Q3 2023 Aviat Networks Inc Earnings Call
Participants
Andrew Fredrickson; Director of Corporate Development & IR; Aviat Networks, Inc.
David M. Gray; Senior VP & CFO; Aviat Networks, Inc.
Peter A. Smith; President, CEO & Director; Aviat Networks, Inc.
Aaron Martin; Strategic Advisor; AIGH Investment Partners
Erik Loren Suppiger; MD & Equity Research Analyst; JMP Securities LLC, Research Division
Ku Kang; Senior Research Analyst of Optical Components; B. Riley Securities, Inc., Research Division
Paul Essi
Scott Wallace Searle; MD & Senior Research Analyst; ROTH MKM Partners, LLC, Research Division
Theodore Rudd O'Neill; CEO & Research Analyst; Litchfield Hills Research, LLC
Timothy Paul Savageaux; MD & Senior Research Analyst; Northland Capital Markets, Research Division
Presentation
Operator
Good afternoon, and welcome to the Aviat Networks Third Quarter Fiscal 2023 Earnings Call. (Operator Instructions) Please note this conference is being recorded. I'll now turn the conference over to your host, Mr. Andrew Fredrickson, Director of Investor Relations. Thank you. You may begin.
Andrew Fredrickson
Thank you, and welcome to Aviat Networks' third quarter fiscal 2023 results conference call and webcast. You can find our Form 10-Q, press release and updated Investor Presentation in the Investor Relations 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 CEO, who will begin with opening remarks on the company's fiscal third quarter; followed by David Gray, our CFO, who will review the financial results for the quarter.
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 materially from those statements.
Additional information on factors that could cause actual results to differ materially from the statements made on this call can be found in our Annual Report on Form 10-K filed with the SEC on September 14, 2022. 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 Investor Relations section of our website at www.aviatnetworks.com and financial tables therein, which include GAAP to non-GAAP reconciliation and other supplemental financial information.
At this time, I would like to turn the call over to Aviat's CEO, Pete Smith. Pete?
Peter A. Smith
Thanks, Andrew, and good afternoon, everyone. Thank you for joining us to review Aviat Networks' results for the third quarter of fiscal year 2023. Aviat executed against its plan this quarter, and we continue to position ourselves to grow from our business drivers of 5G, rural broadband and private networks as well as improving bottom line results. In the third quarter of fiscal year 2023, Aviat delivered revenue of $83.5 million, which represents growth of 12.0% versus Q3 of last year. Non-GAAP operating income of 11.0%, adjusted EBITDA of $10.8 million, a 14% increase versus the same period prior year.
Let's discuss some key highlights from the third quarter. 5G; our business sees healthy demand related to 5G opportunities. In the U.S., wireless backhaul spend for network build-outs continues to be strong and we believe that this is poised to continue. Internationally, we are still in the early innings of the 5G upgrade cycle. We see increased planning at Tier 1s and Tier 2s that lead us to believe there will be healthy demand for years to come. To be specific, we are optimistic about several projects on the horizon with MTN Group in addition to our Bharti Airtel business.
We're also working requests for proposals for several other international Tier 1 and Tier 2 operators. Some of these opportunities are a result of the decisions made by operators to replace our largest global competitor. Our share gain funnel against this competitor remains strong with over $36 million in year-to-date bookings and over $14 million in year-to-date revenue. We will continue to execute on these opportunities to take share of demand. We remain confident in Aviat's ability to compete and win an attractive set of international Tier 1 and Tier 2 business with our leading solutions and our commitment to providing customers compelling products.
Customers continue to increase their attention to energy consumption in their network. Aviat's product road map is well-positioned to meet this customer need and reduce power consumption compared to competitive offerings. Rural Broadband; moving on to Rural Broadband this quarter was steady from a demand perspective. We remain confident that Rural Broadband segment will continue to be a growth driver for Aviat and our e-commerce platform as government funding begins to flow in the back half of this calendar year and as customers accelerate the build-out of their networks.
This quarter, we saw progress on several RDOF projects that are moving through the planning and beginning implementation. We've had engagement and initial project-related orders from four RDOF recipients. In private networks, we continue to be the market leader in North America and are encouraged by the business potential from international opportunities. There are several new developments in our private network business. First, routers. Since the beginning of Q3, we've won five major router deals in North America with utilities and public safety agencies.
We win because we have a high availability router product for mission-critical networks that allows the network operators to scale their networks easily and cost effectively while maintaining the reliability needed for these networks. Second, private LTE. At the time of the Redline acquisition, we justified the investment based on cost synergies. We also highlighted the possibility of revenue synergy in private LTE by leveraging Redline access products and Aviat channels. In Q3, we've achieved our first private LTE win in North America -- we are excited about this market opportunity and believe it will be a growth driver for Aviat moving forward.
Thirdly, outside of our core private network public safety and utility applications, we are seeing increased potential in enterprise private networks as business systems such as ERP and others move to the cloud, enterprise connectivity becomes more critical. Connectivity downtime means business downtime. The reliability delivered from traditional service providers with fiber connectivity is no longer sufficient. Enterprises are starting to understand that microwave transport offers diversified connectivity with higher reliability when compared to fiber, improving business uptime and reducing costs.
Aviat's product portfolio and service offerings are ideally suited to address this issue and capture the growth opportunity. We have several new products to discuss. In the third quarter, we announced an update to our Frequency Assurance Software, or FAS, to support third-party radios. This allows operators to use the FAS application with not only Aviat micro wavelengths, but also the micro wavelengths from other vendors. FAS is designed to help customers monitor, detect and track interference from new WiFi 6E deployments and any other sources of interference.
We are currently in trials with customers, including a North American Tier 1 mobile operator and expect FAS for third-party products to be broadly available in June 2023. We also anticipate expanding this third-party capability to our health assurance software. A few days ago, we announced the integration of our access products in the ProVision Plus and Health Assurance Software or HAS software tools. This marks the further integration of the acquired Redline Communications product base into Aviat and gives customers using access products to most advanced management software for a single end-to-end solution for wireless transport and access and (inaudible) proactive and predictive network monitoring to minimize disruption.
This improves the customer experience and provides new features not previously available on the legacy management platform. We have an installed base of over 200,000 access radios that can benefit from this software, which will be shipping for revenue in Q4. Additionally, we've successfully implemented our Vendor-Agnostic Multi-Band MB-VA Software in a large customer in APAC, where we've overlaid our E-band on top of microwave radios from two separate incumbent microwave vendors. This is a great proof point of the opportunity that MB-VA product creates for Aviat, which helped us to overcome high switching costs and networks.
The product is compelling for the customer because it allows them to add capacity in their network with lower incremental investments. We expect continued success in the market with this product. Moving on to supply chain; we continue to see improvements for approximately 98.5% of our supply, we've returned to pre-crisis performance. Currently, we have 27 components that remain in allocation. Also, we are seeing component lead times trend down towards 12 months. Note that it takes approximately 2,000 components to deliver our microwave system. We've come a long way but are not done derisking the supply chain.
Fortunately, Aviat has been able to avoid significant supply chain interruptions throughout the crisis period. This quarter, we saw no missed revenue opportunity due to supply chain shortages. We will also say that inflationary costs and expedite fees are moderating. Demand environment; given the economic headlines and spending projections in Tier 1 telecom, we would like to comment on the demand environment for Aviat's wireless backhaul. Approximately two-thirds of our demand is in private networks, driven by public safety and utilities. Backlog has grown steadily over this fiscal year, and our book-to-bill remains above 1.
With respect to mobile network operators, typically, the fiber build-out perceives the wireless build-out of networks. Also, much of the financial press is focused on U.S. Tier 1 CapEx spending. Given our limited exposure to U.S. Tier 1 and the build-out sequence, specifically, microwave deployments typically follow fiber deployments we do not see a problem. Lastly, rural broadband has received some press due to buildup of fiber inventory in the channel. On the wireless side, we do not have data to support this. In the U.S., this quarter, we were challenged in field services at several large projects because of the record snow and rainfall in the West.
This affected both our mobile service providers and private network projects and impacted an estimated $1.5 million in revenue. Going forward, we will update the seasonality profile of the business to better account for this contingency. Overall, we see a favorable demand environment. Bookings are ahead of plan in the current quarter, further evidence of a continued strong environment.
I will now turn the call over to David to review our financials before coming back for some final comments. David?
David M. Gray
Thank you, Pete, and good afternoon, everyone. During my remarks today I'll review some of the key third quarter fiscal 2023 financial highlights. Noting our detailed financials can be found in our press release and 10-Q filed this afternoon. As a reminder, all comparisons discussed today are between third quarter fiscal 2023 and third quarter fiscal 2022, unless noted otherwise. For the third quarter, we reported total revenues of $83.5 million as compared to $74.5 million for the same period last year, an increase of $9 million or 12%, driven by strong growth in APAC, Europe, Latin America as well as the contribution from the Redline acquisition.
North America revenue, which comprised 55% of total revenue for the third quarter was $46.1 million, and international revenue was $37.4 million. We continue our trend of trailing four quarter book-to-bill ratio above 1 started in fiscal 2018. Gross margins for the quarter were 35.7% and 35.9% on a GAAP and non-GAAP basis as compared to prior year margins of 37.0% and 37.1% for GAAP and non-GAAP. Current quarter margins were impacted by regional mix from lower sales in the highest margin region of North America. Third quarter GAAP operating expenses were $22.3 million, an increase of $2.3 million from the prior year, driven by the inclusion of the Redline operating expenses.
Third quarter non-GAAP operating expenses, which exclude the impact of restructuring charges, share-based compensation and deal costs were $20.7 million. This is an increase of $1.4 million from the prior year, wholly due to the Redline acquisition. On a like-for-like basis, we continue to manage costs aggressively. Third quarter tax provision was $2.2 million, an increase of $0.9 million to last year. We continue to report our non-GAAP tax expense at $0.3 million per quarter based on a reasonable estimate of cash taxes we expect to incur.
The company has over $500 million of NOLs manifested as the almost $90 million deferred tax asset on our balance sheet and will continue to generate shareholder value via minimal cash tax payments for the foreseeable future. We recorded third quarter GAAP net income of $4.9 million compared to $6.0 million last year. Third quarter non-GAAP net income, which excludes restructuring charges, FX impacts, share-based compensation, M&A-related costs and noncash tax provision was $8.9 million compared to $8.1 million for the same period last year.
Third quarter non-GAAP EPS came in at $0.75 per share on a fully diluted basis compared to $0.69 per share for the same period last year, an increase of 8.7%. Adjusted EBITDA for the third quarter was $10.8 million, an increase of $1.4 million or 14.7% in the prior year. Adjusted EBITDA margins were 13% for the quarter. Moving on to the balance sheet; our net cash at the end of the third quarter was $16.3 million from $21.6 million in the prior quarter. The sudden collapse of Silicon Valley Bank forced us to temporarily suspend and reroute incoming customer deposits, reducing collections for the quarter. Despite the disruption, we made progress reducing our accounts receivable.
Unbilled receivables continued to increase as a result of the cash flow dynamics inherent in a growing project-based business. We continue to leverage our balance sheet to mitigate supply chain risk via buffer stock and supplier deposits. As Pete mentioned, the improving supply chain environment will allow us to begin unwinding these investments in the future quarters. Other assets grew during the quarter as we made investments in our next-gen tech. Our strong balance sheet enabled us to navigate the banking disruption while continuing to invest in the business. We expect to generate positive cash in the coming quarters as the working capital investment moderates, leaving us well positioned to execute our long-term plans.
With that, I will turn it back to Pete for some final comments. Pete?
Peter A. Smith
Thanks, David. Before opening up for Q&A, I'd like to add a few comments and summarize our performance. Thus far, in fiscal year 2023, we have been focused on capitalizing on our long-term growth drivers of 5G, rural broadband and private networks. We are encouraged by the progress the team has made in taking market share and capturing additional share of wallet around the world, which demonstrates the value of Aviat's differentiated products, software and services. This will help to increase profitability and shareholder value over the long term.
Based on this strong demand environment and our execution to-date, we are raising the bottom end of our revenue guidance and affirming our profit guidance for fiscal year 2023, which is now as follows: revenue for fiscal year 2023 to be in the range of $341 million to $347 million and adjusted EBITDA for fiscal year 2023 to be in the range of $45 million to $47.5 million.
With that, operator, let's open the call for questions.
Question and Answer Session
Operator
Thank you. (Operator Instructions) Our first question comes from the line of Scott Searle with ROTH MKM.
Scott Wallace Searle
Nice job on the quarter, guys. Maybe just to quickly dive in. On the services front, revenues were high this quarter and so were the gross margins. I was wondering if you could address that a little bit in terms of mix issues or otherwise and how sustainable that level is, both from a sales perspective and a gross margin perspective as we're going into the June quarter.
David M. Gray
Yes. Scott, how are you doing? It's Dave. Yeah, so we had a nice bounce back in the quarter for our service margins. They were a little depressed, as we spoke about last quarter due to some -- the vagaries of the ASC 606 revenue recognition standards, but that didn't hit us this quarter. I think we would like to say that is a sustainable level, but I think a more realistic level over the long-term horizon is really kind of closer to the 35% range. And then as far as the size of the revenue, it was just a function of the mix of projects that we had in the quarter that was driving that.
Scott Wallace Searle
Got you. And if I could, on the RDOF front, it's nice to see that it sounds like some of that activity is finally percolating. It sounds like it's in the design and planning phases now. So I guess it skews towards the second half of this calendar year when we start to see some revenues. Could you clarify a little bit about and maybe the magnitude as well, you said there were four RDOF customers that you're working with.
Maybe is there some idea to think about the magnitude of that opportunity. And maybe throw on top of that as well, the Defend our Networks Act, which is basically recent legislation that's been introduced in Congress to try and fund the gap or plug the gap on the Rip & Replace program. I know that wasn't a big opportunity necessarily for you guys, but I'm wondering if you're seeing any derivative opportunities coming out of that for you guys.
Peter A. Smith
Okay. So on the RDOF funding, right, we've said once it get started, it will peak three to four years out, and it will run tail off over the next six or seven. So we would see that -- we still believe that to be true. We do think we will have some revenue impact in the back half of the year. But how we space out the design activity that we've had through the peak is a little bit difficult. I think we need to see how those projects shake out. At least two of the customers were in the top 10 of the RDOF recipients. So we're pretty happy with the prospects of the customers that we've engaged.
And we think we have 35% to 40% share of rural broadband. So we're in good shape. And I think to give us another couple of quarters as we go from the design phase into the ramp phase and then we could be more specific with respect to the impact on our overall program. But we're super excited about this because if you roll back the clock the last couple of years (inaudible) RDOF we respond. We think it's coming. We think it's coming. We don't have it in our guidance. We got a little bit of revenue this quarter. We want to give it another quarter or two, and then we could be more certain with respect to what the investment community should expect.
Then pivoting to the legislation, you mentioned. So there is little impact. I believe this is the Huawei Rip & Replace legislation. There is less than 50 -- we stopped tracking this about two years ago when there was 50 remaining microwave Huawei radios. So it's not material for the U.S. market. But what we can say about that competitive dynamic, we booked $35 million of either share gain in networks that we're competing with them or Rip and Replace. So we feel that legislation that you highlighted is not so material to the North American market, but the overall trend is favoring us.
Scott Wallace Searle
Great. And lastly, if I could, Pete, maybe some updated thoughts on India. You got the big order from Airtel going back into late 2022. I'm wondering if there are some Phase 2, Phase 3 opportunities that you're seeing percolating and any thoughts in terms of inorganic opportunities for you going forward?
Peter A. Smith
So with respect to India, it's -- we're still in a very good position with that customer as they build out their network. And it's a project. So sometimes there's a surge, sometimes there is a lull, and they've been digesting our shipments, and we think that, that will pick up again in the back half of this calendar year. And the feedback we've gotten on our performance there is favorable. So we think we'll have a chance for share gain. And what I would also say in the script, we highlighted the multiband vendor-agnostic multi-band.
And what's really critical, we have the only single-box multi-band and now we've made that set up to be vendor-agnostic. So when we're in a network where we're not sole sourced, it facilitates share gains. So we're hopeful there. And then on the M&A front, we would say we closed the Redline transaction on July 5 last year. The integration has gone better than we anticipated, and that's helped would-be sellers engage us, and we continue to be active in evaluating and I hope in the next 6 to 12 months, we're announcing -- getting another deal across the goal line.
Scott Wallace Searle
Pete, one last one, if I could. On the private networks front, specifically with Redline, how has that tracked in terms of -- from a revenue perspective? Is that in line with plans, ahead of plans? How is the pipeline on that front?
Peter A. Smith
So we did not justify that transaction with any revenue synergies. And we had our first win this quarter. So we think that there is upside. And the funnel for the -- let's call it the revenue synergy funnel is now over $10 million. So we need to see how we're converting that. And until the quarter, I wouldn't have talked about that because we didn't get anything across the goal line, now we have. And I think going forward, we'd like to see a few more get across the goal line and then factor that into our guidance.
Operator
Our next question comes to the line of Erik Suppiger with JMP.
Erik Loren Suppiger
On the Huawei front, I think you said $36 million is backlog and $14 million in revenue. I want to just to be clear, those are separate amounts. Those are incremental to each other. And then do you have any update on -- I think you had talked last quarter about there being a funnel of about $60 million. Have you -- and I think that was deals that you had identified. Is there any update on deals that you've identified in the market that could be replacement of Huawei?
Peter A. Smith
Yeah. I would say our deal funnel rate is about $65 million. So it's grown a little bit. And the -- yeah, I did say that it's about $36 million that has now entered backlog. And you cited another number, Erik, that I didn't pick up. So if you could ask it again. So funnel of $65 million, backlog $36 million is about right. Did you want colon on?
Erik Loren Suppiger
Did you say you had $14 million in revenue from those. Did I hear that wrong?
Peter A. Smith
I did.
Erik Loren Suppiger
Is the $14 million incremental or separate from the $36 million?
Peter A. Smith
It's not in the backlog because we've already shifted.
Erik Loren Suppiger
Okay. I just want to be clear. In terms of the Redline, are you seeing competitors, players like Ubiquiti or Cambium -- or who are you competing with in some of that business?
Peter A. Smith
So Redline is significantly engineered mission-critical access point. So we don't compete at all with Ubiquiti or not at all to my knowledge. So let's say that -- maybe 1% of the opportunities compete with Ubiquiti. I think that they're in a different segment. And on occasion, we do compete with Cambium. But yeah, that's what I would say.
Erik Loren Suppiger
Who are you seeing? Is it the likes of Ericsson that you would see more frequently?
Peter A. Smith
Yes. A little bit of Ericsson, a little bit of Nokia.
Erik Loren Suppiger
Okay. And did you say -- you had mentioned the deal earlier, you had talked about a deal with Redline. Was that selling Redline into an existing customer or was that new deal a completely new customer to Aviat.
Peter A. Smith
Redline into a historical Aviat customer.
Operator
Our next question comes from the line of Tim Savageaux of Northland Capital Markets.
Timothy Paul Savageaux
Okay. Good afternoon. (technical difficulty).
Operator
Excuse me, Tim. We're unable to hear you. It's muffled.
Timothy Paul Savageaux
Can you hear me now? Sorry about that. New headphones. Well, I'll dispense with my cheap reintroduction and go straight to the question. So it sounds like for the Huawei replacement, that's $50 million in bookings, $14 million shipped and $36 million in backlog. Is that right?
Peter A. Smith
So we said we have about a $65 million funnel, $36 million in backlog and about $14 million shipped.
David M. Gray
So adding the revenue plus the backlog get you $50 million.
Timothy Paul Savageaux
I only go through that just to say that that's a pretty good book-to-bill generally speaking. And so you mentioned you -- I think in your discussion on the private networks business that, that backlog continues to build, and the book-to-bill remains above 1. On the carrier side, I think you seem to kind of address some of these high-level CapEx concerns and note that they really didn't apply to you on the one hand. But on the other, with that type of booking dynamic in Huawei replacement, is it safe to assume that the bookings on the carrier side, which you described as one-third or that book-to-bill is much higher than what you're seeing on the private network side? And any color or order of magnitude there would be appreciated.
David M. Gray
Yeah. I think what you said, that is probably reasonably accurate although we don't typically disaggregate our book-to-bill between carriers and private networks.
Peter A. Smith
So I think if we did the work, your estimate is directionally correct, Tim.
Timothy Paul Savageaux
Great. And -- well, let's dig into some of the Tier 1 commentary that you made. Obviously, MTN was a 10% customer in the quarter. Does that reflect some of the wins that you talked about or are those still in front of us or can you discuss kind of the overall kind of profile with MTN there, given there's a current customer, but there seems like there's some new business opportunities there.
Peter A. Smith
I think -- I would say we -- it's both. We have wins, and we have more wins in front of us. We had a great meeting with them at Mobile World Congress. And I think part of it is the Huawei issue and it's part of it's our multiband offering has got their attention. And so some of the share gains that we have are in Africa, and we think that there's more to come.
Timothy Paul Savageaux
Great. And last question for me. I guess you mentioned kind of a push on the weather-related issue, which I've certainly seen a lot of here in Southern California. But in addition, and probably some plain old fashion positive seasonality into June. But I want to kind of circle back to India. And obviously, you saw APAC come down pretty substantially sequentially in the quarter. And that has -- can be very lumpy. But is your sort of resumed high level of activity in India, is that part of your kind of implicit fiscal Q4 guide for a pretty significant bounce up in revenue or are there any other drivers to note there?
Peter A. Smith
I actually think our next lump in APAC is probably in the back half of the calendar year, so not our Q4. We think North America is poised to have a great end of the year and then continued growth across the international regions. I don't anticipate at the end of the year that it will be driven by India, just given the cycle, the cycle or the sequence of the -- of that network build out.
Timothy Paul Savageaux
Okay. And let me just follow up on some just said there -- real last question here. But given that expectation for strength in North America, should we assume gross margins pick up sequentially from a mix perspective on that?
Peter A. Smith
Yes. You squeezed a little more good news out of me, Tim.
Operator
Comes from the line of Dave Kang with B. Riley.
Ku Kang
First question is, Pete, backlog. I think I missed it. What was the number? I think you said last quarter was over $245 million. What was it this quarter?
David M. Gray
It remains over $245 million. So we only -- the backlog number once a year at year-end. But here just to give a qualitative perspective on this, we started at $245 million every quarter through the year. We -- our book-to-bill has been greater than 1. So we think when we -- at the end -- at next quarter, we'll (inaudible) our backlog and expect it to be over $245 million.
Ku Kang
Got it. And then just wondering about your lead times. I mean, your products or lead times. Has it gone up or down or any color on that?
David M. Gray
Our lead times are stable. So our -- we had our operating review last week, and our on-time deliveries have never been better. So I actually don't have our lead times, handy, but I think -- so I can't rattle them off. But we -- in our operating review, we look at our on-time delivery. They haven't been as good as they are in over three years. And when we do our competitive benchmarking on lead times, we think we have an advantage over our competition.
Ku Kang
Some of your peers have reported that their lead times are shrinking so that's one of the reasons why backlogs are starting to go down. I mean, will that be kind of similar with your situation if your lead times start to shrink -- your backlog start to go down?
Peter A. Smith
No. So our lead times, right? So we did some -- let me go back to the beginning of the supply chain crisis. So we bought a lot of inventory that we need to work down. But we bought it starting in the February-March of 2020. And the reason we did that was because we were worried about our suppliers getting sick and missing shipments. Well, that actually didn't happen, but then shortly thereafter ensued the supply chain crisis. So through the last three years, we've carried more inventory. We've largely kept our pre-supply chain crisis lead times the same. So we're not -- we didn't have extended lead times.
So we -- if you look at our lead times, and I can get back to you on what our lead times were pre-crisis and now, but they're the same. So we're not going to have a demand gap, which is what a lot of the supply chain questions are that we're not going to have a demand gap because we can shrink our lead times. Our comments in the script about the demand environment, we think the demand environment is good -- first, good. And we do not see any change in the demand profile due to leadx, our ability to supply or any of that. And let me go one step further.
If you roll back the last 12 quarters of earnings announcements, the most revenue we missed in any one quarter was $2 million. And typically, it's gone between zero and $2 million. So we do not have very much -- historically, over the prices, we didn't have very much pent-up demand missing supply. And this quarter, we didn't have any. So we don't have any catch-up demand, our ability over the last three years to serve demand has been steady, and it's largely been because we were worried about COVID and the COVID didn't make our suppliers get sick and miss shipments, but then it positioned us well to go into the supply chain crisis.
David M. Gray
And I'd add one other point. Our backlog is largely premised on the timing of projects and our ability to execute and install out in the field more so than any kind of supply constraint.
Ku Kang
Got it. And my last question is on the Redline revenues. Still on track for $20 million this fiscal year. And then how should we think about -- where does that $20 million go to -- for next fiscal year?
Peter A. Smith
Yeah, we're on track for $20 million. We're on track to deliver a little bit more on the EBITDA line. And I'd like to just get a little bit more traction in the synergy sales before we put that number out, but it's trending in the right direction, Dave. So wait one quarter and we'll give you an update.
Operator
Our next question comes from the line of Theodore O'Neill of Litchfield Hills Research.
Theodore Rudd O'Neill
Two questions. First is, so the North American revenue was down year-over-year with strength in service partially offsetting product sales. And service strength was strong overall for the quarter. Is there a dynamic there between the service and products or does that just reflect your -- the project nature of building out systems?
Peter A. Smith
It's definitely the project nature of building out systems. And if we link back to Tim's question about our last quarter of the year, right, the project nature, it puts some lumpiness in the business, and we see a lot of the projects in North America hitting. And that's why when I was asked if we expect margins to go up in our fourth quarter, the answer is yes. So it's really the lumpy nature of a project-based business deal.
Theodore Rudd O'Neill
Okay. And so unbilled receivables are up $10 million in the quarter. Does that have any implication for the upcoming quarter sales?
David M. Gray
No. I mean the -- what is an unbilled has been recognized as sales, but it's based on the dynamics of the contract. It is sales recognized but do not have the ability to invoice the customer for yet because of the contract structure of milestone payments or one invoice at the end of the project or things of that nature.
Operator
Our next question comes from the line of Paul Essi with William K. Woodruff.
Paul Essi
First question, if you could maybe share a little bit of information on this new agnostic frequency assurance product. What do you think the total addressable market is right now? And where would you see that -- best guess maybe a year or two out? And how much can you guys reasonably capture of that market? And along the same lines, what's the timing of that agnostic HAS product, if you can share that?
Peter A. Smith
That was a [long] question. So we are in trials with a North America Tier 1. We're hopeful that, that translates where we will -- on the FAS, we will release that -- on the FAS we have a private network trial underway. And I think what this does is -- I'd rather not comment on the software TAM. But what it does, similar to the multiband vendor agnostic, it helps us compete in multivendor networks. And we think the microwave market is $3 billion in size, and we're less than 10% share of the microwave piece. What we think is it's going to help us win more radio business at higher margins because our software will work on competitive radios. And then the other part of your question, in June, we will release the HAS piece. And so we think the back half of the calendar year that we should start to have revenue there.
Paul Essi
Okay, great. One last question. Labor issues. Are you or your customers are you seeing any labor constraints trying to get these technicians to deploy the product? And also along those lines, do you expect maybe in the next 6 to 12 months as this -- some of the stimulus starts to roll out that the market tightens and there'll be some shortages of labor?
Peter A. Smith
We have great relationships. We have some of our own install folks, and we have great relationships with third parties. We have not run into any labor install issues. This quarter, we have labor that couldn't apply mountains due to the snow pack, but we have not seen any labor issues, and we are not factoring in any labor issues going forward. I think a lot of our installers were their preferred vendor, and there's no capacity issues on that front.
Operator
Our next question comes from Erik Suppiger with JMP.
Erik Loren Suppiger
Yes. Just a quick follow-up. What is the timing of the backlog of orders for the Huawei replacement? Are those orders where they extend out where Huawei contracts are expiring or is that something that's going to get replaced relatively near term?
Peter A. Smith
I would -- the backlog will play out over the next 6 to 12 months. With respect to the contract situation with Huawei, that's difficult to answer. And because it's not been -- typically, that's not disclosed to us, right? So what we think there's two things that are driving it is the network security and the interruption in Huawei's supply chain. But look, I don't think our customer or anyone who is dependent on Huawei is going to share their contractual situation, probably give us a little bit too much leverage in the negotiation.
Operator
Our next question comes to the line of Aaron Martin with AIGH Capital Management.
Aaron Martin
Pete and David, great quarter. On the RDOF wins that you got and you said that you haven't really incorporated into the guide because you have to get a sense of the schedule. Should I imply from that, that these were multi-year booking wins that you're not sure where you're going to on the schedule the roll out?
Peter A. Smith
They're basically network design and planning at this stage. And we think the funding is multiyear, but the initial POs are to get going and they're not a multiyear PO. But we think that there's -- we think that there's multiyear demand behind it.
Aaron Martin
Okay. And on the software side, I think you said that you expect to see recognizing revenue into the existing -- you mentioned 200,000 radios that could benefit from this. I think you said expect to recognizing revenue in Q4. Was that calendar Q4 or fiscal Q4 next year?
Peter A. Smith
So let me be clear, the FAS is in trials. So the vendor-agnostic FAS is in trials. So I don't think we'll see say, the back half of this year, we'll see revenue for that as those trials mature into orders. And then on the HAS where we -- the HAS that we have on the Redline products, that will be released for sale in June. Maybe we get an order on that, but we would certainly see in the back half of the calendar year, we will expect pass on Redline's products sales.
Operator
I would now like to turn it back to Pete Smith for closing remarks.
Peter A. Smith
Great. Thanks, everyone, for joining and your continued interest in Aviat. We look forward to our next update and keeping you informed of the progress. Thanks for the support. Have a good evening.
Operator
Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
