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

Thank you, Operator. Good afternoon, everybody. And welcome to our Third Quarter Fiscal Year 2012 Earnings Call. This is Cindy Johnson, and I’m 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 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 strong quarter and better than expected financial performance. We continue to focus on the execution of our stated business objectives, which are built on a number of key fundamentals, delighting customers, rolling out new products on time and on budget, extending and leveraging our services capabilities, focusing sharply on working capital management and working more effectively as a team across all functions and geographies. The improving trend of our financial performance is evidence by our Q3 results. Revenue for the quarter was slightly above our guidance range coming in at $111.6 million with the book to bill ratio just above 1. Gross margins were above expectations at 31.1%, mainly owing to a favorable business mix and we increase our cash balance significantly quarter-over-quarter. In addition, we secured a steady flow of new customer wins and continue to ramp up shipments of our new outdoor RF unit, which we call the ODU 600. Our pipeline of new products is progressing well and will enable us to further advance our competitive position in both the mobile and non-mobile markets. In big picture terms, we are executing on our plan. Finally, the business development investment, which we introduced early into our fiscal year, has begun to show results. In Q3, we signed a three-year frame agreement with a new Tier 1 mobile operator with operations in Europe and Asia, and we expect to receive initial orders from one of the regional entities before the end of this fiscal year. With that, I would like to provide an update on the microwave transmission market. Overall, the market for microwave backhaul continues to represent a great opportunity for us. We anticipate ongoing investments in mobile backhaul deployments worldwide based…

Thanks Mike. Our GAAP financial statements along with a reconciliation of non-GAAP financial measures are included in our press release. I would like to take a few minutes to summarize our non-GAAP financial performance at a high level. As Mike previously mentioned, we had another strong quarter with results above expectations. The key highlights were book-to-bill was slightly above 1 in the quarter. Revenue for fiscal Q3 came in at $111.6 million, which was above our guidance range. Sales were particularly strong in North America across all verticals at $42.6 million, as well in the Middle East and Africa at $33.9 million. In terms of product and services revenue mix, that mix return to a more normal level versus last quarter’s performance, with quarterly revenues breaking out at 77% product-related and 23% services-related. Our large Tier 1 mobile operator in Africa, MTN was once again a 10% customer in the third quarter. Non-GAAP gross margins for the quarter were 31.1%, well above our guidance range. Again, in the quarter, we had a very favorable mix of products and strong performance delivered by a North American sector. Worldwide product margins came in at 33.8% while our services margins came in at 22.2% for the quarter. As we noted earlier, services revenue mix was lower than last sequential quarter and this had a somewhat negative impact on service margins, especially in terms of lower fixed cost absorption. Non-GAAP operating expenses for the quarter total $32.3 million and were at the high end of our range, largely driven by variable expenses that increased with our top line performance like agent commissions and selling expenses. Having said that, our focus on optimizing operating spend delivered our fourth consecutive quarter were a non-GAAP OpEx decreased and going forward, we will have delivered focus on G&A…

Thanks, Ned. As mentioned earlier, I’m very pleased with our financial performance in Q3 and the consistency we are demonstrating in meeting our previously stated commitments and objectives. I will now like to conclude the management overview with several investment considerations. Over the last four trailing quarters, we have a solid $440 million plus top line with an improving business model. Non-GAAP gross margins remain steady, at an average exceeding 30%. We intend to manage our OpEx tightly looking for further opportunities to optimize our investments. This means as revenue grows, investors will see earnings leverage. We have a solid balance sheet. In generally with normal fluctuations expect to be generating positive cash flow from operations going forward. And we continue to introduce new products to improve our competitive position. In conclusion, these are some tangible proof points that we are creating shareholder value. Now, I’d like to turn the call over for questions. Operator, you may now proceed with the Q&A.

Thank you, sir. [Operator Instructions] Our first question is from the line of Matt Thornton with Avian Securities.

Maybe you can start with your comment around the Tier 1 mobile operator in Europe and Asia, if I heard that correct, that was a three-year frame agreement…

Yes.

But I missed some of that. Can you kind of walk us through that, give us a little more color on that opportunity?

Yeah. So this is a fairly large operator. I believe that they are in the top -- in the top 10 globally as far as size. We had some -- I would say immaterial business with some of the entities this operator had, across certain parts of Asia. And how we came across it was -- like most operators, we need to establish our presence at the HQ level. Decisions are becoming more centralized, and it was upon us to -- and we were motivated to have a frame agreement that allowed us to operate across all those entities. So this has been something that’s been ongoing for about five or six months. And we actually entered upon the -- the opportunity was triggered by, I would say a displeasure of that particular customer, with one of the existing incumbent providers. They had an RFP/RFI process and really, we were in a position where we’re able to leverage our new products focused on the total cost of ownership equation, which has as much to do about the OpEx as it does about the CapEx. We had a customer who is very interested in working through that TCO value proposition and we were awarded three-year frame agreement and now we’re working on the initial orders from one of the entities from that customer. And the entity that we’re working on the orders from us one that we’ve never done business with before. So it’s not like -- it was one of the minor relationships that we’re already having with them.

Got you. And I heard you say that, you expected orders to commence, was it this fiscal year or…

Yes. We should expect to get our initial orders from this customer from one of those entities before the end of the fiscal year. That is our current expectation.

Okay. Great. And if we want to try put a little bit of size around this, I mean, is this a customer that could join MTN as a 10%-type customer on a normalized basis?

I mean that’s probably a stretch for anybody new coming in, right off the bat. I think that this -- you know, as we’ve been saying all along, Tier 1 mobile customers are great from the standpoint of it. Once you’re in with them then there is a recurring amount of business which is fairly substantial. I think that this particular customer presents us with a very strong opportunity. But it will be a stretch to say that any new customer at this point would be able to contend with MTN which has been our number one customer for several quarters now.

Terrific. And then just a couple of quick ones, if I could, the status on the receivable out of India is that still something you expect to collect in the current quarter or any update there?

I will let Ned answer to that.

Matt, we still continue to have a line of sight that will be collectible, substantially all. We still characterize it as a single digit millions. And I think we’ll be seeing that collection stream over this quarter and perhaps the first quarter of next fiscal year.

Perfect. And then just one last one, if I could, probably for Mike, may be for Ned. Could you, kindly give us maybe a sense of linearity in the quarter and kind of how visibility into this quarter compared to last quarter?

I would say that our backlog continues to be very steady as I think you’ve seen we had another book-to-bill at 1 above. So we’ve got a pretty strong backlog going into any given quarter, very healthy. Are there still fair amount of business, notwithstanding that that we have to book and ship in the quarter and the linearity from a bookings perspective is fairly good, which allows us to be in a position to turn that booking into revenue. The other thing to and it’s all about -- really there, it’s all about meeting the customer’s expectations from the time they place that order until the time that they receive those goods. We’re back to normal as I guess -- from the perspective of delivery, the Thailand that situation is behind us now. So we are back to order relative to meeting those customer requirements. And we see further opportunities to improve our cycle times going forward.

Our next question is from the line of Mac Tatman with Stephens Incorporated.

As far as visibility goes, I guess, some kind of piggy backing of the last question that was asked but they had a nice pick up in Africa this quarter. And I was wondering if we should expect that or see some improvements out of Africa going forward. I know, it’s been lumpy over the past but didn’t know if you guys had any better visibility.

Yeah. So we do give -- we give a perspective, I guess, a quarter out at a time and I would say that our business -- over -- I guess, over a number of quarters. In Africa, we’ve maintained a very strong position and we expect to continue to maintain that strong position. It is a difficult customer to predict from a standpoint of choppiness and that’s just something that I think we’ve always got to manage on a quarter-to-quarter basis.

Got you. What would you say going into the next quarter that -- I mean -- never mind. I got it. And then last quarter, you discussed seven LTE network rollouts in the U.S., which you guys were working on. First, how far along are you in that deployment process and have you gotten any other contracts during the quarter that are similar to that nature?

So, first off, I believe that our remarks around LTE apply globally, not necessarily just in the U.S. and we continue to be deploying those networks and just to use the U.S. as an example. As we predicted, our business as it relates to our U.S. mobile base site did improve in the third quarter as we are seeing more LTE rollouts to the secondary markets and to the rural areas of the U.S.

Okay. That’s helpful. And then as far as microwave trends, I know you discussed it a little bit earlier in the call but are you seeing any different over -- better or worse over the last quarter. And then what impact will the Verizon spectrum sale have, if any, on the near-term for you business.

On the second part, I’m not -- I guess, I would be -- I'm not sure right now what specific impact that Verizon spectrum will have on us. I mean, we could follow up on that and perhaps in the coming weeks have further dialog there. Your first question against, sorry -- Mac was…

Just about demand.

Yes. We continue to see solid demand. Capacity continues to be -- increased capacity continues to be required on the mobile operator space. And we continue to see the demand outside of that space on our mobile segments, as networks continue to modernize. So I -- wouldn't say that we've seen any change in demand, I guess, we are seeing the pickup in a couple of verticals, the finance vertical being one. But we are seeing some new demand and some new business coming out of the low latency vertical. So that would be one additional area of difference that I would say a few quarters ago. But other than that, we continue to see solid demand and our business development efforts continue to focus in on penetrating new business.

[Operator Instructions] Our next question comes from the line of Aalok Shah with D.A. Davidson.

Hi, guys. This is Michael Engellant in for Aalok. Thanks for taking my question. I just had a couple for you guys. First of all, is there a time-table for the ramps in new products?

Well, I can give you, when you say time table, just to give you a better perspective on that. Our ODU 600 which is our RF unit's been rolled out for the last few quarters and now were at the six highest frequency bands that represent most of the demand. So you’ll see that ramp continue. The remaining frequency bands are going to be all about prioritization in terms of, which ones are necessary based on completing, let say, that remaining [Technical Difficulty]. We are in trial right now with the first version of our WTM 3000, all outdoor products. So we would expect that would be the first product in that family will be coming out. And I think we said that we -- we would expect to see some initial orders from now before the end of this fiscal year. So revenue into the next year, as I mentioned earlier, there are going to be a couple of new variants to that product line which I would expect to be introduced sometime in our next fiscal year. We haven’t given any specific timing on that. We have a next version of our IDU 600, which will be coming out -- which has a much stronger performance, transmit power attributes associated with it, at the same time, our smaller footprints or smaller in size. We expect that to come out early in the next fiscal year. And I would say that those would be the key products. We also have, I think as I mentioned, perhaps in the last call, we have some product modifications going on, specifically tailored to the low latency market. And we’re introducing those over the next several months as we’re continuing to ramp our business up in that area.

Okay. Sounds good. And with those products, what you guys expect like gross margin there?

The gross margins vary depending on the market, we’re dealing in, the particular product varies. I mean, I think the message is that as far as our overall margin, we do expect loss improvements in our overall margins is difficult. It’s not going to be a linear straight line but over time, our margins will improve, fueled by the base of new products I just went through then continuing on with the balance of the new products which will be coming out with the key -- I guess, one of the key triggers on that margin improvement that I mentioned earlier to be a next generation packet node which will be out at the -- most likely in the front end of our calendar year of ‘13.

Okay. And then just one more for you. Relating to your OpEx guidance, I mean, with you having all the cost cutting measures why are we really not seeing that going forward?

Well, I think you will see improvement in OpEx going forward.

Okay. Just more later part of the year?

Certainly, if you take a look at our fiscal fourth quarter, I think you are going to see improvement and then yes, especially with some of the initiatives that we have very deliberately focused on G&A. I think you will see some very good improvement on that line item in fiscal year ‘13.

Our next question is from the line of Russ Silvestri with Skiritai Capital. Russell Silvestri: Two questions. One, I don’t know if you said it but did you break out the amount of revenue that was service related and then also what drove the 22% gross margin in Service that was question one. And my second question is unrelated, but can you talk a little bit about perhaps the macro driver in terms of spending and maybe increasing or decreasing CAM [ph], as it relates to microwave backhaul versus the alternatives, predominantly I guess fiber in the markets you guys are addressing?

Okay. So, I’ll take the first one. In our prepared comments, we talked about our Product and Services mix. We talked about that as being -- let’s see where I put that number, 77% Product related and 23% Service related. And then the 22.2% in terms of margins is what we normally see, as we spoke long and hard about on our last call in Q2. Q2 was very much an anomaly in terms of the margin rates that we enjoyed at that particular point in time, specifically because we had a much higher Services mix in that particular quarter and that served to help us on the margin side, especially with fixed costs absorptions. Russell Silvestri: So it’s basically utilization issue that you are running in the Service organization.

That and the number of products -- the number of projects, and the kinds of projects that we went through this quarter versus last quarter.

So just on this -- I guess on the drivers. First off, I mean the drivers relative to need for backhaul, are capacity as we talked about, as I mentioned earlier. And it’s really driving a total cost of ownership mentality or how do I drive, how do I deliver more capacity at a lower cost per unit of capacity? Obviously, it could be delivered in two ways, microwave or fiber. What we are seeing here is that in North America, it’s traditionally been about 90% fiber, 10% microwave and what we are seeing now, as services are now being introduced in the secondary market or the rural markets. It’s really the time to market, time to revenue. It’s much easier to deploy microwave and microwave's capabilities relative to capacity is much stronger than they had been. So the value proposition associated with microwave were fiber doesn’t exists. There is, I guess a bias towards microwave under those scenarios and we are seeing that now in the U.S. On the international front, it’s always been, in the 50-50, microwave versus fiber. There is many of these markets where a fiber really isn’t conducive based on the landscapes of those regions and microwave, we expect to be continuing to be one of the key deliverers of capacity from a backhaul perspective. Russell Silvestri: Can you just talk about couple of the metrics that are being used in your TCO that allows you win the days so to speak?

Yeah. So, our TCO, I see four major components to our TCO. One would be reliability, which is all about -- if you are going to buy product then it’s going to work and it’s going to last. And we’ve had just phenomenal statistics in the past that's an area that we'll continue to be very focused on, is the whole area, quality and the services that we provide that strengthen the overall solution. Another area, we call migration flexibility, which is when a customer makes a purchase then are they able to utilize those assets as they grow either in capacity or they go from TDM to IP and we have a very strong story. We always have had one in terms of being able to transition our customers, as their networks change and everything we introduce, we have a very strong focus on making sure that that’s backward compatible. Our performance is another very important area. Performance is all about providing a high transmit power and system gain, which means you can either go a farther distance or you need smaller antenna and that has a significant impact on the overall CapEx equation as you include the antennas in that as well as the cost of space on the tower has usually a high OpEx component. And then last area is on the area of superior networking, which is really about scalability density. The networking attributes of the products, having a product that can do more than what’s provided today. So, if you’ve got a number of devices at a cell site today to deliver networking capabilities as we are introducing new products, our focus is being able to do more, leveraging our footprint and therefore allowing the customer to reduce their CapEx by not needing all of these other equipment that are at the network. And of course that saves OpEx in terms of training, as an example and maintenance and that’s where our focus areas are.

Our next question is from the line of Richard Greulich with REG Capital Advisors.

I wanted to follow-up on the question on the G&A expenses going forward. So other things being equal, if you don't have the $500,000 NetBoss bad debt expense write-off then you’d be at 24.6. Are you saying you should be lower than that in the fourth quarter?

Number one, the NetBoss was below the line. That wasn’t in our non-GAAP results. Number two, I think we are going to focusing hard on G&A. And so when you take a look at our operating expense spend, it's currently somewhere that is going to be trending lower.

Okay. And is that due to specific programs that you’ve already been implementing or prospective programs?

They are programs -- with that feel, my being on the job for five or six months now, identified very early on a number of initiatives to de-complicate the business. We have a very complicated business, from a business process, business structure, legal entity standpoint, for a $450 million enterprise. A lot of them have been inherited over the course of past mergers. And we're getting after those in particular, to be able to reduce non-value-added effort and ultimately expense and those will begin bearing, I think significant fruit in the next fiscal year.

Will, to do that, will there be expenses associated with that that will then be identified out?

There could be investments that we make, particularly on our system side to the extent that we can rollout more automation, better automation, better systems, better management information systems that investment will be there both from an OpEx perspective and a CapEx perspective. But again, we are looking very hard at the ROIs on those investments with regard to cost reductions that will result from those investments.

And the level of R&D have now $9 million a quarter, is that likely to continue at that rate over the next, let’s say one to two years?

Well, we’ve got -- I mean, as we’ve talked earlier, I mean there is number of new products that have come out. There is a pipeline of further new products. We are moving towards the next generation platform. So, I would say yes. I would expect that the investment in R&D would continue at this rate for a period of time.

Thank you. At this time, there are no further questions in the queue. I will like to pass the call back to Cindy for closing remarks.

Thanks, everyone, for your participation. Just a quick update on our upcoming Investor Conferences and meetings. On May 7th, we will be at the Jefferies 2012 Technology, Media and Telecom Conference in New York City. On May 17th, we will be at the D.A. Davidson Non-Deal Roadshow in San Francisco; May 18th, D.A. Davidson Non-Deal Roadshow, San Diego; May 30th, D.A. Davidson Conference in New York City and May 31st, Avian Securities Non-Deal Roadshow, New York City. With that, I would like to turn it back over to the operator to close.

Thank you. Ladies and gentlemen, this does conclude the Aviat Networks conference call. We would like to thank you for your participation. You may now disconnect.