Ladies and gentlemen, thank you for standing by, and welcome to the Aviat Networks conference call. During today’s presentation, all participants will be in a listen-only-mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to hand the conference over to Ms. Cindy Johnson, Director of Corporate Communications. Cindy, you may begin.

Thank you, operator. Good afternoon, everybody, and welcome to our Fourth Quarter and Fiscal year 2012 Earnings Call. This is Cindy Johnson, and I am joined by Mike Pangia, President and Chief Executive Officer; and Ned Hayes, Senior Vice President and Chief Financial Officer. During this conference call, we may make forward-looking statements regarding our business, including statements relating to projections of earnings and revenues, business drivers, the timing and capabilities of new products, network expansion by mobile and private network operators and variations of economic recovery in different region. These and other forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. For more information, please see the press release and filings made by the company with the SEC. These can be found on the Investor Relations section of our company website, which is www.aviatnetworks.com. Now, I’d like to turn the call over to Mike Pangia, President and CEO of Aviat Networks. Mike?

Thanks, Cindy. And thank you all for joining us today. I’m very pleased to report another solid quarter with several bright spots. We had good top line momentum, we held our spending in check, we had outstanding cash performance, we continued to add new customers and we are executing our technology roadmap. Revenue exceeded our prior guidance at $116 million and for the fifth consecutive quarter our book-to-bill was up one or above. And most importantly, we generated positive cash flow from our core business excluding restructuring. The final mix of products, customers and timing of shipments led to gross margins below our prior expectations, but as discussed in previous calls, gross margin progression towards our long term goal will not be linear. We are confident that our gross margin rate will improve steadily in fiscal year 2013 with a more pronounced pickup in the second half of fiscal year as driven by the increase contribution from our new products. And I will provide more color on this later in the call. We added 33 new customers in our fourth quarter for the total of 119 in fiscal year 2012. Including the first order from a new Tier 1 mobile operator that we announced in last quarter’s call. We also successfully completed the first route with our leading customer for low-latency market application and we received our first WTM 3000 orders. With that, I would like to provide an update on the microwave transmission market. Mobile backhaul continues to be our primary addressable market segment and the demand for increasing backhaul capacity in our customers’ networks is ongoing. In North America, the demand is mainly driven by expansion of LTE deployments in our key customer’s networks, while internationally it is a combination of increasing capacity to handle subscriber growth, ongoing…

Thanks, Mike. Our GAAP financial statements along with a reconciliation of non-GAAP financial measures are included in our press release issued today following the market’s close. I would like to take a few minutes to summarize our non-GAAP financial performance at a high level. As Mike mentioned, we had a solid quarter with several results above expectations. The key highlights were; book-to-bill was once again above one in the quarter in addition to our solid top line performance. We’ve been able to deliver a book-to-bill equal to or greater than one for eight of the last nine quarters and this performance has certainly supported our ability to meet or exceed our revenue commitments recently. Revenue for fiscal Q4 came in at $116 million, which was above our guidance range. Sales were particularly strong in our reported Middle East and Africa segment at $46.9 million and we saw a continued solid performance in North America with another quarter above $40 million. In terms of products and services revenue mix, we were a little heavily weighted towards service than in fiscal Q3 with quarterly revenue breaking out at 75% product related and 25% services related. Our significant Tier 1 mobile operator in Africa MTN was once again our 10% customer in the fourth fiscal quarter. Non-GAAP gross margins for the quarter were 28.6% of revenues below our guidance range. In some, we have consistently cautioned about the mix and the timing of product deliveries and the proportion of services to total revenues can bring volatility to our quarterly gross margin rates. In the past two quarter’s earnings calls, we were quite specific about how product and geographic mix had been favorable for gross margin results. This quarter unfortunately we observed the opposite effect in terms of mix. Compared to the previous sequential…

Thanks Ned. As mentioned earlier, I’m very pleased with the improvements we made in fiscal year 2012. We’re now at the inflection point of our business strategy. We’ve restructured our business successfully through the process. We were able to retain current customers and have restarted our innovation engine. We have an improved financial model, as reflected by our year-over-year performance and are executing again on our key performance indicators. With restructuring largely behind us, we are seeing the potential to generate cash on a more consistent basis. We’re entering the new geographic in vertical markets. We are adding new customers and have introduced new products to enhance our competitive position. We will have more new products in the pipeline. Our competitive position as reflected by our value proposition will advance further. We are well positioned for more consistent, profitable growth and cash generation which should result in increased shareholder value. Now I’d like to turn the call over for questions. Operator, you may proceed with the Q&A.

(Operator instructions). Our first question comes from the line of Blaine Carroll with Avian Securities. Please go ahead.

Hi guys. Congratulations on the quarter and the outlook.

Thank you. Appreciate it.

I’ve got a few questions here, but I’ll just buzz through a couple in order. First of all, Ned, could you talk about the linearity during the quarter? And I guess I’m looking at both orders as well as revenue linearity. It must be a real headache for you to try to do the logistics on shipping all this stuff because the revenue does bounce around from region to region and I’m assuming that’s what you mean by timing of products to certain customers that is impacting the gross margin. So that’s going to be hard to juggle, is it?

I think it speaks to the excellence of our operations group, Blaine, to be perfectly honest with you to be able to get this done within each quarter and at the same time satisfy our customers’ requirements which are indeed choppy. Our operations and manufacturing group is absolutely world class, coming out of the Thailand recovery and now as we product transition to our ODU 600 from our ODU 300 and manage that to an exquisite result. We’re very, very delighted with the quality and caliber of our operations team getting us to where it is we need to be every quarter.

So what is the linearity in that? Is more the orders or more the shipment tables to be done in the beginning part of the quarter?

I think it’s fair to say that linearity continues to improve. I think the sales team is doing a much better job getting those forecasts into our system so that we can then in terms of lead time items and manufacturing get the product out the door. But I will tell you it continues to be somewhat of a challenge again with our large carrier or our large non-mobile customers in terms of the demands they’re placing for product deliveries. That’s tough to forecast.

All right. To get a breakout between mobile applications and the non-mobile because a fair amount of the discussion has been on non-mobile side.

Yes. I can provide that. In terms of our split between mobile and non-mobile, in the fourth quarter, from a North America perspective we actually had – it was about 32% mobile and 68% non-mobile which…

(Inaudible) North America?

Yeah, in North America. In Q3 was about 34% mobile, 66% non-mobile. So pretty flat and then on a global basis because of the – you actually have the inverse effect internationally but globally in the fourth quarter we were 68% mobile, 32% non-mobile and in the third quarter it was 66% mobile, 34% non-mobile. And we actually finished on fiscal year 2012 our mix was 67% mobile and 33% non-mobile. So, pretty steady in that 70/30 high 60s range.

Okay. And then the low latency radio that you’re talking about, is that going into time sensitive data applications or is that going into video applications?

That is specifically in the vertical that’s known as high frequency trading. So this is literally for key trading houses and resellers trying to build networks between trading desks and exchanges and have that data transmitted with the lowest latency possible. Believe it or not microwave provides a lower latency solution than fiber optics for a number of different reasons. Number one, inherent technology. Number two, the repeater technology of fiber optics. And number three, you can build a line of sight network with microwave that you don’t generally see with a fiber optic network that’s somewhat circuitous. And so the nano-seconds that these low latency networks can provide between trading desks and exchanges provides investors a significant opportunity to make a lot of money.

Okay. And then last one for me. On the receivable improvement, was any of that the receivable in India?

So the India receivable, Blaine, in the fourth quarter we collected somewhere between $1 million and $2 million. Since the end of the quarter we’ve collected another $600,000 or so and we continue to successfully work the commercial issues and continue to expect to collect substantially all the remaining net receivable balance gradually over the coming quarters. But it was not a significant impact on our overall collections.

And what is that, about $6 million?

We continued to characterize it as single digit millions.

Okay. Greater than five?

Single digit million.

Okay. Thanks guys. Good luck.

Our next question comes from the line of Barry McCarver with Stephens Inc. Please go ahead. Barry McCarver – Stephens Inc.: Hey, good afternoon guys and thanks for taking the questions. Along the lines of the last questioning, how much of your business falls within the vertical of high frequency trading today? Is it still pretty small piece?

It’s a small piece and we don’t expect it – we characterize these markets an emerging market, difficult to predict how big the market can be. But even in a more mature level the market will be one of the smaller verticals, albeit it highly lucrative in terms of the quality of the business. Barry McCarver – Stephens Inc.: Got you. And then just thinking about your guidance for the first quarter coming up, can you give us an idea of the mix of business you’re expecting in the quarter? And then any big changes geographically from 4Q that you’ve kind of already got your finger on there?

I think it’s as steady as she goes in terms of US versus international. I think it’s steady as she goes in terms of products and services. Products and services the breakout of 75/25 I think is something that we’re going to continue to see here going forward. That is in stark contrast the last Q fiscal year where products and services broke out at 80/20. I think we’ve been very successful in proving to tier one operators in North America that we can help them with their installation. I think certainly the non-mobile space our value added services are absolutely being taken and warmly received. And on added services business in terms of our net capabilities here in the US and now outside the US are starting to be taking advantage of as well. So I think all in all relatively steady state and gross margins improving from what we saw this quarter. Barry McCarver – Stephens Inc.: And it sounds like you’re certainly hinting that the fiscal year is going to be a little bit backend loaded than the last two quarters for revenue expansion particularly in North America. I guess just verify that I’ m making sense that is the case and how confident you are and to what extent is that key to hitting your intermediate gross margin goals there?

So I want to be specific. I think the telegraphing that we’re sending is about gross margin improvement. I don’t think we’re telegraphing anything. To be specific, the guidance that we’re providing is only for the next quarter. We did want to give some special color to gross margin given the performance that we saw this quarter coming from and the improvements that we saw from the continuing rollouts of our new lower cost platforms in the second half of the fiscal year.

Yes. And we’re referring to gross margin rate improvement to the extent there is some attribute of gross margin improvement that’s volume related. We do have some fixed costs from a manufacturing perspective, but not withstanding changes in mix and everything else we’ve explained. That’s kind of how we’re going at it. No indication of what we’re telegraphing for revenue as Ned has indicated. Barry McCarver – Stephens Inc.: Okay, great. That’s very helpful. Thanks a lot guys.

Our next question comes from the line of Rich Valera with Needham & Company. Please go ahead. Rich Valera – Needham & Company: Thank you. Good afternoon. A follow up question on the gross margins. It sounds like you’re guiding for something slightly north of 30% for the second half of this fiscal year and if you look back for the last fiscal year the first half you averaged about 31%. So it sounds like maybe under a good case you’d be roughly flat versus the first half of last year, yet we presumably have a much higher proportion of your revenue from your new low cost ODU product. So want to understand what’s going on under the hood here. Presumably there’s some sort of pricing declines in the market. Are they at this point pretty much offsetting the lower cost of your ODU? Also is the mix towards service adversely affecting that gross margin mix as well? Just trying to understand why we’re not maybe seeing the improvement we would have hoped to later in the fiscal year versus last year’s first half.

So Rich, this is Mike here. So we’re giving an indication of improvement in the second half in gross margins versus the first and I think we’re saying above 30. We didn’t give a range in terms of whether it was 30/31, 30/32. So it would be a bit of a stretch to go directly to your assumption. So take it first as an improvement over the first half of which we expect it to be over 30%. As far as the ability to do how good can gross margins get? What we do understand now, now that we’re in the middle of a product transition rather than at the beginning of it, we now have control over the transition to the ODU 600 from the HP and we’ve been managing that very much along the lines of optimizing inventory and we’ve got lead times to deal with and that management is something that we now understand and we can see the impact that that would have. Beyond that, like any major new product introduction, we expect to be on – there is a startup cost associated with new products and we expect to be beyond that startup costs going into the second part of the fiscal year. So we’ve got a pretty good handle around the cost side of the equation. Of course we expect pricing to be an ongoing thing. But net of those factors we do expect to see an improvement and above 30%. Rich Valera – Needham & Company: Can you give us a sense of what percent of your product revenue was comprised of the 600 in this most recent quarter just so we can get a sense of how that might improve as we work through this year?

Yes. I think we have stated that over 25% of the outdoor radio units that we shipped in the third quarter were the new ODU 600. That metric actually was fairly similar in the fourth quarter. It was slightly up, but not significantly. We would expect that to be in the 70% to 80% range of all outdoor units shipped by the end of this calendar year. Rich Valera – Needham & Company: Okay, that’s a helpful metric. Appreciate that. And then just looking a little longer term, you mentioned the planned – I want to just be clear what exactly you were saying about your new packet node product, I think CTR. You said something about it in the first part of calendar ’13. I think that was sort of – was that initial shipments? What are we expecting there?

W expect to start getting customer validation – working customers in that timeframe in the 2013 front half of the calendar year. Rich Valera – Needham & Company: That doesn’t mean revenue? When would we be talking for initial revenue shipments?

I think as we’ve been saying consistently is even though we would expect shipment of a product before the end of our fiscal year, that we wouldn’t expect any material revenue impact to happen until the fiscal year ’14. Rich Valera – Needham & Company: Okay. That’s helpful. So this year it’s really about getting the 600 being manufactured efficiently, getting rid of startup costs and obviously increasing it as a percent of the ODU ship it sounds like?

Oh yeah. This year we’ve got the 600 completing that portfolio. We’ve got a next version of our all indoor product in North America. We’ve got the full suite of all outdoor IP radios coming out and not withstanding that, we continue to focus even on cost enhancements to our existing eclipse platform. Not to think that we’re waiting on something in the far future. We all understand that improving cost, leveraging our supply chain in a better way is also part of the formula to improve those margins. Rich Valera – Needham & Company: Okay, that’s helpful. Thanks very much.

Our next question comes from the line of Aalok Shah with D.A. Davidson. Please go ahead. Aalok Shah – D.A. Davidson: Hi Ned and Mike. How are you?

Hey Aalok. Good. How are you doing? Aalok Shah – D.A. Davidson: Good. Hey, just a couple of quick questions. In terms of the gross margins again, by geography I know it also wavers quite a bit, but if you can give me a sense of how you think the bookings start to line up towards – should we start to think about maybe seeing a little bit more of a better margin mix because of geography as well in the second half of the year?

Well, I think we’ve stated before from a margin perspective, our highest performing products are in North America. I think North America will continue to be a flagship region for us as well as Africa. So really the biggest takeaway is we don’t expect to see any significant deviation with respect to the African and the North American business. Within those geographies, there is mix even within those geographies so it’s very difficult to predict exactly. But too hard to say right now whether or not there’s going to be any significant change in the geographic mix which can have an impact on gross margins. Aalok Shah – D.A. Davidson: Okay. And then in terms of just maybe explain it to me because I’m maybe not too clear, but when you sell a product, something that requires several quarters of insulation and maybe you have some several quarters of booking, would you necessarily see a strong services contract associated with that? So if you’re dealing with a tier one would you see a pretty strong services contact for a couple of years? Or is it only at the time of the installation? How do you guys account for that?

So we’ve got large turn key projects. Ned can explain to you how we deal with the accounting on the large projects where you’ve got services bundled with product. But as far as how we deal with things, we usually take, when we have a large project, we usually take no more than a year at that project at a time when it comes to our booking. But and the services, there’s different types of services. You’ve got the implementation related services that would be done along with product being installed. But then we have maintenance services as well which is taken over the course of the maintenance level agreement on a monthly basis. So Ned I don’t know if you want to explain a little bit on how we might do the accounting from a project perspective.

Yeah, that’s pretty much it, Aalok, in terms of MLAs, maintenance level agreements over the course of their extended term to the extent where you have installation services or tier ones here in North America. We bill as we execute and then to the extent that we have percentage of completion contracts for very, very large turnkey contracts, that obviously comes under a percentage of completion account. Aalok Shah – D.A. Davidson: Okay. And so Ned is it fair to assume that the maintenance contracts portion of the services line is higher margin generally?

I think generally yes. Having said that, the new value added services that we are providing in cases like our low latency deals, the value that we’re providing and creating there I think is being recognized in our margin rates on those services as well. Aalok Shah – D.A. Davidson: Okay. So netting all that up then I guess getting to the major part of my question, do we expect this mix of revenue to stay relatively consistent even – I know you have higher margin products coming to market. You have potentially some stronger business in North America. But do we expect this mix between products and services to remain pretty consistent to where it is today?

I think from a top level perspective, yes and I think you have opportunities to improve margins both on the product side and on the services side going forward. Aalok Shah – D.A. Davidson: Okay. And then, Ned, very good job in the accounts receivables department. I know you talked a little bit about collection of cash in some geographies, but was there anything else that stood out to you as to why accounts receivables went down as much as they did?

No. It was just again, Aalok, when I first came on board, Mike and I certainly said one of the key focus points on my watch would be working capital management cash generation. It’s almost a matter of what gets measured gets done. And so we had a very exhaustive focus across the company, including operations, including manufacturing, including logistics, including collections, customer satisfaction, to really get done what we needed to get done and optimize our shipments and optimize our customer relationships to make sure that we’re able to optimize our collections effort and our working capital management. This is well done across the company. Aalok Shah – D.A. Davidson: And then last question, in terms of where you are now with the product portfolio, Mike, if you can give us a sense of where you think you stand competitively now? I know you guys have done a bang up job here in the last couple of quarters, but where do you think you still have some hold and where do you think you might start to – you think you’re starting to take some incremental share at this point?

I’m elated as to where our current portfolio stands today in terms of competitiveness. We have a very compelling proposition today. Of course that position will continue to strengthen and of course the cost side of that equation will improve as well. But I’m very satisfied where we are today and very confident the roadmap that we’ve got going forward. That’s me. Having said that, we just came out of our annual sales conference which took place last week. I think I talked when I first got in the CEO role talked about coming out of the first one at being a CEO and how everyone was so pumped up and motivated. The difference between last year and this year is, not only was everyone motivated, they had confidence. They had confidence in what we have today and they have confidence in what’s on our roadmap and that’s exciting to see. I’m very, very energized by it. Aalok Shah – D.A. Davidson: Okay, great. Thank you so much guys.

Ladies and gentlemen, that does conclude the Q&A portion for today’s conference. Thank you for participating in the Aviat Networks fourth quarter FY 2012 financial results conference call. If you would like to listen to today’s replay the phone number is 1800-406-7325, access ID 4557175. Thank you for your participation. You may now disconnect.