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 1, 2022

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 class	Trading Symbol(s)	Name of each exchange on which Registered
Common Stock	AVNW	The 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 filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

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

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

The number of shares outstanding of the registrant’s Common Stock as of April 29, 2022 was 11,166,918. 

AVIAT NETWORKS, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended April 1, 2022

Table of Contents

	Page
Part I. Financial Information	4
Item 1. Financial Statements	5
Condensed Consolidated Balance Sheets (Unaudited)	5
Condensed Consolidated Statements of Operations (Unaudited)	6
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	7
Condensed Consolidated Statements of Cash Flows (Unaudited)	8
Condensed Consolidated Statements of Equity (Unaudited)	9
Notes to Condensed Consolidated Financial Statements (Unaudited)	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	32
Part II. Other Information	34
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3. Defaults upon Senior Securities	34
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36
Signatures	37
Exhibit Index	37

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 1, 2022		July 2, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	31,296	$	47,942
Accounts receivable, net	76,150		48,135
Unbilled receivables	45,700		37,521
Inventories	28,669		23,436
Customer service inventories	1,807		1,431
Assets held for sale	—		2,218
Other current assets	12,984		9,556
Total current assets	196,606		170,239
Property, plant and equipment, net	9,522		11,701
Deferred income taxes	98,002		103,467
Right of use assets	3,196		3,816
Marketable securities	2,515		—
Other assets	9,841		8,430
TOTAL ASSETS	$	319,682	$	297,653
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	40,634	$	32,405
Accrued expenses	25,392		28,154
Short-term lease liabilities	565		769
Advance payments and unearned revenue	38,066		32,304
Restructuring liabilities	999		2,737
Total current liabilities	105,656		96,369
Unearned revenue	7,604		8,592
Long-term lease liabilities	2,786		3,223
Other long-term liabilities	324		356
Reserve for uncertain tax positions	5,396		5,164
Deferred income taxes	586		614
Total liabilities	122,352		114,318
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, 11,166,918 shares issued and outstanding at April 1, 2022; 11,153,445 shares issued and outstanding at July 2, 2021	112		112
Treasury stock	(5,398)		(787)
Additional paid-in-capital	821,976		818,939
Accumulated deficit	(603,975)		(620,602)
Accumulated other comprehensive loss	(15,385)		(14,327)
Total equity	197,330		183,335
TOTAL LIABILITIES AND EQUITY	$	319,682	$	297,653

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended				Nine Months Ended
(In thousands, except per share amounts)	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Revenues:
Revenue from product sales	$	52,047	$	45,246	$	156,361	$	136,401
Revenue from services	22,469		21,158		69,177		66,824
Total revenues	74,516		66,404		225,538		203,225
Cost of revenues:
Cost of product sales	31,850		26,456		97,789		81,823
Cost of services	15,130		14,370		45,976		44,666
Total cost of revenues	46,980		40,826		143,765		126,489
Gross margin	27,536		25,578		81,773		76,736
Operating expenses:
Research and development expenses	5,259		5,275		17,338		15,541
Selling and administrative expenses	14,867		15,106		41,304		41,555
Restructuring (recovery) charges	(72)		1,162		(373)		1,162
Total operating expenses	20,054		21,543		58,269		58,258
Operating income	7,482		4,035		23,504		18,478
Other expense (income), net	175		(128)		387		(201)
Income before income taxes	7,307		4,163		23,117		18,679
Provision for (benefit from) income taxes	1,278		(90,568)		6,490		(88,629)
Net income	$	6,029	$	94,731	$	16,627	$	107,308
Net income per share of common stock outstanding:
Basic	$	0.54	$	8.49	$	1.49	$	9.76
Diluted	$	0.51	$	8.00	$	1.40	$	9.31
Weighted-average shares outstanding:
Basic	11,173		11,152		11,172		10,994
Diluted	11,761		11,842		11,848		11,532

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

6

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended				Nine Months Ended
(In thousands)	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Net income	$	6,029	$	94,731	$	16,627	$	107,308
Other comprehensive (loss) income:
Net change in cumulative translation adjustments	(786)		(284)		(1,058)		314
Other comprehensive (loss) income	(786)		(284)		(1,058)		314
Comprehensive income	$	5,243	$	94,447	$	15,569	$	107,622

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 1, 2022		April 2, 2021
Operating Activities
Net income	$	16,627	$	107,308
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization of property, plant and equipment	3,444		4,016
(Recoveries) Provision for uncollectible receivables	(56)		46
Share-based compensation	2,464		2,154
Deferred tax assets, net	5,437		(89,732)
Charges for inventory and customer service inventory write-downs	1,140		1,148
(Gain) loss on disposition of property, plant and equipment, net	(66)		6
Noncash lease expense	620		581
Net gain on marketable securities	(23)		—
Restructuring (recoveries) charges	(373)		1,162
Changes in operating assets and liabilities:
Accounts receivable	(28,252)		(3,507)
Unbilled receivables	(8,446)		(15,389)
Inventories	(5,634)		(8,365)
Customer service inventories	(1,061)		(684)
Accounts payable	7,934		5,400
Accrued expenses	(569)		(249)
Advance payments and unearned revenue	4,719		12,077
Income taxes payable or receivable	(1,400)		(317)
Other assets and liabilities	(6,652)		(818)
Change in lease liabilities	(641)		(650)
Net cash (used in) provided by operating activities	(10,788)		14,187
Investing Activities
Payments for acquisition of property, plant and equipment	(1,028)		(2,399)
Purchase of marketable securities	(2,492)		—
Proceeds from sale of asset held for sale	2,284		—
Net cash used in investing activities	(1,236)		(2,399)
Financing Activities
Repayments of borrowings	—		(9,000)
Payments for repurchase of common stock - treasury shares	(4,611)		(458)
Payments for taxes related to net settlement of equity awards	(358)		(167)
Proceeds from issuance of common stock under employee stock plans	931		1,889
Net cash used in financing activities	(4,038)		(7,736)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(663)		140
Net (decrease) increase in cash, cash equivalents, and restricted cash	(16,725)		4,192
Cash, cash equivalents, and restricted cash, beginning of period	48,198		41,872
Cash, cash equivalents, and restricted cash, end of period	$	31,473	$	46,064

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

8

AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Three Months Ended April 1, 2022
	Common Stock			Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands, except share amounts)	Shares	$ Amount
Balance as of December 31, 2021	11,195,542	$	112	$	(3,408)	$	820,791	$	(610,004)	$	(14,599)	$	192,892
Net income	—	—		—		—		6,029		—		6,029
Other comprehensive loss, net of tax	—	—		—		—		—		(786)		(786)
Issuance of common stock under employee stock plans	37,327	1		—		345		—		—		346
Stock repurchase	(65,951)	(1)		(1,990)		—		—		—		(1,991)
Share-based compensation	—	—		—		840		—		—		840
Balance as of April 1, 2022	11,166,918	$	112	$	(5,398)	$	821,976	$	(603,975)	$	(15,385)	$	197,330

	Three Months Ended April 2, 2021
	Common Stock			Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands, except share amounts)	Shares	$ Amount
Balance as of January 1, 2021	11,119,536	$	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 plans	54,324	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, 2021	11,164,194	$	112	$	(458)	$	818,155	$	(623,433)	$	(14,655)	$	179,721

9

	Nine Months Ended April 1, 2022
	Common Stock			Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands, except share amounts)	Shares	$ Amount
Balance as of July 2, 2021	11,153,445	$	112	$	(787)	$	818,939	$	(620,602)	$	(14,327)	$	183,335
Net income	—	—		—		—		16,627		—		16,627
Other comprehensive income, net of tax	—	—		—		—		—		(1,058)		(1,058)
Issuance of common stock under employee stock plans	172,996	2		—		931		—		—		933
Shares withheld for taxes related to vesting of equity awards	(10,134)	—		—		(358)		—		—		(358)
Stock repurchase	(149,389)	(2)		(4,611)		—		—		—		(4,613)
Share-based compensation	—	—		—		2,464		—		—		2,464
Balance as of April 1, 2022	11,166,918	$	112	$	(5,398)	$	821,976	$	(603,975)	$	(15,385)	$	197,330

	Nine Months Ended April 2, 2021
	Common Stock			Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
(In thousands, except share amounts)	Shares	$ Amount
Balance as of July 3, 2020	10,792,674	$	108	$	—	$	814,283	$	(730,741)	$	(14,969)	$	68,681
Net income	—	—		—		—		107,308		—		107,308
Other comprehensive loss, net of tax	—	—		—		—		—		314		314
Issuance of common stock under employee stock plans	393,354	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, 2021	11,164,194	$	112	$	(458)	$	818,155	$	(623,433)	$	(14,655)	$	179,721

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 ended April 1, 2022 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 2, 2021.

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 1, 2022 and the three months ended April 2, 2021 both consisted of 13 weeks. Fiscal year 2022 will be comprised of 52 weeks and will end on July 1, 2022. Fiscal year 2021 was comprised of 52 weeks and ended on July 2, 2021.

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.

Summary of Significant Accounting Policies

There have been no material changes in our significant accounting policies as of April 1, 2022 and for the nine months ended April 1, 2022, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 2, 2021.

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

11

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 was effective March 12, 2020 through December 31, 2022. The adoption of ASU 2020-04 will not have a material impact 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.

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 1, 2022		July 2, 2021
Cash and cash equivalents	$	31,296	$	47,942
Restricted cash included in other assets	177		256
Total cash, cash equivalents, and restricted cash in the Statement of Cash Flows	$	31,473	$	48,198

Accounts Receivable, net

Our net accounts receivable are summarized below:

(In thousands)	April 1, 2022		July 2, 2021
Accounts receivable	$	77,484	$	50,276
Less: Allowances for collection losses	(1,334)		(2,141)
Total accounts receivable, net	$	76,150	$	48,135

Inventories

Our inventories are summarized below

(In thousands)	April 1, 2022		July 2, 2021
Finished products	$	16,994	$	15,409
Raw materials and supplies	11,675		8,027
Total inventories	$	28,669	$	23,436
Consigned inventories included within raw materials and supplies	$	11,098	$	6,570

12

We increased certain levels of inventory during the three and nine months ended April 1, 2022 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 ended April 1, 2022 and April 2, 2021 were classified in cost of product sales as follows:

	Three Months Ended				Nine Months Ended
(In thousands)	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Excess and obsolete inventory	$	196	$	270	$	436	$	467
Customer service inventory write-downs	286		293		704		681
Total inventory charges	$	482	$	563	$	1,140	$	1,148

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 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 are summarized below:

(In thousands)	April 1, 2022		July 2, 2021
Land	$	210	$	210
Buildings and leasehold improvements	5,910		6,914
Software	21,375		21,370
Machinery and equipment	52,065		51,244
Total property, plant and equipment, gross	79,560		79,738
Less: Accumulated depreciation and amortization	(70,038)		(68,037)
Total property, plant and equipment, net	$	9,522	$	11,701

Included in the total plant, property and equipment above there were no assets in progress which have not been placed in service as of April 1, 2022 and $0.3 million as of July 2, 2021. Depreciation and amortization expense related to property, plant and equipment, including amortization of software developed for internal use, was as follows:

	Three Months Ended				Nine Months Ended
(In thousands)	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Depreciation and amortization	$	1,051	$	1,355	$	3,444	$	4,016

13

Accrued Expenses

Our accrued expenses are summarized below:

(In thousands)	April 1, 2022		July 2, 2021
Accrued compensation and benefits	$	8,885	$	13,455
Accrued agent commissions	2,079		2,348
Accrued warranties	3,223		3,228
Other	11,205		9,123
Total accrued expenses	$	25,392	$	28,154

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:

	Three Months Ended				Nine Months Ended
(In thousands)	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Balance as of the beginning of the period	$	3,198	$	3,315	$	3,228	$	3,196
Warranty provision recorded during the period	402		469		1,242		1,242
Consumption during the period	(377)		(491)		(1,247)		(1,145)
Balance as of the end of the period	$	3,223	$	3,293	$	3,223	$	3,293

Advance Payments and Unearned Revenue

Our advance payments and unearned revenue are summarized below:

(In thousands)	April 1, 2022		July 2, 2021
Advance payments	$	2,906	$	2,445
Unearned revenue	35,160		29,859
Total advance payments and unearned revenue	$	38,066	$	32,304

Excluded from the balances above are $7.6 million and $8.6 million in long-term unearned revenue as of April 1, 2022 and July 2, 2021, 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.

14

The fair values, and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of April 1, 2022 and July 2, 2021 were as follows:

	April 1, 2022		July 2, 2021		Valuation Inputs
(In thousands)	Fair Value		Fair Value
Assets:
Cash and cash equivalents:
Money market funds	$	8,778	$	26,847	Level 1
Bank certificates of deposit	$	3,475	$	3,288	Level 2
Marketable securities	$	2,515	$	—	Level 1

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 1, 2022 and July 2, 2021, these money market funds were valued at $1.00 net asset value per share.

Our marketable securities are included in non-current assets on our balance sheet as we intend to hold for longer than 12 months. These marketable securities are publicly traded stock measured at fair value and classified within Level 1.

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.

As of April 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 the first nine months of fiscal 2022 and 2021, 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 1, 2022.

The following summarizes our lease costs (in thousands):

	Three Months Ended				Nine Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
	(In thousands)				(In thousands)
Operating lease costs	$	251	$	295	$	813	$	909
Short-term lease costs	$	623	506		1,823		1,323
Variable lease costs	$	64	93		138		255
Total lease costs	$	938	$	894	$	2,774	$	2,487

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The following summarizes our lease term and discount rate for the nine months ended April 1, 2022:

Weighted average remaining lease term	7.8 years
Weighted average discount rate	5.8	%

As of April 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):

	Amount
	(In thousands)
Remainder of 2022	$	163
2023	711
2024	593
2025	612
2026	552
Thereafter	1,701
Total lease payments	4,332
Less: interest	(981)
Present value of lease liabilities	$	3,351

Note 5. Credit Facility and Debt

On May 17, 2021, 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 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 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 April 1, 2022, available credit under the SVB Credit Facility was $21.7 million, reflecting the lower available limit of $25.0 million less outstanding letters of credit of $3.3 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. We have not borrowed against the SVB Credit Facility during the nine months ended April 1, 2022 and there were no borrowing outstanding as of April 1, 2022 or July 2, 2021.

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.

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 1, 2022, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.

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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 1, 2022 and July 2, 2021. The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which none was outstanding as of April 1, 2022 and July 2, 2021. 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):

	April 1, 2022		July 2, 2021
Contract Assets
Accounts receivable, net	$	76,150	$	48,135
Unbilled receivables	$	45,700	$	37,521
Capitalized commissions	$	1,304	$	1,720
Contract Liabilities
Advance payments and unearned revenue	$	38,066	$	32,304
Unearned revenue, long-term	$	7,604	$	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).

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 1, 2022, we had $45.7 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 18% is expected to be recognized as revenue in the remainder of fiscal 2022 and the balance thereafter. During the three and nine months ended April 1, 2022 we recognized $5.3 million and $18.8 million, respectively, of revenue which was included in advance payments and unearned revenue at July 2, 2021.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $82.8 million at April 1, 2022. Of this amount, we expect to recognize approximately 70% 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 (“CEO”).

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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 ended April 1, 2022 and April 2, 2021 was as follows:

	Three Months Ended				Nine Months Ended
(In thousands)	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
North America	$	49,042	$	42,021	$	151,025	$	136,678
Africa and the Middle East	13,123		9,904		37,360		31,138
Europe	2,898		3,280		8,509		7,053
Latin America and Asia Pacific	9,453		11,199		28,644		28,356
Total revenue	$	74,516	$	66,404	$	225,538	$	203,225

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 were as follows:

	Three Months Ended				Nine Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Motorola Solutions, Inc.	12.0	%	*		13.0	%	*
A U.S. State Government Customer	*		12.5	%	*		*
Mobile Telephone Networks Group (MTN Group)	13.0	%	*		10.0	%	*

*Less than 10.0%

Customer accounting for 10% or more of our accounts receivable were as follows:

	April 1, 2022		July 2, 2021
Mobile Telephone Networks Group (MTN Group)	20.0	%	14.0	%

Note 8. Equity

Stock Repurchase Program

During the third quarter of fiscal 2022, we repurchased 65,951 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $2.0 million. During the nine months ended of fiscal 2022, we repurchased 149,389 shares of our common stock in the open market for an aggregate purchase price, including commission of $4.6 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 April 1, 2022, $8.0 million remains available and we may choose to suspend or discontinue the repurchase program at any time.

Stock Incentive Programs

As of April 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 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.

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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 1, 2022, we granted 70,531 restricted stock units, 46,533 market-based stock units and 114,012 stock options to purchase shares of our common stock.

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

	Three Months Ended				Nine Months Ended
(In thousands)	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
By Expense Category:
Cost of revenues	$	101	$	114	$	271	$	279
Research and development	5		82		103		179
Selling and administrative	734		569		2,090		1,696
Total share-based compensation expense	$	840	$	765	$	2,464	$	2,154
By Types of Award:
Options	$	139	$	179	$	434	$	569
Restricted and performance stock awards and units	701		586		2,030		1,585
Total share-based compensation expense	$	840	$	765	$	2,464	$	2,154

As of April 1, 2022, there was approximately $1.1 million of total unrecognized compensation expense related to non-vested stock options granted which is expected to be recognized over a weighted-average period of 1.3 years. As of April 1, 2022, there was $4.8 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.3 years.

Note 9. Restructuring Activities

The following table summarizes our restructuring-related activities:

	Severance and Benefits				Facilities and Other		Total
(In thousands)	Fiscal 2021 Plan		Prior Years' Plan		Fiscal 2015-2016 Plan
Accrual balance, July 2, 2021	$	2,209	$	280	$	248	$	2,737
Charges, net	628		31		—		659
Cash payments	(326)		(49)		—		(375)
Foreign exchange impact	(7)		—		(6)		(13)
Accrual balance, October 1, 2021