Here’s something creative I haven’t seen many try (other than the home builders) to close the affordability gap.
The State of Rhode Island is using treasury deposits placed directly with local banks and credit unions to subsidize mortgage rates.
The end result is helping a first-time home buyer secure a 30-year fixed mortgage at below-market rates, starting as low as 3.99%.
In addition, there’s no private mortgage insurance (PMI) required on these loans either, regardless of down payment.
Collectively, it might be enough to get more homeowners in the door, despite ongoing affordability woes.
How RI AnchorHome Works: 3.99% Mortgage Rates and No PMI When You Buy Your First Home
While it kind of sounds like the temporary and permanent rate buydowns being offered by home builders, it operates quite a bit differently.
Instead of the state handing out grants or becoming the actual mortgage lender, they’re strategically depositing public funds in local depositories.
In turn, those participating banks are armed with more liquidity, giving them the ability to offer below-market mortgage rates to select applicants.
The program is known as “RI AnchorHome,” and is being facilitated by Treasurer James A. Diossa’s office.
How it works is fairly simply. A qualifying first-time home buyer gets approved for a mortgage through one of the participating lenders (such as Navigant Credit Union, Coastal 1, or Washington Trust).
Then the State of Rhode Island deposits matching funds into that same financial institution to offset the cost of offering a below-market interest rate with no PMI.
Those deposits provide the bank with a source of low-cost funding, and in return they can offer the buyer a special 30-year fixed rate as low as 3.99%, despite rates being around 6.50% currently.
Importantly, the home buyer still gets a traditional mortgage issued and serviced by the bank. And the state doesn’t take on any credit risk.
The program started as a pilot with $60 million in deposits and was recently expanded to $80 million after unanimous approval from the State Investment Commission.
The deposits are short-term, fully collateralized, and renewed annually, so the state keeps control of its cash while earning a modest return.
It’s a clever public-private partnership designed to make homeownership more attainable in a high-rate environment without the usual gimmicks.
This Looks to Be a Good Deal, But Check the Closing Costs!
Whenever I see deals like this, I tell people to look at the big picture. There is no free lunch, though in this case borrowers might actually win.
The state is essentially giving up some potential yield on its deposits to make these lower mortgage rates possible in order to better its state, with no real downside to the homeowner.
Sure, buyers still have to qualify under normal underwriting guidelines, complete mandatory first-time homebuyer counseling, and meet specific program rules.
Those include being a first-time buyer with no other property, buying a primary residence in Rhode Island, and having an income of no more than 110% of the statewide median.
Lastly, the maximum loan amount is $525,000 for a single-family home and $575,000 for a duplex.
But other than that, if you can snag the low advertised rate of 3.99% and there aren’t excessive closing costs, what’s not to like?
Oh, and if you put down less than 20% and can avoid PMI at the same time, it’s even sweeter.
After all, one might argue that the more money borrowed at 3.99%, the better.
The RI Treasurer’s office says the goal is to build generational wealth and strengthen local communities.
It’ll be interesting to see if other states start emulating this deposit-based model in the future.
Here in California, we’ve relied on other approaches, such as the “Dream For All Shared Appreciation Loan,” which requires zero down payment in exchange for a share of future equity.
While they’re all good initiatives on the surface, you do wonder if they mostly address the demand side as opposed to the supply side of the problem.
Read on: Try out my new mortgage rate calculator to see how much you can afford at different interest rates.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.
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Imagine two investors, Grinding Gretchen and Relaxed Rachel, who both start with $50,000 to invest.
Most people—including Gretchen—think they’ll sprint or trip based on market timing, hustle, luck, or choosing the perfect market.
Rachel takes a different approach. Here’s why investors like her will not only come out ahead in the long run, but also have more fun and get better sleep along the way.
Good Investors Don’t Time the Market
It’s so tempting to try to time the market, because it feels like you should be able to spot the bottom and the top—they always look so obvious in hindsight.
You’ve heard it before, but it bears repeating: Time in the market always beats timing the market. You don’t have to be perfectly right twice (buying and selling); you don’t skip years-long periods trying to wait for the perfect moment to invest. Remember, the next market low could still be priced higher than today’s pricing, given all the appreciation between now and then.
Trying to time the market also encourages bad behaviors like trend chasing and panic selling. You see one asset class overperforming and say, “That must be the next big thing! I’ll put a bunch of money in that.” Meanwhile, that asset class has already done most of its booming and is poised for a crash.
Or you look at an asset class that has recently crashed and say, “I won’t touch that with a 10-foot pole.” That asset class is actually poised for recovery. “Buy when there’s blood in the streets” and all that.
Consistent Investing
Instead, investors who win in the long term keep investing slowly and steadily, month in and month out. There’s a term for this in finance: dollar-cost averaging. I practice it with my stock investments and my real estate investments.
Every month, I invest around $5,000 in a new passive investment through my co-investing club. Collectively, we invest $400,000 to $800,000, but I personally just invest $2,500 to $10,000.
I can hear the skeptical voice in your head now: “I don’t have that much to invest every month.” There are two solutions to that problem: Either invest at a slower cadence (like bimonthly or quarterly) or boost your savings rate. Start by freezing your lifestyle inflation.
Because that’s part of Grinding Gretchen’s problem: She keeps spending more as she earns more, so she never has as much left over to invest as she wants, and she keeps moving the goalposts on how much nest egg she needs.
As old investments pay off, reinvest the returns. You earn compound returns from consistent investing over years, not waiting on the sidelines to try and find the “perfect” deal.
Leverage People, Not Just Money
When real estate investors hear “leverage,” they immediately think “debt.”
Sure, that’s one type of leverage. But it’s not the only type.
To begin with, you can leverage other people’s expertise. That’s a huge advantage to an investment club: You get the benefit of all the other members’ knowledge. My co-investing club vets deals together on a big video call so we can all grill the operator and analyze risk together.
Speaking of operators, that raises another type of leverage: labor and time. After a miserable decade-plus as a landlord and active investor, I unloaded all my rental properties in my late 30s. Today I onlyinvest passively, which includes investments like syndications, silent joint venture partnerships, private notes, and funds.
Someone else hassles with tenants, property managers, city inspectors, contractors, and the like. I justwatch the cash flow hit my bank account.
Your time is a limited resource. Every hour you spend putzing with tenants and toilets is an hour you can’t spend boosting your career, building a side business, or spending time with family or friends.
Liability Management
When I was an active investor, I took on both legal liability and debt liability. I was sued several times as a landlord. It sucked, costing me money, time, stress, and lost sleep.
On the debt side, when I signed for loans, I didn’t just put up the property as collateral. I had to sign a personal guarantee. If I defaulted, the lender could come after every personal asset I own.
I don’t have that liability risk as a passive investor. No one can sue me or come after my personal assets. That risk is outsourced to the deal operator. This matters to your long-term success as an investor for two reasons.
First, losses could wipe out your entire net worth, and then some. A judgment doesn’t go away when your net worth hits $0; creditors can attach liens to your home and garnish part of each paycheck you earn.
Second, it can also demoralize you so badly that you quit investing in real estate entirely. Either way, it’s Game Over for you.
Risk Management
Liability is, of course, one type of risk. But investors face many other types of risk, and the best investors layer in several ways to mitigate them.
I’m willing to accept market risk. The stock market and the real estate market don’t always go up, after all. Sometimes they dip or even crash. (That’s one reason I practice dollar-cost averaging—so I get the benefits of those lower prices and don’t get too peeved.)
Even so, I still look for protections against it when possible. I want to see conservative underwriting assumptions such as slow rent growth projections and high expense growth projections. I want to see a solid preferred return, low operator fees, and an operator with plenty of their own skin in the game.
I also look for extra downside risk protections. For example, in some of the private partnerships we’ve negotiated in my co-investing club, the operator guaranteed us a minimum return on our investment, even if the deal underperformed. In one of those cases, a house flip didn’t go our way, but we still earned the 8% floor return on it.
Again, your goal as an investor is longevity, building long-term wealth. You’ll have your share of hiccups along the way, so try to minimize risk where you can and spread it out where you can’t.
One of those is operator risk. I want to make sure that the operators I invest with are both competent and honest. While you can never eliminate that risk 100%, you can minimize it through operator due diligence.
Portfolio Planning
Long-term success as an investor also involves intentional planning for your portfolio. How much of your portfolio should sit in stocks? In real estate? In bonds? In alternative investments?
Within your stock portfolio, how much should be U.S. versus foreign? Small-cap versus large-cap?
Within your real estate portfolio, how much do you want in income-oriented versus growth-oriented investments?
I’m a huge proponent of diversification. In fact, I diversify my real estate investments in not one or two but six different ways. I want investments spread among many cities and states, operators, and asset classes. I want my investments to mature along different timelines.
That’s part of why I invest $2,500 to $10,000 per investment. I know I won’t always hit a bull’s-eye—a few investments will inevitably underperform. But others will overperform, and most will perform around the middle of the bell curve. That distributed bell curve is exactly what I want from my returns.
That helps me sleep at night, rather than tossing and turning over that one deal I put $100,000 into that’s underperforming.
Tax Planning
There’s another type of diversification I want too: tax benefits.
Some passive real estate investments come with outstanding tax benefits. Others don’t come with any, but they come with other advantages, like stable passive income.
With my equity investments (including syndications and JV partnerships), I practice the “lazy 1031 exchange” to keep deferring my taxes indefinitely into the future.
Investments that don’t offer any tax advantages (like private notes) are often a better fit for a self-directed IRA or solo 401(k). Read up on some clever uses of your IRA for more ideas.
The bottom line: Investors who get strategic to minimize their tax burden build wealth faster because they’re leaking less money to taxes.
$0 to $1 Million in Seven Years Without a High Income
My wife is a school counselor (same salary as a teacher). I run a small business that has always been more of a passion project than a cash cow.Yet we went from starting over financially to a net worth of over$1 million in less than seven years.
We built wealth faster than most investors for many of the reasons outlined above: consistency and staying power. In particular, it helped that we lived on a tiny budget and invested such a high percentage of our income.
Those savings went toward high-return investments like stocks and passive real estate investments. We invested steadily without grinding through the side hustle of active investing.
Many investors just can’t stomach the thought of relinquishing control over their investments.So they keep building that active investing business, grinding with tenants and toilets and property managers and contractors.And they still suffer from plenty of risks outside their control, such as market risk.
I started earning better returns after easing my grip on control. That’s the price of leveraging other people’s time, but it also helps maintain that staying power of continuing to invest year after year and compounding your wealth.
And that’s how you ultimately win the investment game.
President and Chief Executive Officer — Peter Smith
Chief Financial Officer — Andrew Schmidt
Chief Accounting Officer — Jonanna Mikulenka
Takeaways
Total revenue — $100.0 million, reflecting a decline from $112.6 million in the prior year period, with management citing $9 million in project pushouts and demand shifts at several Tier 1 customers due to the Middle East conflict.
Gross margin — 29.3% GAAP and 29.4% non-GAAP, both below last year’s 34.9% and 35.8%, respectively, attributed to volume, regional, and product mix factors.
Adjusted EBITDA — $4.4 million (4.4% of revenue), down from the previous year’s level, with margin declines linked primarily to the aforementioned third-quarter revenue timing and mix challenges.
Non-GAAP EPS — $0.06, indicating positive earnings on an adjusted basis, while GAAP loss per share was $0.16.
Operating income — $0.9 million GAAP and $3 million non-GAAP, down from $9.3 million GAAP and $13 million non-GAAP in the prior year, as reported by Schmidt.
Inventory reduction — Sequential decline of $4.0 million in inventories, contributing to working capital normalization.
Book-to-bill ratio — Maintained above 1.0 on a trailing twelve-month basis, according to Smith.
Cash and debt — $78.1 million in cash and marketable securities, $104.3 million in outstanding debt, resulting in net debt of $26.1 million.
Regional revenue mix — North America contributed 46.2% ($46.2 million) and international segments 53.8% ($53.8 million) of total revenue this quarter.
Utility segment — Now nearing 10% of total business, with management stating a strong growth pipeline aligned to broader U.S. grid modernization and AI-related demand.
MDU opportunity — Live deployments underway in more than five markets; Smith stated, “we would be comfortable saying it’s an eight-figure opportunity in fiscal year ’27,” with more precise estimates forthcoming after year end.
BEAD program positioning — Management anticipates purchase orders tied to the Broadband Equity Access and Deployment (BEAD) program “should begin in mid- to late calendar 2026,” with Aviat’s opportunity dependent on allocation to fixed wireless access, estimated by Aviat as “between 10% and 15%” of awarded funds.
Aprisa LTE router — Smith described the Aprisa platform and LTE router business as on pace for “over 50% bookings growth this fiscal year,” with initial public safety orders received in the U.S., Europe, and Latin America.
Expense management — GAAP operating expense reduced to $28.3 million versus $30 million one year ago; non-GAAP operating expense fell to $26.4 million.
Share repurchases — Approximately 20,000 shares repurchased for $0.5 million during the quarter.
Fiscal 2026 guidance — Raised to $428 million-$440 million revenue and $35 million-$40 million adjusted EBITDA for the full year.
NOLs and deferred tax assets — Aviat retains over $450 million in net operating losses, “generating shareholder value via minimal cash tax payments for the foreseeable future.” Schmidt stated, “there is a reasonable possibility that within the next few quarters, we will be able to release a significant portion of the [foreign] valuation allowance,” implying a potential one-time GAAP income uplift.
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Risks
Smith explicitly stated, “Quarterly results were impacted by the conflict in the Middle East, where we saw certain project pushouts and unfavorable end-of-quarter demand shifts in several Tier 1 customers totaling approximately $9 million in revenue.”
Peter Smith noted, “The lower adjusted EBITDA margin this period was driven primarily by the unfavorable timing of Q3 revenues previously discussed,” and added that “the challenge is timing related.”
Smith emphasized continued environment-driven caution in guidance: “we want to not have the difficulty in achieving the expectations we set at the end of the June quarter. So that’s why there’s the range.”
Freight cost inflation was described by Smith: “in the recently concluded quarter, there was some freight inflation. And going forward, we’ll adjust our freight prices as well.”
Summary
Aviat Networks(AVNW 33.35%) explicitly reported a revenue decline, tying the shortfall to $9 million in project pushouts from Tier 1 customers due to the Middle East conflict. Profitability metrics, including gross margin and adjusted EBITDA, also trended downward, attributed directly to lower volumes and adverse product mix. Management provided clear guidance for the full year, with expectations for revenue between $428 million-$440 million and adjusted EBITDA of $35 million-$40 million, stating normalization is anticipated in the fourth quarter. The call highlighted significant new revenue prospects in multi-dwelling units, U.S. utilities, and public safety, alongside positioning for BEAD program funding, with management indicating these drivers could lead to materially higher revenue in fiscal year 2027. Share repurchases, working capital improvements, and a possible upcoming release of foreign deferred tax allowances were also cited as supportive of longer-term value creation.
Smith stated Aviat holds a “favored position as the supplier of choice” in MDU deployments, with live projects currently underway and a measurable ramp expected in fiscal 2027.
Management asserted that North American gross margins remain healthy: “Again, pricing is in good shape. We just have to get back to expected volumes.”
“Utilities will deploy $1.4 trillion on capital spending plans over the next five years,” Smith referenced, positioning Aviat’s network offerings as essential for grid modernization, substation monitoring, and wildfire detection.
Forty-six of fifty-six U.S. states and territories have executed final BEAD award agreements; Aviat’s BEAD-related revenue ramp is most likely in calendar 2027, according to direct customer feedback cited by Smith.
Product introductions, such as bringing the all-indoor radio to international markets and Pasolink radios to North America in fiscal 2027, represent further addressable market expansion exceeding $250 million, per Smith’s remarks.
Smith confirmed “no more Aviat technical milestones” are required for current MDU projects, with the focus shifting to customer ramp and next-generation product delivery over the next six to nine months.
Smith described Aviat’s Build America, Buy America credentials and domestic manufacturing footprint as valuable in supporting rural broadband and utility demand, reinforced by recent national policy focus.
Industry glossary
MDU (Multi-Dwelling Unit): A business segment focused on wireless connectivity solutions for apartment buildings or similar residential complexes, often involving large-scale deployments for Tier 1 service providers.
BEAD (Broadband Equity Access and Deployment Program): A U.S. federal program allocating funding to expand broadband access, with funds awarded to states and territories for infrastructure buildout, including fixed wireless projects.
Aprisa: Aviat’s branded platform for LTE routers and software-enabled transmission systems, targeting utilities, public safety, and industrial communications.
Book-to-bill ratio: The ratio of new customer orders received to units shipped and billed in the same period; values above 1.0 indicate a pipeline that supports future revenue growth.
NOL (Net operating loss): The accumulated losses from prior periods, which can be used to reduce taxable income in the future, providing ongoing tax benefits.
Full Conference Call Transcript
Pete Smith, Aviat’s President and CEO, who will begin with opening remarks on the company’s fiscal quarter, followed by Andy Schmidt, CFO, to review the financial results for the quarter. Pete will then provide closing remarks on Aviat’s strategy and outlook, followed by a question-and-answer session. Jonanna Mikulenka, Aviat’s Chief Accounting Officer, is also with us on the call. 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 fiscal guidance, financial projections, business drivers, new products and expansions 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 expressed or implied on this call can be found in our most recent filings with the SEC. The company undertakes no obligation to revise or make public any revision of these forward-looking statements in light of new information or future events. Additionally, during today’s call and webcast, management will reference both GAAP and non-GAAP financial measures.
Please refer to our press release, which is available in the IR section of our website at www.aviatnetworks.com and financial tables therein, which include a GAAP to non-GAAP reconciliation and other supplemental financial information. At this time, I would like to turn the call over to Aviat’s President and CEO, Pete Smith. Pete?
Peter Smith: Thanks, Andrew, and good afternoon. Let’s review the highlights from the third quarter. Total revenues of $100.0 million, adjusted EBITDA of $4.4 million, non-GAAP EPS of $0.06, lowered inventories by $4.0 million versus the December quarter, maintained a trailing 12-month book-to-bill ratio greater than 1.0. Quarterly results were impacted by the conflict in the Middle East, where we saw certain project pushouts and unfavorable end-of-quarter demand shifts in several Tier 1 customers totaling approximately $9 million in revenue. Now let me talk more about our end markets and key developments.
In the U.S., we see reason for optimism in the quarters ahead as we gain increased visibility on timing of our multi-dwelling unit or MDU opportunity. growing demand from utilities as they invest to meet increased power demand from artificial intelligence build-outs and the nearing arrival of the Broadband Equity Access and Deployment or BEAD program. On the MDU, we have increased confidence in the level of commitment to this project from our Tier 1 customer, and we believe that we have secured a favored position as the supplier of choice. This is translating to increased visibility on timing for the markets we have won and opening the door to additional market areas for deployment.
For the projects in progress, we have installations occurring now and through the rest of Q4. These are still relatively small, and we expect a larger step-up during fiscal 2027. As the Aviat installations progress and we compete for additional markets related to the MDU opportunity, we are seeing more prospects to provide services and other value-added solutions to our Tier 1 customer. Overall, we are feeling better about this opportunity today than at any other previous point and believe we will have meaningful revenue contribution from this project in fiscal year 2027. Further, we have validated our next-generation offering in this area. Should subscriber growth materialize, we anticipate demand for this next-gen product in fiscal year 2028.
Private networks remain Aviat’s largest segment today. And within private networks, utilities are Aviat’s second largest customer group in this segment. Aviat has been strategically focused on growing our presence and offerings with utilities over the last several years with product innovations like our ultra-high-powered 11 gigahertz radio and the 2024 acquisition of 4RF. Even prior to the demand brought on by artificial intelligence and data center build-outs, there was a growing need for increased investment in America’s grid from a modernization and reliability standpoint. Today, the outlook for Aviat and utilities is quite robust. Recent industry reports suggest that utilities will deploy $1.4 trillion on capital spending plans over the next 5 years.
This forecast is up over 20% versus a year ago. Approximately half of this spend will go towards transmission and distribution, where Aviat’s network hardware is critical for smart grid connectivity and management. substation monitoring and security, crew communications and wildfire detection. Power generation has become the primary constraint and a fundamental determinant of growth for artificial intelligence or AI. This build-out of the grid lifts the importance of mission-critical communication and Aviat is well positioned to capture increasing share of demand in this market. The utility segment is approaching 10% of our overall business.
Our funnel of opportunity is strong and the discussions we are having with many of the largest utilities in the U.S. signals that this growth opportunity will remain for several years ahead. Lastly, on the BEAD program, our customers continue to signal that purchase orders related to the program should begin in mid- to late calendar 2026. This is consistent with the message we have told investors for approximately a year now. However, as final approvals are made, the set of opportunities is beginning to take shape. 46 of the 56 states and territories have signed their final award agreement. The total funding for the approved deployment spend to date is approximately $20 billion.
The size of Aviat’s opportunity depends on the allocation of BEAD funds towards fixed wireless access, which in our estimation stands between 10% and 15% of the award dollars. The allocation of funds to wireless has been increasing over time. Feedback from four of our wireless Internet service provider customers who have all won BEAD deployment projects signal that calendar 2027 will likely see the largest ramp purchase orders for Aviat. But we still remain very early in the fund deployment life cycle, and we’ll provide updates as available.
Aviat stands at the ready to assist all of its customers with BEAD opportunities, thanks to its Build America Buy America certifications, our e-commerce Aviat store presence and our leading position in serving rural broadband needs. Apart from these growth drivers, we have invested in our road map. We’ve taken our North American all-indoor radio to international markets. We are also bringing Pasolink radios to North America in early fiscal 2027. Both these represent installed base opportunities for an addressable market of over $250 million. I will now turn the call over to Andy to go through the financial results.
Andrew Schmidt: Thanks, Pete, and good afternoon, everyone. Before going through the financial results, I’d like to briefly introduce Jonanna Mikulenka, who joined Aviat in January as our Chief Accounting Officer. She brings with her over 30 years of accounting experience, including previously serving as Chief Accounting Officer and Corporate Controller at other public companies. She is already making a great impact to the overall Aviat team and will help us to achieve our goals. Welcome, Jonanna. Now I’ll review some of our key fiscal 2026 third quarter results.
Please note that our detailed financials can be found in our press release and all comparisons discussed are between the third quarter of fiscal year 2026 and the third quarter of fiscal year 2025, unless otherwise noted. For the third quarter, we reported total revenues of $100 million as compared to $112.6 million for the same period last year. Revenues for the 9-month period were $318.8 million versus $319.3 million for the year ago 9-month period. North America, which comprised 46.2% of our total revenues for the quarter was $46.2 million. International revenues, which made up 53.8% of total revenues were $53.8 million for the quarter.
On a year-to-date basis, North American revenues were $151.7 million, up by $2.1 million or 1.4% versus the same period last year. International revenues were $167.1 million in the first 9 months of fiscal 2026 as compared to $169.7 million in the first 9 months of fiscal 2025. Gross margins in the third quarter were 29.3% on a GAAP basis and 29.4% on a non-GAAP basis. This compares to 34.9% GAAP and 35.8% non-GAAP in prior year periods. The change in gross margins is primarily due to volume, regional and product mix in the quarter as compared to the year ago period. For the first 9 months of fiscal 2026, gross margins were consistent with the prior year.
Gross margins were 31.7% on a GAAP basis, 32.1% on a non-GAAP basis. This compares to 31.3% GAAP and 32.1% non-GAAP versus the period last year. In regard to operating expense, we continue to work on opportunities to increase process efficiencies to drive down our expense. Third quarter GAAP operating expense were $28.3 million, down versus $30 million in the year ago period. Non-GAAP operating expense, which exclude the impact of restructuring charges, share-based compensation and deal costs, were $26.4 million or $0.8 million lower than the year ago period. Third quarter operating income was $0.9 million on a GAAP basis and $3 million on a non-GAAP basis.
This compares to $9.3 million GAAP and $13 million non-GAAP in the year ago period. For the 9-month period, GAAP operating income was $13.4 million, up $11.7 million versus the first 9 months of last fiscal year. Year-to-date non-GAAP operating income was $20.5 million, up $4.4 million or 27.6% versus the year ago period. The third quarter tax provision was $0.2 million. As a reminder, as of fiscal 2025 year-end, the company has over $450 million of net operating losses or NOLs that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future.
As it relates to the valuation allowance against some of our foreign deferred tax assets, we believe that there is a reasonable possibility that within the next few quarters, we will be able to release a significant portion of the valuation allowance. This is good news for Aviat shareholders. The potential release of the valuation allowance is due to increased and sustained profitability in our international entities, thanks to revenue growth and cost management. Similar to when Aviat released its valuation allowance in the U.S. approximately 5 years ago, this will create a onetime GAAP income benefit to the company in the quarter the release occurs.
While exact timing of this release is uncertain, it is reasonable that it could occur at some point in the next four quarters. Continuing, third quarter GAAP net loss was $2.1 million and non-GAAP net income was a positive $0.7 million, which excludes restructuring charges, share-based compensation, M&A-related and other nonrecurring expenses and noncash — and also the noncash tax provision. Third quarter GAAP loss per share was $0.16 on a fully diluted basis and non-GAAP earnings per share came out at a positive $0.06 on a fully diluted basis. Adjusted EBITDA for the third quarter was $4.4 million or 4.4% of revenues.
For the 9-month year-to-date period, adjusted EBITDA was $24.8 million, an improvement of $2.8 million or 12.5% versus the comparable period last year. The lower adjusted EBITDA margin this period was driven primarily by the unfavorable timing of Q3 revenues previously discussed, which was partially offset by improving operating expense performance. We expect a seasonally strong Q4 revenue, which will drive EBITDA margins back to expected levels. Moving on to the balance sheet. Our cash and marketable securities at the end of the third quarter were $78.1 million. Our outstanding debt was $104.3 million, bringing the net debt position to $26.1 million. Aviat made continued improvements in its balance sheet this quarter.
Unbilled receivables were lowered for the second consecutive quarter. The third quarter balance was $5.4 million lower compared to the fiscal 2026 second quarter ending balance. This brings our total unbilled receivables balance to $85.3 million. When compared against our short- and long-term advanced payments and unearned revenue balance of $77.6 million, the net of the two balances is $7.7 million. We would consider this to be in the normal range of where these two balances would net out. Inventories were also lower sequentially in the quarter by $4 million. Cash in the quarter was partially used to pay down accounts payable, which was lowered by $33.3 million sequentially.
This progress in normalizing working capital strengthens Aviat’s ability to use its balance sheet to further its growth opportunities. Lastly, Aviat repurchased approximately 20,000 shares in the quarter for $0.5 million. With that, I’ll turn it back to Pete for some final comments. Pete?
Peter Smith: Thanks, Andy. I will now provide an update on our fiscal 2026 guidance. Based on our year-to-date results and our current outlook for the fourth quarter, inclusive of the war-induced pushouts, we will continue to address our expense base, and we’ll continue to pursue cost savings initiatives. We’re updating our fiscal 2026 guidance to be full year revenues to be in the range of $428 million to $440 million, full year adjusted EBITDA to be in the range of $35 million to $40 million. Our Q3 challenge started at the beginning of March, and the challenge is timing related.
Despite this temporary setback, we see normalization of demand in Q4 and are highly encouraged by the progress of our growth initiatives and the potential impact on FY ’27. With that, operator, let’s open it up for questions.
Operator:[Operator Instructions] Our first question comes from the line of Jaeson Schmidt of Lake Street.
Jaeson Schmidt: Pete, I just want to start with that $9 million in pushouts. Do you expect to recognize those orders here in Q4?
Peter Smith: So I think some of them — and look, we want to be conservative with respect to — it looks like though there is more conflict today. I would say some of that has already shipped. And we’re just at the in the March time frame, some of the Tier 1s got conservative, and we just want to be careful about potential repeat. So that’s why we guided the way we did. I can definitively say some of that has already shipped in the first 2 weeks of the current quarter.
Jaeson Schmidt: Okay. That’s helpful. And then looking at the MDU opportunity, it definitely sounds like you guys are making great traction there. Can you remind us how we should think about the size of this opportunity?
Peter Smith: Yes. Let me just give a little more flavor. So we have live deployments in more than five markets. All of those markets are open for sale. The size of the opportunity is going to be tied to the all-important number of subscribers that sign up. Early indications are favorable. We see with those deployments an opportunity for additional services and insight and work we would be comfortable saying it’s an 8-figure opportunity in fiscal year ’27. Now the problem with that is 8 figures goes from $10 million to $99 million. I think that’s where we’re comfortable saying $8 million.
And over the next 2 months or 3 months, we think we can be more exacting in how big of that opportunity. It’s the most exciting growth program in Aviat, and we’re totally focused. We’ll say 8 figures for now. And I would say that when we get through our year-end and we incorporate this into FY ’27 guidance, we can be more specific and give you a more narrow range, Jaeson.
Jaeson Schmidt: Okay. That’s fair. And then just last one for me, and I’ll jump back in the queue. Last quarter, you highlighted some nice traction with your LTE router. Just curious where that pipeline is today and what you’ve seen over this past quarter?
Peter Smith: Yes. So our upgrade on the Aprisa LTE router, we feel really good about it. We’re on track for the overall Aprisa business to exceed 50% bookings growth this fiscal year. We’re also starting to attach incremental software and accessories to our product sales. We’re seeing expansion across all segments including utilities, oil and gas, public safety and all geographies with strength in North America and Europe. The police applications are small but growing, and we’ve received initial orders in public safety in the U.S., Europe and Latin America. That was a — the platform for this is a small — it was a small acquisition. So it’s a small base, but it’s growing.
And to put this in context, microwave backhaul is, let’s call it, a slow growth market when something like the Middle East conflict happens, it’s tough, and we really feel our growth program in fixed wireless access around MDU, the Aprisa platform for public safety and utilities. These are the things that are going to permit us in FY ’27 to outgrow the microwave market.
Operator: Our next question comes from the line of Scott Searle of ROTH Capital Partners.
Scott Searle: Pete, maybe just to dive in, in terms of the guidance, it sounds like we had $9 million of pushout, some of which has shipped already into the fourth quarter, but it’s still a pretty wide variance out there of $109 million to around $121 million. I’m wondering if you could give us some of the puts and takes. It sounds like the Mid East continues to be a little bit of a headwind there. But I’m kind of wondering what you see at the higher end of the range and the lower end of the range. And as part of that, the gross margin, it sounds like that starts to recover with some utilization.
But I wonder if you could clarify a little bit more. It sounds like you’re talking about it returning more to normal levels. I just want to clarify, is that 32%, 33% that we should be thinking about? And I had a couple of follow-ups.
Peter Smith: All right. Go ahead.
Andrew Schmidt: Scott, this is Andy. Good to hear from you. I’ll just start with the gross margin part. You’re exactly right. Our year-to-date gross margin, 32% plus. Once we get back to normal volumes, Q4 is our best quarter seasonally. So we expect to have a good Q4. Once we’re back at normal volumes, you’re going to see, again, expected performance in gross margin. And just to reiterate, we — we didn’t see gross margins drop due to price compression, not at all. Again, pricing is in good shape. We just have to get back to expected volumes.
Peter Smith: Okay. And then with the range, so we want to — and let’s say, we have the same end of quarter dynamics where Tier 1s push out and we’re not able to get stuff into the Middle East. And today, in India, they said they had a jet fuel. So we’re hedging on that. So that’s why there’s the range. And just for a company at our scale, it’s harder to deal with these risks, and we want to not have the difficulty in achieving the expectations we set at the end of the June quarter. So that’s why there’s the range.
We — obviously, we want to do as well as we can to be — to deliver on the higher end, but we want to be conservative and acknowledge the environment as it is.
Scott Searle: Maybe a couple of quick follow-ups for Andy, just in terms of the gross margins in terms of how you’re managing memory and incremental freight costs now. So are you still comfortable with maintaining that gross margin outlook given the current pricing environment that we’re seeing there? And maybe a quick follow-up on the balance sheet as well. Small improvements again this quarter. I’m wondering if there’s a longer-term target that you could give us in terms of expected free cash flow that you’d be able to generate in terms of working down DSOs and improving inventory turns?
Andrew Schmidt: Sure. So I’ll start with the gross margin. And to your point, you bring up the usual suspects in terms of, let’s call it, inflationary items. Again, this company works very diligently in terms of offsets to inflationary items. So again, that comes down to negotiating power in terms of commodities, all the way down to utilization, let’s say, in terms of our efficiencies internally. So again, we work diligently in terms of looking for offsets to normal inflation items you might hear from your other coverage universe.
In terms of balance sheet, yes, we still see a lot of greenfield opportunities in terms of addressing both our accounts receivable, accounts receivable and terms of aged accounts are really next on our barometer. We expect unbilled to continue to come down. We have good traction two quarters in a row, which means we’ve cracked the nut in terms of the equation on how to attack that. That’s good. We expect inventories to continue to improve. It all drives basically cash flow that should exceed adjusted EBITDA. So that’s what we’re shooting for. And we see clear daylight in terms of next number of quarters continuing this trend. We don’t expect it to end.
Scott Searle: And if I could just — sorry…
Peter Smith: Well, Scott, did you want the memory and freight stuff or…
Scott Searle: Yes, please.
Peter Smith: So memory in microwave radios is a small part of the BOM. We were in a good inventory position. We could see probably 2 quarters out there being a little bit of inflation. We will work to offset that with respect to price. I would say in the recently concluded quarter, there was some freight inflation. And going forward, we’ll adjust our freight prices as well. So that’s to answer the inflation part of your question. Memory is small.
And then if you want to think about what we see in supply and demand in components, I can imagine a couple of quarters out that trailing edge CPUs enter the dialogue that is occurring with memory, but that hasn’t — does not impact us yet. And we will probably buy ahead on CPUs where the trailing of CPUs where it makes sense.
Scott Searle: And Pete, if I could, two just larger, more macro kind of follow-ups, if you will. Nokia, there have been hearing out there that in terms of their time line and expected divestiture of the wireless transmission business that’s creating some opportunities for other vendors in Europe and elsewhere. I’m wondering what you’re seeing on that front. And also, I’ve gotten some questions as it relates to Nokia’s FWA business being sold to Inseego, how that impacts you? And secondly, just in terms of the MDU opportunity, are there any other technical milestones that you need to hit at this point? Or are we good and we’re just kind of waiting for the MDU customer to start to ramp?
Peter Smith: Yes. There’s no more Aviat technical milestones, right? However, let’s say, in the next 6 months to 9 months, we need to deliver the next-generation project or product configuration, and we’re on track for that. And really, right now, it’s working out our fixed wireless with the customers’ back office and everything else that’s in the overall stack in delivering fixed wireless to apartment buildings. So we feel really good. And we think that our microwave system engineering is really winning the day versus the competition there.
The — with respect to what Nokia announced on Capital Markets Day back in November of 2025, I think the playing field is level between everyone who is listening on the call that, that announcement has happened, and we know very little beyond that. The Inseego purchase of fixed wireless access would suggest that Nokia is executing on the announcement that they made in the back of November, but I don’t have anything further to add with respect to their intent to execute on the microwave portion. And the other part of your question is what is it doing in the competitive landscape? I think I don’t know if and when it will come for sale.
I would say Aviat and Aviat’s competitors are very engaged in developing alternatives should that property be trade or should that property become, let’s say, neglected within the portfolio of Nokia. So I don’t know what’s going to happen with respect to the sale. I do know that we and our competitors are active in terms of trying to make sure that the customer base has microwave solutions.
Operator:[Operator Instructions] Our next question comes from the line of Theodore O’Neill of Litchfield Hills Research.
Theodore O’Neill: Pete, just a follow-up on a previous answer. You mentioned that issue in India was related to jet fuel. And I was wondering, are these issues related to simply you or your customers getting around? Or is it trying to avoid a conflict zone?
Peter Smith: It’s not — it’s trying to move stuff. You need to have jet fuel to move, and that’s — the comment about freight inflation is tied to the construction and supply of jet fuel, and that was a headline I wrote from India. But where does it really show up is it shows up in our freight costs.
Theodore O’Neill: Okay. And my other question is, there was an executive order about the Defense Production Act amended for the grid infrastructure. And I was wondering if that is going to drive some private network business at the utilities. And by extension, if that would also drive some private network business to the AI data centers?
Peter Smith: Okay. I think — yes, so the Defense Product Act, it was recently a presidential executive order to push the modernization of the grid. I don’t believe that, that was for data center or AI. It was just because the country has not focused enough on the core grid and reducing bottlenecks and the grid expansion and resilience. And what we see from that is it didn’t call out microwave or critical communications. But as the modernization push happens, we see an increased ramp in grid builds. Our pipeline of utility opportunities is increasing. And as the utility yard gets bigger, the need to extend the microwave coverage goes up.
Then also in that executive order, there was a focus on national defense and foreign supply risks. We are Build America, Buy America compliant. We’re the only microwave company headquartered in North America. Our utility business is approaching slightly under 10%. So we think that this national focus is going to pay dividends for us going forward.
Operator: I would now like to turn the conference back to Pete Smith for closing remarks. Sir?
Peter Smith: Okay, yes. I’d like to thank everybody for joining. The Middle East conflict was certainly a drag on demand and margins. We are very excited about our growth programs. We feel like they’re on the brink of making meaningful impacts, and we look forward to seeing that particularly in FY ’27. And then finally, we see — we’re coming up to our fiscal year-end, and we look forward to giving you an update on the full year and the path forward for FY ’27 with MDU, with BEAD, with the utility and other Aprisa platforms. Thank you, everyone.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
MBW Views is a series of op-eds from eminent music industry people… with something to say. The following MBW op/ed comes from Frederic Schindler, a music supervisor and the founder of the music supervision company Too Young Ltd. and the licensing platform Catalog. He was named the 2025 Music Supervisor of the Year by the Association of Independent Music.
“This ‘stuff’ is rapidly becoming our dominant form of music.” – It’s the Music You Hear All Day, Without Ever Noticing, The New York Times Magazine, March 2026
Pick up any food product in a supermarket and turn it over. You will find a full list of ingredients,allergen declarations, GMO status, country of origin, nutrition values, and the name and address of the business legally responsible for what’s inside.
This is not optional; it’s the law. Our societies decided that we have a fundamental right to know what we are consuming.
Now open any music streamingplatform. The shelves are infinite. The labels are missing. And nobody is responsible for what’s inside. Play any track: what do you know about it?
You know the title and the artist’sname (or what claims to be one). You might know the label if you look. But you don’t know whether it was created from an artist’s intent, commissioned by a library, or generated by AI.
You do not know if the rights are cleared, contested, or nonexistent. You do not know if the entity behind it invested in artist development, employed session musicians, a producer, or a recording studio, or simply uploaded a synthetic file through a pay-to-play distributor for $9.99.
You know almost nothing. Most of the time, you are not even choosing. The algorithm is. And the algorithm may not be as blind as you are.
The Flood
A staggering number of 150,000 tracks enter the digital music supply chain daily. But only fewer than 1 in 10 uploaded tracks, based on available distributor and aggregator data, come from entities that invest in artists, employ creative professionals, verify rights, and stand accountable for what they release.
Both major and independent labels, as well as curated distributors working with self-released artists and niche imprints, account for only a small single-digit percentage of daily uploads. The other 90-plus percent is unverified self-releases, functional made-for-media library content, and an ever-growing volume of AI-generated material that enters the system alongside everything else.
To put that in perspective, the beacon of culture-defining A&R, the Beggars Group, has built a catalog of roughly 100,000 songs across five decades of curation and artist development. That is less than one day’s worth of unverified uploads.
A Nils Frahm composition released through Erased Tapes, performed on handmade instruments in a Berlin studio, sits in the same undifferentiated stream as a synthetic piano loop instantly generated by an algorithm, uploaded by an anonymous account. The system carries no distinction. The metadata, the file format, the per-stream rate; all identical. To a consumer, to a marketing director planning a global campaign, to a playlist algorithm deciding what 800 million people hear next, they are presented as the same thing, because that is exactly what the supply chain calls them. Music.
“Champagne and adulterated counterfeit sparkling wine, sold at the same price, on the same shelf, with no label.”
Global streaming revenue totaled over $22 billion in 2025, according to IFPI. How much of that went to content with no verified human artistic intent? Nobody knows. And in the current system, a stream is a stream: NilsFrahm and an AI piano loop. Champagne and adulterated counterfeit sparkling wine, sold at the same price, on the same shelf, with no label. If the system cannot identify what enters the pool, it cannot protect the value of what truly belongs there.
Stories like this now surface weekly: Murphy Campbell, a folk singer from North Carolina, found AI voice clones of herself uploaded to her own Spotify profile, scraped from her YouTube performances. Days later, a troll used a distributor’s Content ID access to claim ownership of her recordings of Darling Corey and In the Pines, songs in the public domain since the 1870s but whose specific performances are her copyright.
In her own words, “it’s unprecedented, it’s the wild west, and it could happen to anyone.”
Then Instagram removed her video due to a copyright complaint from an unnamed third party, and the United Musicians and Allied Workers had to repost it on her behalf. Impersonated on the way in, claimed on the way out, silenced when she spoke up. One independent artist, three system failures, three dangerous precedents.
Every other industry solved this
Frenchwine solved it with Appellation d’Origine Contrôlée (AOC).In the 1930s, when fraud and relabeled wine flooded the market, the response was not to shrug it off. It was to build a certification system that told consumers exactly where a wine came from, who made it, and what standards it met. Nobody banned anything. The label made the difference visible. Consumers could choose, the premium product could prove its value, and the market held.
Fashion solved it with the “Made in” label and supply chain transparency. You know where your shirt was made, what it is made of, and who made it. Fabric composition, country of origin, and care instructions: all mandatory. “Made in Italy” means something different from “Designed in Italy, Made in China.” The label informs you.
Diamonds solved it with the KimberleyProcess, a joint government, industry, and civil society initiative. “Conflict-free” is now a standard consumer expectation, and the sector has drastically curtailed financing for bad actors.
Musichas not yet found its answer.
We should be celebrating two decades of the digital music age: Spotify was founded in April 2006. Twenty years later, we are the last major consumer industry operating without any form of mandatory product disclosure. None.
There have been promising moves: Deezer pioneered automated AI detection; AppleMusic introduced self-reported TransparencyTags; Spotify has deleted over 75 million “spammy” tracks, and recently blocked AI ‘artists’ from being verified on its platform.
These efforts matter, but they are platform-specific, inconsistent, and voluntary. None operates at the supply chain level, where the problem begins.
From the inside
I came to this question as a musicsupervisor, not a policymaker. Our clients were producing more and more content, and we constantly experienced friction serving the mid- and long-tail of their needs with relevant commercial music, fast and within scope and budget.
Sometimes clients wouldn’t bother calling and ended up in a library – assuming we couldn’t clear something exciting on time for $5k for their short-term campaign. The traditional system could not keep up.
Over two decades of supervision, I have been fortunate to work closely with the leading independents, major publishers and labels, tastemaker imprints, and self-released artists whose talent spoke for itself. So when the friction became impossible to ignore, four years ago, we started building together Catalog, a platform designed to make sync licensing faster and more transparent for professional music supervisors and media producers who champion artistry.
“Once there, you discover something that should alarm everyone who cares about music: there is technically no reliable way to tell what anything is.”
Suddenly, I was no longer curating and licensing songs. I was inside the supply chain, building ingestion systems, defining taxonomies, connecting master and publishing rights, and navigating metadata rabbit holes. I was exactly where the labels, publishers, distributors, and aggregators sit: at the point where music enters the system.
Once there, you discover something that should alarm everyone who cares about music: there is technically no reliable way to tell what anything is. The label name may be in the metadata, but knowing the quality City Slang guarantees, and that an anonymous distributor account does not, requires context that most consumers simply don’t have.
A track arrives: is it a song written by a human being with a career, a publisher that provided A&R guidance, and a live audience? Is it a production library cue commissioned to fill a brief? Is it a synthetic file generated by an algorithm in seconds? The metadata does not answer. You are expected to listen and guess.
I have spent many years training my ear to hear the difference and read the cultural trail of an artist. Most buyers have not. Production libraries understood this first. They invested in technology, built frictionless licensing platforms, and met buyers where the traditional system could not. The problem is not that libraries exist. The problem is that without transparency, their commissioned track is indistinguishable from artistry in the supply chain.
A rare opportunity
Sync is the last major music vertical to be digitized. Streaming transformed consumption. Social media transformed discovery. Publishing administration and collection are being modernized. But licensing, the process that decides which music soundtracks the films, advertisements, games, and content that billions of people experience daily, still runs largely on email, personal relationships, and institutional memory.
That is changing, and as more companies build the digital infrastructure for sync, we have a rare opportunity: to get it right this time. To build transparency into the foundation of the sync digital age, rather than retrofit it later. And because sync sits at the intersection of recorded music, publishing, advertising, gaming, and media, a standard built for this vertical does not remain within it; it also radiates outward.
Most recently, at Act in Sync in Portugal, an EU-funded program that brought together 50 music supervisors and sync professionals for two days of intensive workshops, the scale of the problem became viscerally clear. Two things stayed with me.
As ClementSouchier, Founder of Bridge, noted in his recap of the event, there was unanimous agreement that the industry needs shared guidelines and clear, collective messaging about the difference between artistry, product, and synthetic content, and the compliance risks each carries.
“An A&R colleague at an iconic independent music publisher described how heavily VC-funded production libraries are now approaching his roster of credible, culturally relevant songwriters with juicy flat-fee “remix” deals they can’t ignore.”
Currently, every supervisor fights this battle alone, explaining the differences and risks, client by client, sometimes being perceived as the “bad cops” for raising concerns that should be visible structurally. We compete with carefully blurred messaging from companies whose models depend on the distinction not existing. Moving from individual advocacy to a shared, structured voice is a professional requirement.
Second, a specific tactic that reveals how deliberate the blurring has become. An A&R colleague at an iconic independent music publisher described how heavily VC-funded production libraries are now approaching his roster of credible, culturally relevant songwriters with juicy flat-fee “remix” deals they can’t ignore. These companies are paying artists to lend their names and credibility to functional content that would otherwise be generic stock music.
When you process thousands of tracks and realize that the system cannot flag when a credible artist’s name is being used to launder the reputation of a production library cue, that is not a metadata problem: it’s a market failure.
The conclusion is straightforward: the system lacks the information it needs to function fairly.
Music Facts
It may be time to change that. Not yet with hard regulation but with an enforced standard that borrows directly from the frameworks that already work. The Music Facts protocol simply makes the distinctions visible. What the market does with that clarity is ultimately up to the consumers.
I have recently shared an open draft of MusicFacts with industry bodies, CMOs, indie and major labels and publishers, journalists, other sync platform founders, and music-loving tech activists. The response confirmed what I suspected: this is a broadly shared urgent concern.
There may be many differences and conflicting agendas among these groups, but they agree on one thing: music’s cultural resonance is worth defending, and an undifferentiated supply chain is putting it at risk.
Music Facts is a standardized disclosure label, modeled on the FDA Nutrition Facts panel and grounded in the principles of EU Regulation 1169/2011 for food. It classifies every piece of music in the supply chain by origin, and discloses what is inside: who made it, how it was made, who it employs, and what licensing risks it carries.
The system recognizes four origins:
Music. Human artistry with verified provenance, accountable curation and full copyright compliance. This is music released by labels and curated distributors that invest in artists and employ musicians, songwriters, producers, and engineers, respecting their rights. If self-published, registered with a CMO. Someone with skin in the game is accountable.
Self-Released Music. Independently released at any level of craft, without external verification. This category is honest about the spectrum it contains: brilliant artists with real audiences alongside bedroom recordings and hobby projects created for personal reasons. The system does not judge the quality. It states the verification status.
Production Library. Commissioned for commercial media use, not artistic expression. A legitimate product serving a legitimate need, but a fundamentally different product from artistry based on why it exists in the first place.
AI Generated. Algorithmically trained raw generative content output with no compliance, accountability and attribution model. No human author. No musicians. No chain of title. No remuneration. No one to call.
Each panel displays 20 fields across three sections: Identity, Ecosystem Impact and Licensing. A column of “Yes” next to a column of “No” tells you everything you need to know about what you are choosing and what you are funding.
In practice
What would this look like in practice across DSPs, sync platforms, and beyond? A single column in a playlist view.
One shape per track.
◆ Diamond for certified artistry.
● Circle for self-released.
■ Square for production library.
— Dash for AI.
The user can filter by origin and avoid specific provenances entirely. Here’s a prototype showing how this system could work at the consumer level.
The first question any person should ask is: Does this create a new gatekeeping system? The answer is no, because the certification pathway is not controlled by a committee or a rigid set of actors.
The ◆ is not awarded by a single authority. It leverages the infrastructure the music industry has already built. Major label imprints earn it through verified credentials administered by IFPI, RIAA, BPI, and their national equivalents.
Independent labels through IMPALA, AIM, A2IM, and WIN member bodies. Publishers through ICMP and IMPF. Curated distributors like IDOL or AWAL through a verified curated distributor status. Artists who own their masters but work with established publishers through their publisher’s verified standing. The credential and human validation process already exists. Music Facts makes it visible to the consumers.
“Some listeners will not care, but many will.”
For the self-released artist without institutional backing, the path is different, but the principle is the same. Live performance history. Real audience engagement. Editorial recognition. A cultural trail that exists in the world.
These are facts, not judgments. The system does not ask whether the music is good. It asks whether the music is real. The facts are the key, not a gatekeeper’s approval. The door remains always open.
The consumer never sees the backend. And critically, clear tagging gives consumers something they have never had during music’s digital age: the ability to choose what they listen to with the same transparency they expect from their food, their wine, their clothes.
Some listeners will not care, but many will. The specialty coffee revolution proved that transparency does not shrink markets. It grows them. It creates a premium category and rewards quality. Music that can prove what it is will be worth more, not less.
Why now?
Generative AI is flooding the supply chain at a scale that makes the production library explosion look quaint. The $1.5 billion stock music industry I wrote about in these pages is about to be cannibalized by its own logical conclusion: music that costs nothing to produce, nothing to license, and employs no one. The endpoint of business, social economy, and culture. Pure profit extraction.
In March, Artlist said it has reached $300 million in annual recurring revenue, driven by a commercial offering that integrates Google’s Lyria 3 Pro directly into its package. That’s almost half of the world’s entire annual recorded sync revenue, according to IFPI: from a single AI-powered platform.
The company’s own terms of use state that these outputs are not guaranteed to be “original, non-infringing, or suitable for any particular purpose,” while granting Artlist a worldwide, royalty-free license to use every input and output generated by its customers.
And Google has never disclosed what Lyria 3 was trained on, only that the training used “materials YouTube and Google have a right to use under our terms of service”. The user carries the legal risk. Artlist collects the data and fees. The artists and rights holders whose work trained the models get neither. If this goes uncategorized, the precedent is set: AI-generated music becomes licensable at scale, and Google may not need companies like Artlist for much longer.
“Artificial streaming, bot farms, and synthetic uploads are draining royalty pools at an industrial scale.”
The fraud problem is accelerating in parallel. Artificial streaming, bot farms, and synthetic uploads are draining royalty pools at an industrial scale. In 2025, Apple Music identified and demonetized two billion fraudulent streams. Deezer reported this week that 44% of all new tracks uploaded are AI-generated, and 85% of their streams were manipulated. Every untagged track that enters the royalty pool dilutes the per-stream value of every tagged one. We dreamt of creative freedom, the end of gatekeeping, and a world in which anyone with genuine talent could become a star overnight, but we invited the mafia to our dining table.
Origin tagging would give rights holders and DSPs the data layer they need to isolate, flag, and act on suspicious content faster: verifiable metadata that declares the creation method, rights chain, and upload provenance. Not just ‘is this track synthetic?’ but ‘who is accountable for this release, and can that be verified?” Origin metadata is transparency, but also revenue protection.
How it’s built
The technical infrastructure is ready: every track delivered to a streaming platform already travels through the DDEX Electronic Release Notification standard. Adding origin, authorship, and provenance as mandatory fields is a schema update, not a rebuild. Labels and distributors already carry DDEX Party IDs. Trust Bodies like IMPALA, WIN, and AIM already maintain membership registries that can validate them. DSP ingestion engines already reject tracks with invalid ISRCs. Adding origin validation follows the same logic.
The implementation could be gradual: start with factual, low-friction objective declarations that no one can object to. Who would argue that a Warp or Parlophone release should carry the diamond mark for verified human artistry?
Then add a layer of dynamic verification, certification criteria, and enforcement as the data builds the case. The detection tools developed by IRCAM, Cyanite, Deezer, and Sony plug in as supplementary verification, requiring no new infrastructure, only integration with what already exists. Because the goal is industry-wide adoption and benefit, Music Facts is designed as an open standard to be refined and upgraded collectively by the industry bodies.
“In food, risks have a name: allergens. In music, no one tells you.”
Every transparency framework that works today started as voluntary. AOC, Kimberley, 1169/2011. Once enough participants adopt the standard, it becomes the baseline that regulators codify. French Wine has a National Institute of Origin and Quality to make sure regulations are enforced.
The initial version of Music Facts has been submitted as a proposal to the DDEX ERN Working Group. What is missing is agreement and the industry moving behind it, in a coordinated way.
As a music lover, I think about this personally. My daughter is now three. She is starting to have favorite songs. She dances to them, requests them by name, and sings fragments of them in the bath. One of them is Bongo Bong by Manu Chao. She knows where he lives, because he is our neighbor in Barcelona, and she points at his house every time we walk past.
To her, the song and the man are connected. The music came from someone who lives in her neighborhood and made something that traveled into her life. These songs were written by people. Performed by people. Produced by people who spent years learning and perfecting their craft. Released by labels that believed in the artists and invested in their development.
Will she know the difference when she is fifteen? Will she be able to tell whether the music in her feed was made by a human being who poured something real into it, or generated by an algorithm trained on the work of artists who were never asked and never got paid? Will anyone tell her?
Not unless we build the system that tells her so she can decide for herself.
In food, risks have a name: allergens. In music, no one tells you.
It is time for clear labels and the ability to choose.
Finder (portal) has added a referral program and you can earn up to $25 when you refer a friend. The program is slightly different as you can refer somebody that is already a member and you earn a referral based on what product they sign up for (see sample below)
Our Verdict
We won’t be allowing readers to share their referrals in the comments below or in a dedicated post. That’s because Finder has agreed to donate the same amount to our charity partner instead. You can find current Finder deals by clicking here.
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YouTube Audio Library
Licensed under Creative Commons: By Attribution 3.0 License
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Disclaimer:All the information on this channel is published in good faith and for general information purpose only.This video totally based on my research .I collecting information from internet ,and books .
Its may not be 100% accurate.
