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spk03: Good afternoon. Welcome to AVF Network's fourth quarter fiscal 2021 earnings call. At this time, all participants are in a listener limit. A question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Keith Panaran, Vice President of Global Finance and Investment Relations. Thank you. You may begin.
spk04: Thank you and welcome to Aviat Network's fourth quarter fiscal 21 results conference call and webcast. You can find our Form 10-K press release and updated investor presentation in the IR section of our website at www.aviatnetworks.com, along with a replay of today's call in approximately two hours. With me today are Pete Smith, Aviat's President and CEO, who will begin with opening remarks on the company's fiscal fourth quarter. followed by Eric Chang, our CFO, who will review the financial results for the fourth quarter and fiscal 2021. Pete will then provide closing remarks on Aviat's strategy and outlook, followed by Q&A. As a reminder, during today's call and webcast, management may make forward-looking statements regarding Aviat's business, including but not limited to statements relating to financial projections, business drivers, new products and expansions, the impact of COVID-19, and economic activity in different regions. These... and other forward-looking statements reflect the company's opinions only as of the date of this call and webcast and involve assumptions, risks, and uncertainties that could cause actual results to differ material from these statements. Additional information on factors that could cause actual results to differ material from the statements made on this call can be found in our annual report on our Form 10-K filed with the SEC on August 25, 2021. The company undertakes no obligation to revise or make public any revision of these forward-looking statements in light of new information or future events. Additionally, during today's call and webcast, management will reference both GAAP and non-GAAP financial measures. Please refer to our press release, which is available in the IR section of our website at www.aviatnetworks.com, and financial tables therein, which include a GAAP to non-GAAP, reconciliation, and other supplemental financial information. At this time, I'd like to turn the call over to Aviat's president, CEO, Pete Smith. Pete.
spk07: Thanks, Keith, and good afternoon, everyone. Thanks for joining us to review a successful quarter. The company continued to execute on our key long-term focus areas of growth, margin expansion, expense reductions, and meaningful bottom-line improvements. The AVIAD team commitment resulted in fourth quarter and full fiscal year revenue growth of 14.4% and 15.2%, compared to the same periods last year. Fourth quarter and full fiscal year adjusted EBITDA margins of 9.7% and 11.9%. Our fiscal year 2021 adjusted EBITDA of 32.8 million and adjusted EBITDA margin of 11.9%. More than doubled fiscal year 2020 adjusted EBITDA of 13.5 million and adjusted EBITDA margin of 5.7%. a solid balance sheet and liquidity position with net cash at $47.9 million, growing by $2.1 million sequentially from the last quarter, and $15.3 million for the fiscal year with no loans outstanding. North American fourth quarter revenue increased 21.4% year over year, and for the full fiscal year 2021, North American revenue increased 20.7% compared to the same period last year. International fourth quarter revenue increased 3.5% year over year and full fiscal year 2021 international revenue increased 5.6% compared to the same period last year. Our full fiscal year 2021 revenue of $274.9 million exceeded the top end of our guidance of $265 million. Adjusted EBITDA was $7.0 million for the fourth quarter, representing an improvement of $1.4 million versus the same period last year. Adjusted EBITDA margins improved to 9.7% for the fourth quarter compared to 8.8% for the same period last year. Our full fiscal year 2021 adjusted EBITDA of $32.8 million exceeded the top end of our guidance of $31 million and more than doubled the fiscal year 2020 adjusted EBITDA of $13.5 million. The improvement in revenue and adjusted EBITDA for the fourth quarter and the full fiscal year was primarily due to gross margin expansion from higher volume of private network business, increased sales through our Aviat store, which serves primarily the rural broadband space, improved international business driven by multiband wins, and also software and license sales. We want to recognize our suppliers and the Aviat supply chain team for successfully navigating the current environment. Aviat's team performance has offset the difficult supply environment. On recent calls, I've talked extensively about our exciting new capabilities in software services and e-commerce, which continue to drive our success. Today, I'd like to explain some of the differentiation in our radio products, specifically the WTM 4000 platform, which has played a significant role in our recent growth in 5G and rural broadband. WTM4000 is an all outdoor ultra high capacity microwave, millimeter wave, and multi-band radio platform that has important differentiated capabilities compared to other radio platforms and achieves lowest total cost of ownership. We understand that customers buy systems, not chips, so we built what we believe to be the best system. The WTM4000 leads the industry in system gain enabling radio links to go further in distance, have a greater ability to overcome weather effects like rain, and use smaller antennas, which is an important element in Aviat's total cost of ownership value proposition. WTM4000 also has higher capacity in microwave bands for all practical use cases. Further, WTM4000 has a modular platform architecture designed from the ground up for system flexibility. Not only has this modularity allowed us to build the industry's only single box multiband radio. It also enables us to deliver variants of this quickly, as evidenced by our recent announcement of 11 gigahertz and 13 gigahertz multiband products, which we announced in the fourth fiscal quarter. Being less susceptible to rain than other bands, the 11 gigahertz multiband variant is particularly attractive, enabling extended distance and increased reliability of multiband links. which grows our addressable market, allowing us to sell more multivan in more places around the world. Platform modularity also allows us to mix and match transceivers, enabling 20 gigabits per second in a single box, which is twice the capacity of our competition. In addition to the recent wins at DISH, Safaricom, Nextlink, LTE Broadband, and other 5G and rural broadband accounts, the WTM4000 is responsible for some new contracts. New wins in Afrocell and Union Wireless were driven in part by the differentiated capabilities of the WTM4000 platform. We are also seeing positive activity with the platform internationally. In Asia Pacific, we have broken into two new countries with new operator wins based on our radio differentiation and have significant prospects for growth in the region. especially in segments where spectrum is expensive and operators are moving to 5G. In Africa this quarter, because of our multiband solution, we have gotten back into the access networks of two major tier one accounts in countries where we were shut out a number of years ago. We will continue to communicate more information about these international wins soon. We believe the WTM4000 platform is the most capable radio platform on the market today. We feel confident the platform's modularity will allow us to address customer economic issues as 5G and rural broadband evolves globally. We believe 5G builds will drive new backhaul upgrades and that our rural broadband business will benefit from meaningful government funding, including the $9 billion 5G Fund for Rural America and the $20 billion Rural Digital Opportunity Fund. On top of this, there is an additional proposed $65 billion for broadband funding included in the $1.2 trillion bipartisan infrastructure framework. In fiscal year 2021, Aviat added 150 new rural broadband accounts, growing our business significantly, and we are now the leading wireless backhaul provider to this segment in the USA. So we are well-positioned that this funding comes to fruition. Being an American company, Aviata is proud to deliver broadband connectivity to rural America, enabling economic, social, healthcare, and educational opportunities for all Americans. With respect to private networks, our business remains strong and is growing. Aviata has a highly differentiated offering. Our leading RF performance, along with our software and services capabilities, are keys to lowering TCO, and delivering value to our customers. In the quarter, we secured a new state government network in the U.S. and won a significant multi-year design and deployment project for a nationwide emergency services network in Western Europe. These public safety projects are great business for Avia and will drive revenue throughout fiscal year 22. Before turning the call over to Eric, let me provide a couple of additional observations and insights. First, this was a very good fourth quarter and full fiscal year. We remain focused and continue to execute, and those collective efforts are reflected in our financial and operational results. We've continued to demonstrate our ability to grow and to take a greater share of demand for the products and services we offer. Looking forward, we expect to continue to see three significant revenue drivers, 5G, private networks, and rural . And we believe we are well-positioned to capture significant opportunities with our differentiated products, software, and services offerings. With that, let me turn the call over to Eric to review our financials before coming back for some final comments.
spk06: Eric? Thank you, Pete, and good afternoon, everyone. During my remarks today, I will review some of the key fourth quarter and full-year fiscal 2021 financial highlights, noting our detailed financials can be found from 10-K and earnings release, both of which were filed this afternoon. As a reminder, all comparisons discussed today are between the fourth quarter of fiscal 2021 and the fourth quarter of fiscal 2020, and between full year fiscal 2021 and full year fiscal 2020, unless noted otherwise. For the fourth quarter, we reported total revenues of $71.7 million, as compared to $62.7 million for the same period last year, and increase of $9 million, or 14.4%. Revenue for the full year fiscal 2021 was $274.9 million compared to $238.6 million for the same period last year, an increase of $36.3 million, or 15.2%. During the quarter, the North American team continued to focus on expanding sales and seizing upon obvious unique products and services differentiations. North America revenue, which comprised 64.7% of total revenue for the fourth quarter, was $46.4 million, an increase of $8.2 million, or 21.4%, from $38.2 million for the same period last year, driven primarily by our private network business, rural broadband, and software. For the full year fiscal 2021, our North America revenue was $183.1 million, an increase of $31.4 million, or 20.7%, from 151.7 million for the same period last year. International revenue for the fourth quarter came in at 25.3 million, an increase of 0.9 million, or 3.5%, compared to 24.4 million for the same period last year. For the full year fiscal 2021, our international revenue was 91.8 million, an increase of 4.9 million, or 5.6%, from 86.9 million for the same period last year. Our book-to-bill ratio for the fourth quarter and full year fiscal 2021 was above 1, and we are pleased that our backlog has grown throughout the year and continues to remain above $200 million upon completion of the fiscal year. Fourth quarter gross margin remains strong at 36.1% and 36.2% on a GAAP and non-GAAP basis, respectively, as compared to 34.9% on both a GAAP and non-GAAP basis for the fourth quarter of last year. Fiscal year 2021 gross margin was 37.3% and 37.5% on a gap and non-gap basis, respectively, as compared to 35.5% and 35.6% for fiscal year 2020. Key drivers to strong gross margin are higher volume of private network business, increased sales through our RBS store, which serves primarily the rural broadband space, improving the national business driven by multiband wins, and also software and licensed sales. Fourth quarter gap operating expenses, which include restructuring charges and share-based compensation, were $22.1 million compared to $19.7 million for the same period last year. Fourth quarter non-gap operating expenses, which exclude the impact of restructuring charges and share-based compensation, were $20.4 million compared to $17.5 million for the same period last year. R&D investments were increased $2 million given our focus on software and uptake in bookings led to a corresponding increase in overall SG&A expenses of $0.8 million, with the G&A portion of expenses decreased primarily as a result of our previously announced restructuring. On a four-year basis, both GAAP and non-GAAP operating expenses were favorably impacted due to restructuring plans announced in the second half of fiscal 2020, as well as February 2021, and a slowdown in hiring and reduced travel offset by growth-related initiatives. G&A expenses decreased $1.7 million year-over-year. Moving on, fourth quarter non-GAAP net income was $5.3 million compared to $4.1 million for the same period last year, with fourth quarter non-GAAP EPS coming in at $0.45 per share compared to $0.38 per share for the same period last year. Full-year fiscal 2021 non-GAAP net income was $26.4 million compared to to 8.2 million for the same period last year, with non-GAAP EPS coming in at $2.26 per share compared to 75 cents per share for the same period last year. Please note that our prior periods EPS have been retroactively adjusted to reflect our two-for-one stock split in the form of stock dividend that was effected in early April 2021. Adjusted EBITDA for the fourth quarter was 7 million, a 1.4 million improvement from $5.5 million we reported for the same period last year, with adjusted EBITDA margins coming in at 9.7% for the quarter. For the full year fiscal 2021, our adjusted EBITDA was $32.8 million compared to $13.5 million for the same period last year. Adjusted EBITDA margins for the full year fiscal 2021 was 11.9% compared to 5.7% for the same period last year. Now moving on to the balance sheet. Our cash and cash equivalents at the end of the fourth quarter were 47.9 million, up 2.1 million from the end of the third quarter. On a full fiscal year basis, our net cash increased 15.3 million with no loans outstanding. Therefore, our balance sheet remains very solid, leaving us well-positioned to execute our long-term plans. Last, during Q4 and fiscal 2021, we repurchased $0.3 million and $0.8 million of our common stock, respectively. With that, I will turn it back to Pete for some final comments. Pete?
spk07: Thanks, Eric. Just a few additional comments before opening it up for Q&A. I'm extremely proud of the entire Aviat team for their significant contributions to our results for both the fourth quarter and the full fiscal year 2021. We recognize that there are continues to be a lot of work in front of us, we're on the right path to achieve our long-term objectives. With respect to the financial guidance, we currently anticipate revenues for fiscal 2022 to be in the range of $283 to $293 million and adjusted EBITDA to be in the range of $35 to $38 million. This guidance considers the current supply chain environment. If the supply chain environment improves, we expect to do better. If the supply chain environment deteriorates, The converse is true. Please note that a microwave radio system has greater than 2,000 individual components. Aviat's supply chain team has successfully managed this complexity thus far. This is one of the key challenges for fiscal year 22. With that, operator, let's open it up for questions.
spk01: To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question is from the line of Scott Searle with Roth Capital.
spk10: Hey, good afternoon. Thanks for taking my questions. Eric, maybe just dive in quickly on the financials. I was wondering if there was any color related to the product mix between mobile backhaul and private networks. And also, on the gross margin front, a little bit of a weaker quarter, not surprising given the component headwinds. I was wondering if you had a little bit more color. I'm sure some of that's related to mix of private network, software, but component availability as well. So I was wondering if you could give us an idea about how that kind of parses out the impact on the quarter.
spk06: Right. So high level for us, our private network business deals with about two-thirds of our business. So that's been very consistent throughout the year. When it comes to the gross margin standpoint, it is lower than par quarter, but it was much higher than a year ago quarter, right? One of the things that we're experiencing is some inflation when it comes to component parts and also freight. I would say high level, that has impacted about 100 basis points to our gross margin. But on the other hand, we also probably could have a few million dollar more revenue in fiscal 21 if it wasn't for the supply chain challenge that we have.
spk10: Great. Very helpful. And maybe to dive in a little bit in North America, very, very strong again, nice quarter. I was wondering if you could give a little bit of color in terms of strength in private networks versus rural broadband opportunities, and specifically with some of the RDoF funding out there, and you are working with some customers that you've announced who do have RDoF funding. My understanding is some of that doesn't really come into play until the end of this year and into next year. So I just want to clarify that. If you're actually seeing the benefit of RDOF now or that all comes in the future as we get into, you know, calendar 22.
spk07: Scott, I would say that the rural... particularly the RDoF funding, is just getting going, and the effects will be, let's say, calendar year, next calendar year, so 22 calendar year. So we're poised. We're engaged with the customer base, but the funding is not really flowing. There's a couple – where customers have, you know, barred against that future funding, and that's progressing. But the bulk of the customer base are waiting for the appropriations and then, you know, them to figure out their systems and then the demand to be dispersed to us.
spk10: Okay. And, Pete, if I could just shift in quickly to Europe. It hasn't in recent history been a large contributor to the revenue stream, continues to be that way. But it sounds like I think you just mentioned something about a Western European opportunity that you just won. I was wondering if you could take us through some of the opportunities there. Are you starting to gain some more share? Will that become a growth avenue and larger contributor going forward, particularly as we start to see the competitive landscape with guys like Wally being marginalized?
spk07: Yeah. So we, you know, before I joined, I would say that we didn't spend enough time working on our sales funnel in our EMEA region. And we highlighted the Western Europe Emergency Services Network win because we think over the last year, we've articulated that we have differentiation. The message is getting out, and we're starting to win. So that was kind of an RFP in Western Europe. And Huawei wasn't a factor. With respect to the rest of the EMEA region, and particularly Europe, we are seeing both Huawei supply issues and network security issues starting to grab hold of the operator mindset. our funnel for Huawei share gains is growing. You know, some of our competitors are also probably looking at that. We're excited. We think we're going to win our fair share. And, you know, the next question that usually comes is about the timing. And the timing is difficult to predict because it's hard to say, you know, what the, you know, the network operators are kind of being forced into this. And, you know, I think they're going to hold on to their Huawei inventory until they're ready and they have their new design. But we see the funnel building. Timing's a little bit difficult to say, but we're excited about the opportunity to win share.
spk10: Gotcha. And lastly, if I could, you know, shift into the guidance. It's a nice guide in terms of looking to fiscal 22. It sounds like, I mean, you guys have historically been fairly conservative, but I think as I look at your top line and then the EBITDA guidance, which is above I think consensus expectations implies, I think, that gross margins start to come back a little bit. So I was wondering if you could give us kind of your longer-range thoughts, if you will, in terms of how the gross margin plays out over the next several quarters. Thanks, and nice quarter.
spk07: Thanks, Scott. So gross margins, I think we're still in the thick of it. the freight the chip expedites so gross margins may be a little bit lower than you know what we achieved last year in the first half and we think we have uh you know opex levers and and software to uh maybe offset some of the the headwinds we have on the the component supply and then you know we're hopeful in the back half of the year that that um starts to to moderate our guidance uh You know, look, our guidance, we could, if we exceed guidance, it's because the supply environment is better than we thought. And on the low end, the converse is true. Look, if we don't get chips, then, you know, we'll have a hard time making shipments like everybody else. we tried to take a balanced approach with respect to the guidance, knowing that there's more demand. And if you dig through our 10K, you'll see that our backlog is up 7%. That's towards the high end of our guidance. And we think we could do better with share gains and fast-term business if it were available. But our guidance is what we're comfortable given what we know about the supply environment right now.
spk10: Great. Thanks so much.
spk01: Your next question is from the line of Dave King with B Reilly.
spk08: Thank you. Good afternoon. My first question is actually a clarification. So I believe you said as far as the supply chain impact was approximately 100 bps on margins and maybe a few million dollars. Now, was that for the fiscal 21 or fiscal fourth quarter?
spk06: Yeah, so the 100 basis point impact gross margin, that's for the fourth quarter. I was talking generally in fiscal 21 when we said we could have shipped probably two or three million dollars more in revenue if it was not for the supply chain constraint.
spk08: Got it. And then just wondering how much of the impact you've factored in for the fiscal 22 outlook?
spk06: So, so, so, so I think we, we, let me take that.
spk07: So, so look, Dave, you know, we, we gave the 283 to 293, right? If, if it's, if supply is better, you know, we would, we'd go above, but I don't want to tell you the, you know, the unconstrained, uh,
spk08: number because then it starts to you know we do know our unconstrained number but we're not going to disclose that so got it okay my next question is like Cisco and some other folks you know they're raising prices to offset you know higher supply costs is that something you guys are pondering no we're doing it oh you are doing it okay yeah so and look the
spk07: Part of the, you know, the answer to Scott's question, why we hope to, you know, have some challenges in the front half but get through the back half is because, you know, it's hard to raise price on backlog or firm orders. So you have to do that going forward. And the chip expedite and freight fees are nearly instantaneous. So there's a lag. right? So our hope is to catch up. Where we'd be wrong on the catch up is if there's more expedite fees, more shortages, and the environment worsens. So what's behind our ramp up in gross margin from the first half to the second half is we are pursuing a price to offset the inflationary and expedite and freight challenges that we're under.
spk08: Got it. And then you talked about, you know, highly differentiated product portfolio. How will Open RAN alter the competitive landscape going forward?
spk07: Yeah, that's a great question. Open RAN does, it allows the specialist competitors to compete on a level playing field. And, you know, we think we have the best products. So when the microwave network and the RAN are not bundled, we think we have a better opportunity, right? We can't wait for Open RAN to take hold.
spk08: And when do you think that will be? Is that something that could happen like next year or is it maybe a couple of years out?
spk07: I think it's two years out or so. Got it.
spk08: And then my last question is just the seasonality. I know the fiscal third quarter, the March quarter is always weak, but what about September quarter? It seems like it's kind of, it was up last year sequentially. How should we think about seasonality for the fiscal first quarter?
spk06: So Dave, we're kind of a project-based business, right? It's sometimes difficult to predict seasonality. A lot of contracts that we have are long-term in nature. and we tend to fulfill them for more than a year, basically take revenue over one year period. So it's difficult to predict seasonality.
spk07: Yeah. So, you know, here's a little bit of flavor, right? So when we think about the business, we don't think about it in terms of seasonality. What really happens is it is project-based, as Eric said. And then the second part, There is some favorability in the October to December quarter. Last year we had some huge projects that are driven by government end-of-the-year funding. But other than that, we would say that the seasonality effects is flat, and what's most pronounced in our quarter-to-quarter revenue variation is the project basis.
spk08: Got it. Thank you.
spk01: Your next question is from the line of Tim Savajos with Northland Capital Markets.
spk05: Hi, good afternoon. A couple of questions here. First, as you look at fiscal Q4 just reported here with the stronger than expected revenues in the quarter, seemingly and mostly U.S.-based, and I wonder if you could talk about any particular drivers there either private network or carrier-focused to drive that upside, both to our estimates as well as your guide for the year? And I have a couple follow-ups.
spk07: Yeah, so, Tim, the private network business was strong. We had one state network takeaway, and the rural broadband business was strong.
spk05: Sorry about that. Okay, well, we kind of have this discussion every quarter, so why not revisit? You know, considering the magnitude of the upside in the quarter, it's something on the order of $5 million. I mean, should I conclude from that that the rural broadband business is getting more material or material sooner than you might have expected, given that commentary about the quarter?
spk07: it's getting closer to crossing some materiality thresholds, Tim. How about that? So you're getting closer to a yes, but it will happen.
spk05: That's better than normal. So, you know, I'll take it. And, okay, I did want to follow up on, I think you mentioned a couple of wins on the carrier side in APAC from countries that you've been shut out of. which sounds suspiciously like Huawei-related business, but given your other commentary, maybe it's not. I wonder if you could talk a little more about that and how material a growth driver that could be for fiscal 22.
spk07: Well, I think it's going to contribute to our growth. We won because of our growth. our multiband and our A2C products. And, you know, really what we've been doing over the last year and a half is competing on total cost of ownership. And we won those designs, if you will, in high spectrum cost regions where our multiband solution is more valued versus the competition. And, you know, I don't want to pick on any one competitor, but we think that our value proposition works against all of our competitors.
spk10: Is that helpful?
spk05: Absolutely. And as you consider those wins and some of what you mentioned in Western Europe, I think on the private network side as well, as we look at fiscal 22 in general, You know, again, kind of starting in a mid single digit growth level, which you obviously handily exceeded in fiscal 21. You know, that was last year. It's pretty U.S. driven, right? 20 percent growth plus in the U.S. Can you give us any idea about how you feel in terms of international versus U.S. growth as you as you look at fiscal 22 currently?
spk07: Yeah, so coming in the fiscal year 21, the international business was in decline. And, you know, fiscal 21, we hope is a turning point where we are no longer in decline. We're in, we grew in the year, and we want to continue on that, right? So I think the international business grew just over 5% in fiscal year 21. And, you know, the team is doing better. And if we didn't have, you know, look, if we didn't have the supply constraints, we'd sign up for more growth. But I think that the most important thing is that our value proposition or our commercial team is focused on our differentiation, and that's allowing us to win share, and as the supply environment eases, we'll be able to post more of that. So we feel good about our international prospects.
spk05: Okay, thanks very much. I'll pass it on. Thanks.
spk01: Your next question is from the line of Alex Henderson with Needham.
spk09: Thanks. So I was interested in talking a little bit more about what you said about Africa and particularly the conditions there relative to competition with Huawei. My sense of it is that Huawei, while generally receding on a global basis, particularly in advanced economies, has actually shifted some of their focus into areas where the politics are less in play and where they think that they can deliver a differentiated win where they're not going to be excised out at some later date. And Africa and Latin America seem to be focus areas. Is that what you're seeing, or are you seeing Huawei actually being pushed out of those geographies as well? And particularly, was that Who was the incumbent at the wins that you had in Africa, or was it somebody else?
spk07: So let me do my best to answer that. You know, Latin America, I don't know that we've taken any share from Huawei. I would say that we're more competitive versus Huawei in Africa overall. So the commentary about, you know, the geopolitical impacts on Huawei, we're starting to see more and more operators independent of their geopolitical impacts. meanings be open and putting historical Huawei accounts up for bid. So, and, you know, I believe at least one of those wins was Huawei related in Africa.
spk09: So, I guess the question really is more about when clearly everybody's willing to put everything up to bid and hope that everybody gets as aggressive as possible. to get the lowest price. But the question is, has Huawei differentially abandoned Europe and some of the other areas that are politically challenged for more subsidies, more price pressure, and more aggression in geographies like Africa and like Latin America? Are you seeing any evidence that are also under pressure, more pressure there than historically the case?
spk07: Yeah, so I would say that, you know, look, long before I got here, AVIAD suffered, particularly in Africa, due to Huawei-driven price pressure. And I would say that that impact is much less. And what I can't deconvolute is, is it the network security or the supply? So it's really, you know, but kind of, Quite simply, it's really hard to drive price lower when you can't deliver. So then the next question might be, well, if they get supply return, will the price pressure come back? And a lot of our dialogue, even in, you know, regions that you wouldn't think the politics might favor this, there's concern about network security and we're getting opportunities that we wouldn't have gotten before that we think will stick once the supply constraints are relieved.
spk09: On the chip side, any change in Huawei's outsource versus insourcing of chips? Have you seen any evidence that they've been able to get a new chip to market and and be able to compete effectively with it, or are they so far behind the eight ball on that that they're not competitive on a chip basis with the U.S. vendors?
spk07: Yeah, so we probably don't have any more insight than anyone else on this call, so we haven't seen it. And when I think about this in the abstract, you know, is Huawei going to focus on you know, the chip for their microwave network, or are they going to emphasize the RAN? So we think, you know, on a theoretical prioritization that we'll, you know, we have more time before Huawei can fix their supply or their access to semiconductor technology, but we don't have any specific insight.
spk09: I've heard they have as many as 37 different chip programs in place in at 50 million bucks a piece, it gets expensive. Um, going back to, uh, you know, the, uh, supply side of it for a second. Um, can you talk about whether the breadth of the supply challenges, is it one or two parts or is it all parts? Is it, um, you know, is there been any tightening or loosening of that trajectory?
spk07: All right. So the way I would look, it's, um, you know, a sophisticated game of whack-a-mole. Uh, I would say it's up to 20 different, uh, components, but those components, uh, uh, change from time to time. And, um, you know, this is kind of a game of speculation of when this is going to go away. Um, I would say the most encouraging aspect that we've seen is that our lead times haven't pushed out in the last, uh, two months. So we take that as the first sign of stability. And when are we going to really know that we're past the peak difficulty is that some of the lead times will start to be brought in or some of our expedite requests will be fulfilled. But we're not there yet. I would say the most positive sign for the industry lead times appear to be stabilizing.
spk09: That's encouraging. Good to hear. Okay, I'll see the floor. Thanks.
spk01: Your next question comes from the line of Theodore O'Neill with Litchfield Research.
spk02: Hey, congratulations on the good quarter.
spk07: Thanks, Theo.
spk02: Yeah, so I was just looking through the K, and revenue for the year in the Africa and Middle East region rebounded nicely in 2021. Can you talk about what drove that turnaround?
spk07: Yeah, that was principally, right? So a lot of the regions that we play in Africa are high-spectrum costs, and our multiband radio allows the operator to basically – combine our multi-band radio and run their high-value traffic on the microwave and run their low-value traffic on a less expensive band. And, you know, when we talk to the African network operators and we talk about total cost of ownership, that's resonating with them and that's helping us, you know, start to grow the African region again.
spk02: Okay. The next question is about the Aviat store. I don't think you've disclosed any sort of volume going through the Aviat store, but could you, and if you can't, can you give us some directional guidance on how that's going?
spk07: Yeah, so what we've said in the past is that, you know, we'll start to consider breaking it out when it gets to 10%, and this is, I think, kind of what Tim was alluding to, is that we're we're getting close. So, you know, three years ago we were at 0% of revenue and now we're getting closer and closer to 10%. So, so that's, that's about as much color as we want to give on the size of the store at this point.
spk02: Okay. That's encouraging. Do you hold inventory in the store and how is that managed?
spk07: we do hold inventory in the store and, um, yeah, we, we own the, the, the store, the store inventory. And, um, you know, when we get, get demand, we ship it out as quickly as possible. So that's kind of the way the store works.
spk02: Yeah. But I mean, you must, in terms of managing it, you, you must be looking at, um, you know, with the contracts and sort of where, as you expect them to be, um, taken off, put them in the store. So is it sort of just in time?
spk07: So in a normal supply environment, it's just in time. And in the current environment, when we have our allotment of supply, it's just in time. And then if we're short, then we convert to lead times.
spk02: Okay. Thanks very much.
spk07: Thank you.
spk01: And again, ladies and gentlemen, if you would like to ask a question at this time, simply press star, then the number one on your telephone keypad. And there are no further questions in queue at this time. I'll turn the call back over to you for closing remarks.
spk07: Thanks. So, thanks everyone for joining. You know, it was a good fiscal year 21, a good fourth quarter. We are, like everybody else that uses semiconductors and electronic components, we're challenged with the supply chain. We think our supply chain is doing the best work in the microwave industry. We hope for relief and we look forward to delivering on our guidance and talking to you in 90 days. Thanks everyone.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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