Good day, ladies and gentlemen and thank you for standing by. Welcome to the Aviat Networks’ Fiscal Third Quarter 2013 Earnings 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) This conference is being recorded today, May, 01, 2013. I would now like to turn the conference over to our host, Peter Salkowski, Investor Relations for Aviat Networks. Please go ahead.

Thank you, Ian. Good afternoon everyone, and welcome to Aviat Networks fiscal third quarter 2013 earnings call. I am joined today by Mike Pangia, President and Chief Executive Officer and Ned Hayes, Senior Vice President and Chief Financial Officer. During this conference call, we will 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 regions. These and other forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. Please not that these forward-looking statements reflect our opinions only as of the date of this call and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. For more information, please see the press release and the filings made by the company with the SEC. These can be found on our Investor Relations section of our website, which is www.aviatnetworks.com. In addition, during today's call, we will be referencing both GAAP and non-GAAP financial measures and wish to note that a copy of the press release and financial tables which included GAAP to non-GAAP reconciliation and other supplemental financial information is available on the Investor Relations page of our website. I would now like to turn the call over to Mike.

Thanks Peter. I am pleased to report that Aviat Networks performed as expected during the third fiscal quarter with both revenue and non-GAAP EPS results coming in within our guidance ranges. Revenue for the quarter was $118.3 million, while non-GAAP EPS came in at $0.02 per share. We ended the quarter in a strong cash position with cash on the balance sheet $92.9 million. The fiscal third quarter book-to-bill ratio was below one. Lower fiscal third quarter orders were as anticipated due to the seasonally strong year-end order activity experienced in our fiscal second quarter. Non-GAAP gross margin for the quarter was 29.1%. That was impacted by a one-time, $1.1 million inventory writedown. We estimate the impact of this writedown in gross margin to be approximately 100 basis points and $0.02 on a non-GAAP EPS basis. Before turning the call over to Ned, I would like to provide an update on what we are seeing for the total microwave backhaul market in both the near and longer-term. I’ll follow those comments with some geographic views specific to our third quarter of fiscal year 2013. Entering calendar year 2012, industry analysts had predicted global microwave market growth ranging from 3% to 5%. According to recent industry reports, the 2012 global microwave market was in fact down more than 7%. Performance varied greatly by geography with Africa and North America remaining the most robust. Our strong position in these two large regions is the primary reason Aviat was able to outperform the market in calendar 2012 with the revenue increasing 4.2% over the prior calendar year. Under current conditions, our revenue visibility is more limited in the near-term. Some mobile operators are learning the microwave backhaul spending which is resulting in fewer opportunities for Aviat Networks to break in to new accounts.…

Thanks Mike. Our GAAP financial statements along with the 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 previously mentioned, we had a good quarter. The key highlights were revenue for fiscal third quarter came in at a $118.3 million in the mid-range of the guidance provided in our fiscal second quarter earnings call. Contributing to the predicted sequential decline in revenues for our fiscal third quarter, we experienced an expected seasonal decline in Africa that was offset in part by strong revenue performance in the North America and Asia-Pac sector. 72% of our revenue was derived from product sales and 28% from services, demonstrating continued strong performance in our services offering. Two significant tier one mobile operators MTN in Africa and Verizon Wireless in the United States were 10% plus customers in the third fiscal quarter. Non-GAAP gross margin for the quarter was 29.1% of sales below our previous expectations that gross margins would be 30% or above during the second half of our fiscal year. Our fiscal third quarter gross margin underperformance was due to a one-time item involving a $1.1 million write-down of installed inventory and services relating to a non-mobile operator that declared bankruptcy in late March. This write-down was unforeseen at the time we set our gross margin expectations much earlier in the fiscal year. I would like to reiterate that the write-down was a single unique event and without this non-recurring item, non-GAAP gross margins would have been approximately 30% in the quarter. For fiscal third quarter, non-GAAP operating expenses totaled $32.6 million or 27.5% of revenue. As expected, these expenses increase sequentially, reflecting increased investments…

Thanks, Ned. So in summary, although we expect some near-term challenges, I want to reiterate that we are cautiously optimistic in the medium term and remain very bullish on the long-term prospects for the microwave backhaul industry. The market drivers are strong and we are confident that Aviat is well-positioned to benefit. In support of our view, I would like to share a few market statistics, the number of smartphones in use worldwide surpassed 1.2 billion in the calendar fourth quarter of 2012, up 15% sequentially from the third quarter of 2012. This figure is expected to double to 2.4 billion smartphones worldwide by 2015. There is an increasing use of apps that are heavily driven by cloud services. And lastly, total worldwide shipments of tablets are expected to exceed $210 million in 2013, up from just $10 million in 2010. More devices, more apps and the desire for speed is driving the need for increased throughput and higher capacity networks from mobile operators, resulting in a greater demand for backhaul solutions. The private network market also represents great opportunities. Public safety continues to be a major priority for governments around the world. Opportunities within the utility segment continue to emerge, with the explosion of machine to machine and smart metering programs and the low latency market is still in its infancy stage. All-in-all, the key drivers for our products and solutions remain very strong and support our confidence in the long-term view of the overall market. We will continue to focus on new product development and innovation, improving our own efficiency and productivity while still investing in new growth opportunities. Aviat is in a much better place than it was a few years ago. Our business results have improved substantially from a bottom line perspective. Our balance sheet remains strong supported by steady improvements in working capital management. We've introduced many new products and are looking forward to the launch of our next generation Packet Node which will allow us to extend our reach further. We have a tremendous global base of customers in both the mobile and non-mobile markets, and we have great people experienced in the industry and motivated to win. Now I would like to turn the call over back to the operator for questions. Operator, you may now proceed with the Q&A.

(Operator Instructions) Our first question comes from the line of Rich Valera with Needham & Company. Please go ahead. Rich Valera - Needham & Company: So I mean it looks like you guys are performing well in a challenging environment, but you had strong bookings for kind of last 12 quarters by my count that you had a book-to-bill of one or above, and yet now we think have revenue going kind of in the wrong direction through a couple of quarters now. So I’m trying to get a sense of you know, are we going to see more from all those strong quarters of bookings or has the environment gotten that much more challenging that even with that presumable accumulation of backlog, we're still looking at kind of maybe this reduced level in the 105 to 115 range for a while here?

Yeah. So first off, I mean, I think, as we discussed with our seasonally strong second quarter with the significant bookings that we received, how are we driven by Africa and Africa in the third quarter was down. And actually if you take a look at everybody who is in the telecom space or does business in Africa, Rich, you can see that the Africa sector was actually low for many people in the third quarter. So we do expect that to improve as I said. Beyond the quarter that we're giving guidance on, it is difficult to predict exactly what the number might be, but we're cautiously optimistic that we will continue to see improvement, but it's too early to call that out. Ned, did you have anything else on that?

No, the only other thing I would add, Rich, was just to remind everybody on the call that we had a $129 million for the revenue in fiscal Q2, very, very strong seasonal quarter. We had good bookings. I think we're just again being cautiously optimistic given the macro economic backdrop that we see right now and the fact that we did have a book-to-bill below one. That is going to give rise to less visibility in the coming quarter; a bit lower backlog and a bit more book in shift that we're going to have to make sure that we manage carefully, but w want to be pragmatic in terms of what we telegraph into the street. Rich Valera - Needham & Company: Of course. And is there any other color you can give, and I understand there's probably some competitive considerations here, but that this sheer confidence that you will see a rebound in Africa, it sounds like in not so much in the quarter we are in but perhaps in another quarter or two. Any other color you can provide there?

Yeah, I think, I mean, all the drivers in Africa are very, very strong, I mean they are still into network modernization, TDM to IP, the number of smart devices there are nowhere near as a percentage where they are in the rest of the world. So it is definitely a market that continues representing great opportunities for us. And the relationships we have with our key customers are continued to strength. Rich Valera - Needham & Company: Okay. A question on gross margin if I could. So it looks like you would have been add about 30% extra one-time in 3Q and it looks like your guidance implies something I would guess actually north of 30% to get to kind of the midpoint of your EPS range in Q4. So, can we kind of feel reasonably comfortable that you are north of 30% here; I understand you could be some volatility, but what your comfort level that you are sort of north of 30% or better on the gross margin line as we look out over the next few quarters?

So Rich again, what kind of focusing our guidance now on the bottom line, we think we have a number of different leverage available to us that include gross margin and contemplating operating expenses, I do wonder in a call out that the one-time item was in fact as we believe the one-time item. As we continue to roll out our ODU units and as we continue to roll out our new product that have better performance for lower cost, we will see gross margins improving above -- move above 30%. I think you could take a look at the map as you described between top line and bottom line, you’d probably have appropriate expectations of where we see gross margin for fiscal Q4. Rich Valera - Needham & Company: Okay. And it sounds like the impact from the CTR products, that is really at best case second half of fiscal ’14, is that fair?

Yes, I mean, yes, I think that is the fair assumption to make in terms of having impact in some way at least on the margin side, but again I do want to highlight that as I mentioned earlier when you got geographies where things are tough, macro environment is tough, you got other geographies where things are stronger places like Africa. We are going to have a lot more focus on competitive pressures and pricing, and pricing has been intense and has alleviated based on what we have seen in the last couple of quarters.

I do want to mention one thing tough, Rich, in terms of comments, we do have intermediary new product introductions that are coming out before CTR that will allow us to have additional product cost reductions and hopefully improving gross margins in the interim. So I wouldn’t want anybody to infer or extrapolate that gross margin improving is all the way out into the end of fiscal year ’14. We have several opportunities and new product introductions between now and then that will help us significantly on product cost reductions. Rich Valera - Needham & Company: Sure. I guess obviously those have to be balanced against the increasing price pressure as you reference Mike. So I guess we won't be carried away with the present margin expansion in those products. And I just wanted a clarification on what was your CapEx number for the quarter that, Ned I wasn't sure if I caught that?

(Inaudible) was $3.5 million and that was up significantly from previous quarters driven largely by our Oracle R12 ERP implementation and test equipment for our new product ramp up and rollouts. As I said I think we will see that getting back to a more reasonable norm in the $1 million to $1.5 million range here ,once those projects are completed in the first half of fiscal year ’14.

Our next question is from the line of Barry McCarver with Stephens, Inc.

This is [Brad Henry] for Barry. Your North America market was strong this quarter and you mentioned specifically Verizon being a large part of that. Going forward do you continue to see that to be a significant driver for the North America market in the short term?

Yeah I would say that yes I mean I think we will expect to see Verizon continue to be a strong customer. They have been rolling LTE out. At some point you know we would expect that to somewhat stabilize or normalize, but we expect at least in the near term the trend to continue with Verizon.

And you mentioned that the OpEx is going to decrease sequentially, can you provide a little more color on that.

Yeah, we I guess we've always run the business in what I would call a cautiously optimistic manner, which is we were cautious on what we spend and we are optimistic on where we are going. We have opportunities as we mentioned before to continue to optimize, and we also have opportunities to invest. The combination of those two we see in the short term the opportunity to do more optimization than investment based on what we've already done and therefore you would expect us to continue to focus in on improving our OpEx in absolute dollars on the sequential basis, and we will continue to focus on that. We have a number of opportunities in front of us to do that.

And we also mentioned that that would continue into the next fiscal year as well in terms of sequential declines.

(Operator Instructions) And our next question is from the line of Aalok Shah with D.A. Davidson.

Couple of quick questions; in terms of the one-time charge Ned could you walk me through that, how does the timing work, was there never any revenue recognized on this product.

Correct we had this customer given the profile of the customer on a cash basis as it was. So what we have done was we had a number of different commercial arrangements to make sure that we had access to that non-mobile operators and customers to kind of take them out of the equation. Unfortunately we ran into some operating problems where he was not able to get his network up and running and so his end customers were no longer going to be involved and therefore that customer upon going into bankruptcy we had installed inventory and we had stranded services on our books that we wrote off and of course that went to COGS as well.

Okay, so there's no inventory that you could have reused I guess kind of other or potentially I guess you can (inaudible).

You know depending upon what you know comes out of bankruptcy proceedings there could be some upside there yes.

Okay. And then in terms of Mike your comments on some of the medium term outlook. I know Rich talked about as well, but I am kind of curious, I mean has the activity levels dropped? Have you noticed a specific level of activity drop, maybe across geographies or you seem just overall right now just reluctant by subscriber spend?

I think what we're seeing is, I mean we continue to be very strong. North America and Africa are very strong markets for us. Part of the plan to grow the business was to be able to bring in new accounts. I mean what we've seen is the ability to penetrate some new large accounts in some of those areas where CapEx was down and the markets in the macroeconomic environment are somewhat soft it’s difficult to do. And also with that going on in the backdrop, we're also seeing usually when things are tight in certain geographies, and people are more careful as a result of macroeconomic environment, they're not keen to be adding new suppliers or changing out incumbents because that usually drives a significant amount of OpEx upfront to be able to do that and therefore because some of our opportunities are limited in those markets, it's given us the reason to be more cautiously optimistic in the near or medium term.

And then in your commentary about more of a competitive landscape on price, so does that mean that you are potentially walking away from some deals right now?

No, what that means is that, again when you got certain geographies that are actually stronger, and those geographies are in the areas where you yourself are strong but then for those competitors that are trying to establish a position in those geographies because they are strong markets are actually weak. They are going to go out of the way to be even more aggressive on pricing, so it's more of a position to defend, then it is around us going after business and reducing our pricing in order to get into those areas.

Okay. And I am assuming the competition is the gamut of both large OEMs as well as even some of the smaller OEMs, but is it focused around may be one group or another at this point?

I think the heighten competition are from those that have less than ideal level of business in the geographies that were strong, I mean that’s the best way to pay and that can include the end-to-end players as well as the independence depending on the footprint that they have.

Okay. And then last question. We did see MTN, I guess, get their funding and that is one of your bigger customers. So I am curious just the activity levels in Africa seem to be at least in the short term kind of dropping a little bit, are you -- I am assuming that this should be a positive the longer term for you guys, are you seeing any kind of uptick in their activity levels at this point?

We are very comfortable with our position at MTN. We have a relationship with them that puts up in the same class of the biggest players in the world, as it relates to our position in Africa with them and they continue to have plans to invest and we feel very good about that position going forward.

Okay. And then last question Ned may be for you. Cash has been building, it's been nice growth, are you any plans to maybe returns about the shareholders, is there level that you’d be more comfortable with at this point?

Not at this point in time to look. I think it’s important for us again as we are up against very large global competitors with very large balance sheets to the extent that we want to leverage our balance sheet for commercial terms either with existing customers or prospective strategic customers, I would like to keep that gunpowder dry to be perfectly honest with you.

Okay.

It was $300 and $400 million, we might be talking about something different, but right now I think we had a good equilibrium.

Thank you. Our next question is a follow-up from Barry McCarver with Stephens & Incorporated. Please go ahead.

This is Brad again in for Barry. I think there in your opening comments you mentioned closing on a couple tier 2 and 3 customers and there were new customers, did I hear that right?

Yes, in U.S.

Yes, in the U.S. right. And so do you see that as those customers growing over time in terms of additional spend by them over the next short term, medium and long term?

Well, yeah, I mean answer will be yes. And I think we have other opportunities with customers that are in that second tier as well. We have a very strong position in North America and we expect our position will continue to improve because of our continued strength of ODU 600 product line and the enhancements that we are introducing on that product as well this quarter as well as moving forward.

And we have no further questions. At this time I will turn back to management for any closing remarks.