Q4 2020 EXFO Inc Earnings Call
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Today.
Exfos fourth quarter.
Let me start.
[music].
Good day, everyone and welcome to todays fourth quarter and year.
For the fiscal year.
20.
Again that today's program.
And at this time I'd like to turn the floor over to Ms. Michelle.
Mitch. Please go ahead.
Thank you good afternoon, and welcome to Expos fourth quarter and year end conference call for fiscal 2020 with me on the line today, our she didn't know nine axis, Chief Executive Officer, and careful model CFO and Vice President of Fine [laughter] minimal axles founder and executive Chairman will also be available.
The questions during the Q and a period [laughter]. A reminder, this conference call will include certain forward looking statements and or estimates concerning our intents beliefs or expectations regarding future events that may affect EXFO. Please note that such comments will be affected by risks and uncertainties, including the impact of the Corona buyers tend.
On our employees customers and global operation This may.
This may cause the actual results of the company to be materially different from those expressed or implied today.
For more information about Capex, though I encourage you to review our form 20-F filed with the Securities and Exchange Commission, our annual information form is available with Canadian Securities commissions as well.
Please note that not all right up our EPS numbers may be used during this conference call. A reconciliation of these non I FRS results with our you're far EPS numbers. It's available in the Q4 2020 news release on our website at <unk>.
But oh, the oldest well go where Nelson's conference all are expressed in U.S. dollar.
Otherwise indicated and with that I'll pass it over to see that.
Yes.
Very good thanks, Michele and good afternoon, everyone.
In our fiscal year, a 2020 X four experienced the impact of the krona virus pandemics on the global economy, which.
Which adversely affected our revenue and profitability.
However, I'm pleased to see EXL calls its fourth quarter on a positive note with strong revenue and strong cash flow from operations.
We also made significant progress on our strategic plan and 2020.
Our ongoing digital transformation allowed EXL.
Nick we adapt to a virtualized selling environment and secure five new service assurance contract wins.
Altogether, we generated revenue of 265 million down 7% annually.
It's a full second half of the fiscal year affected by the pandemic.
Regarding the bottom line deliberate and I as far as net loss of 9.5 million and 2020.
While our adjusted EBITDA amounted to 18 Dot 2 million.
You would use the impact it depends I think through strict financial discipline, including companywide hiring freeze.
In August we realigning our resources towards high growth drivers like Fiveg, Fiveg and cloud native deployments to accelerate our company's transformation.
Investments in our growth areas were reduced.
This restructuring initiatives with expected annual cost savings of $5 million.
At a more resilient business model and position the company for profitable growth and 2021.
Looking ahead, we're excited about the opportunities available from test and measurement and SAS product families.
With that in mind, let me.
Got you a bit more about how both groups performed in the past year.
And there are prospects for 2021.
In terms of test and measurement.
Can you spell less than 4% and 2020, we can see.
We consider this a solid achievement considering that preventive measure is triggered by the pandemic.
The fact that I spoke exposed to ability to ship products and deliver services.
Our revenues were also affected by the pause and large scale fiber deployments.
Or maintenance work.
On the lab and manufacturing test side, we did.
We delivered robust sales growth and increase market share throughout 2020.
Mainly in the Asia Pac region, where demand for optical component manufacturing is strong.
Demand for field testing equipment should recover in 2021 with major fiber deployment projects on the horizon.
Provided that the second wave of the virus doesn't bring extensive lockdown restrictions.
We also expect to leverage the pending acquisition I mean obstacles.
To expand our market share in the fast growing 400 gig and 800 gig lot in manufacturing test markets.
In optical supplies ultra high speed of soul scopes deteriorate testers and other critical test answering the optical component and network equipment manufacturers.
Given the strong need for fiber deployment, which comes from fiber to the home fiber to the antenna Fiveg infrastructure and data center connectivity and then.
And as well as a strong need for optical component manufacturing weeks.
We expect to build on our leadership position in optical testing and 2021.
Regarding our service assurance and services.
Our SaaS product families revenue decreased 16% and 2020.
In this case, the pandemic restricted our ability to close deals and install systems at the customer premises.
We also didn't benefit from a large contract for network topology software like.
Like we did in the previous year.
I sat business did close fiscal 2020 with the positive momentum.
We secured orders with five new logos five new mobile network operators in the fourth quarter, highlighting the strength of our service assurance solution and the increased activity in this market.
These multiyear multimillion dollar deals will increase our SAS backlog for 2021.
We expect this momentum to benefit our recently launched Nova adaptive service assurance platform.
It's highly disruptive platform is powered by machine learning based algorithms and automation capabilities to monitor and troubleshoot that works by detecting anomalies and even predicting outages before the <unk>.
You differentiate functionalities that resonate well with mobile operators that are transforming their networks.
We also anticipate increased momentum in 2021 as mobile operators begin migrating to cloud native Fiveg Standalone architecture.
This heightened activity in the network core sales accelerated demand for Arnold our adaptive service or sales platform and I know that essentially I troubleshooting solution.
Well as a result, we're approaching 2021 with a great deal of optimism for our SaaS business.
We have the suburban tend to belong and number two position currently at 10% of global market share in the fragmented broad based monitoring system market.
Turning to our business outlook I saw was suspended quarterly and annual guidance independent lead you to the ongoing sort of certainty surrounding to the breadth and duration of the pandemic and its impact on the macro economic environment.
So at this point I'd like to turn the call over to John So he can discuss more detailed insights on our financials Jeff.
Thank you <unk> and good afternoon, everybody and it doesnt seem decreased 7.4% to 265.6 million these fiscal 2020.
Looking in the White Innovent, plus 1% to 64.9 billion for a book to Bill ratio will either.
For the full quarter. It's doesn't 20 sales reached 70.6 million slightly higher than last year. Despite the pending ivor booking decreased to 63 million compared to Q4 linking.
As previously mentioned and then decrease in same in booking can be many EPS would be <unk>, because even take home decor, and nobody was pandemic, which reduced economic activity worldwide.
[noise] gross margin before depreciation and amortization amounted to 56.9% up say interest does 20 compared to 58.6 in 2019.
In the fourth quarter. It doesn't 20 girls five during the reach 53.8% of sales, including a restructuring charges of 1.1% it's.
Excluding these charges the gross.
The girls, all girls bug and weed out to Dane, 54.9% in Q4 20.
Well and I know these are all girls didn't wasn't he gets picked up by defending me as but were forced to shut down on <unk>. The only made the outbreak of the virus.
This shutdown as well as the CECO, depending be compressing demand, resulting in lower sales and lower absorption or fixed.
<unk> gross margin was also affected by an unfavorable sales mix in 2021 jump in and Phil as Phil mentioned, we did not benefit from Alaska practical nuts, what did the lobbies suffering 2020 as with using its doesn't like the.
Finally, our gross profit in the wasn't it gets to be impacted by recent 16 charging for quarters 2000 20.9 million.
29 media.
These oh somebody at all in fact are upset by a number of positive ITEN, including it in the third quarter. They await subsidy formed a candidate governor minimal think 2.7 million.
Do you think of the I personally seen off 1.1, yet.
Usually that's all girls Mckinsey to range between 57% and 59% in fiscal 21.
Moving to operating expenses, selling and administrative expenses totaled 92.3 million in fiscal 20.
Compared to 98.6 in 2019.
<unk> doesn't 20 did you any expenses amounted to 24.6 million and included 1.9 to be the only restructuring charges.
The 6.4 million decrease in <unk> expenses can be attributed to the wage subsidy provided by their kids and development of 1.1 million the pool.
The positive impact of interface 16, although sitting at the administrative expenses.
1.5 million.
It's generally lower travel expenses due to them, but they make like commissions paid out on lower sales level and tight control on expenses and the I. retreats.
This factor what posted net sales <unk> restructuring charges in fiscal <unk> and she is going to be a 20 called basically 19 and sudden increases year over year.
<unk> expenses as a percentage of sales slightly increased to 34.8% in 2020 from 34.4 in 2019.
With Big Oh, it due to the expenses will range between 33% and 35% in 2021.
Net R&D expenses totaled 45.5 million in 2020 called.
Compared to 50.6 billion just doesn't make the.
In the fourth quarter EPS doesn't 20, this R&D expenses.
Turning to other media.
Likewise, the five points one the decrease in net R&D expenses in place when he can be attributed to the wage subsidy provided by the good because if anything or what I meant Oh, one last time to young boy.
It's even back Oh, I have friends 16 on <unk> or R&D cost of <unk> 0.8 media as well.
Well I live researching charges the year over year, EPS 2.4 million and again I control on the expenses.
As opposed to what they're going to say, yes, R&D expenses reached 17.1% in 2020.
Compared to 17.6% it's doesn't 19.
We think that net R&D expenses would range between 16% and 18 cents of say in 2021.
In 2020, I have first net loss totaled 9.5 million or seven cents per share there.
Net loss in 2020 include expenses still studying totaling 10.3 million.
Namely 5.5 million in after tax amortization of intangible assets.
That's a good that's it.
Joining me on the stock based compensation costs.
Two points told me on the after tax restructuring charges and pointing to use us up 24 million.
That's that's also include 2.4 million for the after tax wage subsidy granted by education and government.
You know what it's done 20, I first net loss amounted to 3.6 million or seven cents per share, which includes and that's sort of tax restructuring charges of 2.4 million or four cents per share.
You cinema, Joe Griffin and she's got a 2020 sales is yes, let's see if you can prove it at 1.9% why the sales.
While sales in the Americas, and the pack sales, 10% and 13.9% respectively. The Lloyds Blackstone's bicycle.
Looking at the seats bid do you make that accounted for 49% of sales you mean, they represented 30% while Asia Pacific totaled 21%.
Turning to customer diversification, our top customer accounted for 8.3% of saving 2020, why not sell three represented 18.1% of sales.
Moving on to a few key points on the balance sheet or cash in terms of its been increased by 14.3 million to 33.7 million at the end of 2020.
We raised all bank loans by 26 point slightly ending 2021, although they did increase by 2.4 million.
These items were partially offset by two points, one nearly cash flow use big operation.
7.6 million photos machines, I guess, Dennis it and fight fight somebody unfold there, Okay man of love them live and ladies.
They always tend to cut over to the operator for the start of the acuity.
<unk>.
[noise], Thank you, Sir and ladies and gentlemen for your questions.
Hi, Chris.
Star one to join the queue.
Function.
That's.
At this time that's right.
Right.
[laughter].
<unk>.
Our first question today.
[laughter] Capitalmark [laughter].
Hi, good afternoon.
Maybe starting off on the fives five t. web access that never product any additional color you can provide as far as the geography of those wins and then also.
Some color maybe in terms of the key factors that drove.
Drove the operators in question choose your solution versus the competition. Thanks.
Yeah. So yeah, you these five customer wins, where I'm against the Americas and Europe.
And they're predominantly what we like is the fact that we are able to place.
Incumbents and you know that and then some of the players that you're familiar where tenants, but the netscouts in Paris.
And and exceed and it sounds like so for us to be able to prove the value of our new platform that you had a a hold a adaptive.
No about adaptive platform was was a key aspect of providing that.
Providing that those wins, so and again these eyes and we mentioned in our press release in August they represented about 5 million of our bookings in Q4.
While these deals are also a multiyear and and and then therefore well be part of our.
I guess, the strengthening our backlog and a 2021.
Okay.
And regarding the Topicals acquisition, you haven't provided any color or.
Color or financial metrics on that is that because it's not material or we'd be giving us some metrics when the deal closes.
Well the so first of all the time that they then in optical acquisition is still pending until we get the regulatory approval <unk>, which we expect to be a later on and the mother told her beginning of November and until then that's where we will be able to provide at that point.
More color on long on <unk>.
On the on the acquisition itself and what the impact is but what the strategy behind this one for sure. It's just continuing if you look at our results for the last couple of years, we've really proven that by expanding our solutions into the manufacturing and research market segments Weve shown some really nice momentum nice growth.
And the improvement in market share and by coupling and optical product, which helps us with cop.
Complementing our optical portfolio with some electrical.
Assets, we really believe we'll be able to address a wider market, mainly the PICC market and some of the photonic integration manufacturing provider. So again pretty important deal for us in terms of helping us grow our market share our addressable market and then our market share and to the manufacturing.
The Ramadan research market segment.
Okay.
And then on Opex or some of them parts here between <unk> restructuring charges.
You know typical seasonality that you have in the quarter I guess all that isn't the case, how should we think about opex heading into <unk>.
Next quarter I mean, if we strip out the restructuring impact and then factor maybe some some seasonal impacts do we assume that the run rate should be kind of yeah.
I'm a little bit from what you got in Q4 or do we think about that.
Yes, I know it's your your your rights U.S.P. I assume this isn't even factor or the biggest sometime in the summer time, so where they expect them to be launched in Q4 compared to two for the waters.
Same thing in the currency as you know play or is it a big.
The growth in our expenses, the outrage hurricanes and daughter get stronger in the in Q4, that's why I always hope they extend to increasing to four Olympic because of that and depending where the kids are than we did when we stand for Q1 that could be it could be an impact as well okay.
On the order size it with the recipient side that we have and I will say, we will start to see the benefits we have enough to find me young cost physics filled over the nail for the next 12 months with the there was 16 cents EPS, we have announced and that we should be starting to see somebody 50 in Q1 was that.
Okay and last one for me I'm feeling.
Characterized.
The current the current state of field deployments I mean, you know, what's good about that and everything I mean or appeal. The plan is now kind of progressing closer to normal or that's really a function of the various jakafi question. What are you seeing on that front.
Yeah, we're starting to see a back to normality now again with the the kinda second wave starting to come in that's the kinda caveat output, but then when you look at the overall PNM portfolio you know that.
The high speed solutions like 400 to 800 gig did really well our manufacturing portfolio as I mentioned earlier, the nice growth and market share increase where we had some challenges on the fiber deployment I. She's just highlighted but we do feel that the hide the man of broadband high speed broadband connected.
Do you buy in the market is going to start really getting that normality into that but the fiber build out and especially with those were saying with fiveg and certain countries, where we're seeing fiveg infrastructure also building up. So so we do expect to see that we're in we're starting to see a bit that funnel increase.
Momentum in that fiber build out again, assuming that the the second wave doesn't get us into the type of lock down that we saw it in the spring.
All right. Thanks, a lot.
Moving on from Canaccord Genuity, we have Robert young.
I, the CNN bookings in the quarter, a little bit weaker and most of that seasonality or.
Was there some other factor there.
Yeah, Robert I mean again, its EBITDA combination of a hobby.
And then and again as I mentioned, there, but some of the cyber attack transmission projects that are being impacted I do think that the cycle to get back tomorrow, Molly we experienced that into Q4, but as as you know operators are being.
Okay. That's all for the health of their employees and their <unk> and their contractors and we saw that impact in that business.
Okay I guess the.
The the distressed sales that work from home trends and whatnot are putting on the network.
He is.
Is that.
I never underlying driver of activity in PNM equipment, and handheld sales or lots of something else. So that's being pushed out by logistics and.
Oh good.
Yeah, not so Robert I think that's the fundamental demand for for for broadband Canary connectivity and fiber really being a big part of that and someone could argue that fiveg fixed wireless access will be as well.
That fundamental demand is strong and but I do think that the <unk> the effect of the pandemic just a as a as an impact of increasing the sales cycles and then the delivery and so on so it just it just takes more time, even though the demand as you highlighted a floor for broadband connectivity from a network point of view.
As is also being a it's been impacted but it's just the nature of.
I'm doing business it takes a bit more time.
Okay, and then the other area of strength in the businesses the lab or the NEM business.
I used it suggests you're taking share and I guess a lot of that was probably driven by the acquisition you announced and then now it's in optical closes as you plan, what's that going to do for that business is like ours.
Like are there any specific areas that you grow I think you talked about some component piece.
Component pieces are there any new net new areas that that that's going to open up for you.
Yes, so the market demand, but we just talked about for broadband connectivity and then the market demand for data center connectivity fiber to the home fiber to the antenna is driving the need for more and more optical components optical transceivers and so on and then it's the manufacturing of these components are predominantly as you know Robert into Asia.
At the China, and Asia, and that's driving again, the combination of a unit acquisition <unk> combination of our existing portfolio, we were able to really.
Capture increased market share and do further business without platform.
And then without an optical we saw an opportunity to to really complement our portfolio as as a more and more of these optical components are moving into pic technology or photonic integrated chip technology, and we felt an opportunity too to really complement and I I think domain was actively involved in it.
The acquisition, nor the pending acquisition I I'll leave it or I'll turn it over to somebody so I'm sure you can provide a bit more color on on an optical gentlemen.
Thanks, <unk> well that's really Robert this is a this is an area in which excludes men involved and then quite extensively this is a strategic area for us.
Good looking called Dnbi aren't so many picturing they would've been in search we've made some important moves in the last few years, both internally in terms of the internal development a strong focus both in our optical test or a high speed test as well with me because they're going to get and stuff. So what we do here with this combination is.
By adding an off the calls it's given us one of the most complete portfolio of products within this industry.
Before we get very high speed or you know component. This thing system testing that sales force. So we think that it's an area in which exports done well and we're expecting to contribute to do well as we can now create solutions that out pretty on large fleets in the industry. We do you get benefit to do that.
You know if the calls is our newest calibrating a market that's in the range of $50 million, which basically as the smaller organization that was difficult for them to really embrace the global markets and compete against larger players, which would be the key sites and then read suse and few others. So I think the combination of.
Of Ah you not the goals would expose could lead you to do who need it says.
For me. This is what we call off in time, the truth, but this acquisition. So very synergistic. So there's a lot of synergies to be generated it's a strategic segment for us and it's also a small acquisition. So those three are the truth is doing so it's a small acquisition that we can be leveraged to bring and create additional value for shareholders like we did with.
She and stuff.
Okay great.
Then you've said a couple of times last quarter or this quarter or that you're seeing a lot of RFP activity in general on the funnels growing and so.
In the in the SaaS business, yet I think relatively.
Good bookings and the CNN business, maybe not so good and I was wondering if you could just talk about folks.
You know the the trends there going forward.
Yeah, So Robert on the our excuse or activities around around the service assurance business, we actually continue to see a good momentum there and a lot of customers are now going through now that they've made decisions around that where are they going to be using for their fiveg core and their fivea fiveg around there.
Now moving into the next phase of the service assurance kind of activities and we see a lot of effort of our Sq. There and then again. The fact that we were able to close five five of them and.
In Q in Q4, and now some of them were for Fourg technology evolving to fiveg, but but we're starting to see an increase activity is there a cross mainly in our case Americas and in Europe.
So and that that bodes well for us in 2021, because we do believe that.
All customers will operators are looking at some places accelerating there if I do the public a movie I was really happy to see the CBR S. spectrum auctions to reaching up to 4.6 billion. So we're seeing more and more spectrum investment going into this business, but ultimately I will.
Be translated into network deployments, and therefore more opportunities for us to leverage our solution in that market.
Okay, and those those those trends the R.R. PNR acute.
Our PNR key trends is that around the SAS business or would you say that that's more of a factor driving the overall business.
It's it's been how many msas business because they are accused tend to be longer but we do see we had some nice growth on our on our t. and I'm around Fiveg infrastructure Buildout, so whether it's our fiber product, but the whole optical RF all of our products, what we're putting which is providing a bit more visibility.
Has your install new radio wise installing new fiber, we saw some really nice growth again.
In the in our platforms on the TNM side, and we believe that's going to continue as.
As has the optics move all the way up to the top of the antenna as as there's more and more deployment of greater density do that Fiveg as you know there's mortality being put in and it's all fiber right. So it does have a positive impact on our team in business.
Okay. So then if investors are looking for like a sign of.
A leading indicator for the New York used to turn into bookings and that Standalone radio or is it something that would happen before that starts to take off and I'll pass it on.
Yeah, the leading indicator for US now is a once the customers have made decisions on the fiveg core for Hsas to start off with the SaaS business. The leading indicator is the decision that now made on Fiveg core and whoever they selected as a provider and are therefore, we know that right behind that there'll be a need for service or sales.
<unk> activities and then on the T.N. side, the leading indicator is absolutely. What you just said so the it's the round deployment I'm. Once you start seeing some some deployment now that's a leading indicator.
Indicator for us to to 14 in business.
Okay. Thanks for answering the questions.
Thank you.
And ladies and gentlemen, another quick reminder, that's number one.
Many questions to queue.
To Tim Savageaux with Northland capital markets.
Yes.
Hello, Hello, Hello, Hello, Hello.
[laughter] good afternoon, everybody [laughter] or at all.
All right I'll try to struggle through this.
My question is Arden or two from a spending perspective from your carrier customer.
As was previously mentioned Hmm T nm bookings looked pretty weak.
In the quarter and at least it appears there.
Revenue.
Artists customer were down pretty sharply on a sequential basis and.
Given some of what we've seen and various suppliers across the industry that might not be.
Surprising although it it looks like your.
Revenues in the Americas were actually pretty decent in the quarter. So I guess my question is that correct.
Characterize kind of the overall spending.
Spending environment.
Or I guess demand environment.
Putting aside any.
Pandemic related network access issues, and whether you're seeing that differing trends.
Across some of your traditional large customer kind of the.
Because of the teen teasing horizons of the world but.
Versus other segments of the fiber test market.
Especially with regard to field, whether that cable rural broadband Europe.
Called out strength. There you know were any of those dynamics at work.
As you looked at your bookings and revenue results in the fourth quarter.
Yeah.
Yeah. So okay. So overall when you look at the seasonality of our Q4. It's it's August from a 10 point of view, it's always a quarter, where we tend to have a and impact on bookings for the TNM side. So there is about seasonality aspect.
What we're seeing though in terms of overall demand and as we move into 2021, our fiscal year.
Is that you know depending on countries and depending on on [noise] on.
On geography is we're seeing some acceleration of deployment and I would tell you. We're seeing a lot of activities in North America, we're seeing a lot of activity and the western Europe, but other parts that we are doing we see maybe more conservatism in terms of the spend.
But but again, if you look at places where fiber to them all the home high speed connectivity.
Overall programs being put together by governments and that is really the the the the momentum in funnel increase that we're seeing coming from all of these these other activities.
[noise] Asia Pac for us tends to be very again, when we talk about the that that the M.D. our market optical component manufacturing transceiver manufacturing that to us is really implying a high speed solutions 400 gig. It undergoes now the network equipment vendors are going to their lives with those type of so.
Yes, we're seeing some some of that activities as well.
Some of the what were monitoring knowledge is the fiveg acceleration, where wearable fiveg get accelerated or or really gets filled out and then as I mentioned on previous calls were seeing certain countries like the U.S. China.
Japan Korea accelerating their fiveg investments, but the other countries, they're seeing a.
As an example, a delay of spectrum auctions that they really like in Spain, or some of these countries in Africa and so on and that will will believe will also have an impact in terms of the the fiveg deployment.
Well, it's a bit of mix Jim that you know I do think that you know when we look at our 2021 that we'll be seeing some nice momentum behind the whole fiber connectivity nice momentum around our R&D on the market and I do think that from our service assurance our point of view.
The activities around Fiveg core a fiveg around for service assurance, we expect that that's going to really continue to see that momentum as we as we continue to be in our fiscal year 2014 was.
Okay, and if I could follow up briefly.
So you're you seem to indicate that.
Seasonality might be more of a factor there.
Then in test and measurement bookings than any kind of pull forward dynamic.
For a broad based slowdown in the in spend that the the larger U.S. carriers just want to confirm.
Confirm that and then.
You're given the overall nature of your commentary I'm heading into 21, it sounds like you might expect.
At least somewhat ever return to kind of a normalized mid single digit growth rate on the test and measurement side.
I don't want to go that far in terms of expectations, but.
Any comments on that would be great. Thanks.
Yeah. So I I think the activities in the U.S. continues to be you know around the fiber deployment around fiveg infrastructure build out continues to be to be strong as I mentioned earlier tend the sales cycle takes more time to close deals to get everybody to get all the appeal is really to get every all the.
Activities and so on the just the nature of those.
Having a lot of our customers working from home.
From home and is creating of that and you compound that with the seasonality is effectively what we saw in Argentina in bookings in Q4.
So for me, it's a you know as we get into.
And to our fiscal year, you know the whole.
Known and you won't you won't be surprised but the unknown is around that whole.
What will happen with a second wave of the pandemic and and what well what will be the impact on the macro environment and song and that's that's the the unknown and that's what's creating a bit of the the challenge for us to figure out how our business will will evolve and.
[noise] or growing the end 2021.
Yeah.
<unk>.
Thank you.
Right well move onto our next question.
Daniel Chan with TD Securities.
[music].
Hi, Thanks for taking my questions just I'm, just just to get some color on the five new customer wins that you've gotten the $5 million in bookings what were those bookings for and how quickly or for like what period of time and how quickly do you think those will.
Those will be converted into revenue.
And in addition to that what is the extent of these initial deployments in other words, what does the cros are they up sell opportunity. Following on these initial deployments.
So the one on the service assurance business and the the types of projects as you get in you get a a purchase order to cover and install the systems and the revenue profile tends to be over milestones that fixed usually a over the next 12 months and so less doesn't the revenues will be.
We recognize that and into the next next 12 month, depending on the projects, but they just give you kind of at a high level.
And so that's that's kind of the and then once you're into the network. Then you get expansion either you put more of our.
Virtual probes into their networks you you scale. It does not work and then ultimately that the that with that you continue to get more purchase orders more maintenance contract that I ends up being the supporting software upgrades into the network and that's why you know beat these important these contracts on it.
Turning to their multiyear contract and not just one year and and that's why we wanted to suppress the momentum we're seeing with these five <unk> five wins and they tend to be you know you start by a specific region specific deployment number of subscriber and then ultimately you girls than not and that's that's it's really important to have that footprint.
So you can grow the business.
What did what was your second.
What was your second sorry.
Well I mean, you could you partially answered it but.
To to what extent do you think this initial deployment like what percentage of the networks do you think you are addressing here you're saying.
A certain number of subscribers or number of regions is it would you say, it's 10% of the existing network or like just trying to size the opportunity.
Beyond this initial deployment.
Yeah. So I'll give you one when are these five accounts, we've actually provided it was Erik calling in Ireland and it starts off with a first win and then it and usually it will double.
In terms of the size to triple depending on the geography. So we started with a small geography, and then you double the footprint and ultimately you can be as high as three times, what you've put in as you as you increase the number of.
Subscribers, it's all that and the way it.
And the way it translates for US I guess one of the important factor that we monitor that is the Ah the backlog that we have on our service assurance business and and the backlog is still very healthy as we head into our 2021 are up to about $62 million of backlog of our business that includes you know project that you've got to do the milestones but did incur.
Sales in their maintenance contracts that that you get on there are you bases for to maintain the software and so on and so it's that's why.
That's why it's it's not just about the initial footprint, but then you start adding more.
More more geography, more more subscribers and the maintenance renewals and that's why it sometimes it doubled the value of the contract to sometimes triple.
Okay. That's helpful. Thanks, and then you also mentioned that some of the leading indicators for the SAS business included five G.
Core and ran a vendor a vendor.
Vendor selections.
Is there a particular vendor that you tend to it tends to get better attach rates too or are you pretty much been recognized.
Well the value that we bring to to are there, but the operator, our customers is the fact that where we are that independent voice that moderate monitors and provides information from an end to end point of view, including the Rhine, including the car and often you know that the the operator will pick a round vendor will pick another in the core.
And we have that capability to provide that end to end visibility the monitoring and troubleshooting and so.
We tend to be vendor neutral and in that context.
But we also obviously are always looking at ways of how we can complement some of these core or Rand.
[noise] vendors and how do we actually bring a value add solutions by working sometimes more closely with some of these core or around vendors, but but again, we tend to want to be as vendor agnostic as Ah that's possible because we do provide.
That additional value.
Great. Thank you [noise].
And another quick reminder, folks.
For any questions.
Alright, and with nothing remaining in the queue. Then it looks like that will conclude our Q and a session. So I'll turn the floor back over to Felipe for any additional or closing remarks.
All right. So just a few ticket what key takeaways before we conclude this call today.
So first EXFO made significant progress on our strategic plan and 2020, despite the pandemic we've quickly adapt it to a virtual site virtualized selling environment.
We consolidated our role as a trusted adviser that generated healthy revenue.
Second are we positioned there.
We positioned the company for profitable growth by strengthening our focus on growth drivers like cyber Fiveg and cloud native deployment, it and restructuring efforts all reducing investments in other areas.
And finally were excited about the the wealth of opportunities and 2021.
The 10 inside we expect major fiber programs to accelerate the fiber to the home fiber to the antenna fiveg infrastructure and data center interconnect deployments and.
And on the sell side, we anticipate whatever momentum should wrap up as mobile operators begin migrating and I said earlier, it's a cloud native and Fiveg standalone architectures. So.
So at this point Ah This concludes our EPS.
Q4, 2020 conference call on behalf of the entire EXFO team. Thank you very much for joining us today.
And ladies and gentlemen that concludes our call for today, we do appreciate your joining US and you may now disconnect your phone lines take care.
Mm Hmm.
Oh.
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