Q2 2020 Earnings Call
Ladies and gentlemen, thank you for standing by welcome Netscout second quarter fiscal year 2020 results conference call.
This time all parties around listen only mode until the question and answer portion of the golf.
As a reminder, this call is being recorded <unk>.
<unk>, Vice president of corporate financing and his colleagues netscout around the light with us today.
If you require operator systems are there any time, please press star zero I'd now like to turn the call over to Tony Peay allows it to begin the company's prepared remarks. Please.
Please go ahead.
Thank you operator, and good morning, everyone welcome to Netscout second quarter fiscal year 2020 conference call for the period ended September Thirtyth 2019, joining me today are no single Netscouts, President and CEO , Michael Szabados Netscouts Chief operating officer.
Okay, and gene Bill Netscouts Executive Vice President and Chief Financial Officer.
There's a slide presentation that accompanies our prepared remarks, you can advance the slides in the webcast you are to follow our commentary both the slides and the prepared remarks can be accessed in multiple areas within the Investor Relations section about website at www Dot Netscout dot com, including the.
I are landing page under financial results, the webcast itself and under financial information on the quarterly results page.
Moving onto slide number three today's conference call will include forward looking statements. These statements maybe a profit by words, such as anticipate be lead and expect animal cover a range of topics that are not strictly historical facts, such as our financial guidance, our market opportunities and more.
Good share key business initiatives and future project.
Got it plans along with their potential impact on our financial performance. These forward looking statements involve risks and uncertainties and actual results could differ materially from the forward looking statements due to known and unknown unknown risks uncertainties assumptions and other factors, which I described on this slide and entity.
Its financial results present press release as well as in the company's annual report on Form 10-K for the year ended March 31st 2019, and subsequent quarterly reports on Form 10-Q on file with the Securities and Exchange Commission.
Netscout assumes no obligation to update any forward looking information contained in this communication or with respect to the announcements described herein.
Let's turn to slide number four which will involve non-GAAP metrics [noise].
While this slide presentation includes both GAAP and non-GAAP results unless otherwise stated financial information discussed on todays conference call will be on non-GAAP basis only.
Rationale for providing non-GAAP measures along with the limitations of relying solely on those measures is detailed on this slide in in today's press release.
These measures should not be considered in isolation from or as a substitute for or financial information prepared in accordance with the gap.
Additionally, as a result of the sale of the agency tools business, we will provide certain organic non gap performance trends, which we moved H.M.T. tools revenue for comparability purposes.
Reconciliations of all non-GAAP metrics with the football GAAP measures are provided in the appendix of this slide presentation in today's earnings press release and they are also on our web site.
I'll now turn the Carlo to an l. for his prepared remarks and they'll [noise].
Thank you Tony Good morning, everyone and thank you for joining us.
Let's begin on slide number six would there be recap a quarterly non-GAAP results.
From a financial perspective, we delivered solid second quarter fiscal year going deeper and deeper form is with both revenue and earnings bloodshed exceeding the high end up what expectations for the quarter.
And I really for the quarter was $216.5 million with corresponding earnings much it up ready absent.
Well I could have benefited from a large game, but said with wider order, which was delayed from last quarter as well as strong go and government spending as previously approved projects what funded this quarter.
From a strategic perspective, we continue to go onto a burden roddick initiate if that is steady space and have made great progress on a go to market initiatives, including about sales what integration desktop did the big me off but the Phillies.
Let's move to slide seven flux out for the perspective on this as really view business highlights.
You never say destroyed the segment had noted earlier this quarter was.
This quarter to be completed a deal with a lot U.S. cable operator that had been in negotiations whats every quarter.
Got somebody is expanding its mobile virtual network company Teradata, N.V. I know space.
Where they are concentrating on optimizing their subscriber stick Sweden.
I'm happy to the board that because somebody <unk> expanded the scope and using it but off putting everything together platform. This dean achieving their objectives.
This expanded scope resulted in a lot of your biggest side than originally proposed.
Hi, good will elaborate further on this transaction on in his remarks.
As you mentioned you know at last earnings call. During the second quarter, we received an equally good order from one up what being one domestic mobile service providers, but 80, if they can see propagation modeling as discussed in my prepared for Fiveg [laughter].
[laughter], you're going to do they need your largest customer plays I think we made a lot everything can be the size and scope of the project [noise].
We're working on the propagation modeling and expect that a significant portion of the project I along with the associated revenue recognition should be completed you know what fourth fiscal quarter, which enhances our visibility for the quarter as well as the second half over fiscal years.
We're pleased to see Guardius begin to be bad for Fiveg and when can be we continue to engage with that have come as a customer on this one why did we couldn't do new believed that this is a longer term opportunity and but I would have grown that will benefit our business in numerous ways, especially as edge computing becomes more mainstream we're beginning to see some leading.
That is excellent did fiveg fiveg initiatives.
We didn't know what international service why did you get after this we continue to C. D. N D. They did opportunity throughout EMEA Latin America, and emerging is yet back a step back countries add dad wants didn't address.
Turning to or would enter by segment as we've said before you ever like biplane, though you. The approved August we didn't have a federal government business that has been bidding for funding do things. During this quarter. We benefited from that he leaves a four month, what some of what bike light. Although some of these are does that have completed during our second daughter second quarter.
We had if you are that or does that will be completed in about a third fiscal quarter.
Michael will elaborate on these deals.
These in his remarks.
Well, what all within the enterprise segment, our customers can do it I'd want there'll be a their digital transformation and security initiatives given that I was just a matter, but at some of the most complex networks in the world. They valuation any implementation of these newer technology takes time and we anticipate these are there to be uneven throughout the.
What is how what do we expect the back then to level out over time at these projects mature and believe we should benefit from these during the second half of the fiscal year then beyond.
Now, let's move to slide Nobody who will review our thousand lives.
We didn't and we remain excited about the opportunities we are seeing and I would I believe due to capitalize on them.
Given the solid perform in the quarter the view of what pipeline and the deals in house it related to the fed to the amendment that 80 of frequency propagation modeling project.
That should benefit the second half of the fiscal year, we had before the year farming over to you never have any guidance range, all paid $95 million to 909 under $15 million, an ingredient links but she had.
Guidance range to $1.45 cents to $1.50 cents, you do have a gap goods that get management the regional range was $1.40 cents to $1.45 cents.
I look forward to shedding of it brought it to be with you add that he had a convenience.
Locked on the call over to Mike OLED display.
I'm good morning, everyone.
Slide 10 of lies the is the value of code.
This is probably the segment as O'neil mentioned, we want and need for good deal the leading U.S. cable company as the advanced this strategy to expand into the N.V. and on mobile I wish you all that food companies [noise].
Face our customers objective is to use a superior customer experience as the key differentiator.
Wanted to help ensure service quality and availability of their life I and mobile video services.
We are deploying solutions from both both Oh, Sobi sessions and de Das security portfolios assist in then shooting I don't do more custom experience. This deal is the initial fees over companywide instrumentation initiative and includes a core I SNG and and you want platform and be a customer.
Billions and <unk> analytic software or enforce synthetic testing platform not flexi siteline <unk> de on this product from the onboard security portfolio.
In the end up by segment, we had moved people seven low eight figure deals from the federal government. The common theme in these deals is indispensible role we play in assuring that the formats and availability of large large scale mission critical systems.
In the largest still these transactions you a bought deal for the first feasible for new initiatives to ensure end to end visibility continuous monitoring and remediation in conjunction with the orchestration of Mendy that security solutions in a hybrid cloud environment initially involving eat up you us Gulf Cloud service.
And this deal.
We leveraged our entire should be sufficient or is it all up offerings, including active at best.
And moving to any switches predominantly in software and virtual form factors.
In another keys, we displaced an incumbent due to our strong reputation and track record with their government bizarre successes.
Our superior service assurance technology, and extensive knowledge of their requirements and internal operations.
Finally in the third deal we leveraged our platform strength combined be those to the superior Julie to customized solution to meet a uniquely strict money sitting at U.S. requirement in a mission critical application, which helped to refresh bought <unk> incumbent solution as the many use them dependable service.
From a go to market. The perspective, we continued to successfully xtend partnerships I'm going to sites. Two examples btw as we recently completed the first deployment before we see him NV energy use one product by a large government agency in E Douglas golf clubs.
I'll keep it really does not include both Aegion. Please.
Aegion bees deployment inside the workload and separate BPC deployment in combination with either of your staffing.
This illustrates the importance of netscouts visibility in assuring the performance of applications migrating to eat Ws Golf club.
It also highlights the benefits of what advanced technology partnership between either obvious and Netscout.
In terms of delivering new markets bellekeno like that and fully interoperable solutions. He was going to demonstrate these capabilities of as shooting performance and security of applications in hybrid cloud environment at the upcoming E.W. as the embed conference in Las Vegas.
Finally be embedded earlier.
Second quarter, we announced the appeal of the Eagle Ford V stream NSX edition will be EBIT, NSX D extending our leading visibility in trouble shooting analytics platform to be deployed neat deeply and invisibly do the workload.
Individually infrastructure, what the datacenter and cloud would be <unk> consistent skewed that concludes my prepared remarks, and I really love to undergo a little that the gene.
Thank you Michael Good morning, everyone I will review key second quarter in first half fiscal year 2020 metric along with our guidance. As a reminder, this view focuses on our non-GAAP results unless otherwise stated and all reconciliations without GAAP results appear in the presentation Appendix. In addition, due to the sale of the agent he took.
His business in mid September 2018, I will highlight certain revenue trends on an organic non-GAAP basis, which removed HNT tools revenue from the applicable period referenced regardless I will note the nature of any such comparing.
Slide number 12 details our results for the second quarter in first half of fiscal year 2020 focusing on the quarterly performance, we reported revenue of $216.5 million, which slightly exceeded the high end of I'll call. It for the quarter as Anil outlined in his remarks second quarter revenue declined by.
About around 3% on a year over year basis, but was flat on an organic basis after excluding approximately $8 million associated with the h. and t. tools business.
Second quarter fiscal year 2020 gross margin was 76.6% up over one half of a percentage point over the same quarter last year quarterly operating expenses were down over 2% from the prior year, primarily due to lower personnel related cost, resulting from reduced head count.
Posted an operating profit margin of 14.6% with diluted earnings per share up 28 cents.
Turning to slide 13, I'd like to review key revenue trends for the first half of the here for the first six months of fiscal year 2020 service provider customer segment revenue grew approximately 2% and the enterprise segment declined approximately 6% after removing the revenue impact to the H. and T. tools business that was down.
Best It this year last year site approximately 52% of total revenue was generated from the service provider segment with the remainder from the enterprise revenue by geography was relatively consistent with the first half of the prior year. There were no customers in the quarter or the first half of the year that represented 10% or more of revenue.
Slide 14 details our balance sheet highlights and free cash flow. We ended the quarter with cash cash equivalents short term marketable securities and long term marketable securities of $307.8 million, which is a decrease of $135.4 million since the ended the first quarter free cash.
Well used in the quarter was $6.8 million during the quarter. We purchased approximately 2.9 million shares about common stock at a cost of $66.8 million on average price of $23.34 per share.
In the first half of this fiscal year, we returned approximately $100 million over two thirds of our anticipated free cash flow for the fiscal year back to actually handle this we anticipate continuing to be active in the market, depending on market conditions and subject to daily trading volumes and price consideration.
In addition to I share repurchases. The also we paid $50 million of debt during the second quarter, we now have $450 million outstanding on our $1 billion revolving credit facility.
To briefly recap other balance sheet highlights accounts receivable nap was $202.3 million up by $42.2 million. Since the end of June Dsos were 79 days versus 88 days at the end fiscal year 2019, and 73 days at the same time last year.
Increasing the dsos in the second quarter this year compared with the second quarter of the prior year is primarily attributable to the timing of a payment from one large customer that is a testament to the ended the quarter normalizing for this the dsos relatively flat this quarter as compared to the same quarter last year.
Let's move to slide 15 for guidance ill focus my review on a non-GAAP guidance as a reminder, we sold the agency tools business in September 2018, and it contributed $18 million to last year's revenue prior to the completion of the sale accordingly, the impact of the divestiture should be taken into consideration.
When comparing fiscal years 2019, 2020, especially for the first two quarters at both years.
Consistent with the mills from off we continue to target fiscal year 2020 revenue in the range of $895 million to $915 million, which implies low single digit organic growth in terms of the other key fiscal year 2020 operating model assumptions outlined on this slide we currently anticipate gross margin to be ready.
Tentatively flat compared to last year as improvements from adoption about software solutions offset by the increased radio frequency propagation modeling activities, where the initial phases have a higher associated costs.
Plan currently calls the low operating costs compared with last year as we benefit from a reduction in personnel related costs, primarily attributable to lower headcount, partially offset by increases in annual merit adjustments, we expect our non-GAAP tax rate to be in the range of 20% to 24%.
Assuming 76.7 million shares outstanding we anticipate delivering mid to upper single digit earnings growth with diluted earnings per share increasing to arrange of $1.45 cents to $1.50 cents due to our capital structure management. The original range was $1.40 cents to one.
Dollar and 45 cents.
I'd also like to offer some additional color on the third quarter. As a reminder, last year's third quarter revenue of $246.3 million was not impacted by the sales sale of the agent he tools business as the sale was completed in the second quarter last year as we assess the timing of opportunities in front of as we kind of.
We anticipate revenue in the range of $245 million to $255 million.
Diluted earnings per share for the third quarter is expected to range from 57 to 60.
That concludes my former with you about financial results before we transitioned to Q and eight I'd like to quickly note that our upcoming <unk> conference participation is listed on slide 16.
I'll now turn the corner the call over to the operated stock queuing <unk> [noise].
And at this time, if you'd like to ask your question. Please press star and one on your Touchtone phone.
If you wish to remove yourself from the Q press the pound key.
We do ask but in the interest of time, you limit yourself to one question on one follow up.
Thank you we'll take our first question from Matt Hedberg with RBC capital markets. Please go ahead.
Oh, Hey, guys. Good morning, Thanks for taking my questions.
Neil Congrats on the improved results this quarter.
Yeah. So in your prepared remarks, you noted that your please see carrier speaking to prepare for the Fiveg. Obviously, you had to eat figure [laughter] order from a Q1 domestic carriers. This quarter here, but you also said that you know do it it's a long term opportunity I guess, when we look at the opportunity.
From an external perspective, what are some of the guidepost milestones that you see that gives you confidence. This this opportunity is progressing.
So [noise].
I mentioned last time on in previous calls that.
I see this ideas is much longer dumb opportunity and over the last six months then a couple of new findings one is.
Gadhia said accelerating the Fiveg deployment in fact, PMO Bill just announced and their advertising are heavily on the D.V., but last few weeks by GE has a differentiator. So this demo being announcement, which I saw into daily yesterday I.
I think he's going to be good acceleration or does that get you have seen U.S.
Second thing, which is they're very interesting trend, which I discovered during my travels in the book last three months. It that Fiveg will also be used outside of good ideas.
In federal government is being used as the next locally and that drugs technology. So the implication of Fiveg.
We'll be beyond.
Good ideas, which is what not known to us at least six to nine months ago. So those other trends and so I know I'm more bullish on.
That's a that's great very encouraging and then as a follow up there wasn't a ton of of commentary about Arbor this quarter in the prepared remarks.
I Wonder if you could provide a bit more color on what you saw in your broader circuit security portfolio.
So as I mentioned, we are in a and ideally going to be in three segments. Starting very soon I read that announcement out what I've done in a big projects. So one area is the Dod security, which is being our bodies and into first half the business was roughly flat versus last year.
As everyone is over traditional studies as short as we've definitely hop enterprise and I've said this why does the security you Wonder what do you does is part of that is the target area and and that's that's a new 80 every of getting into we had area and so when I look at the broader security portfolio.
There are many things we're looking for next year. In addition to lead as one is I went through our dental big brought up we just announced and also we had acquired a small company, which is doing some work into machine learning, India, India based on the next got dataset.
So what on I think there has been as we mentioned in a in the last quarter or some of the international business was impacted in the first half because of.
The integration issues, and which are mostly behind us I think and onboard wasn't much bigger portion of the international business. Then said with so showed and so it was somewhat impacted by their training and all those so I think we hope to make this up.
And but the biggest securities study is not just the dogs, but the other two areas, which we have invested in over the last two elements.
Super helpful. Thanks, a lot guys.
Yeah.
Well take our next question from Eric Martinuzzi with Lake Street. Please go ahead.
We had eight my math is correct, excluding the the handheld networking tools business it was down about.
Mid single digits or so just wondering what your expectations are for that business in the second half of the year and then I have a second question.
Some of it is timing of orders some affected by integration thing and that was top and training and resource alignment. So we think Alex that we'll be able to make up and be flat to slightly up in enterprise by the end of disease.
And by the way you're talking to Eric Alex So yeah. His chance soon enough. Okay. Okay I saw your Manhattan.
Okay.
Hey, let's say like good question [laughter], then on the NVNO, obviously, a big win with a large your large U.S. cable operator, expanding their NVNO.
Indeed, this is ready I mean, there last year there was a different end one.
And then this friend and not consecutive years. So this that deal here was very big because they bought everything including I'd, but solution, but it would be at about a year with them last year. So they were the pent up demand. So yeah, we had working with other operators, but nothing close to decide that magnitude.
I understand congrats on the quarter.
Yeah.
We'll take our next question from Alex Kurtz with Keybanc capital markets. Please go ahead.
Even sense that it could potentially match the 40 cycle in the U.S. as far as dollars over you know a span of time and I guess all this relates to how maybe you know fiscal 21 could could be an uptick from you know how you see it maybe six or nine months ago.
Yeah, I I think so but not just because a five d., but for d. spending in the U.S. has come down dramatically as you know affected by the two biggest operators, which affected our business who do any of the last three years.
Do you feel like.
There's been a base you're at a baseline of kind of maintenance spend on on Fourg domestically, that's where we're out right now.
Yeah, I think its maintenance, but also I want to mention that there are three different we've already done deployment in more so fiveg.
And endeavor for us non standalone or I guess.
You have.
And that's where we are right now.
And then very soon and when you get to the Cups model, which VJ rigid requests by actual.
Spending additional spending for control plan, then you need to do buy additional stuff for them as additional new stuff and then moving forward as you go to be on Fiveg, there are new ideas and damage and everything and that's a big opportunity. So.
And ER and moving forward and that's made there might be some acceleration at driven partly by some lead us a in the market and that we will see excellent expanding and lastly, I'd mention be a they did the boss the plan redeemed backed up which is not where loan at this point.
Is what's the relevance of Fiveg.
And also understand the enterprise traffic in application, we had to both say so that was.
Okay. Thank you.
Yeah.
Our next question comes from Chad Bennett with Craig Hallum. Please go ahead.
Great. Thanks for taking my questions.
So the large NVNO order a that that happened this quarter I'm that came from last quarter I think at least last quarter. We were thinking about that in terms of dollars around 20 million, but it sounds like sounds like that even expanded gene could you quantify the contribution from that this quarter.
As you said, we thought it was probably going to be.
It is a deal that we started many quarters ago and as you can tell it's obviously very complex deal based on how they wanted to roll out this strategy and the amount of integration that they wanted in all of their products that be able to have one single pane of glass to have complete visibility. So over the time, yeah. The quote multiple quarters that we had been working.
It had increased from say mid single digit service assurance deal and then they started putting awesome about security products in there. So it went to you know into $10 million to $12 million range and expanded from that and so you're correct. In that you know we thought it would probably be somewhere between you know the men.
Okay. So from a revenue rec standpoint, there's still.
Yes, that's true along with its I know it said in some of his comments some of the orders that we received from the federal government.
Got it okay.
And then.
Is there.
Solutions can you give us a sense of of where you think you'll be yet this year in terms of you know software based or software defined percentage of product revenue.
Areas. The very interesting thing as you point out Chad is that in the enterprise. We started to see significant use of our software only also such that last quarter in F. Why Nineteens Q2, and service assurance enterprise. It was probably in the mid single digits as a percentage of revenue.
However in Q2 of this comment here it went up to almost a third of our revenue. So as you point as you correctly pointed out the fed and some of the other enterprise larger enterprise strategic customers I definitely interested in software only.
Okay interesting.
Hmm and then maybe last one for you gene real quick how should we think about from a capital deployment standpoint, the appetite for for share buyback versus debt pay down which you did both this quarter.
Sure I think what we what we did for the debt pay down was you know this was a year in our revolver, where the gross leverage amounts were going down as you get you know, it's just a natural structure. That's in a revolver. So we decided to manage our debt levels. According to the gross leverage ratios that were in our.
Revolver credit facility and so we continue to believe that the best use of our capital after investing it back into the business is to give it to the shareholders in the form of share repurchase share repurchase has a better ROI at this point than debt pay down. So we will continue.
You to monitor all cash levels, and we'll continue to keep the minimum required cash if around 300 million, which represents our working capital domestically, our working capital internationally as well as some of the cash that you know stays in your international entities due to operations. So we'll just continue over there.
We can get down to you know seventyish million over the next few years.
Got it thanks much.
Thank you.
Hey, guys. Congrats on your gene. So that's one for you maybe maybe double clicking on Matt Prior question from a or just give us more color around the service insurance portfolio and security portfolios within their respective verticals.
[noise] I'm sure I'll follow a five year to date basis within service assurance.
I would say that the service provider market.
Oh, probably was relatively consistent maybe down a pointed to all of our however has grown close to the mid single digits and I'm, sorry, mid teen and secure in it in the service provider play in enterprise as we talked about its down about overall, 6%.
And as we talked about the digital transformation since we work with so many large customers that have very complex network you know their projects tend to be on even in the pattern as they figure out and they move towards what they want to do with digital transformation in the cloud you know we saw over a few years ago that you know it was kind of.
Hey, wait and see pattern for these people as they decided what they want it to do with their architecture and now we see projects and some of our largest customer. It's like last year, we had a lot of our financial institutions do some digital transformation. So we continue to believe that digital transformation will be very important to us. We also you know the.
And that also pertains to up our when you know the other part of your question there probably down on a year over year basis in the enterprise maybe in the mid teens and again that speaks to some of those very large security projects that they have done in the prior years with financial institution.
Got it thanks, what color 13, maybe on a.
On the guidance the last few years, we talk about more than 55% of revenue coming in the back half the year I'm sort of initial guys and whatnot and that kind of resulted in a midyear died down for cure Gan based on our map looking at about 56% of the annual business in the second half a year based on the midpoint of your guide and it looks like your guidance.
Actually accelerating double digit organic product growth in the fiscal fourth quarter I guess, what beside from the remnants of the larger deals makes you confident but you can hit because again one the macro started kind of come down this quarter and you guys saw benefit.
This quarter from some larger deals with what timing.
Well first of all as we mentioned and I didn't meet our book I Love to this is that [noise].
A bigger deals on the gave a provider or if you didn't have in the leaving it entering the second half. So I think we're slightly ahead in terms of visibility point of view, there last year, and so I feel that Uh huh.
The <unk> I mean, notwithstanding the Dallas you're talking about.
I think we had into method, but much better situation down into biased.
And in my past few years because of many different reasons and despite the fact that it's only 44 it wasn't there, but typically through our days to the company. We are being in this 14th week, 47% range and up lifestyle. So I think if we look at that.
Having to similar domain because of the addition of.
Visibility, we have moving into the third quarter.
Oh thanks.
I guess.
Well take our next question from Kevin lieu of care, you Lou and company. Please go ahead.
I don't have a someone MACRA type question.
No we didn't see any macro issue is a I like I said I know what do you have these large deals that timing of this or does that it wouldn't be a in under got spot.
With regard to <unk> early in the second quarter is all with the right then and you saw that in the last quarter. We admit this cable provider de lever, but fortunately not really came through but it was a bigger size.
Under federal side, clearly with the end of a credit earlier in September is a big driver and typically we do already gone in September and that's what happened there, but that pent up demand has been there.
And project had been approved but there were delayed funding so I think or what all the macro effect, maybe whats positive we don't really see any range the negative trends on the macro site.
Okay. That's great and then just looking at your R&D spend that was.
Down year over year, but on a sequential basis. It seemed like it ticked up fairly meaningfully I'm just kind of curious if there was anything sort of onetime in there that's kind of a reasonable run rate going forward.
Always when I look at it Kevin over the quarter I would say that Q2, probably absorbed the merit increase that we gave in the in the beginning of July and I think you know for the year on a full year basis, it's probably going to be down about 15.
Hi, I'm gonna gets about $15 million over why 19.
Alright, great. Thanks for taking my questions and congrats on a chocolate.
Thank you Kevin.
[laughter].
Our next question as a follow up from Alex Kurtz with Keybanc capital markets. Please go ahead.
Yeah. Thanks for taking a quick follow up here. So this a longer term question about the company and and the model So a lot of companies and.
With your with your approach, which is sovereign appliance had been moving to subscription models to match how customers by a lot. Other there's technology in their software now from from cloud providers and at least.
Hi, complete pays you go but something akin to that and I. Just wonder you know how is that something you guys have considered in moving away from life a device.
Is that a strategic.
You know decision that maybe the customers started to ask you about and and that's something we can see in 21, and 22 or or maybe there hasn't been that kind of interest from from your bigger you know service provider in government customers.
I would give me a quotes onset and dangerous sometime but and then maybe on if you took ought to be can go what we did announce visibility at this out of his visit side, that's opening up or Oh, well for solution. A few quarters ago. I think we do have two three customers, but that has not been there.
And maybe there will be similar to the mind when we go and a lower end of the market, but at the high end festival and people have not been demanding but we had already but I'm, a product and packaging and sales point of view and so at some point, yes, we'll see some revenue from the fed suffering.
But also had the size, that's opening and Ah, but it does not been.
Over the last five years has maybe been one or two customers that were interested in a subscription model I'm, maybe they did it for like a year or two years. So we're not seeing it for most of our customers as Anil had mentioned in Iowa, Bath, offering which is generally targeted towards less complex networks.
They might be an uptick in offering subscription in that area, but we would see that as incremental growth, but could there be an argument gene that moving your core business to subscription or like on a three year near term or whatever it is good.
I mean, you're right about obviously subscription models and visibility and certainty we have offered it to our customers, we and we have not seen willingness at this point the vast majority of I can I just want to move to US I think they model yeah, sorry that there would be low end of that enterprise market or media I don't think area, so going to use subscription Martin.
Okay are going to Scott's offline. Thank you Nick but thank you Alex.
And it appears we have no further questions I'll return the floor to our presenters for closing remarks.
[noise] Oh, we have no more remarks at the time. Thank you for joining us today and have a nice day.