Executive Summary

AVNW delivered a strong rebound in Q2 FY25: revenue $118.2M (+26.2% YoY), non-GAAP gross margin 35.3%, and a company-record adjusted EBITDA $14.8M; non-GAAP EPS was $0.82. Management cited Pasolink contributions, mix improvement (North America, software), and disciplined OpEx as key drivers .
Guidance was maintained: FY25 revenue $430–$470M and adjusted EBITDA $30–$40M, with seasonality implying a softer Q3 (March quarter) and stronger Q4 (June quarter) relative to Q2 .
Operating execution and cash improved: book-to-bill 1.08, cash from operations $20.8M (best in at least seven years), net debt reduced by $10M to $22.3M, and 34.6k shares repurchased .
Strategic update: Pasolink bookings ~$40M in Q2 (run-rate trajectory to $140M by FY25 exit); first Pasolink radio shipped from new Thailand CM, which should support lead times and margins; private networks steady; U.S. Tier 1 muted but sequentially better; Europe strengthening; Africa constrained by FX/interest rates .
Consensus estimates (S&P Global) for Q2 FY25 were unavailable at time of analysis due to an S&P Global request limit; comparison vs Street is not included. Values from S&P Global could not be retrieved this cycle.

What Went Well and What Went Wrong

What Went Well
- Record profitability: “highest quarterly adjusted EBITDA” at $14.8M driven by healthy sales, margins and cost discipline; non-GAAP EPS $0.82 and book-to-bill >1 support quality of demand .
- Pasolink execution: Q2 bookings ~$40M with Q2 revenue “just shy of” $35M; three-quarter average orders at $35M support exiting FY25 at ~$140M annualized, with first Thailand CM shipment to improve lead times and margins .
- Cash and working capital: CFOA $20.8M in Q2 (best in ≥7 years), net debt improved by $10M to $22.3M; repurchased 34.6k shares .
What Went Wrong
- Margin pressure vs prior year: GAAP gross margin 34.6% and non-GAAP 35.3% declined ~420bps/350bps YoY due to Pasolink addition and product mix; gross margins, however, rebounded sharply from Q1 .
- U.S. Tier 1 remains muted: management emphasized the softness is “between projects” and timing-related; Q2 sequentially improved but outlook still conservative in FY25 .
- Africa remains weak: demand constrained by currencies and elevated USD/EUR rates; management expects modest activity through calendar 2025 .

Financial Results

Metric	Q2 2024	Q4 2024	Q1 2025	Q2 2025
Revenue ($M)	$93.7	$116.7	$88.4	$118.2
GAAP Gross Margin %	38.8%	35.3%	22.4%	34.6%
Non-GAAP Gross Margin %	38.8%	35.9%	23.2%	35.3%
GAAP Operating Income ($M)	$3.4	$5.5	$(15.6)	$8.0
Non-GAAP Operating Income ($M)	$11.0	$10.6	$(9.5)	$12.6
Adjusted EBITDA ($M)	$12.1	$11.9	$(7.7)	$14.8
GAAP Diluted EPS	$0.15	$0.12	$(0.94)	$0.35
Non-GAAP Diluted EPS	$0.84	$0.72	$(0.87)	$0.82

Product vs. Services revenue

Revenue Mix ($M)	Q4 2024	Q1 2025	Q2 2025
Product Sales	$78.8	$61.1	$82.3
Services	$37.9	$27.3	$35.9
Total	$116.7	$88.4	$118.2

Geographic revenue

Geography ($M)	Q4 2024	Q1 2025	Q2 2025
North America	$56.2	$42.2	$58.0
Africa & Middle East	$13.1	$10.5	$12.7
Europe	$7.2	$5.6	$8.3
Latin America & Asia Pacific	$40.2	$30.2	$39.2
Total	$116.7	$88.4	$118.2

KPIs and balance sheet snapshots

KPI	Q1 2025	Q2 2025
Book-to-Bill	>1.0	1.08
Cash from Operations ($M)	—	$20.8
Cash & Equivalents ($M)	$51.0	$52.6
Total Debt ($M)	$83.4	$74.9
Net Debt ($M)	$(32.3) cash net of debt metric naming in Q1 PR; total debt context: net cash measure referenced	$22.3
Share Repurchases	—	34,600 shares

Notes on non-GAAP: Management excludes share-based compensation, M&A and other nonrecurring items, and restructuring from non-GAAP operating results; reconciliations are provided in the press release tables .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	$450–$490M (issued with FY24 results on Oct 4, 2024)	$430–$470M (updated Nov 5, 2024)	Lowered
Adjusted EBITDA	FY 2025	$46–$52M (issued Oct 4, 2024)	$30–$40M (updated Nov 5, 2024)	Lowered
Revenue	FY 2025	$430–$470M (as of Q1 FY25)	$430–$470M (Q2 FY25)	Maintained
Adjusted EBITDA	FY 2025	$30–$40M (as of Q1 FY25)	$30–$40M (Q2 FY25)	Maintained

Management commentary on swing factors: upside drivers include faster private networks conversion, stronger rural broadband, and global MNO upgrades; downside risks include tariff-induced supply chain ripples, Tier 1 pushouts, and slower backlog conversion .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY24)	Previous Mentions (Q1 FY25)	Current Period (Q2 FY25)	Trend
Pasolink integration and run-rate	Accretive in Q4; ramping revenue; ProVision Plus opportunity; FY25 ramp expected	Revenues up slightly vs June; $50M 5-year ProVision Plus upsell TAM; inventory build to support CM transfer	Bookings ~$40M; revenue ~ $35M; 3Q avg orders ~$35M; first Thailand CM shipment; targeting $140M run-rate by FY25 exit	Improving scale and visibility
Gross margin drivers	Core non-GAAP GM 38.7% in Q4; Pasolink ~26% but improving	Q1 trough due to mix (Americas down, softer software, APAC timing)	Rebounded on better North America and software mix; still lower YoY due to Pasolink and product mix	Recovery from Q1 trough
U.S. Tier 1	Muted, between projects; late-cycle exposure	Soft; timing-driven	Still muted, sequentially up; timing-related	Stabilizing but subdued
Private networks (public safety/utilities)	Strong in Q4; statewide win; budgets healthy	Projects pushed in Q1; 4RF cross-sell starting	“Strong quarter”; steady demand; cross-sell into utilities	Positive/steady
Europe vs Africa	Europe opportunities amid China vendor restrictions	—	Europe strong; Africa weak on FX/rates	Divergence
Supply chain/tariffs	—	—	Dusting off COVID playbook; monitoring tariff risks; CM transfer to improve lead times/margins	Risk managed
Cash/working capital	FY24 CFOA $30.5M	Q1 pull on revolver; cash $51M	CFOA $20.8M; net debt improvement	Material improvement
Internal controls/material weakness	Disclosed; remediation underway	—	Board strengthened; new Audit member (Halliday)	Remediation progressing

Management Commentary

“The highest quarterly revenue the company has had in over a decade and record quarterly adjusted EBITDA… profitability… strong… thanks to a higher level of revenue and margin as well as disciplined spending.” – CEO Pete Smith .
“Pasolink orders for the last 3 quarters have averaged $35 million, setting us up for continued growth… and giving us confidence we will meet our $140 million run rate target by the end of the fiscal year.” – CEO .
“Adjusted EBITDA for the second quarter was $14.8 million… This marks a record quarterly adjusted EBITDA for Aviat.” – CFO Michael Connaway .
On mix and margins: “Gross profits rebounded… improved revenue mix… North America improved… better product and software mix… 4RF trades at more favorable gross margins.” – CFO .
On supply chain/tariffs: “We’ve dusted off the COVID playbook… well positioned to deal with potential supply chain interruptions… customers value our U.S. basis.” – CEO .

Q&A Highlights

Demand/bookings: Q2 book-to-bill 1.08; Pasolink bookings “upwards of $40M”; 4RF performance also above plan .
U.S. Tier 1: Still muted and timing-driven; sequentially up in Q2; faster recovery would be upside to guide .
Pasolink margins: Improving; further runway as CM transfer completes, likely more in Q4; company GM in mid-30s in Q2 .
Working capital/cash: CFOA $20.8M; first material working capital reduction since Pasolink ownership; inventory peaks in Q3 then converts to cash into Q4/FY26 .
Geographic/segment color: Europe improving (China vendor restrictions a tailwind); Africa weak on FX/rates; private networks strong (public safety, utilities) .
Guidance sensitivities: Upside—faster private networks conversion, rural broadband, global MNO upgrades; Downside—tariff-related supply chain ripples, Tier 1 pushouts, slower backlog conversion .

Estimates Context

Wall Street consensus for Q2 FY25 (revenue and EPS) from S&P Global was unavailable at the time of analysis due to an S&P Global request limit. As a result, we cannot quantify beats/misses versus Street for this quarter. Please note: S&P Global consensus values could not be retrieved this cycle; revisit when access restores.

Key Takeaways for Investors

Execution inflection: Q2 delivered a sharp snapback from Q1, with record adjusted EBITDA, resilient mid-30s non-GAAP gross margin, and robust bookings—evidence that mix normalization and Pasolink scale are taking hold .
Pasolink on track: Three consecutive quarters of ~$35M average orders and the first CM shipment validate integration progress and underpin the $140M run-rate exit target for FY25; continued CM transition should aid margins and lead times into Q4 .
Private networks steady; U.S. Tier 1 timing: Public safety/utilities remain healthy while U.S. Tier 1 is still between projects but improved sequentially; management frames Tier 1 headwinds as timing, not structural .
Cash discipline improving: Record quarterly CFOA ($20.8M), net debt reduction, and working-capital actions signal improving balance sheet optionality into the back half and FY26 .
Guidance intact with seasonal cadence: FY25 guide maintained with softer Q3 (weather/install timing) and stronger Q4; upside hinges on faster conversion and Tier 1 timing, while tariffs/supply chain remain the key watch item .
Margin watch: YoY GM compression (Pasolink mix) persists vs Q2 FY24 but rebounded meaningfully vs Q1; further improvement likely as CM transfer completes and mix (NA/software/4RF) stays favorable .
Governance/controls: Added audit expertise to the Board; management continues to remediate FY24 material weaknesses—monitor for updates and potential completion in 2025 .

Additional Relevant Press Releases in Q2 FY25 Window

Cybersecurity enhancements: Strengthened Secure SDLC and Software Vulnerability Alert services to meet latest requirements, including proactive CVE notifications—supporting critical infrastructure customer needs .
Board: Appointment of Scott K. Halliday (independent; Audit Committee) adds deep finance/audit governance experience .

AVIAT NETWORKS, INC. (AVNW)·Q2 2025 Earnings Summary