash flows. Based upon currently available information,
we do not expect expenditures to protect the environment and to comply with current environmental laws and regulations
over the next several years to have a material impact on our competitive or financial position but can give no assurance
that such expenditures will not exceed current expectations. From time to time, we receive notices from the
U.S. Environmental Protection Agency or equivalent state or international environmental agencies that we are a potentially
responsible party under the Comprehensive Environmental Response, Compensation and Liability Act, which is commonly
known as the Superfund Act, and equivalent laws. Such notices may assert potential liability for cleanup costs at various
sites, which include sites owned by us, sites we previously owned and treatment or disposal sites not owned by us, allegedly
containing hazardous substances attributable to us from past operations. We are not presently aware of any such liability
that could be material to our business, financial condition or operating results, but due to the nature of our business and
environmental risks, we cannot provide assurance that any such material liability will not arise in the future.
Electronic products are subject to environmental regulation in a number of jurisdictions. Equipment produced by us
is subject to domestic and international requirements requiring end-of-life management and/or restricting materials in
products delivered to customers. We believe that we have complied with such rules and regulations, where applicable, with
respect to our existing products sold into such jurisdictions.
Radio communications are also subject to governmental regulation. Equipment produced by us is subject to
domestic and international requirements to avoid interference among users of radio frequencies and to permit
interconnection of telecommunications equipment. We believe that we have complied with such rules and regulations with
respect to our existing products, and we intend to comply with such rules and regulations with respect to our future
products. Reallocation of the frequency spectrum could impact our business, financial condition and results of operations.
We have a comprehensive policy and procedures in effect concerning conflict minerals compliance.
Employees
As of July 1, 2022, we had 712 employees, compared with 687 employees at the end of fiscal 2021, and 674
employees at the end of fiscal 2020. As of July 1, 2022, of the 712 employees, 636 were full-time employees with 258
located in the U.S. None of our employees in the U.S. are represented by a labor union. In certain international subsidiaries,
our employees are represented by workers’ councils or statutory labor unions. In general, we believe that our employee
relations are good.
Executive Officers of the Registrant
The name, age, position held with us, and principal occupation and employment during at least the past 5 years for
each of our executive officers as of September 14, 2022, are as follows:
Name and Age
Position Currently Held and Past Business Experience
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Peter A. Smith, 56
...........................................
David M. Gray, 53
...........................................
Bryan C. Tucker, 54
...........................................
Erin Boase, 43
...........................................
Mr. Smith was appointed President and Chief Executive Officer in January 2020. Prior to
joining Aviat Networks, Mr. Smith served as Senior Vice President, US Windows and
Canada for Jeld-Wen from March 2017 to December 2019. Prior to Jeld-Wen, he served as
President of Polypore International’s Transportation and Industrial segment from October
2013 to March 2017. Previously, he served as Chief Executive Officer and a director of
Voltaix Inc. from September 2011 to October 2013. Earlier in his career, Mr. Smith held
various executive leadership positions at Fortune 100 and Fortune 500 companies,
including Cooper Industries, Dover Knowles Electronics and Honeywell Specialty
Materials. Mr. Smith also served on the board of Soleras Advanced Coatings from August
2015 to October 2018 and Adaptive 3D Technologies from December 2020 through its sale
in May 2021. He has both a Bachelor of Science degree in Material (Ceramics) Engineering
and PhD in Material Science and Engineering from Rutgers University, and holds a Master
of Business Administration degree from Arizona State University.
As Chief Financial Officer (CFO), Mr. Gray is responsible for worldwide finance, treasury,
accounting, reporting, compliance and taxation. Prior to joining Aviat, Mr. Gray was Chief
Financial Officer and Treasurer of Superior Essex, a $2.6 billion global manufacturer and
distributor of communications and electrical equipment, and before that he served at
Cooper Industries where he was CFO of an $800M revenue business focused on electrical,
electronic and power management solutions. He also held a variety of executive finance
and accounting positions at Newell Brands, Philips Electronics, and Autoliv. Mr. Gray
holds a BS in Accounting from Penn State University, is a Certified Public Accountant
(CPA) and Certified Management Accountant (CMA), and brings to Aviat significant CFO
experience in complex multi-national businesses as well as a deep background in P&L
leadership, cash flow management, and mergers and acquisitions.
As Senior Vice President Americas, Mr. Tucker is responsible for sales and services in the
Americas. Mr. Tucker joined the Company in 2005, and since, has served in a number of
roles for Aviat Networks and its predecessor companies Harris Stratex Networks and Harris
Microwave Communications Division (“MCD”). For example, as senior director for North
America Operations, Mr. Tucker spearheaded major transitions in ERP systems, product
lines and operational locations. He also led the company’s post-merger systems unification
with Harris MCD in 2007. Before joining Aviat Networks, Mr. Tucker worked for Sony
Corp. as director of Manufacturing Engineering and Maintenance for two production
facilities. Overall, Mr. Tucker has more than 24 years of experience in engineering and
manufacturing operations with high-tech companies. He has a bachelor’s degree in
electrical engineering from the University of Florida, is Six Sigma Certified and has
pursued postgraduate studies/research in semiconductor physics at Georgia Tech.
As General Counsel, Ms. Boase is responsible for all aspects of the Legal function. Ms.
Boase brings a depth of experience to the team in privacy, employment, compliance, real
estate, M&A, as well as, copyright, trademark and other product, software, service and
cloud-related legal matters. Ms. Boase was previously at Lifesize, Inc. where she served as
Head of Legal and Corporate Secretary. Prior to that she was the Senior Corporate Counsel
at Cisco (formerly Duo Security, Inc.) where she managed the adoption of GDPR privacy
compliance, development of company policies, copyright and trademark, technical
compliance as well as other legal matters. Earlier in her career she held legal positions of
progressive responsibility with Dell’s Computer and Security business and Thomson
Reuters. Erin holds a Juris Doctorate, Technology and Communications and graduated
Cum Laude from Thomas Jefferson School of Law and a Bachelor of Arts from Midwestern
State University.
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Gary G. Croke, 50
...........................................
As Vice President of Marketing, Mr. Croke is responsible for Aviat’s global marketing
which includes corporate and strategic marketing functions and product line management.
Mr. Croke charts Aviat’s global product and marketing strategy and ensures successful
company-wide implementation. His team's primary focus is on achieving business growth
through the definition and launch of new solutions that drive customer economic value.
Mr. Croke has over 25 years of leadership experience in the data and mobile
communications sectors and he is highly skilled at delivering creative and compelling value
propositions with demand generation programs that produce business results. Gary has a
bachelor’s degree in electrical engineering from Memorial University of Newfoundland
and has pursued postgraduate studies/research in business administration at the University
of Ottawa.
There is no family relationship between any of our executive officers or directors, and there are no arrangements or
understandings between any of our executive officers or directors and any other person pursuant to which any of them was
appointed or elected as an officer or director, other than arrangements or understandings with our directors.
Website Access to Aviat Networks’ Reports; Available Information
We maintain a website at http://www.aviatnetworks.com. Our annual reports on Form 10-K, proxy statements,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) are available free of charge on our
website as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the Securities
and Exchange Commission (“SEC”). Our website and the information posted thereon are not incorporated into this Annual
Report on Form 10-K or any current or other periodic report that we file or furnish to the SEC.
We will also provide the reports in electronic or paper form, free of charge upon request. All reports we file with or
furnish to the SEC are also available free of charge via EDGAR through the SEC’s website at http://www.sec.gov.
Additional information relating to our business and operations is set forth in “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
Item 1A. Risk Factors
The nature of the business activities conducted by the Company subjects us to certain hazards and risks. The
following is a summary of some of the material risks relating to the Company’s business activities. Other risks are described
in “Item 1. Business,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.” Prospective and existing investors are
strongly urged to carefully consider the various cautionary statements and risks set forth in this Annual Report on Form
10-K and in our other public filings.
We face many business risks, including those related to our financial performance, investments in our common
stock, operating our business and legal matters. The risks and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair our
business operations. If any of these risks occur, our financial condition and results of operations could be materially and
adversely affected. In that case, the market price of the Company’s common stock could decline.
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, operations and financial
results.
Business and Operational Risk Factors
16
• Our sales cycle may be lengthy, and the timing of sales, along with additional services such as network design,
installation and implementation of our products within our customers’ networks, may extend over more than one
period, which can make our operating results difficult to predict.
• We face risks related to the ongoing COVID-19 pandemic, threatened health epidemics and other outbreaks,
which could significantly disrupt our manufacturing, sales and other operations.
• We may undertake further restructuring activities, which may adversely impact our operations, and we may not
realize all of the anticipated benefits of these activities or any potential future restructurings. Any restructuring
activities may harm our business.
• We must continue to increase our revenues and/or reduce costs if we hope to maintain profitability.
• Our quarterly results may be volatile, which can adversely affect the trading price of our common stock.
• Our success will depend on new products introduced to the marketplace in a timely manner, successfully
completing product transitioning and achieving customer acceptance.
• We rely on various third-party service partners to help complement our global operations, and failure to adequately
manage these relationships could adversely impact our financial results and relationships with customers.
• We must respond to rapid technological change and comply with evolving industry standards and requirements
for our products to be successful.
• Our average sales prices may decline in the future.
• Credit and commercial risks and exposures could increase if the financial condition of our customers declines.
• Our restructuring actions could harm our relationships with our employees and impact our ability to recruit new
employees.
• Our business could be adversely affected if we are unable to attract and retain key personnel.
• We face strong competition for maintaining and improving our position in the market, which can adversely affect
our revenue growth and operating results.
•
•
• Our ability to sell our products and compete successfully is highly dependent on the quality of our customer
service and support, and our failure to offer high quality service and support could have a material adverse effect
on our sales and results of operations.
Product performance problems, including undetected errors in our hardware or software, or deployment delays
could harm our business and reputation.
If we fail to accurately forecast our manufacturing requirements or customer demand, we could incur additional
costs, which would adversely affect our business and results of operations.
If we fail to effectively manage our contract manufacturer relationships, we could incur additional costs or be
unable to timely fulfill our customer commitments, which would adversely affect our business and results of
operations and, in the event of an inability to fulfill commitments, would harm our customer relationships.
• We depend on sole or limited sources and geographies for some key components and failure to receive timely
•
delivery of any of these components could result in deferred or lost sales.
• Because a significant amount of our revenue may come from a limited number of customers, the termination of
any of these customer relationships may adversely affect our business.
• We continually evaluate strategic transaction opportunities which could involve merger, divestiture, sale and/or
acquisition activities that could disrupt our operations and harm our operating results.
If we fail to develop and maintain distribution and licensing relationships, our revenue may decrease.
•
Financial and Macroeconomic Risk Factors
• Due to the volume of our international sales, we may be susceptible to a number of political, economic and
geographic risks that could harm our business.
• There are inherent limitations on the effectiveness of our controls.
• We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our
stockholders.
17
• The effects of global financial and economic conditions in certain markets have had, and may continue to have,
significant effects on our customers and suppliers, and has in the past, and may in the future have, a material
adverse effect on our business, operating results, financial condition and stock price.
• Changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation in any country in which
we operate; the loss of a major tax dispute; a successful challenge to our operating structure, intercompany pricing
policies or the taxable presence of our key subsidiaries in certain countries; or other factors could cause volatility
in our effective tax rate and could adversely affect our operating results.
• Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax
purposes and other tax benefits may be limited.
• We may be adversely affected by fluctuations in currency exchange rates.
Legal and Regulatory Risk Factors
• Continued tension in U.S.-China trade relations may adversely impact our supply chain operations and business.
•
If we are unable to adequately protect our intellectual property rights, we may be deprived of legal recourse
against those who misappropriate our intellectual property.
If sufficient radio frequency spectrum is not allocated for use by our products, or we fail to obtain regulatory
approval for our products, our ability to market our products may be restricted.
•
• Our business is subject to changing regulation of corporate governance, public disclosure and anti-bribery
measures which have resulted in increased costs and may continue to result in additional costs or potential
liabilities in the future.
• Our products are used in critical communications networks which may subject us to significant liability claims.
• We may be subject to litigation regarding our intellectual property. This litigation could be costly to defend and
resolve and could prevent us from using or selling the challenged technology.
• We are subject to a variety of federal, state and local laws relating to data privacy and security, which are
continuously evolving. It may become costly for us to comply with such data privacy laws, and violating any of
these data privacy law could cause an adverse effect on our reputation, business, and operations.
•
• We are subject to complex federal, state, local and international laws and regulations related to protection of the
environment that could materially and adversely affect the cost, manner or feasibility of conducting our
operations, as well as those of our suppliers and contract manufacturers.
Increased attention to environmental, social, and governance (“ESG”) matters and conservation measures may
adversely impact our business.
Increased focus on climate change issues has contributed to an evolving state of environmental regulation relating
to climate change, and uncertainty related to such regulation, as well as physical risks of climate change, could
impact our results of operations, financial or competitive position.
•
General Risk Factors
• Natural disasters or other catastrophic events such as terrorism and war could have an adverse effect on our
•
business.
System security risks, data protection breaches, and cyber-attacks could compromise our proprietary information,
disrupt our internal operations and harm public perception of our security products, which could cause our
business and reputation to suffer and adversely affect our stock price.
• We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-
term stockholder value.
• Anti-takeover provisions of Delaware law, Tax Benefit Preservation Plan (“The Plan”), and provisions in our
Amended and Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws could make
a third-party acquisition of us difficult.
For a more complete discussion of the material risks facing our business, see below.
18
Business and Operational Risk Factors
Our sales cycle may be lengthy, and the timing of sales, along with additional services such as network design,
installation and implementation of our products within our customers’ networks, may extend over more than one period,
which can make our operating results difficult to predict.
We experience difficulty in accurately predicting the timing of the sale of products and amounts of revenue
generated from sales of our products, primarily in developing countries. The establishment of a business relationship with
a potential customer is a lengthy process, usually taking several months or more. Following the establishment of the
relationship, the negotiation of purchase terms can be time-consuming, and a potential customer may require an extended
evaluation and testing period. Once a purchase agreement has been executed, the timing and amount of revenue, if
applicable, may remain difficult to predict. Our typical product sales cycle, which results in our products being designed
into our customers’ networks, can take 12 to 24 months. A number of factors contribute to the length of the sales cycle,
including technical evaluations of our products and the design process required to integrate our products into our customers’
networks. The completion of services such as installation and testing of the customer’s networks and the completion of all
other suppliers’ network elements are subject to the customer’s timing and efforts and other factors outside our control,
each of which may prevent us from making predictions of revenue with any certainty and could cause us to experience
substantial period-to-period fluctuations in our operating results.
Due to the challenges from our lengthy sales cycle, our recognition of revenue from our selling efforts may be
substantially delayed, our ability to forecast our future revenue may be more limited and our revenue may fluctuate
significantly from quarter to quarter.
We face risks related to the ongoing COVID-19 pandemic, threatened health epidemics and other outbreaks, which
could significantly disrupt our manufacturing, sales and other operations.
Our business could be adversely impacted by the effects of a widespread outbreak of contagious disease, such as
COVID-19. The pandemic or other such health crisis could impact our supply operations; for example, if any of our
suppliers cease operating, causing us to move production to an alternate supplier. In addition, constraints on supply
operations as a result of a pandemic such as COVID-19 could result in component part shortages due to global capacity
constraints, such as the current global capacity constraint we are facing in the supply of component parts, particularly of
chipsets and other semiconductor components. Such a constraint could and has caused lead times for our products to
increase. In an effort to halt the outbreak of a pandemic such as COVID-19, governments may place significant restrictions
on travel, such as the restrictions placed by the Chinese government on travel within China, leading to extended business
closures, including closures at our third-party manufacturers. Although most of the restrictions on operations of our third-
party manufacturers and other suppliers as a result of COVID-19 have been lifted or eased, our suppliers and third-party
manufacturers could continue to be disrupted by worker absenteeism, quarantines, office and factory closures, disruptions
to ports and other shipping infrastructure, or other travel or health-related restrictions and such restrictions could spread to
other locations where we outsource manufacture or distribution of our products if the virus and its variants continues to
spread or resurge. If our supply chain operations are affected or are curtailed by the outbreak of diseases such as COVID-
19, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business,
operations and customer relationships. We may need to seek alternate sources of supply which may be more expensive,
unavailable or may result in delays in shipments to us from our supply chain and subsequently to our customers. Further,
if our distributors’ or end user customers’ businesses are similarly affected, they might delay or reduce purchases from us,
which could adversely affect our results of operations.
19
In addition, freight and logistics constraints caused in part by restrictions imposed by governments to combat the
COVID-19 pandemic and additionally due to container and carriage shortages, have resulted in increased costs and
constrained available transport, for us and our channel partners, all at a time when global demand has increased. If our
supply chain operations continue to be affected or are curtailed by the outbreak of diseases such as COVID-19, our supply
chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and
customer relationships. We have sought and may continue to seek alternate sources of supply which may be more
expensive, unavailable or may result in delays in shipments to us and from our supply chain and subsequently to our
customers.
We are conducting business with substantial modifications to employee travel, employee work locations, and
virtualization or cancellation of certain sales and marketing events, among other modifications. Our business is dependent
on travel of our sales, operations, quality and technical support, and other managers and employees. Limitations placed on
travel globally could limit our ability to manage post-contract support and maintenance activities. Other companies as well
as many governments have imposed restrictions on business operations and other precautionary and preemptive actions to
address COVID-19, and they may take further actions that cause us or our customers or suppliers to alter their normal
business operations. We will continue to actively monitor the situation and may take further actions that alter our business
operations as may be required by federal, state or local authorities, or that we determine are in the best interest of our
employees, customers, partners, suppliers and shareholders. Any such alterations or modifications may adversely impact
our business, our customers and prospects, or our financial results.
The extent to which the COVID-19 pandemic or any other pandemic will impact our business and financial results
going forward will be dependent on future developments such as the length and severity of the crisis, the potential
resurgence of COVID-19 or other pandemic and its variants in the future, future government actions in response to the
crisis, the acceptance and effectiveness of the COVID-19 vaccines and the overall impact of the COVID-19 pandemic on
the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.
We cannot at this time quantify or forecast the business impact of COVID-19, and there can be no assurance that the
COVID-19 pandemic or other health crisis will not have a material and adverse effect on our business, financial results
and financial condition.
We may undertake further restructuring activities, which may adversely impact our operations, and we may not realize
all of the anticipated benefits of these activities or any potential future restructurings. Any restructuring activities may
harm our business.
We continue to evaluate our business to determine the potential need to realign our resources as we continue to
transform our business to achieve desired cost savings in an increasingly competitive market. In prior years, we have
undertaken a series of steps to restructure our operations involving, among other things and depending on the year,
reductions of our workforce, the relocation of our corporate headquarters and the reduction and outsourcing of
manufacturing activities. We incurred restructuring charges of $0.2 million, $2.3 million and $4.0 million in fiscal 2022,
2021 and 2020, respectively.
We have based our restructuring efforts on assumptions and plans regarding the appropriate cost structure of our
business based on our product mix and projected sales, among other factors. Some of our assumptions include the
elimination of jobs and the outsourcing of certain functions to reduce our operating expenses. These assumptions may not
be accurate and we may not be able to operate in accordance with our plans. Should this occur we may determine that we
must incur additional restructuring charges in the future. Moreover, we cannot assure you that we will realize all of the
anticipated benefits of our restructuring actions or that we will not further reduce or otherwise adjust our workforce or exit,
or dispose of, certain businesses and product lines. Any decision to further limit investment, exit, or disposal of businesses
or product lines may result in the recording of additional restructuring charges. Consequently, the costs actually incurred
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in connection with the restructuring efforts may be higher than originally planned and may not lead to the anticipated cost
savings and/or improved results. For example, if we consolidate additional facilities in the future, we may incur additional
restructuring and related expenses, which could have a material adverse effect on our business, financial condition or
results of operations.
We must continue to increase our revenues and/or reduce costs if we hope to maintain profitability.
As measured under U.S. generally accepted accounting principles (“U.S. GAAP”), we recorded net income of $21.2
million in fiscal 2022, compared to $110.1 million in fiscal 2021 and $0.3 million in fiscal 2020. We generated cash from
operations of $2.8 million, $17.3 million and $17.5 million in fiscal 2022, 2021 and 2020, respectively. The net income of
$110.1 million in fiscal 2021 included a $90.4 million release of net change in deferred tax assets.
Throughout fiscal 2022, we experienced price competition for new business in all regions while major customer
consolidations from prior years also put pressure on revenue and gross margin. In addition, we saw pricing pressures in all
markets, particularly in international markets. Customer consolidation may have an increasing negative impact on our
revenue if Aviat is not selected as a vendor for the products and/or services we provide. To counter pricing pressures, we
invested heavily in product improvements to reduce unit costs and enhance product features, decreased overall company
expenses, and worked with our vendors to attain more favorable pricing. If we are unable to reduce product unit costs
associated with enhanced product features, including payments to contract manufacturers and other suppliers, or achieve
the projected cost reductions, we may not maintain profitability.
We cannot be certain that these actions or others that we may take will allow us to maintain operating profitability
or net income as determined under U.S. GAAP in the future.
Our quarterly results may be volatile, which can adversely affect the trading price of our common stock.
Our quarterly operating results may vary significantly for a variety of reasons, many of which are outside our
control. These factors could harm our business and include, among others:
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seasonality in the purchasing habits of our customers;
the volume and timing of product orders and the timing of completion of our product deliveries and installations
due to the length of our sales cycle;
our ability and the ability of our key suppliers to respond to changes on demand as needed due to component
shortages or other supply chain constraints;
litigation costs and expenses;
continued timely rollout of new product functionality and features;
increased competition resulting in downward pressure on the price of our products and services;
• margin variability based on geographic and product mix;
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• maintaining appropriate inventory levels and purchase commitments;
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failure to realize expected cost improvement throughout our supply chain, or the incurrence of cost increases;
order cancellations or postponements in product deliveries, including due to the COVID-19 pandemic, resulting
in delayed revenue recognition;
restructuring and streamlining of our operations, and associated timing of charges or write-offs;
natural disasters, or other catastrophic events including war and acts of terrorism;
diseases or pandemics, such as the COVID-19 pandemic, and corresponding governmental actions;
the ability of our customers to obtain financing to enable their purchase of our products;
fluctuations in international currency exchange rates;
regulatory developments including denial of export and import licenses; and,
general economic conditions worldwide that affect demand and financing for microwave and millimeter wave
telecommunications networks.
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Our quarterly results are expected to be difficult to predict and delays in product delivery or closing a sale can cause
revenue, margins and net income or loss to fluctuate significantly from anticipated levels. A substantial portion of our
contracts are completed in the latter part of a quarter and a significant percentage of these are large orders. Because a
significant portion of our cost structure is largely fixed in the short term, revenue shortfalls tend to have a disproportionately
negative impact on our profitability and can increase our inventory. The number of large new transactions also increases
the risk of fluctuations in our quarterly results because a delay in even a small number of these transactions could cause
our quarterly revenues and profitability to fall significantly short of our predictions. In addition, we may increase spending
in response to competitive actions, in pursuit of new market opportunities, or to mitigate supply chain disruptions.
Accordingly, we cannot provide assurances that we will be able to achieve profitability in the future or that if profitability
is attained, that we will be able to sustain profitability, particularly on a quarter-to-quarter basis.
Our success will depend on new products introduced to the marketplace in a timely manner, successfully completing
product transitioning and achieving customer acceptance.
The market for our products and services is characterized by rapid technological change, evolving industry standards
and frequent new product introductions. Our future success will depend, in part, on continuous, timely development and
introduction of new products and enhancements that address evolving market requirements and are attractive to customers.
If we fail to develop or introduce, on a timely basis, new products or product enhancements or features that achieve market
acceptance, our business may suffer. Additionally, we work closely with a variety of third-party partners to develop new
product features and new platforms. Should our partners face delays in the development process, then the timing of the
rollout of our new products may be significantly impacted which may negatively impact our revenue and gross margin.
Another factor impacting our future success is the growth in the customer demand of our new products. Rapidly changing
technology, frequent new product introductions and enhancements, short product life cycles and changes in customer
requirements characterize the markets for our products. We believe that successful new product introductions provide a
significant competitive advantage because of the significant resources committed by customers in adopting new products
and their reluctance to change products after these resources have been expended. We have spent, and expect to continue
to spend, significant resources on internal research and development to support our effort to develop and introduce new
products and enhancements.
As we transition to new product platforms, we face significant risk that the development of our new products may
not be accepted by our current customers or by new customers. To the extent that we fail to introduce new and innovative
products that are adopted by customers, we could fail to obtain an adequate return on these investments and could lose
market share to our competitors, which could be difficult or impossible to regain. Similarly, we may face decreased
revenue, gross margins and profitability due to a rapid decline in sales of current products as customers hold spending to
focus purchases on new product platforms. We could incur significant costs in completing the transition, including costs
of inventory write-downs of the current product as customers transition to new product platforms. In addition, products or
technologies developed by others may render our products non-competitive or obsolete and result in significant reduction
in orders from our customers and the loss of existing and prospective customers.
We rely on various third-party service partners to help complement our global operations, and failure to adequately
manage these relationships could adversely impact our financial results and relationships with customers.
We rely on a number of third-party service partners, to complement our global operations. We rely upon these
partners for certain installation, maintenance, logistics and support functions. In addition, as our customers increasingly
seek to rely on vendors to perform additional services relating to the design, construction and operation of their networks,
the scope of work performed by our service partners is likely to increase and may include areas where we have less
experience providing or managing such services. We must successfully identify, assess, train and certify qualified service
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partners to ensure the proper installation, deployment and maintenance of our products. The vetting and certification of
these partners can be costly and time-consuming, and certain partners may not have the same operational history, financial
resources and scale as we have. Moreover, certain service partners may provide similar services for other companies,
including our competitors. We may not be able to manage our relationships with our service partners effectively, and we
cannot be certain that they will be able to deliver services in the manner or time required, that we will be able to maintain
the continuity of their services, or that they will adhere to our approach to ethical business practices. Our service partners
may also experience challenges in providing services to us as a result of the impact of the COVID-19 pandemic. We may
also be exposed to a number of risks or challenges relating to the performance of our service partners, including:
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delays in recognizing revenue;
liability for injuries to persons, damage to property or other claims relating to the actions or omissions of our
service partners;
our services revenue and gross margin may be adversely affected; and
our relationships with customers could suffer.
If we do not effectively manage our relationships with third-party service partners, or if they fail to perform these
services in the manner or time required, our financial results and relationships with our customers could be adversely
affected.
We must respond to rapid technological change and comply with evolving industry standards and requirements for our
products to be successful.
The optical transport networking equipment market is characterized by rapid technological change, changes in
customer requirements and evolving industry standards. We continually invest in research and development to sustain or
enhance our existing products, but the introduction of new communications technologies and the emergence of new
industry standards or requirements could render our products obsolete. Further, in developing our products, we have made,
and will continue to make, assumptions with respect to which standards or requirements will be adopted by our customers
and competitors. If the standards or requirements adopted by our prospective customers are different from those on which
we have focused our efforts, market acceptance of our products would be reduced or delayed, and our business would be
harmed.
We are continuing to invest a significant portion of our research and development efforts in the development of our
next-generation products. We expect our competitors will continue to improve the performance of their existing products
and introduce new products and technologies and to influence customers’ buying criteria so as to emphasize product
capabilities that we do not, or may not, possess. To be competitive, we must anticipate future customer requirements and
continue to invest significant resources in research and development, sales and marketing, and customer support. If we do
not anticipate these future customer requirements and invest in the technologies necessary to enable us to have and to sell
the appropriate solutions, it may limit our competitive position and future sales, which would have an adverse effect on
our business and financial condition. We may not have sufficient resources to make these investments and we may not be
able to make the technological advances necessary to be competitive.
Our average sales prices may decline in the future.
We have experienced, and could continue to experience, declining sales prices. This price pressure is likely to result
in downward pricing pressure on our products and services. As a result, we are likely to experience declining average sales
prices for our products. Our future profitability will depend upon our ability to improve manufacturing efficiencies, to
reduce the costs of materials used in our products and to continue to introduce new lower-cost products and product
enhancements and if we are unable to do so, we may not be able to respond to pricing pressures. If we are unable to respond
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to increased price competition, our business, financial condition and results of operations will be harmed. Because
customers frequently negotiate supply arrangements far in advance of delivery dates, we may be required to commit to
price reductions for our products before we are aware of how, or if, cost reductions can be obtained. As a result, current or
future price reduction commitments and any inability on our part to respond to increased price competition could harm our
business, financial condition and results of operations.
Credit and commercial risks and exposures could increase if the financial condition of our customers declines.
A substantial portion of our sales are to customers in the telecommunications industry. These customers may require
their suppliers, including the Company, to provide extended payment terms, direct loans or other forms of financial support
as a condition to obtaining commercial contracts. In addition, if local currencies cannot be hedged, we have an inherent
exposure in our ability to convert monies at favorable rates from or to U.S. dollars. More generally, we expect to routinely
enter into long-term contracts involving significant amounts to be paid by our customers over time. Pursuant to these
contracts, we may deliver products and services representing an important portion of the contract price before receiving
any significant payment from the customer. As a result of the financing that may be provided to customers and our
commercial risk exposure under long-term contracts, our business could be adversely affected if the financial condition of
our customers erodes. Over the past few years, certain of our customers have filed with the courts seeking protection under
the bankruptcy or reorganization laws of the applicable jurisdiction or have experienced financial difficulties. Our
customers’ financial conditions face additional challenges in many emerging markets, where our customers are being
affected not only by recession, but by deteriorating local currencies and a lack of credit and, more broadly, by the COVID-
19 pandemic and related economic effects. If customers fail to meet their obligations to us, we may experience reduced
cash flows and losses in excess of reserves, which could materially adversely impact our results of operations and financial
position.
Our business requires extensive credit risk management that may not be adequate to protect against customer
nonpayment. A risk of non-payment by customers is a significant focus of our business. We expect a significant amount of
future revenue to come from international customers in developing countries. We do not generally expect to obtain
collateral for sales, although we require letters of credit or credit insurance as appropriate for international customers. For
information regarding the percentage of revenue attributable to certain key customers, see “Risk Factors - Business and
Operational Risk Factors - Because a significant amount of our revenue may come from a limited number of customers,
the termination of any of these customer relationships may adversely affect our business.” Our historical accounts
receivable balances have been concentrated in a small number of significant customers. Unexpected adverse events
impacting the financial condition of our customers, bank failures or other unfavorable regulatory, economic or political
events in the countries in which we do business may impact collections and adversely impact our business, require
increased bad debt expense or receivable write-offs and adversely impact our cash flows, financial condition and operating
results, which could also result in a breach of our bank covenants.
Our restructuring actions could harm our relationships with our employees and impact our ability to recruit new
employees.
Employees, whether or not directly affected by any restructuring actions that we undertake, may seek employment
with our business partners, customers or competitors. We cannot assure that the confidential nature of our proprietary
information will not be compromised by any such employees who terminate their employment with us. Further, we believe
that our future success will depend in large part upon our ability to attract, motivate and retain highly skilled personnel.
We may have difficulty attracting and retaining such personnel as a result of a perceived risk of future workforce reductions,
and we may terminate the employment of employees as part of a restructuring and later determine that such employees
were important to the success of the ongoing business.
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Our business could be adversely affected if we are unable to attract and retain key personnel.
Our success and ability to invest and grow depend largely on our ability to attract and retain highly skilled technical,
professional, managerial, sales and marketing personnel. Historically, competition for these key personnel has been intense.
The loss of services of any of our key personnel, the inability to retain and attract qualified personnel in the future, delays
in hiring required personnel, particularly engineering and sales personnel, or the loss of key personnel to competitors could
make it difficult for us to meet key objectives, such as timely and effective product introductions and financial goals.
We face strong competition for maintaining and improving our position in the market, which can adversely affect our
revenue growth and operating results.
The wireless access, interconnection and backhaul business is a specialized segment of the wireless
telecommunications industry and is extremely competitive. Competition in this segment is intense, and we expect it to
increase. Some of our competitors have more extensive engineering, manufacturing and marketing capabilities and
significantly greater financial, technical and personnel resources than we have. In addition, some of our competitors have
greater name recognition, broader product lines, a larger installed base of products and longer-standing customer
relationships. Our competitors include established companies, such as Ericsson, Huawei, NEC and Nokia, as well as a
number of other public and private companies, such as Ceragon and SIAE. Some of our competitors are OEMs or systems
integrators through whom we market and sell our products, which means our business success may depend on these
competitors to some extent. One or more of our largest customers could internally develop the capability to manufacture
products similar to those manufactured or outsourced by us and, as a result, the demand for our products and services may
decrease.
In addition, we compete for acquisition and expansion opportunities with many entities that have substantially
greater resources than we have. Our competitors may enter business combinations to accelerate product development or to
compete more aggressively and we may lack the resources to meet such enhanced competition.
Our ability to compete successfully will depend on a number of factors, including price, quality, availability,
customer service and support, breadth of product lines, product performance and features, rapid time-to-market delivery
capabilities, reliability, timing of new product introductions by us, our customers and competitors, the ability of our
customers to obtain financing and the stability of regional sociopolitical and geopolitical circumstances, and the ability of
large competitors to obtain business by providing more seller financing especially for large transactions. We can give no
assurances that we will have the financial resources, technical expertise, or marketing, sales, distribution, customer service
and support capabilities to compete successfully, or that regional sociopolitical and geographic circumstances will be
favorable for our successful operation.
Our ability to sell our products and compete successfully is highly dependent on the quality of our customer service and
support, and our failure to offer high quality service and support could have a material adverse effect on our sales and
results of operations.
Once our products are delivered, our customers depend on our service and support to resolve any issues relating to
our products. Our support personnel includes employees in various geographic locations, who provide general technical
support to our customers. A high level of support is important for the successful marketing and sale of our products. If we
do not effectively help our customers quickly resolve issues or provide effective ongoing support, it could adversely affect
our ability to sell our products to existing customers as well as demand for maintenance and renewal contracts and could
harm our reputation with existing and potential customers.
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Product performance problems, including undetected errors in our hardware or software, or deployment delays could
harm our business and reputation.
The development and production of products with high technology content is complicated and often involves
problems with hardware, software, components and manufacturing methods. Complex hardware and software systems,
such as our products, can often contain undetected errors or bugs when first introduced or as new versions are released. In
addition, errors associated with components we purchase from third parties, including customized components, may be
difficult to resolve. We have experienced issues in the past in connection with our products, including failures due to the
receipt of faulty components from our suppliers and performance issues related to software updates. From time to time we
have had to replace certain components or provide software remedies or other remediation in response to errors or bugs,
and we may have to do so again in the future. In addition, performance issues can be heightened during periods where we
are developing and introducing multiple new products to the market, as any performance issues we encounter in one
technology or product could impact the performance or timing of delivery of other products. Our products may also suffer
degradation of performance and reliability over time.
If reliability, quality, security or network monitoring problems develop, a number of negative effects on our business
could result, including:
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reduced orders from existing customers;
declining interest from potential customers;
delays in our ability to recognize revenue or in collecting accounts receivables;
costs associated with fixing hardware or software defects or replacing products;
high service and warranty expenses;
delays in shipments;
high inventory excess and obsolescence expense;
high levels of product returns;
diversion of our engineering personnel from our product development efforts; and
payment of liquidated damages, performance guarantees or similar penalties.
Because we outsource the manufacturing of certain components of our products, we may also be subject to product
performance problems as a result of the acts or omissions of third parties, and we may not have adequate compensating
remedies against such third parties.
From time to time, we encounter interruptions or delays in the activation of our products at a customer’s site. These
interruptions or delays may result from product performance problems or from issues with installation and activation, some
of which are outside our control. If we experience significant interruptions or delays that we cannot promptly resolve, the
associated revenue for these installations may be delayed or confidence in our products could be undermined, which could
cause us to lose customers, fail to add new customers, and consequently harm our financial results.
If we fail to accurately forecast our manufacturing requirements or customer demand, we could incur additional costs,
which would adversely affect our business and results of operations.
If we fail to accurately predict our manufacturing requirements or forecast customer demand, we may incur
additional costs of manufacturing and our gross margins and financial results could be adversely affected. If we
overestimate our requirements, our contract manufacturers may experience an oversupply of components and assess us
charges for excess or obsolete components that could adversely affect our gross margins. If we underestimate our
requirements, our contract manufacturers may have inadequate inventory or components, which could interrupt
manufacturing and result in higher manufacturing costs, shipment delays, damage to customer relationships and/or our
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payment of penalties to our customers. Our contract manufacturers also have other customers and may not have sufficient
capacity to meet all of their customers’ needs, including ours, during periods of excess demand.
If we fail to effectively manage our contract manufacturer relationships, we could incur additional costs or be unable
to timely fulfill our customer commitments, which would adversely affect our business and results of operations and,
in the event of an inability to fulfill commitments, would harm our customer relationships.
We outsource all of our manufacturing and a substantial portion of our repair service operations to independent
contract manufacturers and other third parties. Our contract manufacturers typically manufacture our products based on
rolling forecasts of our product needs that we provide to them on a regular basis. The contract manufacturers are responsible
for procuring components necessary to build our products based on our rolling forecasts, building and assembling the
products, testing the products in accordance with our specifications and then shipping the products to us. We configure the
products to our customer requirements, conduct final testing and then ship the products to our customers. There can be no
assurance that we will not encounter problems with our contract manufacturer related to these manufacturing services or
that we will be able to replace a contract manufacturer that is not able to meet our demand.
In addition, if we fail to effectively manage our relationships with our contract manufacturers or other service
providers, or if they do not fully comply with their contractual obligations or should experience delays, disruptions,
component procurement problems or quality control problems, then our ability to ship products to our customers or
otherwise fulfill our contractual obligations to our customers could be delayed or impaired which would adversely affect
our business, financial results and customer relationships.
We depend on sole or limited sources and geographies for some key components and failure to receive timely delivery
of any of these components could result in deferred or lost sales.
In some instances, we are dependent upon one or a few sources, either because of the specialized nature of a
particular item or because of local content preference requirements pursuant to which we operate on a given project.
Examples of sole or limited sourcing categories include metal fabrications and castings, for which we own the tooling and
therefore limit our supplier relationships, and MMICs (a type of integrated circuit used in manufacturing microwave
radios), which we procure at a volume discount from a single source. Additionally, certain semiconductor supply is
concentrated in Taiwan, with little to no availability in other geographies. As such, any military conflict between Taiwan
and China could interrupt supply.
Our supply chain strategy includes mitigation plans for alternative manufacturing sources and identified alternate
suppliers. However, if these alternatives cannot address our requirements when our existing sources of these components
fail to deliver them on time, we could suffer delayed shipments, canceled orders and lost or deferred revenues, as well as
material damage to our customer relationships. Should this occur, our operating results, cash flows and financial condition
could be materially adversely affected.
Because a significant amount of our revenue may come from a limited number of customers, the termination of any of
these customer relationships may adversely affect our business.
Although we have a large customer base, during any given quarter or fiscal year a small number of customers may
account for a significant portion of our revenue. Principal customers for our products and services include domestic and
international wireless/mobile service providers, OEMs, as well as private network users such as public safety agencies;
government institutions; and utility, pipeline, railroad and other industrial enterprises that operate broadband wireless
networks. During fiscal 2022, Motorola accounted for 13% of our total revenue, comprised of approximately 70 number
of discrete projects. No customer accounted for more than 10% of our total revenue in fiscal 2021.
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In addition, the telecommunications industry has experienced significant consolidation among its participants, and
we expect this trend to continue. Some operators in this industry have experienced financial difficulty and have filed, or
may file, for bankruptcy protection. Other operators may merge and one or more of our competitors may supply products
to the customers of the combined company following those mergers. This consolidation could result in purchasing decision
delays and decreased opportunities for us to supply products to companies following any consolidation. This consolidation
may also result in lost opportunities for cost reduction and economies of scale, and could generally reduce our opportunities
to win new customers to the extent that the number of potential customers decreases. Furthermore, as our customers
become larger, they may have more leverage to negotiate better pricing which could adversely affect our revenues and
gross margins.
It is possible that a significant portion of our future product sales could become even more concentrated in a limited
number of customers due to the factors described above. Product sales to major customers have varied widely from period
to period. The loss of any existing customer, a significant reduction in the level of sales to any existing customer, the
consolidation of existing customers, or our inability to gain additional customers could result in declines in our revenue or
an inability to grow revenue.
We continually evaluate strategic transaction opportunities which could involve merger, divestiture, sale and/or
acquisition activities that could disrupt our operations and harm our operating results.
Our growth depends upon market growth, our ability to enhance our existing products and our ability to introduce
new products on a timely basis. We intend to continue to address the need to develop new products and enhance existing
products through acquisitions, or “tuck-ins,” product lines, technologies, and personnel. Strategic transactions involve
numerous risks, including the following:
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difficulties in integrating the operations, systems, technologies, products, and personnel of the combined
companies, particularly companies with large and widespread operations and/or complex products;
diversion of management’s attention from normal daily operations of the business and the challenges of
managing larger and more widespread operations resulting from business combinations, sales, divestitures
and/or restructurings;
potential difficulties in completing projects associated with in-process research and development intangibles;
difficulties in entering markets in which we have no or limited direct prior experience and where competitors
in each market have stronger market positions;
initial dependence on unfamiliar supply chains or relatively small supply partners;
insufficient revenue to offset increased expenses associated with acquisitions; and
the potential loss of key employees, customers, resellers, vendors and other business partners of our company
or the companies with which we engage in strategic transactions following and continuing after announcement
of an anticipated strategic transaction.
Strategic transactions may also cause us to:
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issue common stock that would dilute our current stockholders or cause a change in control of the combined
company;
use a substantial portion of our cash resources, or incur debt;
significantly increase our interest expense, leverage and debt service requirements if we incur additional debt
to pay for an acquisition;
assume material liabilities;
record goodwill and non-amortizable intangible assets that are subject to impairment testing on a regular basis
and potential periodic impairment charges;
incur amortization expenses related to certain intangible assets;
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incur tax expenses related to the effect of acquisitions on our intercompany R&D cost sharing arrangement and
legal structure;
incur large and immediate write-offs and restructuring and other related expenses; and
become subject to intellectual property or other litigation.
Mergers, restructurings, sales and acquisitions of high-technology companies are inherently risky and subject to
many factors outside of our control. No assurance can be given that any future strategic transactions will be successful and
will not materially adversely affect our business, operating results or financial condition. Failure to manage and
successfully complete a strategic transaction could materially harm our business and operating results. Even when an
acquired or acquiring company has already developed and marketed products, there can be no assurance that product
enhancements will be made in a timely fashion or that pre-acquisition due diligence will have identified all possible issues
that might arise with respect to such products.
If we fail to develop and maintain distribution and licensing relationships, our revenue may decrease.
Although a majority of our sales are made through our direct sales force, we also market our products through
indirect sales channels such as independent agents, resellers, OEMs and systems integrators. These relationships enhance
our ability to pursue major contract awards and, in some cases, are intended to provide our customers with easier access
to financing and a greater variety of equipment and service capabilities, which an integrated system provider should be
able to offer. We may not be able to maintain our current relationships or develop new ones. If additional relationships are
developed, they may not be successful. Furthermore, as we consider increasing licensing revenue based on upgraded
technology, we may not be successful in transitioning customers to the planned software upgrades. Our inability to establish
or maintain these distribution and licensing relationships could restrict our ability to market our products and thereby result
in significant reductions in revenue. If these revenue reductions occur, our business, financial condition and results of
operations would be harmed.
Financial and Macroeconomic Risk Factors
Due to the volume of our international sales, we may be susceptible to a number of political, economic and geographic
risks that could harm our business.
We are highly dependent on sales to customers outside the U.S. In fiscal 2022, our sales to international customers
accounted for 34% of total revenue. Significant portions of our international sales are in less developed countries. Our
international sales are likely to continue to account for a large percentage of our products and services revenue for the
foreseeable future. As a result, the occurrence of any international, political, economic or geographic event could result in
a significant decline in revenue. In addition, compliance with complex foreign and U.S. laws and regulations that apply to
our international operations increases our cost of doing business in international jurisdictions. These numerous and
sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and filtering
requirements, anti-corruption laws, such as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt
payments to governmental officials, and anti-competition regulations, among others. Violations of these laws and
regulations could result in fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions
on the conduct of our business and on our ability to offer our products and services in one or more countries, and could
also materially affect our brand, our international expansion efforts, our ability to attract and retain employees, our
business, and our operating results. Although we have implemented policies and procedures designed to ensure compliance
with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our
policies.
Some of the risks and challenges of doing business internationally include:
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unexpected changes in regulatory requirements;
fluctuations in international currency exchange rates including its impact on unhedgeable currencies and our
forecast variations for hedgeable currencies;
imposition of tariffs and other barriers and restrictions;
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the burden of complying with a variety of laws and regulations in various countries;
application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and
relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and
uncertainty;
the conduct of unethical business practices in developing countries;
general economic and geopolitical conditions, including inflation and trade relationships;
restrictions on travel to locations where we conduct business, including those imposed due to COVID-19;
kidnapping and high crime rate;
natural disasters;
availability of U.S. dollars especially in countries with economies highly dependent on resource exports,
particularly oil; and
changes in export regulations.
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• war and acts of terrorism;
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While these factors and the impacts of these factors are difficult to predict, any one or more of them could adversely
affect our business, financial condition and results of operations in the future.
There are inherent limitations on the effectiveness of our controls.
We do not expect that our disclosure controls 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 resource constraints exist, 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. These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur
because of simple errors or mistakes. Controls can also be circumvented by individual acts of some persons, by collusion
of two or more people, or by management’s override of the controls. 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 due to changes in conditions or
deterioration in the degree of compliance with policies or procedures. If our controls become inadequate, we could fail to
meet our financial reporting obligations, our reputation may be adversely affected, our business and operating results could
be harmed, and the market price of our stock could decline.
We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our stockholders.
We believe that our existing cash and cash equivalents, the available line of credit under our credit facility and future
cash collections from customers will be sufficient to provide for our anticipated requirements for working capital and
capital expenditures for the next 12 months and the foreseeable future. However, it is possible that we may not generate
sufficient cash flow from operations or otherwise have the capital resources to meet our longer-term capital needs. If this
occurs, we may need to sell assets, reduce capital expenditures, or obtain additional equity or debt financing. We have no
assurance that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available
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or are not available on acceptable terms if and when needed, our business, financial condition and results of operations
could be harmed.
If we raise additional funds through the issuance of equity or convertible debt securities, the ownership of our
existing stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or
privileges senior to those of existing stockholders.
The effects of global or market specific financial and economic conditions have, and may continue to have, significant
effects on our customers and suppliers, and have in the past, and may in the future have, a material adverse effect on
our business, operating results, financial condition and stock price.
The effects of global financial and economic conditions in certain markets include, among other things, significant
reductions in available capital and liquidity from credit markets, supply or demand driven inflationary pressures, and
substantial fluctuations in currency values worldwide.
Economic conditions in certain markets have adversely affected and may continue to adversely affect our customers’
access to capital and/or willingness to spend capital on our products, and/or their levels of cash liquidity and/or their ability
and/or willingness to pay for products that they will order or have already ordered from us, or result in their ceasing
operations. Further, we have experienced an increasing number of our customers, principally in emerging markets,
requesting longer payment terms, lease or vendor financing arrangements, longer terms for the letters of credit securing
purchases of our products and services, which could potentially negatively impact our orders, revenue conversion cycle,
and cash flows.
In seeking to reduce their expenses, we have also seen significant pressure from our customers to lower prices for
our products as they try to improve their operating performance and procure additional capital equipment within their
reduced budget levels. To the extent that we lower prices on our products and services, our orders, revenues, and gross
margins may be negatively impacted. Additionally, certain emerging markets are particularly sensitive to pricing as a key
differentiator. Where price is a primary decision driver, we may not be able to effectively compete, or we may choose not
to compete due to unacceptable margins.
In addition, economic conditions in certain markets could materially adversely affect our suppliers’ access to capital
and liquidity with which to maintain their inventories, production levels, or product quality, could cause them to raise
prices or lower production levels, or result in their ceasing operations. Supply or demand driven scarcity can lead to
significant inflationary pressures on the cost of our products from our suppliers. Our ability to substantially offset
inflationary impacts by raising prices may be limited by the competitive factors discussed above.
Further, with respect to our credit facility discussed under “Liquidity, Capital Resources and Financial Strategies”
in Item 7 of this Annual Report on Form 10-K, our ability to access the funds available under our credit facility could be
materially adversely affected.
The potential effects of these economic factors are difficult to forecast and mitigate. As a consequence, our operating
results for a particular period are difficult to predict and prior results are not necessarily indicative of results to be expected
in future periods. Any of the foregoing effects could have a material adverse effect on our business, results of operations,
and financial condition and could adversely affect our stock price.
Changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation in any country in which we
operate; the loss of a major tax dispute; a successful challenge to our operating structure, intercompany pricing policies
or the taxable presence of our key subsidiaries in certain countries; or other factors could cause volatility in our effective
tax rate and could adversely affect our operating results.
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We operate in multiple jurisdictions and our profits are taxed pursuant to the tax laws of these jurisdictions. Our
future effective tax rate may be adversely affected by a number of factors, many of which are outside of our control,
including:
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the jurisdictions in which profits are determined to be earned and taxed;
adjustments to estimated taxes upon finalization of various tax returns;
increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and
development and impairment of goodwill in connection with acquisitions;
our ability to utilize net operating loss;
changes in available tax credits;
changes in share-based compensation expense;
changes in the valuation of our deferred tax assets and liabilities;
changes in domestic or international tax laws, treaties, rulings, regulations or agreements or the interpretation
of such tax laws, treaties, rulings, regulations or agreements, including the impact of the Tax Cuts and Jobs Act
of 2017 and any new administrations;
the resolution of issues arising from tax audits with various tax authorities, including the loss of a major tax
dispute;
local tax authority challenging our operating structure, intercompany pricing policies or the taxable presence
of our key subsidiaries in certain countries;
the tax effects of purchase accounting for acquisitions and restructuring charges that may cause fluctuations
between reporting periods; and
taxes that may be incurred upon a repatriation of cash from foreign operations.
Any significant increase in our future effective tax rates could impact our results of operations for future periods
adversely.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes
and other tax benefits may be limited.
Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) imposes an annual limitation on the
amount of taxable income that may be offset if a corporation experiences an “ownership change” as defined in Section 382
of the Code. An ownership change occurs when a company’s “five-percent shareholders” (as defined in Section 382 of the
Code) collectively increase their ownership in the company by more than 50 percentage points (by value) over a rolling
three-year period. Additionally, various states have similar limitations on the use of state net operating losses (“NOL”)
following an ownership change.
If we experience an ownership change, our ability to use our NOLs, any loss or deduction attributable to a “net
unrealized built-in loss” and other tax attributes (collectively, the “Tax Benefits”) could be substantially limited, and the
timing of the usage of the Tax Benefits could be substantially delayed, which could significantly impair the value of the
Tax Benefits. There is no assurance that we will be able to fully utilize the Tax Benefits and we could be required to record
an additional valuation allowance related to the amount of the Tax Benefits that may not be realized, which could adversely
impact our results of operations.
We believe that these Tax Benefits are a valuable asset for us. On September 6, 2016, the Board adopted certain
amendments to our Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”), to
protect our tax benefits. In addition, on March 3, 2020, the Board approved The Plan (as amended and restated on August
27, 2020, in an effort to protect our Tax Benefits during the effective period of the Plan. We submitted the Plan to a
stockholder vote and our stockholders approved the plan at the 2020 Annual Meeting of Stockholders. Although the Plan
and the Charter Amendments are intended to reduce the likelihood of an “ownership change” that could adversely affect
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us, there is no assurance that the restrictions on transferability in the Plan and the Charter Amendments will prevent all
transfers that could result in such an “ownership change.” There also can be no assurance that the transfer restrictions in
the Charter Amendments will be enforceable against all of our stockholders absent a court determination confirming such
enforceability. The transfer restrictions may be subject to challenge on legal or equitable grounds.
The Plan and the Charter Amendments could make it more difficult for a third party to acquire, or could discourage
a third party from acquiring, us or a large block of our common stock. A third party that acquires 4.9% or more of our
common stock could suffer substantial dilution of its ownership interest under the terms of the Plan through the issuance
of common stock or common stock equivalents to all stockholders other than the acquiring person. The acquisition may
also be void under the Charter Amendments.
The foregoing provisions may adversely affect the marketability of our common stock by discouraging potential
investors from acquiring our stock. In addition, these provisions could delay or frustrate the removal of incumbent directors
and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to acquire a
significant or controlling interest in us, even if such events might be beneficial to us and our stockholders.
We may be adversely affected by fluctuations in currency exchange rates.
A portion of our sales and expenses stem from countries outside of the United States, and are in currencies other
than U.S. dollars, and therefore subject to foreign currency fluctuation. Accordingly, fluctuations in foreign currency rates
could have a material impact on our financial results in future periods. We currently enter into foreign currency exchange
forward contracts to reduce the volatility of cash flows primarily related to forecasted foreign currency expenses. These
forward contracts reduce the impact of currency exchange rate movements on certain transactions, but do not cover all
foreign-denominated transactions and therefore do not entirely eliminate the impact of fluctuations in exchange rates on
our results of operations and financial condition.
Legal and Regulatory Risk Factors
Continued tension in U.S.-China trade relations may adversely impact our supply chain operations and business.
The U.S. government has taken certain actions that change U.S. trade policies, including tariffs that affect certain
products manufactured in China. Some components manufactured by our Chinese suppliers are subject to tariffs if imported
into the United States. The Chinese government has taken certain reciprocal actions, including recently imposed tariffs
affecting certain products manufactured in the United States. Certain of our products manufactured in our U.S. operations
have been included in the tariffs imposed on imports into China from the United States. Although some of the products
and components we import are affected by the tariffs, at this time, we do not expect these tariffs to have a material impact
on our business, financial condition or results of operations.
It is unknown whether and to what extent additional new tariffs (or other new laws or regulations) will be adopted
that increase the cost or feasibility of importing and/or exporting products and components from China to the United States
and vice versa. Further, the effect of any such new tariffs or retaliatory actions on our industry and customers is unknown
and difficult to predict. As additional new tariffs, legislation and/or regulations are implemented, or if existing trade
agreements are renegotiated or if China or other affected countries take retaliatory trade actions, such changes could have
a material adverse effect on our business, financial condition, results of operations or cash flows.
If we are unable to adequately protect our intellectual property rights, we may be deprived of legal recourse against
those who misappropriate our intellectual property.
Our ability to compete will depend, in part, on our ability to obtain and enforce intellectual property protection for
our technology in the U.S. and internationally. We rely upon a combination of trade secrets, trademarks, copyrights, patents,
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contractual rights and technological measures to protect our intellectual property rights from infringement,
misappropriation or other violations to maintain our brand and competitive position. We also make business decisions
about when to seek patent protection for a particular technology and when to rely upon trade secret protection, and the
approach we select may ultimately prove to be inadequate. With respect to patents, we cannot be certain that patents will
be issued as a result of any currently pending patent application or future patent applications, or that any of our patents,
once issued, will provide us with adequate protection from competing products or intellectual property owned by others.
For example, issued patents may be circumvented or challenged, declared invalid or unenforceable or narrowed in scope.
We also cannot provide assurances that the protection provided to our intellectual property by the laws and courts of
particular nations will be substantially similar to the protection and remedies available under U.S. law. Furthermore, we
cannot provide assurances that third parties will not assert infringement claims against us based on intellectual property
rights and laws in other nations that are different from those established in the U.S.
In addition, we enter into confidentiality and invention assignment agreements with our employees and contractors
and enter into non-disclosure agreements with our suppliers and appropriate customers so as to limit access to and
disclosure of our proprietary information. We cannot guarantee that we have entered into such agreements with each party
who has developed intellectual property on our behalf and each party that has or may have had access to our confidential
information, know-how and trade secrets. These agreements may be insufficient or breached, or may not effectively prevent
unauthorized access to or unauthorized use, disclosure, misappropriation or reverse engineering of our confidential
information, intellectual property, or technology. Moreover, these agreements may not provide an adequate remedy for
breaches or in the event of unauthorized use or disclosure of our confidential information or technology, or infringement
of our intellectual property. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret or know-
how is difficult, expensive, and time-consuming, and the outcome is unpredictable.
We cannot give assurances that any steps taken by us will be adequate to deter infringement, misappropriation,
dilution or otherwise impede independent third-party development of similar technologies. Any of our intellectual property
rights may be successfully challenged, opposed, diluted, misappropriated or circumvented by others or invalidated,
narrowed in scope or held unenforceable through administrative process or litigation in the United States or in non-U.S.
jurisdictions. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual
property rights are uncertain and any changes in, or unexpected interpretations of, intellectual property laws may
compromise our ability to enforce our trade secrets and other intellectual property rights. In the event that such intellectual
property arrangements are insufficient, our business, financial condition and results of operations could be materially
harmed.
If sufficient radio frequency spectrum is not allocated for use by our products, or we fail to obtain regulatory approval
for our products, our ability to market our products may be restricted.
We may be affected by the allocation and auction of the radio frequency spectrum by governmental authorities both
in the U.S. and internationally. The unavailability of sufficient radio frequency spectrum may inhibit the future growth of
wireless communications networks. In addition, to operate in a jurisdiction, we must obtain regulatory approval for our
products and each jurisdiction in which we market our products has its own regulations governing radio communications.
If we are unable to obtain sufficient allocation of radio frequency spectrum by the appropriate governmental authority or
obtain the proper regulatory approval for our products, our business, financial condition and results of operations may be
harmed.
Our business is subject to changing regulation of corporate governance, public disclosure and anti-bribery measures
which have resulted in increased costs and may continue to result in additional costs or potential liabilities in the future.
We are subject to rules and regulations of federal and state regulatory authorities, The NASDAQ Stock Market LLC
(“NASDAQ”) and financial market entities charged with the protection of investors and the oversight of companies whose
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securities are publicly traded, and foreign and domestic legislative bodies. During the past few years, these entities,
including the Public Company Accounting Oversight Board, the SEC, NASDAQ and several foreign governments, have
issued requirements, laws and regulations and continue to develop additional requirements, laws and regulations, most
notably the Sarbanes-Oxley Act of 2002 (“SOX”), and recent laws and regulations regarding bribery and unfair
competition, including the SEC’s recently-proposed rules relating to the disclosure of a range of climate-related risks. Our
efforts to comply with these requirements and regulations have resulted in, and are likely to continue to result in, increased
general and administrative expenses and a diversion of substantial management time and attention from revenue-generating
activities to compliance activities.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in
practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty
regarding compliance matters and additional costs potentially necessitated by ongoing revisions to our disclosure and
governance practices. Finally, if we are unable to ensure compliance with such requirements, laws, or regulations, we may
be subject to costly prosecution and liability, and resulting reputational harm, from such noncompliance.
Our products are used in critical communications networks which may subject us to significant liability claims.
Because our products are used in critical communications networks, we may be subject to significant liability claims
if our products do not work properly. We warrant to our current customers that our products will operate in accordance
with our product specifications. If our products fail to conform to these specifications, our customers could require us to
remedy the failure or could assert claims for damages. The provisions in our agreements with customers that are intended
to limit our exposure to liability claims may not preclude all potential claims. In addition, any insurance policies we have
may not adequately limit our exposure with respect to such claims. Liability claims could require us to spend significant
time and money in litigation or to pay significant damages. Any such claims, whether or not successful, would be costly
and time-consuming to defend, and could divert management’s attention and seriously damage our reputation and our
business.
We may be subject to litigation regarding our intellectual property. This litigation could be costly to defend and resolve
and could prevent us from using or selling the challenged technology.
The wireless telecommunications industry is characterized by vigorous protection and pursuit of intellectual
property rights, which has resulted in often protracted and expensive litigation. Any litigation regarding patents or other
intellectual property could be costly and time-consuming and could divert our management and key personnel from our
business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation
increase these risks. Such litigation or claims could result in substantial costs and diversion of resources. In the event of
an adverse result in any such litigation, we could be required to pay substantial damages, cease the use and transfer of
allegedly infringing technology or the sale of allegedly infringing products and expend significant resources to develop
non-infringing technology or obtain licenses for the infringing technology. We can give no assurances that we would be
successful in developing such non-infringing technology or that any license for the infringing technology would be
available to us on commercially reasonable terms, if at all. This could have a materially adverse effect on our business,
results of operation, financial condition, competitive position and prospects.
We are subject to laws, rules, regulations and policies regarding data privacy and security. Many of these laws and
regulations are subject to change and reinterpretation, and could result in claims, changes to our business practices,
monetary penalties, increased cost of operations or other harm to our business.
We are subject to a variety of federal, state and local laws, directives, rules and policies relating to data privacy and
security. The regulatory framework for data privacy and security worldwide is continuously evolving and developing and,
as a result, interpretation and implementation standards and enforcement practices are likely to remain uncertain for the
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foreseeable future. It is also possible inquiries from governmental authorities regarding cybersecurity breaches increase in
frequency and scope. These data privacy and security laws also are not uniform, which may complicate and increase our
costs for compliance. Any failure or perceived failure by us or our third-party service providers to comply with any
applicable laws relating to data privacy and security, or any compromise of security that results in the unauthorized access,
improper disclosure, or misappropriation of personal data or other customer data, could result in significant liabilities, and
negative publicity and reputational harm, one or all of which could have an adverse effect on our reputation, business,
financial condition and operations.
We are subject to complex federal, state, local and international laws and regulations related to protection of the
environment that could materially and adversely affect the cost, manner or feasibility of conducting our operations, as
well as those of our suppliers and contract manufacturers.
Environmental, health and safety regulations govern the manufacture, assembly and testing of our products,
including without limitation regulations governing the emission of pollutants and the use, remediation, and disposal of
hazardous materials (including electronic wastes). Our failure or the failure of our suppliers or contract manufacturers to
properly manage the use, transportation, emission, discharge, storage, recycling or disposal of wastes generated from our
operations could subject us to increased compliance costs or liabilities such as fines and penalties. We may also be subject
to costs and liabilities for environmental clean-up costs on sites owned by us, sites previously owned by us, or treatment
and disposal of wastes attributable to us from past operations, under the Comprehensive Environmental Response,
Compensation and Liability Act or equivalent laws. Existing and future environmental regulations may additionally restrict
our and our suppliers’ use of certain materials to manufacture, assemble and test products. New or more stringent
environmental requirements applicable to our operations or the operations of our suppliers could adversely affect our costs
of doing business and result in material costs to our operations.
Increased attention to Environmental, Social, and Governance (“ESG”) matters and conservation measures may
adversely impact our business.
Increasing attention to, and societal expectations on companies to address, climate change and other
environmental and social impacts, investor and societal expectations regarding voluntary ESG disclosures may result in
increased costs to us and our suppliers, contract manufacturers, and customers. Moreover, while we create and publish
voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures are
based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or
events or forecasts of expected risks or events, including the costs associated therewith. Such expectations and assumptions
are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and
the lack of an established single approach to identifying, measuring and reporting on many ESG matters. Additionally, on
March 21, 2022, the U.S. Securities and Exchange Commission proposed new rules relating to the disclosure of a range of
climate-related risks. We are currently assessing the rule, but at this time we cannot predict the costs of implementation or
any potential adverse impacts resulting from the rule. To the extent this rule is finalized as proposed, we could incur
increased costs relating to the assessment and disclosure of climate-related risks.
Increased focus on climate change issues has contributed to an evolving state of environmental regulation relating to
climate change, and uncertainty related to such regulation, as well as physical risks of climate change, could impact
our results of operations, financial or competitive position.
Increased public awareness and worldwide focus on climate change issues has led to legislative and regulatory
efforts to limit greenhouse gas emissions, and may result in more international, federal or regional requirements or industry
standards to reduce or mitigate risks related to climate change. As a result, we may become subject to new or more stringent
regulations, legislation or other governmental requirements or industry standards, and we anticipate that we will see
increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products,
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reducing emissions of greenhouse gases, and increasing energy efficiency. Increased regulation of climate change concerns
could subject us to additional costs and restrictions and require us to make certain changes to our manufacturing practices
and/or product designs, which could negatively impact our business, results of operations, financial condition and
competitive position.
General Risk Factors
Natural disasters or other catastrophic events such as terrorism and war could have an adverse effect on our business.
Natural disasters, such as hurricanes, earthquakes, fires, extreme weather conditions and floods, could adversely
affect our operations and financial performance. In addition, climate change may contribute to the increased frequency or
intensity of extreme weather events, including storms, wildfires, and other natural disasters. Further, acts of terrorism or
war could significantly disrupt our supply chain and access to vital components. Such events have in the past and could
[in the future] result in physical damage to one or more of our facilities, the temporary closure of one or more of our
facilities or those of our suppliers, a temporary lack of an adequate work force in a market, a temporary or long-term
disruption in the supply of products from local or overseas suppliers or contract manufacturers, a temporary disruption in
the transport of goods from overseas, and delays in the delivery of goods. Accordingly, climate change and natural disasters
may impact the availability and cost of materials and natural resources, sources and supply of energy necessary for our
operations, and could also increase insurance and other operating costs. Many of our facilities around the world (and the
operations of our suppliers) are in locations that may be impacted by the physical risks of climate change, and we face the
risk of losses incurred as a result of physical damage to our facilities or those of our suppliers, such as loss or spoilage of
inventory and business interruption caused by such events. In addition, if there is a natural disaster in any of the locations
in which our significant customers are located, our customers may incur losses or sustained business interruption, or both,
which may materially impair their ability to continue their purchase of products from us. Public health issues, whether
occurring in the United States or abroad, could disrupt our operations, disrupt the operations of suppliers or customers, or
have an adverse impact on customer demand. As a result of any of these events, we may be required to suspend operations
in some or all of our locations, which could have an adverse effect on our business, financial condition, results of
operations, and cash flows. These events could also reduce demand for our products or make it difficult or impossible to
receive components from suppliers. Although we maintain business interruption insurance and other insurance intended to
cover some or all of these risks, such insurance may be inadequate, whether because of coverage amount, policy limitations,
the financial viability of the insurance companies issuing such policies, or other reasons.
System security risks, data protection breaches, and cyber-attacks could compromise our proprietary information,
disrupt our internal operations and harm public perception of our security products, which could cause our business
and reputation to suffer and adversely affect our stock price.
In the ordinary course of business, we store sensitive data, including intellectual property, our proprietary business
information and proprietary information of our customers, suppliers and business partners, on our networks. The secure
maintenance of this information is critical to our operations and business strategy. Increasingly, companies, including ours,
are subject to a wide variety of attacks on their networks on an ongoing basis. Despite our security measures, our
information technology and infrastructure may be vulnerable to interruption, disruption, penetration or attacks due to
natural disasters, power loss, telecommunications failure, terrorist attacks, domestic vandalism, Internet failures, computer
malware, ransomware, cyberattacks, data breaches and other events unforeseen or generally beyond our control. Any such
breach could compromise our systems and networks, which could cause system disruptions or slowdowns and exploitation
of the security vulnerabilities in our products, and lead to the information stored on our networks being accessed, publicly
disclosed, lost or stolen, which could subject us to liability to our customers, suppliers, business partners and others, and
cause us reputational and financial harm. In addition, sophisticated hardware and operating system software and
applications that we produce or procure from third parties may contain defects in design or manufacture, including “bugs”
and other problems that could unexpectedly interfere with the operation of our networks. Due to the COVID-19 pandemic,
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an increased number of our employees and service providers are working from home and connecting to our networks
remotely on less secure systems, which we believe may further increase the risk of, and our vulnerability to, a cyber-attack
or breach on our network.
If an actual or perceived breach of network security occurs in our network or in the network of a customer of our
security products, regardless of whether the breach is attributable to our products, the market perception of the effectiveness
of our products could be harmed. Because the techniques used by computer programmers and hackers, many of whom are
highly sophisticated and well-funded, to access or sabotage networks or systems change frequently and generally are not
recognized until after they are used, we may be unable to anticipate or immediately detect these cyber-attacks. This could
impede our sales, manufacturing, distribution or other critical functions. In addition, the economic costs to us to eliminate
or alleviate cyber or other security problems, bugs, viruses, worms, malicious software systems and security vulnerabilities
could be significant and may be difficult to anticipate or measure because the damage may differ based on the identity and
motive of the programmer or hacker, which are often difficult to identify.
As cyber-attacks become more sophisticated, the need to develop, modify, upgrade or enhance our information
technology infrastructure and measures to secure our business can lead to increased cybersecurity protection costs. Such
costs may include making organizational changes, deploying additional personnel and protection technologies, training
employees, and engaging third party experts and consultants. These efforts come at the potential cost of revenues and
human resources that could be utilized to continue to enhance our product offerings, and such increased costs may
adversely affect our operating margins.
Additionally, certain of our suppliers have in the past and may in the future experience cybersecurity attacks that
can constrain their capacity and ability to meet our product demands. If our contract manufacturers and suppliers suffer
future cyberattacks, our ability to ship products or otherwise fulfill our contractual obligations to our customers could be
delayed or impaired which would adversely affect our business, financial results and customer relationships.
We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term
stockholder value.
During the second quarter of fiscal 2022 we completed the $7.5 million stock repurchase program approved by our
board of directors in May 2018. This repurchase program was temporarily suspended from February 2020 to February
2021. In November 2021 our board of directors approved a stock repurchase program to purchase up to $10.0 million of
our common stock. During fiscal 2022, 2021 and 2020 we repurchased $5.4 million, $0.8 million and $1.8 million of our
common stock in the open market respectively. As of July 1, 2022, $7.3 million remained available for repurchase under
our November 2021 stock repurchase program.
Anti-takeover provisions of Delaware law, the Plan, and provisions in our Amended and Restated Certificate of
Incorporation, as amended, and Amended and Restated Bylaws could make a third-party acquisition of us difficult.
Because we are a Delaware corporation, the anti-takeover provisions of Delaware law could make it more difficult
for a third party to acquire control of us, even if the change in control would be supported by our stockholders. We are
subject to the provisions of Section 203 of the General Corporation Law of Delaware, which prohibits us from engaging
in certain business combinations, unless the business combination is approved in a prescribed manner. In addition, our
Amended and Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws also contain certain
provisions that may make a third-party acquisition of us difficult, including the ability of the Board to issue preferred stock
and the requirement that nominations for directors and other proposals by stockholders must be made in advance of the
meeting at which directors are elected or the proposals are voted upon.
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In addition, the Plan and the Charter Amendments could make an acquisition of us more difficult, and certain
acquisitions may also be void under the Charter Amendments. The risks associated with the Plan and the Charter
Amendments are described in more detail above under the heading “Our ability to use net operating loss carryforwards to
offset future taxable income for U.S. federal income tax purposes and other tax benefits may be limited.”
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of July 1, 2022, we leased approximately 138,000 square feet of facilities worldwide, with approximately 39%
in the United States, mostly in Texas. Our corporate headquarters is located in Austin, Texas, and consists of approximately
18,000 square feet of office space. We also lease approximately 35,000 square feet of office, assembly facilities and
warehouse in multiple locations in Texas. Internationally, we lease approximately 103,000 square feet of facilities
throughout Europe, North America, Africa and Asia regions, including offices in Singapore, Slovenia, Philippine Islands,
India, Mexico, Canada, South Africa, Ghana, Ivory Coast, Kenya, Nigeria, Algeria, Congo, France, Netherlands, Australia,
Dubai, Saudi Arabia, Lebanon, China, and Thailand. We have repair and service centers in the Philippines and the
United States. In addition, we own approximately 57,000 square feet of facilities in Wellington, New Zealand.
We maintain our facilities in good operating condition and believe that they are suitable and adequate for our current
and projected needs. We continuously review our anticipated requirements for facilities and may, from time to time, acquire
additional facilities, expand existing facilities, or dispose of existing facilities or parts thereof, as we deem necessary.
For more information about our leases, see “Note 4. Leases” of the notes to consolidated financial statements, which
are included in Item 8 in this Annual Report on Form 10-K.
Item 3. Legal Proceedings
We are subject from time to time to disputes with customers concerning our products and services. In May 2016,
we received notification of a claim for damages from a customer alleging that certain of our products were defective which
we settled for an immaterial amount during the third quarter of 2021.
In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought
against our 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, our 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. We have accrued an immaterial amount representing the estimated probable loss for which we
would settle the matter. We currently cannot form an estimate of the range of loss in excess of our amounts already accrued.
If the outcome of this matter is greater than the current immaterial amount accrued, we intend to dispute it vigorously.
From time to time, we may be involved in various other legal claims and litigation that arise in the normal course
of our operations. We are aggressively defending all current litigation matters. Although there can be no assurances and
the outcome of these matters is currently not determinable, we currently believe that none of these claims or proceedings
are likely to have a material adverse effect on our financial position. We expect to defend each of these disputes vigorously.
39
There are many uncertainties associated with any litigation and these actions or other third-party claims against us may
cause us to incur costly litigation and/or substantial settlement charges. As a result, our 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 estimates, if any.
We record accruals for our 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, 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 not
recorded any significant accrual for loss contingencies associated with such legal claims or litigation discussed above.
Item 4. Mine Safety Disclosures
Not applicable.
40
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information on Common Stock
Our common stock, with a par value of $0.01 per share, is listed and primarily traded on the NASDAQ Global
Select Market, under the ticker symbol AVNW (prior to January 28, 2010 our ticker symbol was HSTX). There was no
established trading market for shares of our common stock prior to January 29, 2007.
According to the records of our transfer agent, as of September 2, 2022, there were 1,968 holders of record of our
common stock.
Dividend Policy
We have not paid cash dividends on our common stock and do not intend to pay cash dividends in the foreseeable
future. We intend to retain any earnings for use in our business. In addition, the covenants of our credit facility may restrict
us from paying dividends or making other distributions to our stockholders under certain circumstances.
On April 7, 2021, we effected a two-for-one split in the form of a stock dividend to shareholders of record as of
April 1, 2021.
Sales of Unregistered Securities
On April 13, 2021, we filed a registration statement on Form S-3 with the SEC using a “shelf” registration process.
When we utilize the shelf registration we will be able to, from time to time, offer and sell, either individually or in
combination, in one or more offerings, up to a total dollar amount of $200 million of any combination of the securities
described in the shelf registration statement or a related prospectus supplement. During fiscal 2022, we did not issue or
sell any unregistered securities.
Issuer Repurchases of Equity Securities
During the fourth quarter of fiscal 2022 we repurchased 25,967 shares of our common stock in the open market for
an aggregate purchase price, including commissions, of $0.7 million. These shares were recorded as treasury stock and we
do not anticipate retiring them.
In November 2021 our Board of Directors approved a stock repurchase program to purchase up to $10.0 million of
our common stock. As of July 1, 2022, $7.3 million remains available under the stock repurchase program, and we may
choose to suspend or discontinue the repurchase program at any time.
Following is a summary of stock repurchases for the three months ended July 1, 2022:
41
Period
Total Number of
Shares
Repurchased
Average Price
Paid per Share
Total Number of
Shares Repurchased
as Part of Publicly
Announced Program
Approximate dollar
Value of Shares that
May Yet be
Repurchased Under
the Program (1)
(in thousands)
April 2, 2022 through April 29, 2022
April 30, 2022 through May 27, 2022
May 28, 2022 through July 1, 2022
Total
25,967
—
—
25,967
28.86
—
—
25,967 $
— $
— $
7,260
7,260
7,260
(1) In November 2021, our Board of Directors approved a stock repurchase program, which does not have an expiration
date, for the repurchase of up to $10.0 million of our common stock.
42
Performance Graph
The following graph and accompanying data compare the cumulative total return on our common stock with the
cumulative total return of the Total Return Index for The NASDAQ Composite Market (U.S. Companies) and the
NASDAQ Telecommunications Index for the five-year period ended July 1, 2022. The stock price performance shown on
the graph below is not necessarily indicative of future price performance. Note that this graph and accompanying data is
“furnished,” not “filed,” with the SEC.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Aviat Networks, Inc., the NASDAQ Composite Index
and the NASDAQ Telecommunications Index
Aviat Networks, Inc.
NASDAQ Composite
NASDAQ Telecommunications
____________________________
6/30/2017
$
6/29/2018
6/28/2019
100.00 $
100.00 $
100.00 $
94.08 $
123.60 $
120.98 $
78.74 $
133.22 $
145.35 $
$
$
7/3/2020
7/2/2021
7/1/2022
106.84 $
171.63 $
151.78 $
366.44 $
247.91 $
202.41 $
288.39
189.76
162.03
* Assumes (i) $100 invested on June 30, 2017 in Aviat Networks, Inc. common stock, the Total Return Index for The
NASDAQ Composite Market (U.S. companies) and the NASDAQ Telecommunications Index; and (ii) immediate
reinvestment of all dividends.
Item 6. [Reserved]
43
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview of Business; Operating Environment and Key Factors Impacting Fiscal 2022 and 2021 Results
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand our
results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction
with, our consolidated financial statements and the accompanying notes. In the discussion below, our fiscal year ended
July 1, 2022 is referred to as “fiscal 2022” or “2022”; our fiscal year ended July 2, 2021 is referred to as “fiscal 2021” or
“2021”; and our fiscal year ended July 3, 2020 is referred to as “fiscal 2020” or “2020.” Our fiscal year ends on the Friday
nearest to June 30. Fiscal 2022 and fiscal 2021 presented included 52 weeks while fiscal 2020 included 53 weeks. This
one week difference between fiscal 2022 and 2021 to fiscal 2020 impacts the comparison of both revenue and expenses.
Overview
Aviat sells radios, routers, software and services. We have more than 3,000 customers and significant relationships
with global service providers and private network operators. Our manufacturing base in North America consists of a
combination of contract manufacturing and assembly and test operated in Austin, Texas by Aviat. Our technology is
underpinned by more than 200 patents. We compete on the basis of total cost of ownership, microwave radio expertise and
solutions for mission critical communications. We have a global presence.
The COVID-19 pandemic related disruptions to our business, operations, customers and suppliers lessened over the
course of fiscal 2022. While supply chain lead-times remain extended and difficult to manage, the impact on our ability to
fulfill orders for the year ended July 1, 2022 was minimal. Depending on the progression of pandemic-related factors such
as supply constraints, potential for temporary manufacturing restrictions and our ability to perform field services during
shelter in place orders, we could experience constraints and delays in fulfilling customer orders in future periods. We are
monitoring, assessing and adapting to the situation to mitigate impacts on our business, supply chain and customer demand.
We expect the potential for these challenges to continue until business and economic activities return to more normal
levels.
Our first priority remains the health and safety of our employees and their families. Employees whose tasks can be
done offsite have been instructed to work from home. Our manufacturing sites remain operational, and we are maintaining
social distancing and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.
Operations Review
The market for mobile backhaul continued to be our primary addressable market segment globally in fiscal 2022.
In North America, we supported 5G and long-term evolution (“LTE”) deployments of our 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 business continued to rely on a combination of customers increasing their
capacity to handle subscriber growth, the ongoing build-out of 3G deployments, 5G deployments and LTE deployments.
Our position continues to be to support our customers for 5G and LTE readiness and ensure that our technology roadmap
is well aligned with evolving market requirements. We continue to find that our strength in turnkey and after-sale support
services is a differentiating factor that wins business for us and enables us to expand our business with existing customers
in all markets. However, as disclosed in “Overview” above and in the “Risk Factors” section in Item 1A of this Annual
Report on Form 10-K, a number of factors could prevent us from achieving our objectives, including ongoing pricing
pressures attributable to competition and macroeconomic conditions in the geographic markets that we service.
Revenue
We manage our sales activities primarily on a geographic basis in North America and three international geographic
regions: (1) Africa and the Middle East, (2) Europe and (3) Latin America and Asia Pacific. Revenue by region for fiscal
2022, 2021 and 2020 and the related changes are shown in the table below:
44
Fiscal Year
2021
$ Change
% Change
(In thousands, except percentages)
North America
Africa and the Middle East
Europe
Latin America and Asia Pacific
Total Revenue
2022
2020
$ 199,801 $ 183,071 $ 151,709 $ 16,730 $ 31,362
6,428
(2,331)
810
$ 302,959 $ 274,911 $ 238,642 $ 28,048 $ 36,269
2022/2021 2021/2020 2022/2021 2021/2020
20.7 %
17.1 %
(20.9) %
2.1 %
15.2 %
9.1 %
8.0 %
47.0 %
9.4 %
10.2 %
47,527
12,973
42,658
44,023
8,826
38,991
37,595
11,157
38,181
3,504
4,147
3,667
We achieved revenue growth of 10.2% in fiscal 2022. We have progressed in the U.S. rural broadband and wireless
internet service provider areas and there is evidence of investment to support 5G deployments with our U.S. service
provider customers.
Our revenue from North America increased by $16.7 million, or 9.1%, in fiscal 2022 compared with fiscal 2021.
The increase in North America revenue during fiscal 2022 was due to revenue growth with private network customers and
rural broadband customers. Revenue from North America increased $31.4 million, or 20.7%, in fiscal 2021 compared with
fiscal 2020. The increase in North America revenue during fiscal 2021 was due to stronger order flow from private network
customers, as well as increased sales to mobile operators.
Our revenue from Africa and the Middle East increased by $3.5 million, or 8.0%, in fiscal 2022 compared with
fiscal 2021. The increase in revenue was primarily due to increased sales to mobile operators in the region. Revenue from
Africa and the Middle East increased $6.4 million, or 17.1%, in fiscal 2021 compared with fiscal 2020. The increase in
revenue was primarily due to increased sales to mobile operators in the region.
Revenue from Europe increased by $4.1 million, or 47.0%, in fiscal 2022 compared with fiscal 2021. The increase
in revenue was due to higher sales to private network customers. Revenue in Europe decreased $2.3 million, or 20.9%, in
fiscal 2021 compared with fiscal 2020. The decrease was due to lower sales to mobile operator customers.
Revenue in Latin America and Asia Pacific increased by $3.7 million, or 9.4%, in fiscal 2022 compared with fiscal
2021. The increase in revenue was primarily due to higher sales to mobile operator customers in Asia Pacific offset in part
by decreased revenue in Latin America. Revenue from Latin America and Asia-Pacific increased $0.8 million, or 2.1%, in
fiscal 2021 compared with fiscal 2020. The increase in revenue was primarily due to higher sales to mobile operator
customers in Asia Pacific offset in part by decreased revenue in Latin America.
Fiscal Year
$ Change
% Change
(In thousands, except percentages)
Product sales
...................................................
Services
...................................................
Total Revenue
...................................................
2021
2022
2020
$ 208,100 $ 185,787 $ 153,793 $ 22,313 $ 31,994
4,275
$ 302,959 $ 274,911 $ 238,642 $ 28,048 $ 36,269
2022/2021 2021/2020 2022/2021 2021/2020
20.8 %
5.0 %
15.2 %
12.0 %
6.4 %
10.2 %
94,859
89,124
84,849
5,735
Our revenue from product sales increased by $22.3 million, or 12.0%, in fiscal 2022 compared with fiscal 2021.
Product volume increased with customers in all regions. Our services revenue increased by $5.7 million, or 6.4%, in fiscal
2022 compared with fiscal 2021 from increased sales in all regions, except for Asia Pacific.
Our revenue from product sales increased $32.0 million, or 20.8%, in fiscal 2021 compared with fiscal 2020. Product
volume increased with customers in North America and Middle East Africa, offset in part by small declines in the other
international markets. Our services revenue increased by $4.3 million, or 5.0%, in fiscal 2021 compared with fiscal 2020
from increased sales in North America.
45
Gross Margin
(In thousands, except percentages)
Revenue
2022
$ 302,959
Cost of revenue
Gross margin
% of revenue
Product margin %
Service margin %
Fiscal Year
2021
$ 274,911
172,296
$ 102,615
$ Change
% Change
2020
$238,642
153,946
$ 84,696
2022/2021 2021/2020 2022/2021 2021/2020
15.2 %
$ 28,048 $ 36,269
11.9 %
21,428 18,350
21.2 %
$ 6,620 $ 17,919
10.2 %
12.4 %
6.5 %
193,724
$ 109,235
36.1 %
36.4 %
35.4 %
37.3 %
39.1 %
33.5 %
35.5 %
38.0 %
30.9 %
Gross margin for fiscal 2022 increased by $6.6 million, or 6.5%, compared with fiscal 2021. Gross margin as a
percentage of revenue for fiscal 2022 decreased to 36.1%, compared with 37.3% in fiscal 2021, primarily due to
inflationary pressures during the year.
Gross margin for fiscal 2021 increased $17.9 million, or 21.2%, compared with fiscal 2020. Gross margin as a
percentage of revenue for fiscal 2021 increased to 37.3%, compared with 35.5% in fiscal 2020, primarily due to higher
volume of Private Network business, increased sales through Aviat Store which serves primarily the Rural Broadband, and
wins with our multiband products and software sales.
Research and Development Expenses
(In thousands, except percentages)
Research and development
expenses
% of revenue
2022
Fiscal Year
2021
$ Change
% Change
2020
2022/2021 2021/2020 2022/2021 2021/2020
$ 22,596
$ 21,810
$ 19,284
$
786 $ 2,526
3.6 %
13.1 %
7.5 %
7.9 %
8.1 %
Our research and development (“R&D”) expenses increased by $0.8 million, or 3.6%, in fiscal 2022 compared with
fiscal 2021. The increase was due to additional investments to support new product offerings and redesigns to mitigate
supply chain constraints.
Our R&D expenses increased $2.5 million, or 13.1%, in fiscal 2021 compared with fiscal 2020. The increase was
due to additional investments to support new product offerings.
Selling and Administrative Expenses
(In thousands, except percentages)
Selling and administrative
expenses
% of revenue
2022
Fiscal Year
2021
$ Change
% Change
2020
2022/2021 2021/2020 2022/2021 2021/2020
$ 57,656
$ 56,324
$ 57,985
$ 1,332 $ (1,661)
2.4 %
(2.9) %
19.0 %
20.5 %
24.3 %
Our selling and administrative expenses increased by $1.3 million, or 2.4%, in fiscal 2022 compared with fiscal
2021. The increase was primarily due to higher corporate expenses.
Our selling and administrative expenses decreased $1.7 million, or 2.9%, in fiscal 2021 compared with fiscal 2020.
The decrease was primarily due to lower travel expenses and restructuring savings offset in part by increases in sales-
related expenses.
Restructuring Charges
46
During the fourth quarter of Q4 2022, our Board of Directors approved a restructuring plan (the “Q4 2022 Plan”)
to restructure specific groups to optimize skill sets and execute on strategic deliverables. The Q4 2022 Plan was anticipated
to be implemented through early fiscal year 2023, with a certain number of positions being consolidated. We recorded $0.4
million restructuring charges for this plan in Fiscal Year 2022.
During the third quarter of fiscal 2021, our Board of Directors approved restructuring plans (the “Fiscal 2021 Plan”)
to continue to reduce our operating costs and improve profitability. We recorded restructuring charges of $2.4 million
related to the Fiscal 2021 Plan in fiscal 2021. Payments related to the accrued restructuring balances for this plan are
expected to be fully paid in fiscal 2023.
During the fourth quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q4 2020 Plan”)
to continue to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.
We recorded restructuring charges of $1.9 million related to the Q4 2020 Plan in fiscal 2020. Payments related to the
accrued restructuring liability balance for this plan were fully paid in fiscal 2022.
During the third quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q3 2020 Plan”)
to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies. We
recorded restructuring charges of $0.6 million related to the Q3 2020 Plan in fiscal 2020. Payments related to the accrued
restructuring liability balance for this plan were fully paid in fiscal 2021.
Our restructuring charges by plan for fiscal 2022, 2021 and 2020 are summarized in the table below:
(In thousands, except percentages)
Q4 2022 Plan
Fiscal 2021 Plan
Prior Years Plans
Prior Year Plan: Facilities and
Other
Restructuring charges
2022
Fiscal Year
2021
2020
$
$
434 $
271
(231)
(236)
238 $
— $
2,414
(143)
—
2,271 $
$ Change
% Change
2022/2021 2021/2020 2022/2021 2021/2020
N/A
—
2,414
N/A
(4,192)
(103.5) %
434 $
(2,143)
(88)
N/A
(88.8) %
61.5 %
— $
—
4,049
—
—
(236)
4,049 $ (2,033) $ (1,778)
N/A
(89.5) %
N/A
(43.9) %
Restructuring charges for fiscal 2022 included employee and severance and benefits of $0.4 million under the Q4
2022 Plan and $0.3 million under the Fiscal 2021 Plan and reductions of Prior Years Plans estimated accruals of $0.5
million. Restructuring charges for fiscal 2021 included employee severance and benefits of $2.4 million, the Fiscal 2021
Plan and a reduction in the previously estimated accrual of $0.1 million in Prior Years Plans. Restructuring charges for
fiscal 2020 included employee severance and benefits costs of $1.9 million for the Q4 2020 Plan and $2.2 million for the
Prior Years Plans.
Our successfully executed restructuring initiatives have enabled us to restructure specific groups to optimize skill
sets and align structure to execute on strategic deliverables, in addition to aligning cost structure with core of the business.
Other Income (Expense), Net
(In thousands, except percentages)
Other income, net
2022
1,690
Fiscal Year
2021
230
$ Change
% Change
2020
2022/2021 2021/2020 2022/2021 2021/2020
(31) %
1,460
635 %
(101)
331
Our other income, net increased by $1.5 million, in fiscal 2022 compared with fiscal 2021, primarily due to gains
in marketable securities partially offset by movement in foreign exchange.
47
Income Taxes
(In thousands, except percentages)
Income before income taxes
.....................................................................................
Provision for (benefit from) income taxes
As % of income before income taxes
2022
$ 30,435
9,275
30.5 %
Fiscal Year
2021
$ 22,440
(87,699)
(390.8) %
2020
$ 3,709
3,452
93.1 %
$ Change
2022/2021 2021/2020
$ 7,995 $ 18,731
96,974 (91,151)
.....................................................................................
Our provision for (benefit from) income taxes was $9.3 million of expense for fiscal 2022, $87.7 million of benefit
for fiscal 2021 and $3.5 million of expense for fiscal 2020. Our tax expense for fiscal 2022 was primarily due to tax
expense related to U.S. and profitable foreign subsidiaries.
Our tax benefit for fiscal 2021 was primarily due to the release of $92.2 million in valuation allowance on our U.S.
federal and state deferred tax assets, offset by tax expenses related to profitable foreign subsidiaries and an increase in our
reserve for uncertain tax positions.
Liquidity, Capital Resources and Financial Strategies
As of July 1, 2022, our cash and cash equivalents and marketable securities totaled $47.8 million. Approximately
$5.9 million, or 12.3%, was held in the United States. The remaining balance of $41.9 million, or 87.7%, was held by
entities outside the United States. This amount includes $14.0 million moved in advance of the Redline acquisition closure.
Of the amount of cash and cash equivalents held by our foreign subsidiaries at July 1, 2022, $29.2 million was held in
jurisdictions where our undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign
withholding taxes.
Operating Activities
Cash used in or provided by operating activities is presented as net income adjusted for certain non-cash items and
changes in assets and liabilities. Net cash provided by operating activities was $2.8 million for fiscal 2022, $17.3 million
and $17.5 million, respectively, were provided by operating activities for fiscal 2021 and fiscal 2020.
For fiscal 2022 compared to fiscal 2021, cash provided by operating activities decreased by $14.5 million. The net
contribution of non-cash items to cash provided by operating activities increased by $97.4 million and the net contribution
of changes in operating assets and liabilities to cash provided by operating activities decreased by $22.9 million in fiscal
2022 as compared to fiscal 2021.
The $97.4 million increase in the net contribution of non-cash items to cash provided by operating activities was
primarily attributable to a $98.6 million net change in deferred tax assets.
Net changes in operating assets and liabilities resulted in a decrease of $22.9 million additional cash used by
operating activities for fiscal 2022 compared to fiscal 2021. Accounts receivable and unbilled costs fluctuate from period
to period, depending on the amount and timing of sales and billing activities and cash collections. The fluctuations in
accounts payable and accrued expenses during fiscal 2022 were primarily due to the timing of liabilities incurred and
vendor payments. The change in inventories and in customer service inventories during fiscal 2022 were primarily driven
by forecasted demand and to secure component parts in shortage. The decrease in customer advance payments and
unearned revenue during fiscal 2022 was due to the timing of payment from customers and revenue recognition. We used
$1.6 million in cash during fiscal 2022 on expenses related to restructuring liabilities.
For fiscal 2021 compared to fiscal 2020, cash provided by operating activities increased by $0.2 million. The net
contribution of non-cash items to cash provided by operating activities decreased by $92.3 million and the net changes in
operating assets and liabilities to cash provided by operating activities decreased by $17.7 million in fiscal 2021 as
compared to fiscal 2020.
48
The $92.3 million decrease in the net contribution of non-cash items to cash provided by operating activities was
primarily attributable to a $90.4 million net change in deferred tax assets offset by proceeds from sale of asset held for
sale.
Investing Activities
Net cash used in investing activities was $7.8 million for fiscal year 2022, $2.8 million for fiscal 2021 and $4.6
million for fiscal 2020, which consisted of purchases of marketable securities and capital expenditures net of cash received
from sale of a real estate asset.
For fiscal 2023, we expect to spend between $5.0 million to $6.0 million for capital expenditures, primarily on
equipment for development and manufacturing of new products and IT infrastructure.
Financing Activities
Financing cash flows consist primarily of proceeds and repayments of short-term debt, repurchase of stock and
proceeds from the sale of shares of common stock through employee equity plans. Net cash used in financing activities
was $4.9 million for fiscal year 2022, which was attributable to $5.4 million for repurchase of common stock relating to
treasury shares, $0.5 million payments for taxes related to net settlement of equity awards, offset by $1.0 million proceeds
from the issuance of common stock from employee stock plans. Net cash used by financing activities was $8.0 million for
fiscal 2021 and $2.5 million for fiscal 2020.
As of July 1, 2022, our principal sources of liquidity consisted of the $47.8 million in cash and cash equivalents and
marketable securities, $21.7 million of available credit under our $25.0 million credit facility with Silicon Valley Bank
(“SVB Credit Facility”) which matures on June 28, 2024, and future collections of receivables from customers. We
regularly require letters of credit from certain customers and, from time to time, these letters of credit are discounted
without recourse shortly after shipment occurs to meet immediate liquidity requirements and to reduce our credit and
sovereign risk. Historically, our primary sources of liquidity have been cash flows from operations and credit facilities.
On May 17, 2021 we entered into Amendment No. 4 to Third Amended and Restated Loan and Security Agreement,
which extended the expiration date to June 28, 2024. While we intend to continue to renew the SVB Credit Facility in the
future, 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, that we will be in compliance with the quarterly financial covenants
contained in the SVB Credit Facility, or that we will have a sufficient borrowing base under such facility. 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.
On April 13, 2021, we filed a registration statement on Form S-3 with the SEC using a “shelf” registration process.
If and when we utilize the shelf registration, we will be able to, from time to time, offer and sell, either individually or in
combination, in one or more offerings, up to a total dollar amount of $200 million of any combination of the securities
described in the shelf registration statement. Each time we offer securities under this shelf registration, we will provide a
prospectus supplement that will contain more specific information about the terms of that offering.
49
We believe that our existing cash and cash equivalents, the available line of credit under the SVB Credit Facility
and future cash collections from customers will be sufficient to provide for our anticipated requirements for working capital
and capital expenditures for at least the next 12 months.
Available Credit Facility, Borrowings and Repayment of Debt
On May 17, 2021, we entered into Amendment No. 4 to Third Amended and Restated Loan and Security Agreement
to extend the maturity date to June 28, 2024. The SVB Credit Facility provides for a $25.0 million accounts receivable
formula-based revolving credit facility that can be borrowed by the U.S. company, with a $25.0 million sub-limit that can
be borrowed by our U.S. and Singapore entities. Loans may be advanced under the SVB Credit Facility based on a
borrowing base equal to a specified percentage of the value of eligible accounts of all borrowers under the SVB Credit
Facility. The borrowing base is subject to certain eligibility criteria. Availability under the accounts receivable formula-
based revolving credit facility can also be utilized to issue letters of credit with a $12.0 million sub-limit. We may prepay
loans under the SVB Credit Facility in whole or in part at any time without premium or penalty. As of July 1, 2022,
available credit under the SVB Credit Facility was $21.7 million reflecting the calculated borrowing base of $25.0 million
less outstanding letters of credit of $3.3 million. We did not borrow against the SVB Credit Facility during fiscal 2022 and
there was no borrowing outstanding as of July 1, 2022.
The SVB Credit Facility carries an interest rate, at our option, computed (i) at the prime rate reported in the Wall
Street Journal plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ratio; or (ii) if
we satisfy a minimum adjusted quick ratio, a LIBOR rate determined in accordance with the SVB Credit Facility, plus a
spread of 2.75%. Any outstanding Singapore subsidiary-borrowed loans shall bear interest at an additional 2.00% above
the applicable prime or LIBOR rate.
The SVB Credit Facility contains monthly and quarterly financial covenants for minimum adjusted quick ratio and
minimum profitability (EBITDA) requirements, respectively. 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 ability to dispose of assets, enter into a
transaction resulting in 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 equal to 5.00% above the applicable interest rate.
As of July 1, 2022, we were in compliance with the quarterly financial covenants, as amended, contained in the
SVB Credit Facility.
During fiscal 2022, we terminated our uncommitted short-term line of credit from a bank in New Zealand.
Restructuring Payments
We had liabilities for restructuring activities totaling $1.4 million as of July 1, 2022, which was classified as current
liability and expected to be paid in cash over the next 12 months. We expect to fund these future payments with available
cash and cash provided by operations.
Financial Risk Management
In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates
and changes in interest rates. We employ established policies and procedures governing the use of financial instruments to
manage our exposure to such risks.
50
Exchange Rate Risk
We conduct business globally in numerous currencies and are therefore exposed to foreign currency risks. We use
derivative instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency
exchange rates. We do not hold or issue derivatives for trading purposes or make speculative investments in foreign
currencies.
We also enter into foreign exchange forward contracts to mitigate the change in fair value of specific non-functional
currency assets and liabilities on the consolidated balance sheets. 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 July 1, 2022, we had multiple forward contracts in one foreign currency outstanding as follows:
Currency
Euro
Notional Contract Amount
(Local Currency)
Notional Contract Amount
(USD)
(In thousands)
1,500 $
1,681
Net foreign exchange (loss) gain recorded in our consolidated statements of operations during fiscal 2022, 2021 and
2020 were $(1.1) million, $(1.0) million, and $0.4 million, respectively.
A 10% adverse change in currency exchange rates for our foreign currency derivatives held as of July 1, 2022 would
have no impact as we held no foreign currency derivatives as of July 1, 2022.
Certain of our international business are transacted in non-U.S. dollar currency. As discussed above, we utilize
foreign currency hedging instruments to minimize the currency risk of international transactions. The impact of translating
the assets and liabilities of foreign operations to U.S. dollars is included as a component of stockholders’ equity. As of
July 1, 2022 and July 2, 2021, the cumulative translation adjustment decreased our stockholders’ equity by $16.0 million
and $14.3 million, respectively.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our cash equivalents, short-term
investments and borrowings under our credit facility.
Exposure on Cash Equivalents and Short-term Investments
We had $47.8 million in total cash and cash equivalents and marketable securities as of July 1, 2022. Cash
equivalents and short-term investments totaled $9.0 million as of July 1, 2022 and were comprised of money market funds
and certificates of deposit. Cash equivalents and short-term investments have been recorded at fair value on our
consolidated balance sheets.
We do not use derivative financial instruments in our short-term investment portfolio. We invest in high-credit
quality issues and, by policy, limit the amount of credit exposure to any one issuer and country. The portfolio includes only
marketable securities with active secondary or resale markets to ensure portfolio liquidity. The portfolio is also diversified
by maturity to ensure that funds are readily available as needed to meet our liquidity needs. This policy reduces the potential
need to sell securities to meet liquidity needs and therefore the potential effect of changing market rates on the value of
securities sold.
The primary objective of our short-term investment activities is to preserve principal while maximizing yields,
without significantly increasing risk. Our cash equivalents and short-term investments earn interest at fixed rates; therefore,
51
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 investments held as of
July 1, 2022, had weighted-average days to maturity of 36 days, and an average yield of 6.43% per annum. A 10% change
in interest rates on our cash equivalents and short-term investments is not expected to have a material impact on our
financial position, results of operations or cash flows.
Exposure on Borrowings
During fiscal 2022, we had no demand borrowings outstanding under our credit facility. The interest would have
been at the prime rate plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ratio.
During fiscal 2022, our weighted average interest rate would have been 5.25%.
A 10% change in interest rates on the current borrowings or on future borrowings is not expected to have a material
impact on our financial position, results of operations or cash flows since interest on our borrowings is not material to our
overall financial position.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles
require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions
upon which we rely are reasonable based upon information available to us.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date
of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods
presented. To the extent there are material differences between these estimates, judgments or assumptions and actual
results, our financial statements will be affected.
The accounting policies that reflect our more significant estimates, judgments and assumptions and which we
believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
•
•
•
revenue recognition for estimated costs to complete overtime services;
inventory valuation and provision for excess and obsolete inventory losses; and
income taxes valuation.
In some cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does
not require management’s judgment in its application. There are also areas in which management’s judgment in selecting
among available alternatives would not produce a materially different result. Our senior management has reviewed these
critical accounting policies and related disclosures with the Audit Committee of the Board.
The following is not intended to be a comprehensive list of all of our accounting policies or estimates. Our
significant accounting policies are more fully described in “Note 1. The Company and Summary of Significant Accounting
Policies” in the notes to consolidated financial statements. In preparing our financial statements and accounting for the
underlying transactions and balances, we apply those accounting policies. We consider the estimates discussed below as
critical to an understanding of our financial statements because their application places the most significant demands on
our judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain.
Besides estimates that meet the “critical” accounting estimate criteria, we make many other accounting estimates in
preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported
amounts of assets, liabilities, revenue and expenses as well as disclosures of contingent assets and liabilities. Estimates are
based on experience and other information available prior to the issuance of the financial statements. Materially different
results can occur as circumstances change and additional information becomes known, including for estimates that we do
not deem “critical.”
52
Revenue Recognition
Effective June 30, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 606, using the modified retrospective method applied to those contracts that were not completed as
of June 29, 2018. Results for the reporting periods after June 29, 2018 are presented under ASC 606, while prior period
amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605.
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, we
recognize revenue by applying the following five-step approach: (1) identification of the contract with a customer; (2)
identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of
the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy
a performance obligation.
Revenue from services includes certain network planning and design, engineering, installation and commissioning,
extended warranty, customer support, consulting, training, and education. Maintenance and support services are generally
offered to our customers and recognized over a specified period of time and from sales and subsequent renewals of
maintenance and support contracts. The network planning and design, engineering and installation related services noted
are recognized based on an over-time recognition model using the cost-input method. Certain judgment is required when
estimating total contract costs and progress to completion on the over-time arrangements, as well as whether a loss is
expected to be incurred on the contract. The cost estimation process for these contracts is based on the knowledge and
experience of the Company’s project managers, engineers, and financial professionals. Changes in job performance and
job conditions are factors that influence estimates of the total costs to complete those contracts and the Company’s revenue
recognition. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward
completion, revisions to the estimates are made in a timely manner. These revisions may result in increases or decreases
in estimated revenues or costs, and such revisions are reflected in income in the period in which the circumstances that
gave rise to the revision become known to us. We perform ongoing profitability analysis of our service contracts accounted
for under this method to determine whether the latest estimates of revenues, costs, and profits require updating. In rare
circumstances if these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder
of the contract is recorded immediately.
Inventory Valuation and Provisions for Excess and Obsolete Losses
Our inventories have been valued at the lower of cost and net realizable value. Net realizable value is defined as the
estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and
transportation. We balance the need to maintain prudent inventory levels to ensure competitive delivery performance with
the risk of excess or obsolete inventory due to changing technology and customer requirements, and new product
introductions. The manufacturing of our products is handled primarily by contract manufacturers. Our contract
manufacturers procure components and manufacture our products based on our forecast of product demand. We regularly
review inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our
estimated forecast of product demand, the stage of the product life cycle, anticipated end of product life and production
requirements. Several factors may influence the sale and use of our inventories, including decisions to exit a product line,
technological change, new product development and competing product offerings. These factors could result in a change
in the amount of obsolete inventory quantities on hand. Additionally, our estimates of future product demand may prove
to be inaccurate, in which case the provision required for excess and obsolete inventory may be overstated or understated.
In the future, if we determine that our inventory is overvalued, we would be required to recognize such costs in cost of
product sales and services in our consolidated statements of operations at the time of such determination. In the case of
goods which have been written down below cost at the close of a fiscal quarter, such reduced amount is considered the
new lower cost basis for subsequent accounting purposes, and subsequent changes in facts and circumstances do not result
in the restoration or increase in that newly established cost basis. We did not make any material changes in the valuation
methodology during the past three fiscal years.
53
Our customer service inventories are stated at the lower of cost and net realizable value. We carry service parts
because we generally provide product warranty for 12 to 36 months and earn revenue by providing enhanced and extended
warranty and repair service during and beyond this warranty period. Customer service inventories consist of both
component parts, which are primarily used to repair defective units, and finished units, which are provided for customer
use permanently or on a temporary basis while the defective unit is being repaired. We record adjustments to reduce the
carrying value of customer service inventories to their net realizable value. Factors influencing these adjustments include
product life cycles, end of service life plans and volume of enhanced or extended warranty service contracts. Estimates of
net realizable value involve significant estimates and judgments about the future, and revisions would be required if these
factors differ from our estimates.
Income Taxes Valuation
We record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities of
amounts reported in our consolidated balance sheets, as well as operating loss and tax credit carryforwards. Certain
judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although
we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be
different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light
of changing facts and circumstances, such as the opening and closing of a tax audit or the refinement of an estimate. To
the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may result in
an increase or decrease to our tax provision in a subsequent period in which such determination is made.
We record deferred taxes by applying enacted statutory tax rates to the respective jurisdictions and follow specific
and detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded on the consolidated
balance sheets and provide necessary valuation allowances as required. Future realization of deferred tax assets ultimately
depends on meeting certain criteria in ASC 740, Income Taxes. One of the major criteria is the existence of sufficient
taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or
carryforward periods available under the tax law. We regularly review our deferred tax assets for recoverability based on
historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary
differences and tax planning strategies. Our judgments regarding future profitability may change due to many factors,
including future market conditions and our ability to successfully execute our business plans and/or tax planning strategies.
Should there be a change in our ability to recover our deferred tax assets, our tax provision would increase or decrease in
the period in which the assessment is changed.
The accounting estimates related to the liability for uncertain tax position require us to make judgments regarding
the sustainability of each uncertain tax position based on its technical merits. It is inherently difficult and subjective to
estimate our reserves for the uncertain tax positions. Although we believe our estimates are reasonable, no assurance can
be given that the final tax outcome of these matters will be same as these estimates. These estimates are updated quarterly
based on factors such as change in facts or circumstances, changes in tax law, new audit activity, and effectively settled
issues.
Impact of Recently Issued Accounting Pronouncements
See “Note 1. The Company and Summary of Significant Accounting Policies” in the notes to consolidated financial
statements for a full description of recently issued accounting pronouncements, including the respective expected dates of
adoption and effects on our consolidated financial position and results of operations.
54
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates
and changes in interest rates. We employ established policies and procedures governing the use of financial instruments to
manage our exposure to such risks. For a discussion of such policies and procedures and the related risks, see “Financial
Risk Management” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
which is incorporated by reference into this Item 7A.
55
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 243)
...................................................................................................................................................................................
Consolidated Statements of Operations
...................................................................................................................................................................................
Consolidated Statements of Comprehensive (Loss) Income
............................................................................................................................................................................
Consolidated Balance Sheets
...................................................................................................................................................................................
Consolidated Statements of Cash Flows
...................................................................................................................................................................................
Consolidated Statements of Equity
............................................................................................................................................................................
Notes to Consolidated Financial Statements
...................................................................................................................................................................................
Note 1. The Company and Summary of Significant Accounting Policies
.........................................................................................................................................................................
Note 2. Net Income per Share of Common Stock
.........................................................................................................................................................................
Note 3. Revenue Recognition
.........................................................................................................................................................................
Note 4. Leases
.........................................................................................................................................................................
Note 5. Balance Sheet Components
.........................................................................................................................................................................
Note 6. Fair Value Measurements of Assets and Liabilities
.........................................................................................................................................................................
Note 7. Credit Facility and Debt
.........................................................................................................................................................................
Note 8. Restructuring Activities
.........................................................................................................................................................................
Note 9. Stockholders’ Equity
.........................................................................................................................................................................
Note 10. Segment and Geographic Information
.........................................................................................................................................................................
Note 11. Income Taxes
.........................................................................................................................................................................
Note 12. Commitments and Contingencies
.........................................................................................................................................................................
Note 13 Subsequent Event
.........................................................................................................................................................................
Page
57
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62
63
65
67
68
68
75
76
64
80
82
83
84
85
90
91
95
97
56
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Aviat Networks, Inc.
Austin, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Aviat Networks, Inc. (the “Company”) as of July 1,
2022 and July 2, 2021, the related consolidated statements of operations, comprehensive (loss) income, equity, and cash
flows for each of the three fiscal years in the period ended July 1, 2022, the related notes and the financial statement
schedule - Valuation and Qualifying Accounts (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
at July 1, 2022 and July 2, 2021, and the results of its operations and its cash flows for each of the three fiscal years in the
period ended July 1, 2022, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company's internal control over financial reporting as of July 1, 2022, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) and our report dated September 14, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Estimated Costs to Complete
57
As described in Note 3 to the consolidated financial statements, revenues from network planning and design, engineering
and installation-related services are recognized based on an overtime recognition model using the cost-input method. The
cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers,
engineers, and financial professionals. Changes in job performance and job conditions are factors that influence estimates
of the total costs to complete those contracts and the Company’s revenue recognition.
We identified estimated costs to complete for open and ongoing over-time revenue contracts at year end as a critical audit
matter. The determination of the total estimated cost and progress toward completion requires management to make
significant estimates and assumptions. Changes in these estimates or timing of when the costs occur can have a significant
impact on the revenue recognized each period. Auditing these elements involved especially challenging and subjective
auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the duration of these
contracts.
The primary procedures we performed to address this critical audit matter included:
a. Testing the design and operating effectiveness of certain controls related to estimated costs to complete, including
controls over management’s review of cost estimates.
b. Evaluating the reasonableness of a sample of project budgets for projects completed during the year through a
retrospective review against actual performance at project completion.
c. Assessing the reasonableness of the estimated costs to complete for a sample of open projects through: (i)
evaluating the reasonableness of project budgets and the nature of costs required to complete open projects, (ii)
assessing the status of completion of respective projects through testing of a sample of project costs incurred to
date, (iii) evaluating the reasonableness of project status by performing inquiries of project managers and
assessing the nature of activities required to complete open projects, and (iv) performing retrospective review on
closed projects and investigating budget to actual variances (if any).
d. Assessing the reasonableness of project margins and changes in estimated costs to complete and investigating
reasons for changes.
/s/ BDO USA, LLP
We have served as the Company's auditor since 2015.
San Jose, California
September 14, 2022
58
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Aviat Networks, Inc.
Austin, Texas
Opinion on Internal Control over Financial Reporting
We have audited Aviat Networks, Inc.’s (the “Company’s”) internal control over financial reporting as of July 1, 2022,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of September 14, 2022, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of July 1, 2022 and July 2, 2021, the related consolidated
statements of operations, comprehensive (loss) income, equity, and cash flows for each of the three fiscal years in the
period ended July 1, 2022, the related notes and the financial statement schedule - Valuation and Qualifying Accounts and
our report dated September 14, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A,
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
59
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, LLP
San Jose, California
September 14, 2022
60
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Revenues:
Revenue from product sales
Revenue from services
Total revenues
Cost of revenues:
Cost of product sales
Cost of services
Total cost of revenues
Gross margin
Operating expenses:
Research and development expenses
Selling and administrative expenses
Restructuring charges
Total operating expenses
Operating income
Other income, net
Income before income taxes
Provision for (benefit from) income taxes
Net income
Net income per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Fiscal Year Ended
July 2,
2021
July 1,
2022
July 3,
2020
$ 208,100 $ 185,787 $ 153,793
84,849
302,959 274,911 238,642
89,124
94,859
61,320
132,404 113,055
59,241
95,321
58,625
193,724 172,296 153,946
84,696
109,235 102,615
22,596
57,656
238
80,490
28,745
1,690
30,435
9,275
21,810
56,324
2,271
80,405
22,210
230
22,440
(87,699)
$ 21,160 $ 110,139 $
19,284
57,985
4,049
81,318
3,378
331
3,709
3,452
257
$
$
1.89 $
1.79 $
9.98 $
9.42 $
0.02
0.02
11,167
11,820
11,036
11,688
10,782
10,936
See accompanying Notes to Consolidated Financial Statements
61
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net income
Other comprehensive (loss) income:
Net change in cumulative translation adjustment, net of tax
Other comprehensive (loss) income
Comprehensive income (loss)
...............................................................................................................................
See accompanying Notes to Consolidated Financial Statements
Fiscal Year Ended
July 2,
2021
July 1,
2022
July 3,
2020
$ 21,160 $ 110,139 $
257
(1,702)
(1,702)
642
642
$ 19,458 $ 110,781 $
(2,233)
(2,233)
(1,976)
62
AVIAT NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
63
(In thousands, except share and par value amounts)
ASSETS
Current Assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Unbilled receivables
Inventories
Customer service inventories
Asset held for sale
Other current assets
Total current assets
Property, plant and equipment, net
Deferred income taxes
Right of use assets
Other assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
Accrued expenses
Short-term lease liabilities
Advance payments and unearned revenue
Restructuring liabilities
Total current liabilities
Unearned revenue
Long-term lease liabilities
Other long-term liabilities
Reserve for uncertain tax positions
Deferred income taxes
Total liabilities
Commitments and contingencies (Note 12)
Equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued
Common stock, $0.01 par value; 300,000,000 shares authorized; 11,160,160 and
11,153,445 shares issued and outstanding as of July 1, 2022 and July 2, 2021, respectively
Treasury stock 194,943 and 19,587 shares as of July 1, 2022 and July 2, 2021, respectively
...............................................................................................................................................
Additional paid-in-capital
Accumulated deficit
Accumulated other comprehensive loss
Total equity
TOTAL LIABILITIES AND EQUITY
See accompanying Notes to Consolidated Financial Statements
64
July 1, 2022 July 2, 2021
10,893
73,168
45,857
25,394
1,775
—
12,437
$ 36,877 $ 47,942
—
48,135
37,521
23,436
1,431
2,218
9,556
206,401 170,239
8,887
11,701
95,412 103,467
3,816
2,759
8,430
10,445
$ 323,904 $ 297,653
$ 42,394 $ 32,405
28,154
769
32,304
2,737
96,369
8,592
3,223
356
5,164
614
122,151 114,318
26,451
513
33,740
1,381
104,479
8,920
2,412
273
5,504
563
—
—
112
(6,147)
112
(787)
823,259 818,939
(599,442) (620,602)
(14,327)
201,753 183,335
$ 323,904 $ 297,653
(16,029)
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property, plant and equipment
Provision for (recovery from) uncollectible receivables
Share-based compensation
Deferred tax assets, net
Charges for inventory and customer service inventory write-downs
Loss on disposition of property, plant and equipment, net
Noncash lease expense
Net gain on marketable securities
Gains on sale of assets held for sale
Changes in operating assets and liabilities:
Accounts receivable
Unbilled receivables
Inventories
Customer service inventories
Accounts payable
Accrued expenses
Advance payments and unearned revenue
Income taxes payable or receivable
Other assets and liabilities
Change in lease liabilities
Net cash provided by operating activities
Investing Activities
Payments for acquisition of property, plant and equipment
Purchase of marketable securities
Proceeds from sale of asset held for sale
Net cash used in investing activities
Financing Activities
Proceeds from borrowings
Repayments of borrowings
Payments for repurchase of common stock
Payments for repurchase of common stock - treasury shares
Payments for taxes related to net settlement of equity awards
..........................................................................................................................
Proceeds from issuance of common stock under employee stock plans and
exercises of stock options
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
65
Fiscal Year Ended
July 2,
2021
July 1,
2022
July 3,
2020
$ 21,160 $ 110,139 $
257
4,463
(23)
3,834
8,004
1,735
11
1,057
(2,614)
(66)
5,383
171
2,921
(90,599)
1,452
6
(342)
—
—
(25,719)
(8,725)
(2,508)
(1,393)
10,503
876
1,713
(1,620)
(6,832)
(1,067)
2,789
(1,792)
(8,279)
2,284
(7,787)
—
—
—
(5,362)
(541)
1,029
(4,874)
(1,222)
(4,232)
(8,579)
(9,987)
(1,104)
580
1,767
10,560
159
(997)
—
17,298
(2,847)
—
—
(2,847)
—
(9,000)
—
(787)
(167)
1,906
(8,048)
(77)
4,387
23
1,686
(172)
945
56
4,416
—
—
7,043
(304)
(5,651)
(1,023)
(3,122)
4,285
6,304
1,978
(3,615)
—
17,493
(4,608)
—
—
(4,608)
41,911
(41,911)
(1,772)
—
(802)
29
(2,545)
(669)
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash, beginning of year
Cash, cash equivalents, and restricted cash, end of year
(11,094)
48,198
9,671
32,201
$ 37,104 $ 48,198 $ 41,872
6,326
41,872
(In thousands)
Non-cash investing activities:
Unpaid property, plant and equipment
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash (received) paid for income taxes, net
Fiscal Year Ended
July 2,
2021
July 3,
2020
July 1,
2022
$
$
$
95 $
228 $
277
— $
1,241 $
4 $
(2,119) $
60
1,057
See accompanying Notes to Consolidated Financial Statements
66
Shares
10,719,390 $
—
—
450,112
(112,482)
(256,046)
—
10,800,974
—
—
393,724
(13,366)
(27,887)
—
11,153,445
—
—
(In thousands, except share amounts)
Balance as of June 28, 2019
Net income
Other comprehensive (loss), net of tax
Issuance of common stock under employee
stock plans
Shares withheld for taxes related to vesting
of equity awards
Stock repurchase
Share-based compensation
Balance as of July 3, 2020
Net income
Other comprehensive income, net of tax
Issuance of common stock under employee
stock plans
Shares withheld for taxes related to vesting
of equity awards
Stock repurchase
Share-based compensation
Balance as of July 2, 2021
Net income
Other comprehensive (loss), net of tax
Issuance of common stock under employee
stock plans
Shares withheld for taxes related to vesting
of equity awards
Stock repurchase
Share-based compensation
Balance as of July 1, 2022
AVIAT NETWORKS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
Common Stock
Treasury Stock
$ Amount Shares $ Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
Accumulated
Deficit
(730,998) $
257
—
(12,736) $
—
(2,233)
— $ — $ 815,142 $
—
—
—
—
—
—
—
25
—
—
(800)
—
(1,770)
—
1,686
—
— 814,283
—
—
—
—
—
—
—
(730,741)
110,139
—
—
—
—
(14,969)
—
642
71,516
257
(2,233)
29
(802)
(1,772)
1,686
68,681
110,139
642
108
—
—
4
(2)
(2)
—
108
—
—
4
—
—
—
—
—
—
—
—
—
1,902
—
—
1,906
—
—
— 19,587
—
—
112 19,587
—
—
—
—
(167)
—
—
(787)
2,921
—
(787) 818,939
—
—
—
—
—
—
—
(620,602)
21,160
—
—
—
—
(14,327)
—
(1,702)
(167)
(787)
2,921
183,335
21,160
(1,702)
198,143
2
—
—
1,029
—
—
1,031
(16,072)
(175,356)
—
11,160,160 $
(543)
—
—
—
(2) 175,356
—
3,834
—
112 194,943 $ (6,147) $ 823,259 $
—
(5,360)
—
—
—
—
(599,442) $
—
—
—
(16,029) $
(543)
(5,362)
3,834
201,753
See accompanying Notes to Consolidated Financial Statements
67
AVIAT NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Summary of Significant Accounting Policies
The Company
We design, manufacture and sell a range of wireless 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. Our 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.
We were incorporated in Delaware in 2006 to combine the businesses of Harris Corporation’s Microwave
Communications Division (“MCD”) and Stratex Networks, Inc. (“Stratex”). On January 28, 2010, we changed our
corporate name from Harris Stratex Networks, Inc. to Aviat Networks, Inc. (“the Company”, “Aviat Networks,” “Aviat”,
“we,” “us,” and “our”) to more effectively reflect our business and communicate our brand identity to customers.
Additionally, the change of our corporate name was to comply with the termination of the Harris Corporation (“Harris”)
trademark licensing agreement resulting from the spin-off by Harris of its interest in our stock to its stockholders in May
2009.
Basis of Presentation
The consolidated financial statements include the accounts of Aviat Networks and its wholly-owned and majority
owned subsidiaries. Significant intercompany transactions and accounts have been eliminated.
Our fiscal year ends on the Friday nearest June 30. This was July 1, for fiscal 2022, July 2, for fiscal 2021 and July
3, for fiscal 2020. Fiscal 2022 and 2021 presented 52 weeks while fiscal 2020 included 53 weeks . In these notes to
consolidated financial statements, we refer to our fiscal years as “fiscal 2022”, “fiscal 2021” and “fiscal 2020.”
Stock Split
On April 7, 2021 we effected a two-for-one stock split in the form of a stock dividend to shareholders of record as
of April 1, 2021. Common stock, Additional paid-in-capital, per share and equity award amounts for all periods presented
have been retrospectively reclassified to reflect the two-for-one stock split in the form of a stock dividend.
Use of Estimates
The preparation of consolidated financial statements in accordance with accounting principles generally accepted
in the United States (“U.S. GAAP”) requires us 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 management. We evaluate our 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, valuation allowances for
deferred tax assets and uncertainties in income taxes.
68
Cash, Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of three months or less at the date of purchase
to be cash equivalents. Cash equivalents are carried at amortized cost, which approximates fair value due to the short-term
nature of these investments. Investments with an original maturity of greater than three months are accounted for as short-
term investments and are classified as such at the time of purchase.
We hold cash and cash equivalents at several major financial institutions, which often significantly exceed Federal
Deposit Insurance Corporation insured limits. However, a substantial portion of the cash equivalents is invested in prime
money market funds which are backed by the securities in the fund.
As of July 1, 2022 and July 2, 2021, all of our high-quality marketable debt securities were invested in prime money
market funds.
Cash and cash equivalents that are restricted as to withdrawal or usage under the terms of contractual agreements
are recorded as restricted cash. Our long-term restricted cash included the cash balance in our disability insurance voluntary
plan account that cannot be used by us for any operating purposes other than to pay benefits to the insured employees and
was recorded in other assets on our consolidated balance sheets and the corresponding liabilities were included in other
long-term liabilities on our consolidated balance sheets.
Significant Concentrations
We typically invoice our customers for the sales order (or contract) value of the related products delivered at various
milestones, including order receipt, shipment, installation and acceptance and for services when rendered. Our trade
receivables are derived from sales to customers located in North America, Africa, Europe, the Middle East, Asia-Pacific
and Latin America.
Accounts receivable is presented net of allowance for estimated uncollectible accounts to reflect any loss anticipated
on the collection of accounts receivable balances. We calculate the allowance based on our history of write-offs, level of
past due accounts and the economic status of the customers. The fair value of our accounts receivable approximates their
net realizable value.
We regularly require letters of credit from certain customers and, from time to time, we discount these letters of
credit issued by customers through various financial institutions. The discounting of letters of credit depends on many
factors, including the willingness of financial institutions to discount the letters of credit and the cost of such arrangements.
Under these arrangements, collection risk is fully transferred to the financial institutions. We record the financing charges
on discounting these letters of credit as interest expense.
During fiscal 2022, Motorola accounted for 13% of our total revenue. During fiscal 2021 and 2020 there were no
customers that accounted for more than 10% of our total revenue. As of July 1, 2022 and July 2, 2021, MTN Group
accounted for approximately 17% and 14%, respectively, of our accounts receivable.
Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash
equivalents, marketable debt securities, trade accounts receivable and financial instruments used in foreign currency
hedging activities. We invest our excess cash primarily in prime money market funds and certificates of deposit. We are
exposed to credit risks related to such instruments in the event of default or decrease in credit-worthiness of the issuers of
the investments. Risks associated with cash and cash equivalents, and investments are mitigated by banking with, and
investing in, creditworthy institutions.
We perform ongoing credit evaluations of our customers and generally do not require collateral on accounts
receivable, as the majority of our customers are large, well-established companies. However, in certain circumstances, we
may require letters of credit, additional guarantees or advance payments. We maintain allowances for collection losses, but
69
historically have not experienced any significant losses related to any particular geographic area. Our customers are
primarily in the telecommunications industry, so our accounts receivable are concentrated within one industry and exposed
to concentrations of credit risk within that industry. Accounts receivable are written off when attempts to collect
outstanding amounts have been exhausted or there are other indicators that the amounts are no longer collectible.
We rely on third parties to manufacture our products and we purchase raw materials from third-party vendors. In
addition, we purchase certain strategic component inventory which is consigned to our third-party manufacturers. Other
components included in our products are sourced from various suppliers and are principally industry standard parts and
components that are available from multiple vendors. The inability of a contract manufacturer or supplier to fulfill our
supply requirements or changes in their financial or business condition could disrupt our ability to supply quality products
to our customers, and thereby may have a material adverse effect on our business and operating results.
We have entered into agreements relating to our foreign currency contracts with Silicon Valley Bank, a multinational
financial institution. The amounts subject to credit risk arising from the possible inability of any such parties to meet the
terms of their contracts are generally limited to the amounts, if any, by which such party’s obligations exceed our
obligations to that party.
Inventories
Inventories are valued at the lower of cost and net realizable value. Net realizable value is defined as the estimated
selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.
Cost is determined using standard cost, which approximates actual cost on a weighted-average first-in-first-out basis. We
regularly review inventory quantities on hand and record adjustments to reduce the cost of inventory for excess and
obsolete inventory based primarily on our estimated forecast of product demand and production requirements. Inventory
adjustments are measured as the difference between the cost of the inventory and net realizable value based upon
assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the
point of the loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements
in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
Customer Service Inventories
Our customer service inventories are stated at the lower of cost and net realizable value. We carry service parts
because we generally provide product warranty for 12 to 36 months and earn revenue by providing enhanced and extended
warranty and repair service during and beyond this warranty period. Customer service inventories consist of both
component parts, which are primarily used to repair defective units, and finished units, which are provided for customer
use permanently or on a temporary basis while the defective unit is being repaired. We record adjustments to reduce the
carrying value of customer service inventories to their net realizable value. Factors influencing these adjustments include
product life cycles, end of service life plans and volume of enhanced or extended warranty service contracts. Estimates of
net realizable value involve significant estimates and judgments about the future, and revisions would be required if these
factors differ from our estimates.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost less accumulated depreciation and amortization. We
capitalize costs of software, consulting services, hardware and other related costs incurred to purchase or develop internal-
use software. We expense costs incurred during preliminary project assessment, re-engineering, training and application
maintenance.
Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the
respective assets. Leasehold improvements are amortized on the straight-line method over the shorter of the remaining
lease term or the estimated useful life of the improvements. The useful lives of the assets are generally as follows:
70
Buildings
Leasehold improvements
Software
Machinery and equipment
40 years
2 to 10 years
3 to 5 years
2 to 5 years
Expenditures for maintenance and repairs are charged to expense as incurred. Cost and accumulated depreciation
of assets sold or retired are removed from the respective property accounts, and any gain or loss is reflected in the
consolidated statements of operations.
Impairment of Long-Lived Assets
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an
undiscounted basis are less than the carrying amount of the assets. If impairment exists, the impairment loss is measured
and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the
lowest levels for which there are identifiable cash flows that are largely independent of cash flows from other asset groups.
Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future
operating performance, growth rates and other factors. The actual cash flows realized from these assets may vary
significantly from our estimates due to increased competition, changes in technology, fluctuations in demand, consolidation
of our customers, reductions in average selling prices and other factors. Assumptions underlying future cash flow estimates
are therefore subject to significant risks and uncertainties.
Warranties
On product sales, we provide for future warranty costs upon product delivery. The specific terms and conditions of
those warranties vary depending upon the product sold and the country in which we do business. In the case of products
sold by us, our warranties generally start from the delivery date and continue for one to three years, depending on the
terms.
Many of our products are manufactured to customer specifications and their acceptance is based on meeting those
specifications. Factors that affect our warranty liabilities include the number of product units subject to warranty protection,
historical experience and management’s judgment regarding anticipated rates of warranty claims and cost per claim. We
assess the adequacy of our recorded warranty liabilities every quarter and make adjustments to the liabilities as necessary.
Leases
We lease facilities under non-cancelable operating lease agreements. These leases have varying terms that range
from one to 20 years and contain leasehold improvement incentives, rent holidays and escalation clauses. In addition, some
of these leases have renewal options for up to 3 years.
We determine if an arrangement contains a lease at inception. These operating leases are included in Right of use
assets (ROU assets) on our July 1, 2022 consolidated balance sheets and represent our right to use the underlying asset for
the lease term. Our obligation to make lease payments are included in "Short-term lease liabilities" and "Long-term lease
liabilities" on our July 1, 2022 consolidated balance sheets. We have not entered into any financing leases during fiscal
2022.
Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum
lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we used
the incremental borrowing rate based on the remaining lease term at commencement date in determining the present value
of future payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives
and initial direct costs incurred. Variable lease payments are expensed as incurred and are not included within the ROU
71
asset and lease liability calculation. Lease expense for minimum lease payments is recognized on a straight-line basis over
the lease term. Certain of our lease arrangements include non-lease components and we account for non-lease components
together with lease components for all such lease arrangements.
Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets. We recognize
lease expense for these leases on a straight-line basis over the lease term.
Foreign Currency Translation
The functional currency of our subsidiaries located in the United Kingdom, Singapore, Mexico, Algeria and New
Zealand is the United States (“U.S.”) dollar. Determination of the functional currency is dependent upon the economic
environment in which an entity operates as well as the customers and suppliers the entity conducts business with. Changes
in facts and circumstances may occur which could lead to a change in the functional currency of that entity. Accordingly,
all of the monetary assets and liabilities of these subsidiaries are re-measured into U.S. dollars at the current exchange rate
as of the applicable balance sheet date, and all non-monetary assets and liabilities are re-measured at historical rates.
Income and expenses are re-measured at the average exchange rate prevailing during the period. Gains and losses resulting
from the re-measurement of these subsidiaries’ financial statements are included in the consolidated statements of
operations.
Our other international subsidiaries use their respective local currency as their functional currency. Assets and
liabilities of these subsidiaries are translated at the local current exchange rates in effect at the balance sheet date, and
income and expense accounts are translated at the average exchange rates during the period. The resulting translation
adjustments are included in accumulated other comprehensive loss.
Gains and losses resulting from foreign exchange transactions and revaluation of monetary assets and liabilities in
non-functional currencies are included in other income, net in the accompanying consolidated statements of operations,
based on the nature of the transactions. Net foreign exchange (loss) gains recorded in our consolidated statements of
operations during fiscal 2022, 2021 and 2020 were $(1.1) million, $(1.0) million, and $0.4 million, respectively.
Retirement Benefits
As of July 1, 2022, we provided retirement benefits to substantially all employees primarily through our defined
contribution retirement plans. These plans have matching and savings elements. Contributions by us to these retirement
plans are based on profits and employees’ savings with no other funding requirements. Contributions to retirement plans
are expensed as incurred. Retirement plan expense amounted to $1.9 million, $1.8 million and $1.7 million in fiscal 2022,
2021 and 2020, respectively.
Revenue Recognition
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, we
recognize revenue by applying the following five-step approach: (1) identification of the contract with a customer;
(2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation
of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we
satisfy a performance obligation. See Note 3 for additional discussion on revenue recognition.
Cost of Product Sales and Services
Cost of sales consists primarily of materials, labor and overhead costs incurred internally and amounts incurred for
contract manufacturers to produce our products, personnel and other implementation costs incurred to install our products
and train customer personnel, and customer service and third party original equipment manufacturer costs to provide
continuing support to our customers.
72
Shipping and handling costs are included as a component of costs of product sales in our consolidated statements
of operations because they are also included in revenue that we bill our customers.
Advertising Costs
We expense all advertising costs as incurred. Advertising costs were immaterial during fiscal 2022, 2021 and 2020.
Presentation of Transactional Taxes Collected from Customers and Remitted to Government Authorities
We present transactional taxes such as sales and use tax collected from customers and remitted to governmental
authorities on a net basis.
Research and Development Costs
Our research and development costs, which include costs in connection with new product development,
improvement of existing products, process improvement, and product use technologies, are generally charged to operations
in the period in which they are incurred. For certain software projects under development, we capitalize the development
costs during the period between determining technological feasibility of the product and commercial release and are
included in Other assets on the consolidated balance sheet. We amortize the capitalized development cost upon commercial
release, generally over three years. To date, the amount of development costs capitalized and amount amortized have not
been material.
Share-Based Compensation
We estimate the grant date fair value of our share-based awards and amortize this fair value to compensation expense
over the requisite service period or vesting term. To estimate the fair value of our stock option awards, we use the Black-
Scholes option pricing model. The determination of the fair value of stock option awards on the date of grant using an
option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective
variables. These variables include our expected stock price volatility over the expected term of the awards, actual and
projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. Due to the inherent
limitations of option valuation models, including consideration of future events that are unpredictable and the estimation
process utilized in determining the valuation of the share-based awards, the ultimate value realized by our employees may
vary significantly from the amounts expensed in our financial statements. For restricted stock awards and units and
performance share awards and units, we measure the grant date fair value based upon the market price of our common
stock on the date of the grant. The fair value of each market-based stock unit with market conditions was estimated using
the Monte-Carlo simulation model. We elected to account for forfeitures as they occur.
We generally recognize compensation cost for share-based payment awards on a straight-line basis over the requisite
service period. For an award that has a graded vesting schedule, compensation expense is recognized on a straight-line
basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance,
multiple awards. The amount of compensation cost recognized at any date must at least equal the portion of the grant-date
value of the award that is vested at that date.
For awards with a performance condition vesting feature, we recognize share-based compensation costs for the
performance awards and units when achievement of the performance conditions is considered probable. Any previously
recognized compensation cost would be reversed if the performance condition is not satisfied or if it is not probable that
the performance conditions will be achieved. For awards with a market condition vesting feature, we recognize share-
based compensation costs over the period the requisite service is rendered, regardless of when, if ever, the market condition
is satisfied.
Restructuring Charges
73
Our restructuring charges represent expenses incurred in connection with certain cost reduction programs that we
have implemented, and consisted of the costs of employee termination costs, lease and other contract termination charges
and other costs of exiting activities or geographies. A liability for costs associated with an exit or disposal activity is
measured at its fair value when the liability is incurred. Expenses for one-time termination benefits are recognized at the
date we notify the employee, unless the employee must provide future service, in which case the benefits are expensed
ratably over the future service period. We recognize severance benefits provided as part of an ongoing benefit arrangement
when the payment is probable, and the amounts can be reasonably estimated. Liabilities related to termination of an
operating lease or contract are measured and recognized at fair value when the contract does not have any future economic
benefit to the entity and the fair value of the liability is determined based on the present value of the remaining lease
obligations, adjusted for the effects of deferred items recognized under the lease, and reduced by estimated sublease rentals
that could be reasonably obtained for the property. The assumptions in determining such estimates include anticipated
timing of sublease rentals and estimates of sublease rental receipts and related costs based on market conditions. We
expense all other costs related to an exit or disposal activity as incurred.
Income Taxes and Related Uncertainties
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined
based on the estimated future tax effects of temporary differences between the financial statement and tax basis of assets
and liabilities, as measured by tax rates at which temporary differences are expected to reverse as well as operating loss
and tax credit carry forwards. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities.
A valuation allowance is established to offset any deferred tax assets if, based upon the available information, it is more
likely than not that some or all of the deferred tax assets will not be realized.
We are required to compute our income taxes in each federal, state, and foreign jurisdiction in which we operate.
This process requires that we estimate the current tax exposure as well as assess temporary differences between the
accounting and tax treatment of assets and liabilities, including items such as accruals and allowances not currently
deductible for tax purposes as well as operating loss and tax credit carry forwards. The income tax effects of the differences
we identify are classified as current or long-term deferred tax assets and liabilities in our consolidated balance sheets. Our
judgments, assumptions, and estimates relative to the current provision for income taxes take into account current tax laws,
our interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic
tax authorities. Changes in tax laws or our interpretation of tax laws and the resolution of current and future tax audits
could significantly impact the amounts provided for income taxes in our consolidated balance sheets and consolidated
statements of operations. We must also assess the likelihood that deferred tax assets will be realized from future taxable
income and, based on this assessment, establish a valuation allowance, if required. Our determination of our valuation
allowance is based upon a number of assumptions, judgments, and estimates, including forecasted earnings, future taxable
income, and the relative proportions of revenue and income before taxes in the various domestic and international
jurisdictions in which we operate. To the extent we establish a valuation allowance or change the valuation allowance in a
period, we reflect the change with a corresponding increase or decrease to our tax provision in our consolidated statements
of operations.
We use a two-step process to determine the amount of tax benefit to be recognized for uncertain tax positions. The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more
than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such
amounts, as this requires us to determine the probability of various possible outcomes. We reevaluate these uncertain tax
positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or
circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in
recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in
the period.
74
Accounting Standards Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2019-12, Income Taxes (Topic 740). This guidance simplifies the accounting for income taxes by removing
certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis of
goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes. ASU
2019-12 became effective for us in our first quarter of fiscal 2022. The adoption had no material impact on our unaudited
condensed consolidated financial statements.
Accounting Standards Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This guidance provides
optional guidance related to reference rate reform, which provides practical expedients for contract modifications and
certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This
guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and will be effective through
December 31, 2022. We are currently evaluating the potential impact of ASU 2020-04 will have on our consolidated
financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments (ASU 2016-13) and also issued subsequent amendments to the initial guidance:
ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, Topic 326). Topic 326 requires measurement and recognition
of expected credit losses for financial assets held. Topic 326 will be effective for us in our first quarter of fiscal 2023, and
earlier adoption is permitted. We are evaluating the impact adopting Topic 326 will have on our consolidated financial
statements.
Note 2. Net Income 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.
The following table presents the computation of basic and diluted net income per share attributable to our common
stockholders:
(In thousands, except per share amounts)
Numerator:
Net income
Denominator:
2022
Fiscal Year
2021
2020
$
21,160 $
110,139 $
257
Weighted average shares outstanding, basic
Effect of potentially dilutive equivalent shares
Weighted average shares outstanding, diluted
11,167
653
11,820
11,036
652
11,688
10,782
154
10,936
Net income per share:
Basic
Diluted
$
$
1.89 $
1.79 $
9.98 $
9.42 $
0.02
0.02
75
The following table summarizes the weighted-average equity awards that were excluded from the diluted net income
per share calculations since they were antidilutive:
(In thousands)
Stock options
Restricted stock units and performance stock units
............................................................................................................
Total shares of common stock excluded
Note 3. Revenue Recognition
2022
Fiscal Year
2021
2020
114
72
186
8
4
12
356
2
358
We recognize revenue by applying the following five-step approach: (1) identification of the contract with a
customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4)
allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or
as, we satisfy a performance obligation.
Contracts and customer purchase orders are used to determine the existence of an arrangement.
Many of the Company’s arrangements with customers contain multiple performance obligations and therefore
promises to provide multiple goods and services. The Company evaluates each promised good and service in a contract to
determine whether it represents a distinct performance obligation or should be accounted for as a combined performance
obligation. For goods and services determined to be distinct we have concluded that they provide a benefit to the customer
either on their own or together with other resources that are readily available to the customer, without having the need for
significant integration or customization.
Revenue from product sales, recognized at a point-in-time, is generated predominately from the sales of products
manufactured by third-party manufacturers to whom we have outsourced our manufacturing processes. Printed circuit
assemblies, mechanical housings, and packaged modules are manufactured by contract manufacturing partners, with
periodic business reviews of material levels and obsolescence. Product assembly, product testing, complete system
integration, and system testing may either be performed within our own facilities or at the locations of our third-party
manufacturers.
Revenue from services includes certain network planning and design, engineering, installation and commissioning
(“field services”), extended warranty, customer support, consulting, training, and education. Maintenance and support
services are generally offered to our customers and recognized over a specified period of time and from sales and
subsequent renewals of maintenance and support contracts. The network planning and design, engineering and installation
related services noted are recognized based on an over-time recognition model using the cost-input method. Certain
judgment is required when estimating total contract costs and progress to completion on the over-time arrangements, as
well as whether a loss is expected to be incurred on the contract. The cost estimation process for these contracts is based
on the knowledge and experience of the Company’s project managers, engineers, and financial professionals. Changes in
job performance and job conditions are factors that influence estimates of the total costs to complete those contracts and
the Company’s revenue recognition. If circumstances arise that change the original estimates of revenues, costs, or extent
of progress toward completion, revisions to the estimates are made in a timely manner. These revisions may result in
increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which the
circumstances that gave rise to the revision become known to us. We perform ongoing profitability analysis of our service
contracts accounted for under this method to determine whether the latest estimates of revenues, costs, and profits require
updating. In rare circumstances if these estimates indicate that the contract will be unprofitable, the entire estimated loss
for the remainder of the contract is recorded immediately. We establish billing terms at the time project deliverables and
milestones are agreed. Revenues recognized in excess of the amounts invoiced to clients are classified as unbilled
76
receivables and if invoicing is ahead of revenue recognized it is classified as an unearned liability on the consolidated
balance sheets.
In addition, shipping documents and customer acceptances, when applicable, are used to verify delivery and transfer
of control. We typically satisfy our performance obligations upon shipment or delivery of product depending on the
contractual terms. Payment terms to customers generally range from net 30 to 120 days from invoice, which are considered
to be standard payment terms. Revenue recognition does not necessarily follow payment terms as there are a number of
scenarios where they would be different. Recognition follows contractual terms and those vary depending on the nature of
the performance obligation being satisfied. These timing differences result in contract assets and liabilities as discussed
below. We assess our ability to collect from our customers based primarily on the creditworthiness and past payment history
of the customer.
While our customers do not have the right of return, we reserve for estimated product returns as an offset to revenue
based primarily on historical trends. Actual product returns may be different than what was estimated. These factors and
unanticipated changes in economic and industry condition could make actual results differ from our return estimates.
We present transactional taxes such as sales and use tax collected from customers and remitted to government
authorities on a net basis.
Bill-and-Hold Sales
Certain customer arrangements consist of bill-and-hold characteristics under which transfer of control has been met
(including the passing of title and significant risk and reward of ownership to the customers). Therefore, the customers can
direct the use of the bill-and-hold inventory while we retain physical possession of the product until it is installed at a
customer site at a point in time in the future.
Termination Rights
The contract term is determined on the basis of the period over which the parties to the contract have present
enforceable rights and obligations. Certain customer contracts include a termination for convenience clause that allows the
customer to terminate services without penalty, upon advance notification. We concluded that the duration of support
contracts does not extend beyond the non-cancellable portion of the contract.
Variable Consideration
The consideration associated with customer contracts is generally fixed. Variable consideration includes discounts,
rebates, refunds, credits, incentives, penalties, or other similar items. The amount of consideration that can vary is not a
substantial portion of total consideration.
Variable consideration estimates are re-assessed at each reporting period until a final outcome is determined. The
changes to the original transaction price due to a change in estimated variable consideration are applied on a retrospective
basis, with the adjustment recorded in the period in which the change occurs. Changes to variable consideration are tracked
and material changes disclosed.
Stand-alone Selling Price
Stand-alone selling price is the price at which an entity would sell a good or service on a stand-alone (or separate)
basis at contract inception. Under the model, the observable price of a good or service sold separately provides the best
evidence of stand-alone selling price. However, in certain situations, stand-alone selling prices will not be readily
observable and the entity must estimate the stand-alone selling price.
When allocating on a relative stand-alone selling price basis, any discount provided in the contract is allocated
proportionately to all of the performance obligations in the contract.
77
The majority of products and services that we offer have readily observable selling prices. For products and services
that do not, we estimate stand-alone selling price using the market assessment approach based on expected selling price
and adjust those prices as necessary to reflect our costs and margins. As part of our stand-alone selling price policy, we
review product pricing on a periodic basis to identify any significant changes and revise our expected selling price
assumptions as appropriate.
Shipping and Handling
Shipping and handling costs are included as a component of costs of product sales in our consolidated statements
of operations because they are also included in revenue that we bill our customers.
Costs to Obtain a Contract
We have assessed the treatment of costs to obtain or fulfill a contract with a customer. Under ASC 606, we capitalize
sales commissions related to multi-year service contracts, and amortize the asset over the period of benefit, which is the
estimated service period. Sales commissions paid on contract renewals, including service contract renewals, is
commensurate with the sales commissions paid on the initial contracts. The capitalized sales commissions are included in
Other Current Assets and Other Assets on the consolidated balance sheets. We have not identified any impairments during
the periods presented.
We elected the practical expedient to expense sales commissions as incurred when the amortization period of the
related asset is one year or less. These costs are recorded as sales and marketing expense and included in our consolidated
balance sheet as accrued expenses until paid. Our amortization expense was not material for the fiscal years ended July 1,
2022, July 2, 2021 and July 3, 2020.
Contract Balances, Performance Obligations, and Backlog
The following table provides information about receivables and liabilities from contracts with customers (in
thousands):
Contract Assets
Accounts receivable, net
Unbilled receivables
Capitalized commissions
Contract Liabilities
July 1, 2022
July 2, 2021
$
$
$
73,168 $
45,857 $
2,341 $
48,135
37,521
1,720
Advance payments and unearned revenue
Unearned revenue, long-term
32,304
8,592
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). The Contract Asset balance has continued to grow
as we continue to execute on large North American over time projects and International projects that carry notably longer
payment terms.
33,740 $
8,920 $
$
$
From time to time, we may experience unforeseen events that could result in a change to the scope or price associated
with an arrangement. We would update the transaction price and measure of progress for the performance obligation and
recognize the change as a cumulative catch-up to revenue. Because of the nature and type of contracts we engage in, the
timeframe to completion and satisfaction of current and future performance obligations can shift; however, this will have
no impact on our future obligation to bill and collect.
As of July 1, 2022, we had $42.7 million in advance payments and unearned revenue and long-term unearned
revenue, of which approximately 60% is expected to be recognized as revenue in fiscal 2023 and the remainder thereafter.
78
During fiscal years 2022 and 2021, we recognized approximately $23.3 million and $21.9 million respectively, that was
included in advance payments and unearned revenue at the beginning of each reporting period.
Remaining Performance Obligations
We elect the practical consideration to exclude performance obligations that relate to contracts with original
expected durations of one year or less. As our product purchase orders are generally delivered within one year or less and
our maintenance and support service contracts can be terminated without substantive termination penalties resulting in
contracts with less than one year of duration, these performance obligations have been excluded from the remaining
performance obligation amounts. The aggregate amount of transaction price allocated to the remaining unsatisfied
performance obligations (or partially unsatisfied) was approximately $97.0 million at July 1, 2022 relating to our long-
term field service projects. Of this amount, we expect to recognize approximately 50% as revenue during fiscal 2023, with
the remaining amount to be recognized as revenue beyond 12 months.
Note 4. Leases
We lease facilities under non-cancelable operating lease agreements. These leases have original terms that range
from one to 20 years and may contain leasehold improvement incentives, rent holidays and escalation clauses. In addition,
some of these leases have renewal options for up to 3 years. We lease office space in Austin, Texas as our corporate
headquarters with an original term of 36 months.
We determine if an arrangement contains a lease at inception. These operating leases are included in "Right of use
assets" (ROU assets) on our July 1, 2022 consolidated balance sheet and represent our right to use the underlying asset for
the lease term. Our obligation to make lease payments are included in "Short-term lease liabilities" and "Long-term lease
liabilities" on our July 1, 2022 consolidated balance sheet. We have not entered into any financing leases during fiscal
2022.
Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum
lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we used
the incremental borrowing rate based on the remaining lease term at commencement date in determining the present value
of future payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives
and initial direct costs incurred. Variable lease payments are expensed as incurred and are not included within the ROU
asset and lease liability calculation. Lease expense for minimum lease payments is recognized on a straight-line basis over
the lease term. Certain of our lease arrangements include non-lease components and we account for non-lease components
together with lease components for all such lease arrangements.
Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets. We recognize
lease expense for these leases on a straight-line basis over the lease term.
As of July 1, 2022, total ROU assets were approximately $2.8 million, and short-term lease liabilities and long-term
lease liabilities were approximately $0.5 million and $2.4 million, respectively. Cash paid for lease liabilities was $0.7
million for fiscal 2022.
The following summarizes our lease costs, lease term and discount rate for fiscal 2022 and 2021 (in thousands):
79
Operating lease costs
Short-term lease costs
Variable lease costs
Total lease costs
Fiscal
2022
2021
$
$
1,061 $
2,252
171
3,484 $
1,213
1,639
324
3,176
Other information related to our operating leases for fiscal 2022 and 2021 (in thousands, except for weighted
average):
Weighted average remaining lease term
Weighted average discount rate
Operating lease assets obtained in exchange for operating lease liabilities
$
Fiscal
2022
2021
7.9 years
5.6 %
104
$
7.8 years
5.7 %
1,772
Rental expense for operating leases, including rentals on a month-to-month basis was $3.6 million for fiscal 2022
and $3.3 million for each of fiscal 2021 and 2020.
As of July 1, 2022, our future minimum lease payments under all non-cancelable operating leases with an initial
term in excess of one year were as follows (in thousands):
Fiscal years
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: interest
Present value of lease liabilities
Amount
$
$
667
553
570
476
169
1,386
3,821
(896)
2,925
Note 5. Balance Sheet Components
Cash, Cash Equivalents, and Restricted Cash
The following table provides a summary of cash, cash equivalents, and restricted cash reported within the
Consolidated Balance Sheets that reconciles to the corresponding amount in the Consolidated Statements of Cash Flows:
(In thousands)
Cash and cash equivalents
Restricted cash included in Other assets
Total cash, cash equivalents, and restricted cash
July 1, 2022
July 2, 2021
$
$
36,877 $
227
37,104 $
47,942
256
48,198
80
Accounts Receivable, net
Our net accounts receivable are summarized below:
(In thousands)
Accounts receivable
Less: Allowances for collection losses
Total accounts receivable, net
Inventories
Our inventories are summarized below:
(In thousands)
Finished products
Raw materials and supplies
Total inventories
Consigned inventories included within raw materials
July 1, 2022
July 2, 2021
74,102 $
(934)
73,168 $
50,276
(2,141)
48,135
July 1, 2022
July 2, 2021
14,916 $
10,478
25,394 $
9,796 $
15,409
8,027
23,436
6,570
$
$
$
$
$
During fiscal 2022, 2021 and 2020, we recorded charges to adjust our inventory and customer service inventory due
to excess and obsolete inventory resulting from lower sales forecasts, product transitioning or discontinuance. Such charges
incurred during fiscal 2022, 2021 and 2020 were classified in cost of product sales as follows:
(In thousands)
Excess and obsolete inventory charges (recovery)
Customer service inventory write-downs
Total charges
Assets Held for Sale
2022
647 $
1,088
1,735 $
$
$
Fiscal Year
2021
2020
544 $
908
1,452 $
233
712
945
We consider properties to be Assets held for sale when management approves and commits to a plan to dispose of
a property or group of properties. The property held for sale prior to the sale date is separately presented on the balance
sheet as Assets held for sale.
During the second quarter of fiscal 2021 management initiated the sale of our facility located in the United Kingdom.
We completed the sale during the third quarter of fiscal 2022 with proceeds of $2.3 million, reflecting a gain of $0.1
million. We have no additional assets held for sale.
Property, Plant and Equipment, net
Our property, plant and equipment, net is summarized below:
(In thousands)
Land
Buildings and leasehold improvements
Software
Machinery and equipment
Less accumulated depreciation and amortization
Total Property, Plant and Equipment, net
July 1, 2022
July 2, 2021
210 $
5,796
21,368
49,584
76,958
(68,071)
8,887 $
210
6,914
21,370
51,244
79,738
(68,037)
11,701
$
$
81
Included in the total plant, property and equipment above were $1.2 million and $0.3 million of assets in progress
which have not been placed in service as of July 1, 2022 and July 2, 2021, respectively. Depreciation and amortization
expense related to property, plant and equipment, including amortization of internal use software was $4.5 million, $5.4
million and $4.4 million in fiscal 2022, 2021 and 2020, respectively.
Accrued Expenses
Our accrued expenses are summarized below:
(In thousands)
Accrued compensation and benefits
Accrued agent commissions
Accrued warranties
Other
July 1, 2022
July 2, 2021
11,625 $
1,864
2,913
10,049
26,451 $
13,455
2,348
3,228
9,123
28,154
$
$
We accrue for the estimated cost to repair or replace products under warranty. Changes in our warranty liability,
which is included as a component of accrued expenses in the consolidated balance sheets, were as follows:
(In thousands)
Balance as of the beginning of the fiscal year
Warranty provision recorded during the period
Consumption during the period
Balance as of the end of the period
Advance payments and Unearned Revenue
2022
Fiscal Year
2021
$
$
3,228 $
1,328
(1,643)
2,913 $
3,196 $
1,679
(1,647)
3,228 $
2020
3,323
1,564
(1,691)
3,196
Our advance payments and unearned revenue are summarized below:
(In thousands)
Advance payments
Unearned revenue
July 1, 2022
July 2, 2021
$
$
1,870 $
31,870
33,740 $
2,445
29,859
32,304
Note 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 use of observable inputs and minimize the use
of unobservable inputs in measuring fair value and establish a three-level fair value hierarchy that prioritizes the 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 July 1, 2022 and July 2, 2021 were as follows:
82
(In thousands)
Assets:
Cash and cash equivalents:
Money market funds
Bank certificates of deposit
Marketable securities
Liabilities:
Other accrued expenses:
July 1, 2022
July 2, 2021
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Valuation
Inputs
$
5,367 $
3,682 $
5,367 $ 26,847 $ 26,847
3,288
3,288 $
3,682 $
$
—
— $
$ 10,893 $ 10,893 $
Level 1
Level 2
Level 1
Foreign exchange forward contracts
$
114 $
114 $
14 $
14
Level 2
We classify items within Level 1 if quoted prices are available in active markets. Our Level 1 items mainly are
marketable securities and money market funds purchased from major financial institutions. Our marketable securities are
included in current assets on our balance sheet as they are available to be converted into cash to fund current operations.
These marketable securities are publicly traded stock measured at fair value and classified within Level 1. As of July 1,
2022, these money market funds were valued at $1.00 net asset value per share by these financial institutions.
We classify items in 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 bank
certificates of deposit and foreign exchange forward contracts are classified within Level 2. Foreign currency forward
contracts are measured at fair value using observable foreign currency exchange rates. The assets and liabilities related to
our foreign currency forward contracts were not material as of July 1, 2022 and July 2, 2021. We did not have any recurring
assets or liabilities that were valued using significant unobservable inputs.
Our 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 fiscal 2022, 2021 and 2020, we had no transfers between
levels of the fair value hierarchy of our assets or liabilities measured at fair value.
Note 7. Credit Facility and Debt
On May 17, 2020, we entered into Amendment No. 4 to Third Amended and Restated Loan and Security Agreement
with Silicon Valley Bank (the “SVB Credit Facility”) which extended the expiration date to June 28, 2024. The SVB Credit
Facility provides for a $25.0 million accounts receivable formula based revolving credit facility that can be borrowed by
our U.S. company, with a $25.0 million sublimit that can be borrowed by our U.S. and Singapore entities. Loans may be
advanced under the SVB Credit Facility based on a borrowing base equal to a specified percentage of the value of eligible
accounts of the borrowers under the SVB Credit Facility. The borrowing base is subject to certain eligibility criteria.
Availability under the accounts receivable formula based revolving credit facility can also be utilized to issue letters of
credit with a $12.0 million sub limit. We may prepay loans under the SVB Credit Facility in whole or in part at any time
without premium or penalty. As of July 1, 2022, available credit under the SVB Credit Facility was $21.7 million reflecting
the calculated borrowing base of $25.0 million less outstanding letters of credit of $3.3 million. We did not borrow against
the SVB Credit Facility during fiscal 2022 or 2021 and there was no borrowing outstanding as of July 1, 2022.
The SVB Credit Facility carries an interest rate, at our option, computed (i) at the prime rate reported in the Wall
Street Journal plus a spread of 0.50% to 1.50%, with such spread determined based on our adjusted quick ratio; or (ii) if
we satisfy a minimum adjusted quick ratio, a LIBOR rate determined in accordance with the SVB Credit Facility, plus a
spread of 2.75%. Any outstanding Singapore subsidiary borrowed loans shall bear interest at an additional 2.00% above
the applicable prime or LIBOR rate.
83
The SVB Credit Facility contains monthly and quarterly financial covenants including minimum adjusted quick
ratio and minimum profitability (EBITDA) requirements. In the event our adjusted quick ratio falls below a certain level,
cash received in our accounts with Silicon Valley Bank may be directly applied to reduce outstanding obligations under
the SVB Credit Facility. The SVB Credit Facility also imposes certain restrictions on our ability 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 equal to
5.00% above the applicable interest rate. As of July 1, 2022, we were in compliance with the quarterly financial covenants,
as amended, contained in the SVB Credit Facility.
During fiscal 2022, we terminated an uncommitted short-term line of credit from a bank in New Zealand to
support the operations of our subsidiary located there.
Note 8. Restructuring Activities
The following table summarizes our restructuring related activities during fiscal year 2022, 2021 and 2020:
$
(In thousands)
Balance as of June 28, 2019
Charges, net
Cash payments
Foreign currency translation (gain) loss
Balance as of July 3, 2020
Charges, net
Cash payments
Foreign currency translation (gain) loss
Balance as of July 2, 2021
Charges, net
Cash payments
Foreign currency translation (gain) loss
Balance as of July 1, 2022
$
Severance and Benefits
Q4 2022
Plan
Fiscal 2021
Plan
Prior Years
Plans
Facilities
and Other
Prior Years
Plans
— $
—
—
—
—
—
—
—
—
434
(139)
—
295 $
— $
—
—
—
—
2,414
(205)
—
2,209
271
(1,371)
(23)
1,086 $
1,089 $
4,049
(2,636)
—
2,502
(143)
(2,086)
7
280
(231)
(49)
—
— $
238 $
—
—
(2)
236
—
—
12
248
(236)
—
(12)
— $
Total
1,327
4,049
(2,636)
(2)
2,738
2,271
(2,291)
19
2,737
238
(1,559)
(35)
1,381
As of July 1, 2022, the sum of the accrual balance of $1.4 million was in short-term restructuring liabilities on the
consolidated balance sheets. Included in the above plans for which we were carrying a provision were positions identified
for termination that have not been executed from a restructuring perspective.
Q4 2022 Plan
During the fourth quarter of Q4 2022, our Board of Directors approved a restructuring plan (the “Q4 2022 Plan”)
to restructure specific groups to optimize skill sets and align structure to execute on strategic deliverables. The Q4 2022
Plan was anticipated to entail a reduction in force of approximately 11 employees to be implemented through early fiscal
year 2023, with a certain number of positions being consolidated.
Fiscal 2021 Plan
84
During the third quarter of fiscal 2021, our Board of Directors approved restructuring plans (the “Fiscal 2021 Plan”)
to continue to reduce our operating costs and improve profitability as part of our transformational initiative to optimize
our business model and increase efficiencies. We recorded restructuring charges of $2.4 million related to the Fiscal 2021
Plan in fiscal 2021. The Fiscal 2021 Plan was anticipated to entail a reduction in force of approximately 30 employees to
be implemented through the end of fiscal year 2022, with a certain number of positions being consolidated and/or relocated.
Q4 2020 Plan
During the fourth quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q4 2020 Plan”)
to continue to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.
Payments related to the accrued restructuring liability balance for this plan was completed in the second quarter of fiscal
2022.
Prior Years’ Plan
Activities under the Fiscal 2015-2016 Plan primarily included reductions in workforce across the Company, but
primarily in operations outside the United States. Payments related to the accrued restructuring liability balance for this
plan are complete.
Note 9. Stockholders’ Equity
Stock Repurchase Program
During the second quarter of fiscal 2022 we completed the $7.5 million stock repurchase program approved by our
board of directors in May 2018. This repurchase program was temporarily suspended from February 2020 to February
2021. In November 2021 our board of directors approved a stock repurchase program to purchase up to $10.0 million of
our common stock. During fiscal 2022, 2021 and 2020 we repurchased $5.4 million, $0.8 million and $1.8 million of our
common stock in the open market respectively. As of July 1, 2022, $7.3 million remained available for repurchase under
our November 2021 stock repurchase program.
The following table summarizes the repurchase of our common stock:
Shares
Weighted-Average
Price Paid per Share
175,356 $
19,587 $
256,046 $
Aggregate
purchase price
5,361
787
1,769
30.57 $
40.16 $
6.91 $
(In thousands, except share and per-share amounts)
Fiscal 2022 Treasury Shares
Fiscal 2021 Treasury Shares
Fiscal 2020
85
Starting in February 2021, repurchased shares were recorded as treasury stock and we do not anticipate retiring them.
Treasury stock did not participate in the two-for-one stock split in the form of a stock dividend paid on April 7, 2021. All
repurchased shares prior to February 2021 were retired and reflected the two-for-one stock split. As of July 1, 2022, $7.3
million remained available for repurchase under our November 2021 stock repurchase program.
Stock Incentive Programs
Stock Equity Plan
At July 1, 2022, we had one stock incentive plan for our employees and non-employee directors, the 2018 Incentive
Plan (the “2018 Plan”). The 2018 Plan was approved by the stockholders at the fiscal year 2017 Annual Stockholders’
Meeting and it added 500,000 shares to the equity pool of shares available to grant to employees and non-employee
directors. The 2018 Plan replaced the 2007 Plan as our primary long-term incentive program (“LTIP”). The 2007 Plan was
discontinued following stockholder approval of the 2018 Plan, but the outstanding awards under the 2007 Plan will
continue to remain in effect in accordance with their terms; provided that, as shares are returned under the 2007 Plan upon
cancellation, termination or otherwise of awards outstanding under the 2007 Plan, such shares will be available for grant
under the 2018 Plan. The 2018 Plan also 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 our common stock on the date the
options are granted using our 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 to non-executive board
members annually 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
criteria and continued employment through the end of the applicable period. Market-based stock units vest upon meeting
certain predetermined share price performance criteria and continued employment through the end of the applicable period.
We issue new shares of our common stock to our employees upon the exercise of stock options, vesting of restricted
stock awards and units or vesting of performance share awards and units. All awards that are canceled prior to vesting or
expire unexercised are returned to the approved pool of reserved shares and made available for future grants under the
2018 Plan. Shares of our common stock remaining available for future issuance under the 2018 Plan totaled 932,752 as of
July 1, 2022.
On March 3, 2020, our Board of Directors authorized and declared a dividend distribution of one right (a “Right”)
for each outstanding share of our common stock, par value $0.01 per share, to our stockholders of record as of the close of
business on March 3, 2020, (the “Record Date”). Each Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.01 per share (the “Preferred Shares”),
of the Company at an exercise price of $35.00 per one one-thousandth of a Preferred Share, subject to adjustment. Until
the rights become exercisable, they will not be evidenced by separate certificates and will trade automatically with shares
of the Company’s common stock. The Rights have a de minimis fair value. The complete terms of the Rights are set forth
in The Plan, dated as of March 3, 2020, and amended as of August 27, 2020, between the Company and Computershare
Inc., as rights agent. By adopting the Plan, we are helping to preserve the value of certain deferred tax benefits, including
those generated by net operating losses (collectively, the “Tax Benefits”), which could be lost in the event of an “ownership
change” as defined under Section 382 Code. We submitted the Plan to a stockholder vote and our stockholders voted to
approve the Plan at the 2020 Annual Meeting of Stockholders.
86
Also, on September 6, 2016, our Board of Directors adopted certain amendments to our Amended and Restated
Certificate of Incorporation, as amended (the “Charter Amendments”) The Charter Amendments are designed to preserve
the Tax Benefits by restricting certain transfers of our common stock.
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan (“ESPP”), employees are entitled to purchase shares of our common stock
at a 5% discount from the fair market value at the end of a three-month purchase period. As of July 1, 2022, 110,123 shares
were reserved for future issuances under the ESPP. We issued 2,329 shares under the ESPP during fiscal 2022.
Share-Based Compensation
Total following table presents the compensation expense for share-based awards included in our consolidated
statements of operations for fiscal 2022, 2021 and 2020:
(In thousands)
By Expense Category:
Cost of product sales and services
Research and development
Selling and administrative
Total share-based compensation expense
By Types of Award:
Options
Restricted stock awards and units
Performance share awards and units and market-based stock units
Total share-based compensation expense
2022
Fiscal Year
2021
2020
$
$
$
$
440 $
246
3,148
3,834 $
582 $
1,482
1,770
3,834 $
372 $
250
2,299
2,921 $
757 $
857
1,307
2,921 $
182
112
1,392
1,686
588
743
355
1,686
The following table summarizes the unamortized compensation expense and the remaining years over which such
expense would be expected to be recognized, on a weighted-average basis, by type of award:
Options
Restricted stock awards and units
Performance share awards and units
Unamortized
Expense
(In thousands)
839
7,736
2,243
$
$
$
July 1, 2022
Weighted-Average Remaining
Recognition Period
(Years)
1.11
2.02
1.10
87
Stock Options
A summary of the combined stock option activity under our equity plans during fiscal 2022 is as follows:
Options outstanding as of July 2, 2021
Granted
Exercised
Forfeited
Expired
Options outstanding as of July 1, 2022
Options vested and expected to vest as of July 1, 2022
Options exercisable as of July 1, 2022
Shares
Weighted-
Average
Exercise Price-
540,790 $
114,012 $
(103,088) $
(81,998) $
— $
469,716 $
469,716 $
111,505 $
9.55
33.84
9.33
11.35
—
15.15
15.15
9.97
Weighted-
Average
Remaining
Contractual
Life
(Years)
Aggregate
Intrinsic
Value
(In thousands)
5.38 $
12,090
4.68 $
4.68 $
3.3 $
5,599
5,599
1,693
The aggregate intrinsic value represents the total pre-tax intrinsic value or the aggregate difference between the
closing price of our common stock on July 1, 2022 of $25.09, and the exercise price for in-the-money options that would
have been received by the optionees if all options had been exercised on July 1, 2022.
Additional information related to our stock options is summarized below:
(In thousands)
Intrinsic value of options exercised
Fair value of options vested
2022
Fiscal Year
2021
2020
$
$
1,624 $
608 $
2,208 $
484 $
3
499
The fair value of each option grant under our 2018 Stock Plan was estimated using the Black-Scholes option pricing
model on the date of grant. A summary of the significant weighted-average assumptions we used in the Black-Scholes
valuation model is as follows:
Expected dividends
Expected volatility
Risk-free interest rate
Expected term (in years)
2022
— %
61.9 %
0.4 %
3.0
Fiscal Year
2021
— %
48.5 %
0.2 %
3.0
2020
— %
51.7 %
1.7 %
4.6
88
The following summarizes all of our stock options outstanding and exercisable as of July 1, 2022:
Actual Range of Exercise Prices
Number
Outstanding
Options Outstanding
Weighted-
Average
Remaining
Contractual
Life
(Years)
Options Exercisable
Weighted-
Average
Exercise Price
Number
Exercisable
Weighted-
Average
Exercise Price
$6.42
$7.23
$8.90
$11.00
$17.25
—
—
—
—
—
$6.42
$7.23
$8.90
$11.00
$35.97
9,826
145,554
40,204
150,956
123,176
469,716
4.88 $
3.76 $
2.52 $
5.06 $
6.01 $
4.68 $
6.42
7.23
8.90
11.00
32.32
15.15
6,552 $
18,668 $
40,204 $
40,708 $
5,373 $
111,505 $
6.42
7.23
8.90
11.00
24.00
9.97
Restricted Stock Awards and Units
A summary of the status of our restricted stock as of July 1, 2022 and changes during fiscal 2022 is as follows:
Restricted stock outstanding as of July 2, 2021
Granted
Vested and released
Forfeited
Restricted stock outstanding as of July 1, 2022
Shares
Weighted-Average
Grant Date
Fair Value
189,244 $
279,588 $
(46,788) $
(38,787) $
383,257 $
10.46
32.26
11.57
16.73
25.59
The fair value of each restricted stock grant is based on the closing price of our common stock on the date of grant.
The total grant date fair value of restricted stock that vested during fiscal 2022, 2021 and 2020 was $0.5 million, $0.5
million and $1.7 million, respectively.
Market-Based Stock Units
A summary of the status of our market-based stock units as of July 1, 2022 and changes during fiscal 2022 is as
follows:
Market-based stock units outstanding as of July 2, 2021
Granted
Vested and released
Forfeited
Market-based stock units outstanding as of July 1, 2022
Weighted-Average
Grant Date
Fair Value
Shares
165,000 $
46,533
—
(3,474)
208,059 $
11.51
38.91
—
35.97
14.54
89
The fair value for each market-based stock units with market condition was estimated using the Monte-Carlo
simulation model. A summary of the significant weighted-average assumptions we used in the Monte-Carlo simulation
model is as follows:
Expected dividends
Expected volatility
Risk-free interest rate
Weighted-average grant date fair value per share granted
Performance Share Awards and Units
Fiscal Year
2022
2021
—
—
62.2% - 60.0% 53.2% - 48.9%
0.37% - 0.45% 0.13% - 0.19%
14.07
$35.56 - $31.88 $
A summary of the status of our performance shares awards and units as of July 1, 2022 and changes during fiscal
2022 is as follows:
Performance share awards and units outstanding as of July 2, 2021
Granted
Vested and released
Forfeited/Cancelled
Performance share awards and units outstanding as of July 1, 2022
Shares
103,328 $
— $
(45,938) $
(40,346) $
17,044 $
Weighted-Average
Grant Date
Fair Value
14.58
—
8.66
9.38
42.85
The total grant date fair value of performance share units that vested during fiscal 2022, 2021 and 2020 was $0.4
million, $0.4 million and $0.5 million, respectively.
Note 10. Segment and Geographic Information
We operate 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 Chief Executive Officer is the Chief Operating Decision Maker (the “CODM”). Our CODM
manages our business primarily by function globally and reviews financial information on a consolidated basis,
accompanied by disaggregated information about revenues by geographic region, for purposes of allocating resources and
evaluating financial performance. The profitability of our geographic regions is not a determining factor in allocating
resources and the CODM does not evaluate profitability below the level of the consolidated company.
We report revenue by region and country based on the location where our customers accept delivery of our products
and services. Revenue by region for 2022, 2021 and 2020 were as follows:
(In thousands)
North America
Africa and Middle East
.........................................................................................................
Europe
Latin America and Asia Pacific
.........................................................................................................
Total Revenue
2022
199,801 $
47,527
12,973
42,658
302,959 $
Fiscal Year
2021
183,071 $
44,023
8,826
38,991
274,911 $
$
$
2020
151,709
37,595
11,157
38,181
238,642
90
Revenue by country comprising more than 5% of our total revenue for fiscal 2022, 2021 and 2020 was as follows:
(In thousands, except percentages)
Fiscal 2022:
United States
Philippines
Fiscal 2021:
United States
Fiscal 2020:
United States
Philippines
Revenue
% of
Total Revenue
$
$
$
$
198,824
16,327
65.6 %
5.4 %
181,842
66.1 %
147,795
12,550
61.9 %
5.3 %
Our long-lived assets, consisting primarily of net property, plant and equipment, by geographic areas based on the
physical location of the assets as of July 1, 2022 and July 2, 2021 were as follows:
(In thousands)
New Zealand
United States
Slovenia
Other countries
Total
Note 11. Income Taxes
July 1, 2022
July 2, 2021
$
$
5,149 $
2,972
433
333
8,887 $
6,840
3,434
1,122
305
11,701
Income before provision for income taxes during fiscal year 2022, 2021 and 2020 consisted of the following:
(In thousands)
United States
Foreign
Total income before income taxes
2022
31,923 $
(1,488)
30,435 $
$
$
Fiscal Year
2021
26,325 $
(3,885)
22,440 $
2020
9,497
(5,788)
3,709
Provision for (benefit from) income taxes for fiscal year 2022, 2021 and 2020 were summarized as follows:
(In thousands)
Current provision (benefit):
Federal
Foreign
State and local
Deferred provision (benefit):
Federal
Foreign
State and local
$
Total provision for (benefit from) income taxes
$
91
2022
Fiscal Year
2021
2020
15 $
1,234
333
1,582
6,348
161
1,184
7,693
9,275 $
(60) $
2,128
221
2,289
(75,587)
983
(15,384)
(89,988)
(87,699) $
(10)
3,589
45
3,624
(744)
572
—
(172)
3,452
The provision for (benefit from) income taxes differed from the amount computed by applying the federal statutory
rate of 21.0%, to our income before provision for (benefit from) income taxes as follows:
(In thousands)
Tax provision at statutory rate
Valuation allowances
Permanent differences
$
State and local taxes, net of U.S. federal tax benefit
Foreign income taxed at rates different than the U.S. statutory rate
Executive compensation limitation
Stock-based compensation excess tax benefits
Tax credit/deductions - generated and expired
Foreign withholding taxes
Brazil withholding tax receivable
Change in uncertain tax positions
Return-to-provision/Deferred true-up adjustments
Other
Total provision for (benefit from) income taxes
$
2022
Fiscal Year
2021
2020
6,344 $
220
242
1,534
439
439
(580)
113
267
—
644
(269)
(118)
9,275 $
4,713 $
(95,796)
(346)
1,436
209
—
(482)
108
1,184
72
102
—
1,101
(87,699) $
779
(6,577)
(347)
542
764
—
—
99
303
—
2,674
5,634
(419)
3,452
.....................................................................................................
Our provision for (benefit from) income taxes was $9.3 million of expense for fiscal 2022, $87.7 million of benefit
for fiscal 2021 and $3.5 million of expense for fiscal 2020. Our tax expense for fiscal 2022 was primarily due to tax
expense related to U.S. and profitable foreign subsidiaries.
Our tax benefit for fiscal 2021 was primarily due to the release of $92.2 million in valuation allowance on our U.S.
federal and state deferred tax assets, offset by tax expenses related to profitable foreign subsidiaries and an increase in our
reserve for uncertain tax positions.
92
The components of deferred tax assets and liabilities were as follows:
(In thousands)
Deferred tax assets:
Inventory
Accruals and reserves
Bad debts
Amortization
Stock compensation
Deferred revenue
Unrealized exchange gain/loss
Other
Tax credit carryforwards
Tax loss carryforwards
Total deferred tax assets before valuation allowance
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Branch undistributed earnings reserve
Depreciation
Right of use assets
Other
Total deferred tax liabilities
Net deferred tax assets
As Reported on the Consolidated Balance Sheets
Deferred income tax assets
Deferred income tax liabilities
Total net deferred income tax assets
July 1, 2022
July 2, 2021
$
$
$
$
4,065 $
3,248
157
2,274
807
1,913
374
2,888
4,926
114,048
134,700
(37,529)
97,171
176
948
548
650
2,322
94,849 $
5,279
3,437
392
1,530
552
1,960
197
3,433
5,447
119,287
141,514
(37,447)
104,067
130
450
634
—
1,214
102,853
95,412 $
563
94,849 $
103,467
614
102,853
...........................................................................................................................................
Our valuation allowance related to deferred income taxes, as reflected in our consolidated balance sheets, was
$37.5 million as of July 1, 2022 and $37.4 million as of July 2, 2021. The change in valuation allowance for the fiscal
years ended July 1, 2022 and July 2, 2021 was an increase of $0.1 million and a decrease of $98.7 million, respectively.
The increase in the valuation allowance in fiscal 2022 was primarily due to losses in tax jurisdictions in which we cannot
recognize tax benefits, partially offset by the release of certain U.S. federal, state, and foreign valuation allowances. The
decrease in the valuation allowance in fiscal 2021 was primarily due to the release of certain U.S. federal, state, and foreign
valuation allowances, partially offset by losses in tax jurisdictions in which we cannot recognize tax benefits. During the
third quarter of fiscal 2021, we recorded a valuation allowance release of $92.2 million as a discrete item based on
management’s reassessment of the amount of its U.S. federal and state deferred tax assets that are more likely than not to
be realized, primarily as a result of increases in U.S. profitability in the current period and expectations of continued
profitability in future periods. In performing our analysis, we used the most updated plans and estimates that we currently
use to manage the underlying business and calculated the utilization of our deferred tax assets. As of July 1, 2022, we
continue to maintain a valuation allowance of $1.1 million on certain U.S. federal and state deferred tax assets that we
believe is not more likely than not to be realized in future periods.
Tax loss and credit carryforwards as of July 1, 2022 have expiration dates ranging between one year and no
expiration in certain instances. The amounts of U.S. federal tax loss carryforwards as of July 1, 2022 was $358.9 million
93
and begin to expire in fiscal 2023. The amount of U.S. federal and state tax credit carryforwards as of July 1, 2022 was
$7.0 million, and certain credits began to expire in fiscal 2023. The amount of foreign tax loss carryforwards as of July 1,
2022 was $188.0 million and certain losses began to expire in fiscal 2023. The amount of foreign tax credit carryforwards
as of July 1, 2022 was $2.8 million, and certain credits will begin to expire in fiscal 2026.
We use the flow-through method to account for investment tax credits generated on eligible scientific research and
development expenditures. Under this method, the investment tax credits are recognized as a benefit to income tax in the
year they are generated.
United States income taxes have not been provided on basis differences in foreign subsidiaries of $3.2 million as of
July 1, 2022 because of our intention to reinvest these earnings indefinitely. Additionally, no foreign withholding taxes,
federal or state taxes have been provided if these unremitted earnings of the Company’s foreign subsidiaries were
distributed, as such amounts are considered permanently reinvested.
It is not practicable to estimate the additional income taxes, including applicable foreign withholding taxes, that
would be due upon the repatriation of these earnings.
As of July 1, 2022, we had unrecognized tax benefits of $17.7 million for various federal, foreign, and state income
tax matters. Unrecognized tax benefits increased by $0.4 million during fiscal 2022. Our total unrecognized tax benefits
that, if recognized, would affect our effective tax rate was $9.7 million as of July 1, 2022. These unrecognized tax benefits
are presented on the accompanying consolidated balance sheets net of the tax effects of net operating loss carryforwards.
We account for interest and penalties related to unrecognized tax benefits as part of our provision for income taxes.
The interest accrued was $0.7 million as of July 1, 2022. As of July 2, 2021, an immaterial amount of penalties have been
accrued.
Our unrecognized tax benefit activity for fiscal 2022, 2021 and 2020 was as follows:
(In thousands)
Unrecognized tax benefit as of June 28, 2019
Additions for tax positions in prior periods
Additions for tax positions in current periods
Decreases for tax positions in prior periods
Decreases related to change of foreign exchange rate
Unrecognized tax benefit as of July 3, 2020
Additions for tax positions in prior periods
Additions for tax positions in current periods
Decreases for tax positions in prior periods
Decreases related to change of foreign exchange rate
Unrecognized tax benefit as of July 2, 2021
Additions for tax positions in prior periods
Additions for tax positions in current periods
Decreases for tax positions in prior periods
Decreases related to change of foreign exchange rate
Unrecognized tax benefit as of July 1, 2022
Amount
12,987
7,023
3,094
(4,692)
(365)
18,047
184
869
(1,788)
(57)
17,255
54
704
(104)
(202)
17,707
$
$
There was no change in our unrecognized tax benefit for tax positions in prior periods for fiscal year 2022 related
to settlements with tax authorities in the table above. Our unrecognized tax benefit decreased for tax positions in prior
periods by $0.9 million and $3.8 million for fiscal year 2021 and 2020, respectively, related to settlements with tax
authorities in the table above.
94
We have a number of years with open tax audits which vary from jurisdiction to jurisdiction. Our major tax
jurisdictions that are open and subject to potential audits include the U.S., Singapore, Nigeria, and Saudi Arabia. The
earliest years for these jurisdictions are as follows: U.S. - 2003; Singapore - 2015; Nigeria – 2006; and Saudi Arabia -
2019.
On December 27, 2020, the US enacted the Consolidated Appropriations Act of 2021 (CAA) which extended and
expanded certain tax relief measures created by the CARES Act, including, but not limited to, (1) second round of Payroll
Protection Program loans, and (2) the Employer Retention Credit for 2021.
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 31, 2026. We continue to examine the elements of CAA and ARPA
and the impact they may have on our future business.
Note 12. Commitments and Contingencies
Purchase Orders and Other Commitments
From time to time in the normal course of business, we may enter into purchasing agreements with our suppliers
that require us to accept delivery of, and remit full payment for, finished products that we have ordered, finished products
that we requested be held as safety stock, and work in process started on our behalf in the event we cancel or terminate 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 no present intention
to cancel or terminate any of these agreements, we currently do not believe that we have any future liability under these
agreements.
As of July 1, 2022, we had outstanding purchase obligations and other commitments as follows:
2023
Payments due by period
2025
2024
2026
2027
Total
Purchase obligations with suppliers of
contract manufacturers
Contractual obligations associated with
software as a service and software
maintenance support
Total obligations
$ 45,378 $
4,530 $
2,909 $
— $
— $ 52,817
2,895
$ 48,273 $
922
5,452 $
124
3,033 $
—
— $
3,941
—
— $ 56,758
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 July 1, 2022, we had no guarantees applicable to our debt arrangements.
We have 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 July 1, 2022, we had commercial
commitments of $65.4 million outstanding that were not recorded on our consolidated balance sheets.
95
Indemnifications
Under the terms of substantially all of our license agreements, we have agreed to defend and pay any final judgment
against our customers arising from claims against such customers that our products infringe the intellectual property rights
of a third party. As of July 1, 2022, we have not received any notice that any customer is subject to an infringement claim
arising from the use of our products; we have not received any request to defend any customers from infringement claims
arising from the use of our products; and we have not paid any final judgment on behalf of any customer related to an
infringement claim arising from the use of our 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, we cannot estimate the
maximum amount of potential future payments, if any, related to our indemnification provisions. As of July 1, 2022, we
had not recorded any liabilities related to these indemnifications.
Legal Proceedings
We are subject from time to time to disputes with customers concerning our products and services. In May 2016,
we received notification of a claim for damages from a customer alleging that certain of our products were defective which
we settled for an immaterial amount during the third quarter of 2021.
In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought
against our 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, our 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. We have accrued an immaterial amount representing the estimated probable loss for which we
would settle the matter. We currently cannot form an estimate of the range of loss in excess of our amounts already accrued.
If the outcome of this matter is greater than the current immaterial amount accrued, we intend to dispute it vigorously.
From time to time, we may be involved in various other legal claims and litigation that arise in the normal course
of our operations. We are aggressively defending all current litigation matters. Although there can be no assurances and
the outcome of these matters is currently not determinable, we currently believe that none of these claims or proceedings
are likely to have a material adverse effect on our financial position. We expect to defend each of these disputes vigorously.
There are many uncertainties associated with any litigation and these actions or other third-party claims against us may
cause us to incur costly litigation and/or substantial settlement charges. As a result, our 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 estimates, if any.
We record accruals for our 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, 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 not
recorded any significant accrual for loss contingencies associated with such legal claims or litigation discussed above.
Contingent Liabilities
We record 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 financial statements; and (ii) the amount of the loss can be reasonably estimated.
Disclosure in the notes to the financial statements is required for loss contingencies that do not meet both those conditions
96
if there is a reasonable possibility that a loss may have been incurred. Gain contingencies are not recorded until realized.
We expense all legal costs incurred to resolve regulatory, legal and tax matters as incurred.
Periodically, we review 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 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 consolidated
financial statements. As additional information becomes available, we reassess the potential liability related to our 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 results of operations and financial position.
Note 13. Subsequent Event
On April 13, 2022, Aviat and Redline Communications, Inc. (“Redline”), a leading provider of mission-critical data
infrastructure, signed a definitive agreement for Aviat to acquire all outstanding common stock of Redline. The transaction
closed on July 5, 2022, subsequent to the balance sheet date. Redline allows Aviat to expand its Private Networks Offering
with Private LTE/5G, Unlicensed Wireless Access Solutions, by creating an integrated end-to-end offering for wireless
access and transport in the Private Networks segment, leveraging Aviat's sales channel to address a large dollar Private
LTE/5G addressable market and increasing Aviat’s reach in mission-critical industrial Private Networks. Redline
shareholders received $0.69 ($0.90 CAD) per share in cash. The total transaction value was approximately $12.9 million
USD and the implied enterprise value was approximately $15.0 million after adding back Redline’s net debt as of July 5,
2022. Aviat is continuing to integrate Redline and additional disclosures are not available as of the time of this filing as we
are in the process of determining the fair value of the assets and liabilities assumed.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on management’s evaluation, with participation of our Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”), as of the end of the period covered by this report, 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 Exchange Act 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 recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’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.
Changes in Internal Controls Over Financial Reporting
There were no changes to our internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f)
that occurred during the quarter ended July 1, 2022 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
97
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in
accordance with U.S. GAAP.
Management, including our CEO and CFO, assessed our internal control over financial reporting as of July 1, 2022,
the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial
reporting controls, process documentation, accounting policies, and our overall control environment.
Based on this assessment, management has concluded that our internal control over financial reporting was effective
as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. We
reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.
BDO USA LLP, the independent registered public accounting firm that audited the consolidated financial statements
of the Company included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of the
Company’s internal control over financial reporting as of July 1, 2022. The report is included in this Item under the heading
“Report of Independent Registered Public Accounting Firm.”
Inherent Limitations on Effectiveness of Controls
Our management, including 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.
Item 9B. Other Information
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
98
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a
definitive Proxy Statement with the SEC within 120 days after the end of our fiscal year ended July 1, 2022.
Item 10. Directors, Executive Officers and Corporate Governance
We adopted a Code of Conduct that is available at www.aviatnetworks.com. We most recently amended and restated
our Code of Conduct on February 10, 2021, and posted it on our website. If, in the future, we amend our Code of Conduct
or grant waivers from our Code of Conduct with respect to any of our executive officers or directors, we will make
information regarding such amendments or waivers available on our corporate website (www.aviatnetworks.com) for a
period of at least 12 months.
For information with respect to Executive Officers, see Part I, Item 1 of this Annual Report on Form 10-K, under
“Executive Officers of the Registrant,” which is incorporated herein by reference.
All information required to be disclosed in this Item 10 that is not otherwise contained herein will appear in our
definitive Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
Information regarding our executive and director compensation will appear in our definitive Proxy Statement and
is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information regarding security ownership of certain beneficial owners and management and related stockholder
matters will appear in our definitive Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and related transactions, and director independence will appear in our
definitive Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information regarding our principal accountant fees and services will appear in our definitive Proxy Statement and
is incorporated herein by reference.
99
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this report.
1. Financial Statements
The financial statements of Aviat Networks, Inc. are set forth in Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules
Schedule
Schedule II — Valuation and Qualifying Accounts for the three fiscal years ended July 1, 2022
...................................................................................................................................................................................
Page
102
All other schedules have been omitted because the required information is not present or is not present in amounts
sufficient to require submission of the schedules or because the information required is included in the consolidated
financial statements or notes thereto.
(b) Exhibits.
The information required by this Item is set forth on the Exhibit Index (following the Signatures section of this
report) and is included, or incorporated by reference, in this Form 10-K.
100
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Date: September 14, 2022
AVIAT NETWORKS, INC.
(Registrant)
By: /s/ David M. Gray
David M. Gray
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Peter A. Smith
Peter A. Smith
/s/ David M. Gray
David M. Gray
/s/ John Mutch
John Mutch
/s/ Bryan Ingram
Bryan Ingram
/s/ Michele Klein
Michele Klein
/s/ Somesh Singh
Somesh Singh
/s/ James C. Stoffel
James C. Stoffel
/s/ Bruce Taten
Bruce Taten
President and Chief Executive Officer
(Principal Executive Officer)
September 14, 2022
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
September 14, 2022
Chairman of the Board
September 14, 2022
Director
September 14, 2022
Director
September 14, 2022
Director
September 14, 2022
Director
September 14, 2022
Director
September 14, 2022
101
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
AVIAT NETWORKS, INC.
Years Ended July 1, 2022, July 2, 2021 and July 3, 2020
(In thousands)
Allowances for collection losses:
Year ended July 1, 2022
Year ended July 2, 2021
Year ended July 3, 2020
____________________________
Balance at
Beginning of
Period
Charged to
(Credit from)
Costs and
Expenses
Deductions
Balance
at End
of Period
$
$
$
2,141 $
1,841 $
1,602 $
(1,206) $
300 $
248 $
—
$
—
$
9 (1) $
935
2,141
1,841
(1) - Consisted of changes to allowance for collection losses of $0 for foreign currency translation gain and $9 thousand
for uncollectible accounts charged off, net of recoveries on accounts previously charged off.
102
The following exhibits are filed or furnished herewith or are incorporated herein by reference to exhibits previously
filed with the SEC:
EXHIBIT INDEX
Ex. #
3.1
3.2
4.1
4.2
4.3
4.4*
10.1
10.2
10.3+
10.4+
10.5
10.5.1
10.5.2
10.5.3
Description
Amended and Restated Certificate of Incorporation of Aviat Networks, Inc., as amended (incorporated
by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q filed with the SEC on February 10,
2017, File No. 001-33278)
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 23, 2022, File No. 001-33278)
Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred
Stock (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC
on September 7, 2016. File No. 001-33278)
Specimen common stock certificate, adopted as of January 29, 2010 (incorporated by reference to
Exhibit 4.1.1 to the Annual Report on Form 10-K for fiscal year end July 2, 2010 filed with the SEC on
September 9, 2010, File No. 001-33278)
Amended and Restated Tax Benefit Preservation Plan, dated as of August 27, 2020, 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 August 31, 2020, File No. 011-33278)
Description of Registered Securities
Intellectual Property Agreement between Harris Stratex Networks, Inc. and Harris Corporation dated
January 26, 2007 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed
with the SEC on February 1, 2007, File No. 001-33278)
Tax Sharing Agreement between Harris Stratex Networks, Inc. and Harris Corporation dated
January 26, 2007 (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed
with the SEC on February 1, 2007, File No. 001-33278)
Standard Form of Executive Employment Agreement between Harris Stratex Networks, Inc. and certain
executives (incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K filed with
the SEC on February 1, 2007, File No. 001-33278)
Aviat Networks, Inc. 2007 Stock Equity Plan (as Amended and Restated Effective November 13, 2015)
(incorporated by reference to Appendix A to Schedule 14A filed with the SEC on October 1, 2015, File
No. 001-33278)
Third Amended and Restated Loan and Security Agreement, dated as of June 29, 2018, by and among
Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and Silicon Valley bank
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
June 29, 2018, File No. 001-33278)
Amendment #1 to Third Amended and Restated Loan and Security Agreement, dated as of September
28, 2018, by and among Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and Silicon
Valley Bank (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with
the SEC on October 4, 2018, File No. 001-33278)
Amendment #2 to Third Amended and Restated Loan and Security Agreement, dated as of June 10,
2019, by and among Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and Silicon
Valley Bank (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with
the SEC on June 12, 2019, File No. 001-33278)
Third Amendment to Third Amended and Restated Loan and Security Agreement, dated as of May 4,
2020, by and among Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and Silicon
Valley Bank (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with
the SEC on May 5, 2020, File No. 001-33278)
103
Ex. #
10.5.4
10.6
10.7+
10.7.1+
10.7.2+
10.8
10.9+
10.9.1+
10.9.2+
10.10+
10.11+
10.12+*
10.12.1+*
21*
23.1*
31.1*
31.2*
32.1**
101.INS
101.SCH
101.CAL
Description
Fourth Amendment to Third Amended and Restated Loan and Security Agreement, dated as of May 17,
2021, by and among Aviat Networks, Inc., Aviat U.S., Inc., Aviat Networks (S) Pte. Ltd. and Silicon
Valley Bank (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with
the SEC on May 5, 2020, File No. 001-33278)
Letter Agreement, dated as of January 11, 2015, among Aviat Networks, Inc., Steel Partners Holdings
L.P., Lone Star Value Management, LLC and certain other parties (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K filed with the SEC on January 12, 2015, File No. 001-33278)
Employment Agreement, dated January 20, 2016, between Aviat Networks, Inc. and Eric Chang
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
January 21, 2016, File No. 001-33278)
Amendment to Employment Agreement, dated June 20, 2018, between Aviat Networks, Inc. and Eric
Chang (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC
on June 25, 2018, File No. 001-33278)
Amendment to Employment Agreement, dated April 3, 2020, between Aviat Networks, Inc. and Eric
Chang (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC
on April 3, 2020, File No. 001-33278)
Lease Agreement, dated June 8, 2016, between Aviat Networks, Inc., through its wholly owned
subsidiary Aviat U.S., Inc., and The Irvine Company LLC (incorporated by reference to Exhibit 10.34
to the Annual Report on Form 10-K for fiscal year end July 1, 2016 filed with the SEC on September 9,
2016, File No. 001-33278)
Employment Agreement, dated January 2, 2020, between Aviat Networks, Inc. and Peter Smith
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
January 2, 2020, File No. 001-33278)
First Amendment to the Employment Agreement between Aviat Networks, Inc. and Peter Smith, dated
May 17, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with
the SEC on May 18, 2021, File No. 001-33278)
Second Amendment to Employment Agreement, dated July 4, 2021, between the Company and Pete
Smith (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC
on July 7, 2021, File No. 001-33278)
Aviat Networks, Inc. Amended and Restated 2018 Incentive Plan (incorporated by reference to
Appendix 1 to the Registrant’s Proxy Statement on Schedule 14A filed with the SEC on September 27,
2021, File No. 001-33278)
Employment Agreement, dated September 21, 2021 between the Company and David Gray
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
October 18, 2021, File No. 001-33278)
Employment Agreement, dated July 1, 2012 between the Company and Bryan C. Tucker
Letter Agreement amending Employment Agreement dated June 27, 2019, between the Company and
Bryan C. Tucker
List of Subsidiaries of Aviat Networks, Inc.
Consent of BDO USA, LLP
Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
104
Ex. #
Description
101.DEF
101.LAB
101.PRE
______________________________
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
+ Management compensatory contract, arrangement or plan required to be filed as an exhibit pursuant to Item 15(b)
of this report.
Filed herewith.
*
** Furnished herewith.
105
APPENDIX
STOCKHOLDER INFORMATION
Executive Offices
Independent Public Accountants
Investor Relations Contact
Aviat Networks, Inc.
200 Parker Drive, Suite C100A
Austin, TX 78728
(512) 265-3680
Transfer Agent and Registrar
Computershare
P.O. Box 505000
Louisville, KY 40233-5002
Deloitte & Touche LLP
Investor Relations
InvestorInfo@aviatnet.com
Overnight Correspondence to:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Tel: (800) 522-6645
TDD for hearing impaired: (800) 231-5469
Foreign Shareowners: (201) 680-6578
TDD Foreign Shareowners: (201) 680-6610
Shareholder website: www.computershare.com/investor
Shareholder online inquiries: https://www-us.computershare.com/investor/contact
Stockholder Inquiries
Questions relating to stockholder records, change of ownership or change of address should be sent to our transfer
agent, Computershare, whose address appears above.
Financial Information
Securities analysts, investment managers and stockholders should direct financial information inquiries to the
Investor Relations contact listed above.
SEC Form 10-K
A copy of the Company’s Form 10-K filed with the Securities and Exchange Commission is available by
downloading from our website, Aviatnetworks.com or by writing to:
Aviat Networks, Inc.
Attn: Investor Relations
200 Parker Drive, Suite C100A
Austin, TX 78728
2022 Annual Report
We have published this 2022 Annual Report to Stockholders, including the Consolidated Financial Statements and
Management’s Discussion and Analysis, as an appendix to our Proxy Statement. Further information regarding
various aspects of our business can be found on our website www.Aviatnetworks.com.
Electronic Delivery
In an effort to reduce paper mailed to your home, we offer stockholders the convenience of viewing the Proxy
Statement, Annual Report to Stockholders and related materials online. With your consent, we can stop sending
future paper copies of these documents to you by mail. To participate, follow the instructions at
www.icsdelivery.com.
Aviat Networks, Inc.
Proxy Statement - Appendix
Appendix-1
Online Voting at www.proxyvote.com
If you are a registered stockholder, you may now use the Internet to transmit your voting instructions any time before
11:59 p.m. ET on November 8, 2022. Have your proxy card in hand when you access the Web site. You will be
prompted to enter your Control Number to obtain your records and create an electronic voting instruction form.
www.aviatnetworks.com
The Aviat Networks web site provides access to a wide variety of information, including products, new releases and
financial information. A principal feature of the Web site is the Investor Relations section, which contains general
financial information and access to the current Proxy Statement and Annual Report to Stockholders. The site also
provides archived information (for example, historical financial releases and stock prices) and access to conference
calls and analyst group presentations. Other interesting features are the press release alerts and SEC filings email
alerts, which allow users to receive automatic updates informing them when new items such as news releases,
financial event announcements and SEC documents are added to the site.
www.computershare.com/investor
The Computershare Web site provides access to an Internet self-service product, Investor Centre. Through Investor
Centre, registered stockholders can view their account profiles, stock certificate histories, Form 1099 tax information,
current stock price quote (20-minute delay) and historical stock prices. Stockholders may also request the issuance
of stock certificates, duplicate Form 1099s, safekeeping of stock certificates or an address change.
CORPORATE DIRECTORY
Directors
John Mutch
Chairman of the Board
Aviat Networks
Somesh Singh
Director
TiE Houston
Peter Smith
President & CEO
Aviat Networks
Management
Bryan Ingram
Director
SGH
Michele Klein
CEO
Jasper Ridge Inc.
Dr. James C. Stoffel
Lead Independent Director
PAR Technology Corporation
Bruce Taten
Partner
Law Office of Bruce M. Taten
Peter Smith
President & Chief Executive Officer
David Gray
Sr. Vice President & Chief Financial
Officer
Erin Boase
General Counsel, Vice President
Legal Affairs
Bryan Tucker
Sr. Vice President Americas Sales &
Services
Gary Croke
Vice President of Marketing &
Product Line Management
Outside Legal Counsel
Vinson & Elkins LLP
Austin, TX
Aviat Networks, Inc.
Proxy Statement - Appendix
Appendix-2
Headquarters and Operations
Corporate Headquarters:
Aviat Networks, Inc.
200 Parker Drive, Suite C100A
Austin, TX 78728
USA
North America
Quebec, Canada
Toronto, Canada
San Antonio, TX, USA
Latin America
Mexico D.F., Mexico
Europe
Châtillon, France
München, Germany
Schiphol, The Netherlands
Ljubljana, Slovenia
London, United Kingdom
Africa
Abidjan, Cote d’Ivoire
Accra, Ghana
Nairobi, Kenya
Lagos, Nigeria
Centurion, South Africa
Asia & Pacific Rim
Gurgaon Haryana, India
Lower Hutt, New Zealand
Clark Freeport Zone, Philippines
Taguig, Philippines
Singapore
Middle East
Zahle, Lebanon
Riyadh, Saudi Arabia
Dubai, United Arab Emirates
FORWARD LOOKING STATEMENTS
This Annual Report, including the letter to shareholders, contains forward-looking statements that are based on the
views of management regarding future events at the time of publication of this report. These forward-looking
statements, which include, but are not limited to: our plans, strategies and objectives for future operations; new
products, services or developments; future economic conditions; outlook; impact on operating results due to the
volume, timing, customer, product and geographic mix of our product orders; our growth potential and the potential
of industries and the markets we serve, are subject to the known and unknown risks, uncertainties and other factors
that may cause our actual results to be materially different from those expressed or implied by each forward-looking
statement. These risks, uncertainties and other factors are discussed in the 2022 Form 10-K.
Aviat Networks, Inc.
Proxy Statement - Appendix
Appendix-3
WWW.AVIATNETWORKS.COM
200 Parker Dr., Suite C 100A, Austin, TX 78728
Tel: 408-941-7100
BR05366Y-0922-COMBO