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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
________________________________
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  _______ to _______           
Commission File Number 001-33278

  AVIAT NETWORKS, INC.
(Exact name of registrant as specified in its charter)

Delaware 20-5961564
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
200 Parker Drive, Suite C100A, Austin,Texas 78728
(Address of principal executive offices) (Zip Code)
(408) 941-7100
(Registrant’s telephone number, including area code)

__________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common StockAVNWThe Nasdaq Global Select Market
Indicate by checkmark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
The number of shares outstanding of the registrant’s Common Stock as of April 30, 2021 was 11,164,194



AVIAT NETWORKS, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended April 2, 2021
Table of Contents
 Page
3



PART I.     FINANCIAL INFORMATION
4



Item 1.Financial Statements
AVIAT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and par value amounts)April 2,
2021
July 3,
2020
ASSETS
Current Assets:
Cash and cash equivalents$45,808 $41,618 
Accounts receivable, net47,564 44,661 
Unbilled receivables37,862 28,085 
Inventories21,894 13,997 
Customer service inventories1,233 1,234 
Assets held for sale2,218  
Other current assets7,705 10,355 
Total current assets164,284 139,950 
Property, plant and equipment, net12,563 16,911 
Deferred income taxes102,551 12,799 
Right of use assets2,893 3,474 
Other assets8,285 6,667 
TOTAL ASSETS
$290,576 $179,801 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable$37,247 $31,995 
Accrued expenses26,755 26,920 
Short-term lease liabilities754 1,445 
Advance payments and unearned revenue26,954 21,872 
Short-term debt 9,000 
Restructuring liabilities1,956 2,738 
Total current liabilities93,666 93,970 
Unearned revenue9,021 8,142 
Long-term lease liabilities2,344 2,303 
Other long-term liabilities343 401 
Reserve for uncertain tax positions4,916 5,759 
Deferred income taxes565 545 
Total liabilities110,855 111,120 
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, 11,164,194 shares issued and outstanding at April 2, 2021; 10,792,674 shares issued and outstanding at July 3, 2020 (see Note 1 Stock Split)
112 108 
Treasury stock(458) 
Additional paid-in-capital818,155 814,283 
Accumulated deficit(623,433)(730,741)
Accumulated other comprehensive loss(14,655)(14,969)
Total equity179,721 68,681 
TOTAL LIABILITIES AND EQUITY
$290,576 $179,801 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
5



AVIAT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedNine Months Ended
(In thousands, except per share amounts)April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
Revenues:
Revenue from product sales$45,246 $40,930 $136,401 $111,676 
Revenue from services21,158 20,449 66,824 64,314 
Total revenues66,404 61,379 203,225 175,990 
Cost of revenues:
Cost of product sales26,456 24,676 81,823 68,466 
Cost of services14,370 14,742 44,666 44,688 
Total cost of revenues40,826 39,418 126,489 113,154 
Gross margin25,578 21,961 76,736 62,836 
Operating expenses:
Research and development expenses5,275 4,875 15,541 15,069 
Selling and administrative expenses15,106 15,233 41,555 44,334 
Restructuring charges1,162 617 1,162 2,175 
Total operating expenses21,543 20,725 58,258 61,578 
Operating income4,035 1,236 18,478 1,258 
Interest income128 112 202 318 
Interest expense (19)(1)(23)
Income before income taxes4,163 1,329 18,679 1,553 
(Benefit from) provision for income taxes(90,568)598 (88,629)2,439 
Net income (loss)$94,731 $731 $107,308 $(886)
Net income (loss) per share of common stock outstanding:
Basic$8.49 $0.07 $9.76 $(0.08)
Diluted$8.00 $0.07 $9.31 $(0.08)
Weighted-average shares outstanding (see Note 1 Stock Split):
Basic11,152 10,790 10,994 10,780 
Diluted11,842 10,914 11,532 10,780 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
6



AVIAT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months EndedNine Months Ended
(In thousands)April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
Net income (loss)$94,731 $731 $107,308 $(886)
Other comprehensive (loss) income:
Net change in cumulative translation adjustments
(284)(2,374)314 (2,477)
Other comprehensive (loss) income(284)(2,374)314 (2,477)
Comprehensive income (loss)$94,447 $(1,643)$107,622 $(3,363)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7



AVIAT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended
(In thousands)April 2,
2021
April 3,
2020
Operating Activities
Net income (loss)$107,308 $(886)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment4,016 3,226 
Provision for uncollectible receivables46 18 
Share-based compensation2,154 1,315 
Deferred tax assets, net(89,732)(475)
Charges for inventory and customer service inventory write-downs1,148 751 
Loss on disposition of property, plant and equipment, net6 14 
Noncash lease expense581 3,282 
Changes in operating assets and liabilities:
Accounts receivable(3,507)2,977 
Unbilled receivables(15,389)4,644 
Inventories(8,365)(5,810)
Customer service inventories(684)(930)
Accounts payable5,400 3,170 
Accrued expenses(249)140 
Advance payments and unearned revenue12,077 6,157 
Income taxes payable or receivable(317)1,372 
Other assets and liabilities344 (938)
Change in lease liabilities(650)(3,402)
Net cash provided by operating activities14,187 14,625 
Investing Activities
Payments for acquisition of property, plant and equipment(2,399)(3,945)
Net cash used in investing activities(2,399)(3,945)
Financing Activities
Proceeds from borrowings 27,000 
Repayments of borrowings(9,000)(27,000)
Payments for repurchase of common stock— (1,772)
Payments for repurchase of common stock - treasury shares(458)— 
Payments for taxes related to net settlement of equity awards(167)(764)
Proceeds from issuance of common stock under employee stock plans1,889 11 
Net cash used in financing activities(7,736)(2,525)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash140 (895)
Net increase in cash, cash equivalents, and restricted cash4,192 7,260 
Cash, cash equivalents, and restricted cash, beginning of period41,872 32,201 
Cash, cash equivalents, and restricted cash, end of period$46,064 $39,461 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
8



AVIAT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (1)
(Unaudited)
Three Months Ended April 2, 2021
Common StockTreasury StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive LossTotal Equity
(In thousands, except share amounts)Shares$
Amount
Balance as of January 1, 202111,119,536 $111 $ $816,988 $(718,164)$(14,371)$84,564 
Net income— — — — 94,731 — 94,731 
Other comprehensive loss, net of tax— — — — — (284)(284)
Issuance of common stock under employee stock plans54,324 1 — 401 — — 402 
Shares withheld for taxes related to vesting of equity awards (1,366)— — 1 — — 1 
Stock repurchase(8,300)— (458)— — — (458)
Share-based compensation— — — 765 — — 765 
Balance as of April 2, 202111,164,194 $112 $(458)$818,155 $(623,433)$(14,655)$179,721 

Three Months Ended April 3, 2020
Common StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive LossTotal Equity
(In thousands, except share amounts)Shares$
Amount
Balance as of December 27, 201910,820,660 $108 $813,813 $(732,615)$(12,839)$68,467 
Net income— — — 731 — 731 
Other comprehensive loss, net of tax— — — — (2,374)(2,374)
Issuance of common stock under employee stock plans13,430 — 1 — — 1 
Shares withheld for taxes related to vesting of equity awards (3,362)— (18)— — (18)
Stock repurchase(52,968)— (371)— — (371)
Share-based compensation— — 507 — — 507 
Balance as of April 3, 202010,777,760 $108 $813,932 $(731,884)$(15,213)$66,943 

9




Nine Months Ended April 2, 2021
Common StockTreasury StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive LossTotal Equity
(In thousands, except share amounts)Shares$
Amount
Balance as of July 3, 202010,792,674 $108 $ $814,283 $(730,741)$(14,969)$68,681 
Net income— — — — 107,308 — 107,308 
Other comprehensive income, net of tax— — — — — 314 314 
Issuance of common stock under employee stock plans393,354 4 — 1,885 — — 1,889 
Shares withheld for taxes related to vesting of equity awards (13,534)— — (167)— — (167)
Stock repurchase(8,300)— (458)— — — (458)
Share-based compensation— — — 2,154 — — 2,154 
Balance as of April 2, 202111,164,194 $112 $(458)$818,155 $(623,433)$(14,655)$179,721 


Nine Months Ended April 3, 2020
Common StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive LossTotal Equity
(In thousands, except share amounts)Shares$
Amount
Balance as of June 28, 201910,711,090 $108 $815,142 $(730,998)$(12,736)$71,516 
Net loss— — — (886)— (886)
Other comprehensive loss, net of tax— — — — (2,477)(2,477)
Issuance of common stock under employee stock plans430,846 4 7 — — 11 
Shares withheld for taxes related to vesting of equity awards (108,130)(2)(762)— — (764)
Stock repurchase(256,046)(2)(1,770)— — (1,772)
Share-based compensation— — 1,315 — — 1,315 
Balance as of April 3, 202010,777,760 $108 $813,932 $(731,884)$(15,213)$66,943 

(1) See Note 1 Stock Split.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.



10



AVIAT NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. The Company and Basis of Presentation
The Company
Aviat Networks, Inc. (the “Company,” “we,” “us,” and “our”) designs, manufactures, and sells 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, license-exempt applications, supporting new network deployments, network expansion, and capacity upgrades.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information, and we have made estimates, assumptions and judgments affecting the amounts reported in our unaudited condensed consolidated financial statements and the accompanying notes, as discussed in greater detail below. Accordingly, the statements do not include all information and footnotes required by U.S. GAAP for annual consolidated financial statements. In the opinion of our management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows for such periods. The results for the three and nine months April 2, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. All intercompany transactions and accounts have been eliminated.
We operate on a 52-week or 53-week year ending on the Friday closest to June 30. The three months ended April 2, 2021 consisted of 13 weeks while the three months ended April 3, 2020 consisted of 14 weeks. Fiscal year 2021 will be comprised of 52 weeks and will end on July 2, 2021. Fiscal year 2020 was comprised of 53 weeks and ended on July 3, 2020.
Stock Split
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. 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 unaudited condensed consolidated financial statements in accordance with 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, uncertainties in income taxes, contingencies and recoverability of long-lived assets. The actual results that we experience may differ materially from our estimates.
11



Summary of Significant Accounting Policies
There have been no material changes in our significant accounting policies as of April 2, 2021 and for the nine months ended April 2, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020.
Accounting Standards Adopted
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 became effective for us in our first quarter of fiscal 2021. We adopted this guidance during the first quarter of fiscal 2021. The adoption had no material impact on our unaudited condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). The update eliminates, adds, and modifies certain disclosure requirements for fair value measurements. We adopted this update during the first quarter of fiscal 2021. 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 was effective March 12, 2020 through December 31, 2022. We are currently evaluating the potential impact ASU 2020-04 will have on our unaudited condensed consolidated financial statements.
In December 2019, the FASB issued 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 goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes. ASU 2019-12 will be effective for us in our first quarter of fiscal 2022. We are currently evaluating the potential impact that adopting ASU 2019-12 will have on our unaudited condensed 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 2024 and earlier adoption is permitted. We are evaluating the impact adopting Topic 326 will have on our unaudited condensed consolidated financial statements.


12



Note 2. Balance Sheet Components
Cash, Cash Equivalents, and Restricted Cash
The following table provides a summary of our cash, cash equivalents, and restricted cash reported within our unaudited condensed consolidated balance sheets that reconciles to the corresponding amount in our unaudited condensed consolidated statement of cash flows:
(In thousands)April 2,
2021
July 3,
2020
Cash and cash equivalents$45,808 $41,618 
Restricted cash included in other assets256 254 
Total cash, cash equivalents, and restricted cash in the Statement of Cash Flows$46,064 $41,872 
Accounts Receivable, net
Our net accounts receivable are summarized below:
(In thousands)April 2,
2021
July 3,
2020
Accounts receivable$49,365 $46,502 
Less: Allowances for collection losses(1,801)(1,841)
Total accounts receivable, net$47,564 $44,661 
Inventories
Our inventories are summarized below:
(In thousands)April 2,
2021
July 3,
2020
Finished products$15,347 $9,055 
Raw materials and supplies6,547 4,942 
Total inventories
$21,894 $13,997 
Consigned inventories included within raw materials and supplies
$4,846 $1,324 

We increased certain levels of inventory during the three and nine months ended April 2, 2021 primarily to mitigate supply chain constraints.
We currently rely on a few vendors for substantially all of our inventory purchases.
We record charges to adjust our inventory and customer service inventory due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning, or discontinuance. The charges during the three and nine months April 2, 2021 and April 3, 2020 were classified in cost of product sales as follows:
 Three Months EndedNine Months Ended
(In thousands)April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
Excess and obsolete inventory charges (recovery)$270 $(13)$467 $156 
Customer service inventory write-downs293 250 681 595 
Total inventory charges
$563 $237 $1,148 $751 
13



Assets Held for Sale
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 expect to complete the sale within twelve months. The carrying value of this asset held for sale as of April 2, 2021 of $2.2 million which represents the lower of 1) the carrying value or 2) fair value of the assets, less estimated costs to sell the assets. We performed an analysis and determined the estimated fair value of the assets, less estimated selling costs, is higher than the carrying value of the assets. As a result, no impairment charge was recorded in our statement of operations.
Property, Plant and Equipment, net
Our property, plant and equipment, net are summarized below:
(In thousands)April 2,
2021
July 3,
2020
Land$210 $710 
Buildings and leasehold improvements6,913 11,737 
Software21,330 17,887 
Machinery and equipment50,797 52,293 
Total property, plant and equipment, gross79,250 82,627 
Less: Accumulated depreciation and amortization(66,687)(65,716)
Total property, plant and equipment, net$12,563 $16,911 
    
Excluded in the total plant, property and equipment above were $0.5 million for land, $4.9 million for buildings and leasehold improvements and $3.2 million for accumulated depreciation in connection with Assets Held for Sale.

Included in the total plant, property and equipment above were $0.2 million and $3.5 million of assets in progress which have not been placed in service as of April 2, 2021 and July 3, 2020, respectively. Depreciation and amortization expense related to property, plant and equipment, including amortization of software developed for internal use, was as follows:
 Three Months EndedNine Months Ended
(In thousands)April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
Depreciation and amortization$1,355 $1,111 $4,016 $3,226 
Accrued Expenses
Our accrued expenses are summarized below:
(In thousands)April 2,
2021
July 3,
2020
Accrued compensation and benefits$11,744 $11,814 
Accrued agent commissions2,533 2,356 
Accrued warranties3,293 3,196 
Other9,185 9,554 
Total accrued expenses$26,755 $26,920 
Accrued Warranties
We accrue for the estimated cost to repair or replace products under warranty. Changes in our warranty liability, which are included as a component of accrued expenses in our unaudited condensed consolidated balance sheets were as follows:
14



Three Months EndedNine Months Ended
(In thousands)April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
Balance as of the beginning of the period$3,315 $3,197 $3,196 $3,323 
Warranty provision recorded during the period469 492 1,242 1,249 
Consumption during the period(491)(439)(1,145)(1,322)
Balance as of the end of the period$3,293 $3,250 $3,293 $3,250 
Advance Payments and Unearned Revenue
Our advance payments and unearned revenue are summarized below:
(In thousands)April 2,
2021
July 3,
2020
Advance payments$3,238 $2,529 
Unearned revenue23,716 19,343 
Total advance payments and unearned revenue$26,954 $21,872 
Excluded from the balances above are $9.0 million and $8.1 million in long-term unearned revenue as of April 2, 2021 and July 3, 2020, respectively.

Note 3. 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 April 2, 2021 and July 3, 2020 were as follows:
 April 2, 2021July 3, 2020Valuation Inputs
(In thousands)Carrying AmountFair ValueCarrying AmountFair Value
Assets:
Cash and cash equivalents:
Money market funds
$24,947 $24,947 $18,189 $18,189 Level 1
Bank certificates of deposit
$2,856 $2,856 $3,250 $3,250 Level 2
Liabilities:
Other accrued expenses:
Foreign exchange forward contracts
$ $ $14 $14 Level 2
We classify items within Level 1 if quoted prices are available in active markets. Our Level 1 items mainly are money market funds. As of April 2, 2021 and July 3, 2020, these money market funds were valued at $1.00 net asset value per share.
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.
15



As of April 2, 2021 and July 3, 2020, 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 the first nine months of fiscal 2021 and 2020, we had no transfers between levels of the fair value hierarchy of our assets or liabilities measured at fair value.

Note 4. Leases
The Company has 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.
We determine if an arrangement contains a lease at inception. These operating leases are included in "Right of use assets" on our unaudited condensed consolidated balance sheets and represent our right to use the underlying asset for the lease term. Our obligations to make lease payments are included in "Short-term lease liabilities" and "Long-term lease liabilities" on our unaudited condensed consolidated balance sheets. We did not enter into any finance leases during the nine months ended April 2, 2021.
The following summarizes our lease costs (in thousands):
Three Months EndedNine Months Ended
April 2,
2021
April 3, 2020April 2,
2021
April 3, 2020
(In thousands)(In thousands)
Operating lease costs$295 $444 $909 $1,290 
Short-term lease costs506 393 1,323 1,164 
Variable lease costs93 95 255 251 
Total lease costs
$894 $932 $2,487 $2,705 

The following summarizes our lease term and discount rate for the nine months ended April 2, 2021:

Weighted average remaining lease term8.4 years
Weighted average discount rate6.5 %

As of April 2, 2021, 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):
Amount
(In thousands)
Remainder of 2021
$315 
2022728 
2023464 
2024338 
2025349 
Thereafter1,990 
Total lease payments4,184 
Less: interest(1,086)
Present value of lease liabilities$3,098 

16



Note 5. Credit Facility and Debt
On May 4, 2020, we entered into Amendment No. 3 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, 2021. 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 Singapore subsidiary. 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 sublimit. We may prepay loans under the SVB Credit Facility in whole or in part at any time without premium or penalty. As of April 2, 2021, available credit under the SVB Credit Facility was $23.5 million, reflecting the lower available limit of $25.0 million less outstanding letters of credit of $1.5 million. As of July 3, 2020, our outstanding debt balance under the SVB Credit Facility, classified as a current liability, was $9.0 million, and the interest rate was 3.75%. We repaid the outstanding debt balance in July 2020.
The SVB Credit Facility carries an interest rate computed, at our option, based on either (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. During the first nine months of fiscal 2021, the weighted-average interest rate on our outstanding loan was 3.75%.
The SVB Credit Facility contains 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 April 2, 2021, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.
We also obtained an uncommitted short-term line of credit of $0.4 million from a bank in New Zealand to support the operations of our New Zealand subsidiary. This line of credit provides for up to $0.3 million in short-term advances at various interest rates, all of which was available as of April 2, 2021 and July 3, 2020. The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $0.1 million was outstanding as of April 2, 2021 and July 3, 2020. This line of credit may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a corporate guarantee.

Note 6. Revenue Recognition
Contract Balances, Performance Obligations, and Backlog

The following table provides information about receivables and liabilities from contracts with customers (in thousands):
17



 April 2, 2021 July 3, 2020
Contract Assets  
Accounts receivable, net$47,564  $44,661 
Unbilled receivables$37,862  $28,085 
Capitalized commissions$1,353 $1,157 
Contract Liabilities  
Advance payments and unearned revenue$26,954  $21,872 
Unearned revenue, long-term$9,021  $8,142 
Significant changes in contract balances may arise as a result of recognition over time for services, transfer of control for equipment, and periodic payments (both in arrears and in advance).
From time to time, we may experience unforeseen events that could result in a change to the scope or price associated with an arrangement. When such events occur, we 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 April 2, 2021, we had $36 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 27% is expected to be recognized as revenue in the remainder of fiscal 2021 and the balance thereafter. During the three and nine months ended April 2, 2021 we recognized $3.6 million and $19.4 million, respectively, of revenue which was included in advance payments and unearned revenue at July 3, 2020.
Remaining Performance Obligations
The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $73 million at April 2, 2021. Of this amount, we expect to recognize approximately 60% as revenue during the next 12 months, with the remaining amount to be recognized as revenue within two to five years.

Note 7. 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. Our financial performance is regularly reviewed by our chief operating decision maker who is our chief executive officer.
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 the three and nine months April 2, 2021 and April 3, 2020 was as follows:
 Three Months EndedNine Months Ended
(In thousands)April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
North America
$42,021 $37,250 $136,678 $113,489 
Africa and the Middle East9,904 9,230 31,138 28,679 
Europe and Russia3,280 1,903 7,053 7,728 
Latin America and Asia Pacific11,199 12,996 28,356 26,094 
Total revenue
$66,404 $61,379 $203,225 $175,990 
The loss of a significant portion of business from any significant customers could adversely affect our unaudited condensed consolidated financial statements.
Customers accounting for 10% or more of our total revenue was as follows:
18



Three Months EndedNine Months Ended
April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
Motorola Solutions, Inc.***10.0 %
*Less than 10.0%
Customers accounting for 10% or more of our accounts receivable was as follows:
April 2, 2021July 3, 2020
A U.S. State Government Customer13.9 %*
Mobile Telephone Networks Group (MTN Group)*21.0 %
*Less than 10.0%
Note 8. Equity
Stock Repurchase Program
In May 2018, our board of directors approved a stock repurchase program, which does not have an expiration date, for the repurchase of up to $7.5 million of our common stock.
As of April 2, 2021, $3.0 million remained available under our stock repurchase program. The repurchase program was suspended temporarily from February 2020 to February 2021. During the third quarter of fiscal 2021, our Board of Directors voted to re-instate our stock repurchase program and repurchased 8,300 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $0.5 million. These 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.

Stock Incentive Programs
At April 2, 2021, we had one stock incentive plan for our employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”). The 2018 Plan provides for the issuance of share-based awards in the form of stock options, stock appreciation rights, restricted stock awards and units, and performance share awards and units.
Under the 2018 Plan, option exercise prices are equal to the fair market value of 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.
During the nine months ended April 2, 2021, we granted 116,396 restricted stock units, 76,706 performance restricted stock units, 72,000 market-based stock units and