Q2 2021 Viavi Solutions Inc Earnings Call
[music].
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Avi solutions second quarter sales Boston fiscal.
Fiscal year earnings call at this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
And I ask the question during the session you will need to press Star then the number one on your telephone keypad, if required and any further assistance. Please press star zero and I would now like to hand, the call over to your speaker today, Mr. Bill on <unk>.
And the Vacuolation. Please go ahead.
Thank you, Greg and welcome to be honest solutions second quarter fiscal year 2021.
And it belongs head of Investor Relations, joining me on today's call and Oleg <unk>, President and CEO and Pam Ebbing.
Please note. This call will include forward looking statements about the company's financial performance. These statements are subject to risks and uncertainties that can cause actual results to differ materially.
And on expectations and estimations, we encourage you to view on most recent annual report and SEC filings, particularly the risk factors described and those filings. The forward looking statements moving guidance. We provide during this call are valid only as of today.
Undertakes no obligation to update these statements.
Please also note that and let me state and otherwise all results except revenue on a non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitations and debates on each day.
Yes.
That's our supplemental earnings slides, which include historical financial tables are available on the website.
Finally, we haven't pointed as core and will make the clothing available by 430 P. M. Pacific time. This evening on our website I would now like to turn the call over to Pam.
Thank you Bill.
Fiscal second quarter revenue came in at $299 $9 million at the high and if our guidance range of 280 million to $300 million. The Q2 results represent a 424% year on year decline and a five 3% quarter on quarter growth.
The sequential growth was driven by continued recovery in NFC and strong OSP performance.
The RV and record operating margin at 22, 3% expanded 70 basis points year on year and exceeded the guidance range of 19 to 20 per cent.
EPS at <unk> 23 cents tied the record EPS from a year ago and exceeded the guidance range of 18 to 20 cents.
Now moving to our reported results by business segment.
And with N S C.
And as Steve revenue at $206 $7 million declined 11, 7% year on year and grew 12, 6% sequentially.
Within and a C and E revenue at $189 million declined 10, 9% from a year ago, primarily due to pandemic related declines and field instruments.
S. C revenue decreased 17, 3% due in part last year's strong keeping us demand and data center products.
And a secret margin at 63, 3% declined 310 basis points year on year within NSE any gross margin at 62, 6% declined 380 basis points from last year, primarily due to lower volumes.
And see gross margin at 68, 2% increased to 150 basis points year on year due to favorable product mix.
And as these operating margin at 10, 7% decreased 530 basis points year on year, primarily as a result.
Revenue, partially offset by lower operating expenses.
Now turning to OSP.
And I wish he had a strong quarter with revenue at $93 $2 million up 17, 2% year on year, driven by strong demand in anti counterfeiting and three D sensing.
Margin was at a record 62, 7% up 790 basis points year on year, driven by higher volume favorable product mix and higher factory utilization.
And I always P. Also delivered a record operating margin of 47, 9% up 970 basis points from last year's levels as a result of higher gross margin and Opex management.
Now turning to the balance sheet.
The ending balance of our total cash and short term investments was $648 $8 million and increase of $53 $3 million sequentially.
Our operating cash flow.
Quarter was a record $68 $7 million.
And Q2, we repurchased approximately $17 $1 million of V. R B stock and an average cost and $13.26 per share including commissions.
Overall, we have repurchased approximately $68 $3 million out of the $200 million authorized and its share buyback plan announced in September 2019, and.
At the end of Q2 cumulatively under this plan. The average overall cost was $12.28 per share we will continue to be opportunistic and our share repurchase.
Now onto guidance.
We expect the third quarter revenue to be approximately $290 million.
Right 10 million on.
Operating margin is expected to be between 17, 5% to $18 five per cent and G E.
And the range of 16th and <unk>.
18 cents.
We expect NSE revenue to be approximately $197 million, plus or minus $8 million with operating margin and six 5% plus or minus 50 basis points.
The O S. P revenue is expected to be approximately $993 million, plus or minus $2 million with operating margin at 43% plus or minus 10 basis points.
Our tax expense rate is expected to be approximately 18% to 20% and.
And we expect other income and expenses to reflect a net expense of approximately $3 $5 million.
Yes, you need and fully diluted share count used in our calculation is 240 million shares and this includes an increase of approximately 8 million shares from Q2 as an adjustment to reflect the estimated dilution impact from our 'twenty and 'twenty, three and 'twenty 'twenty four and convertible notes.
With that I will turn the call over total lake.
Yeah.
Thank you Pam.
I'm pleased with the obvious performance and the second fiscal quarter, our OSP business segment recorded its second highest revenue quarter and a record profitability and.
And I see a business segment saw its revenue and profitability to continue to recover.
And your second per segment revenue recovery was led by increased demand for field instruments and our service providers have resumed their network maintenance activities and geared up for a new deployment project.
Optical lab and production and wireless continued to enjoy strong customer demand driven by a 400 gig and.
Fiber and fiber and wireless we are also seeing growing customer interest and 800, geeky and already and we see 800 gig and Oran technology has drivers behind the next growth wave 411 production and wireless respectively.
The S T.
Business segment had a robust Q2 looking ahead, we expect Q3 to be weaker driven by a confluence of two trends the reduced spending by service providers on an existing network. So as they gear up for five G and the delays and new project by the enterprise customers until more staff is able to return to work and that's.
We expect <unk> revenue to start rebounding and fiscal Q4.
Overall, we expect NSE demand continued to improve and calendar 2021 with above seasonal demand outlook and the current fiscal Q3. Additionally, we expect five G field instrument demand to start picking up and the second half of calendar 2021, as five G service providers.
And ramping up their network build outs.
Now turning to OSP.
The OSP business segment finished the first half of fiscal year 2021 with record revenue and profitability driven by strong demand for anti counterfeiting and <unk> sensing products.
And the counterfeiting demand is being driven by a combination of global central banks fiscal stimulus inventory replenishment and new based on all three designs.
We expect the secular strength to be sustainable in the foreseeable future.
Three D sensing demand from mobile devices came in stronger than expected driven by increased adoption and penetration with facial recognition.
Condition applications in the marketplace for more than three years now we now have a large and growing demand for me the lead customer with more customers and device is planning to launch later in calendar 'twenty and 'twenty. One as a result, we now expect <unk> sensing revenue for fiscal year 2021 to increase to 20% year on year on.
From the initial guidance of 10% to 20% year on year.
Looking back at calendar 2020, I am pleased with our performance and execution.
Despite the unprecedented pandemic driven setback to our business and early 2020, we managed to recover our revenue and profits throughout the year, finishing it by tying a record quarterly EPS.
Our fiscal Q3 is off to a good start and we look forward to driving continued recovery and growth in calendar 2021.
A quick update on the CFO search we have interviewed many impressive candidates and have narrowed it down to a final few.
We expect to announce our newest CFO sometime in March.
In conclusion I'd like to express my appreciation to the V. RV team for its strong execution. During these challenging times and wish all our employees supply chain partners customers and our shareholders to stay safe and healthy I will now turn the call over to Bill.
Thank you all like this call it will be participating at the Morgan Stanley TMT Investor Conference on March 1st Great. Let's begin the question answer session. We ask everyone to limit discussion to one question and one follow up.
Oh.
There's generally a reminder, Tulsa questions you all need to grasp on then the number one on your telephone keypad against that as far as the number one on the telephone keypad.
Your first question comes from the line of Tony <unk> from Jpmorgan. Your line is open.
Oh, Hi, and thanks for taking my question and congrats on being on strong guide healed.
Well look I just wanted to start off on the OSB segment and.
I think what I heard you will see as you expect on the anti counterfeiting strength to continue a photo and duration of time, maybe if you can kind of talk.
Talk about how long do you think this go on momentum and on.
I think on interpreting will sustain and am I reading it right that you were kind of been seeing this 90, low 90 million and kind of what your run rate of revenue should be the new level for OSB segment and have them.
Hello, and thank you.
Thank you Simon So I think listen I mean, clearly U S is not the only country.
And doing a significant stimulus spend it's pretty much.
The norm around the world and as a result, we constantly see additional orders coming in.
And above and beyond or sooner than we expected. So there's clearly the stimulus to that is.
And driving some of the upside and the demand.
And that's usually coming on top of what we should expect.
We have we expect it to be already a stronger demand because of many redesigns and.
And.
Right.
And additional.
Adoption of our security features.
What's driving additional growth so that's coming up on top of it in addition to that and the first six months of shutdown a lot of printer lines have been shut down and they have exhausted all of their inventory and they badly and the need of replacing them and existing currency much less provider.
Providing stimulus cash so that's obviously driving and an extra layer of demand.
And on top of all of it.
There is also a very low inventories across the entire supply chain. So.
So people trying to replenish their inventory as they need to that so I expect we're going to see and an increased level of demand of.
For anti counterfeiting products.
I think it's really we don't unfortunately, we don't get much visibility, but given all the elements I think in the foreseeable future and the next 12 months I expect us to be running.
Stronger than.
We traditionally have been and you know traditionally we said our base business running around.
Around $50 million a quarter plus.
Other business I think now it's safe to assume that's 55 might be a little more and then you've given quarter, there's going to be.
Some things will come and more than one quarter, maybe lessen the other quarter, but.
Overall, I expect us to be running pretty tight on the anti counterfeiting products in the foreseeable future and then three D sensing is.
And really going to be a function of.
Customer shipments and I mean, even though we expected pretty good adoption and penetration.
Our lead customer I think had a much stronger demand and that was initially anticipated and we're seeing obviously some of that volume coming through driving much stronger resolves and we anticipated.
Got it.
I can just follow up on the recovery and B and E U.
And you talked about the crude rivals in the prepared remarks, five G wireless and viable curious.
Curious kind of which one do you see.
As having more visibility into particularly I think when you mentioned and fight G wireless there's.
And there's this broader concern that most of the service telco service providers have always spend on spectrum auction. So does that promote ramification and dumps are pushing some of them to spend dollars and wireless infrastructure on.
Just wanted to get your thoughts on that.
Sure, So I mean, and when we say about recovery and any.
That's the old.
Our bread and butter of the business the cable access fiber feel.
Field fiber instruments, and that's what's really been driving the recovery.
The wireless and lab and production test.
It was very strong and Q1 it continued to be strong and Q2, so that business continues to be strong and and.
As far as we can see it's not going to.
Decrease is going to continue to be very healthy and strong. So the only thing and the area that you're bringing up is the field wireless instruments, right and thats really going to be linked to the deployment. So I do agree they all spend a lot of money on buying spectrum, but at certain point and they have to start monetizing so.
From our perspective.
The strength and our traditional broadband field instrumentation like fiber DSL.
Cable and.
Strength in our lab and production equipment for fiber and the wireless lab those we see those trends continue to be putting and robust.
And to the extend the second half we start seeing more deployment is happening we expect also.
Field wireless instruments to contribute.
Whether they are and are going to really start and the second half.
Tend to believe that day will start whether it is going to be as aggressive as some people think is another matter, but they need to start monetizing the spectrum and generating revenue because.
It's no longer a duopoly and U S, where you could kind of take you on time and do it I think there is in some ways we are.
Seeing emerging a race too.
And to claim the five G crown between T mobile Verizon and AT&T and so I do believe that we will see.
And more aggressive deployment, rather than less aggressive deployment when it starts.
Okay. Thank you for the insight thank you.
Sure.
Thank you and your next question comes from the line of Alex Henderson from Needham. Your line is open it's actually a great time to task it because it was kind of a follow on on.
Just talking about.
You've historically.
And then.
Seen by the street is tied to Capex, but in fact.
It seems pretty clear to me that the predominant driver is actually more opex are relevant to your test and measurement business and particularly the field instrument business.
As you look at the pressures that was mentioned I E. The license spectrum license.
She is going out.
More of a capex or even independent of Capex phenomenon.
I would think that that would not have much impact at all on the Opex driven side of your business you seem to have pulled forward the timeline for <unk>.
And five G. A little bit I think you were talking about at the end of calendar.
'twenty, one being the point, where it starts to pull forward that demand.
You changed your thinking in terms of the time and pulling it forward some and.
And what gives you that visibility.
Thanks, Alex Good question, So no I still say second half of calendar 2021, and so I mean, whether you're going to take December quarter September quarter I mean.
I'm not that.
Insight is not that great, but I do believe that theyre going to start deploying and remember you are right.
Our.
Field instrumentation demand for traditional fiber cable and DSL is driven by Opex, but remember for us.
The sales of instruments are driven theres two drivers one day networks are being built they need equipment to test and turn them on and then when the equipment is being maintained so maintenance is driven by opex.
The build out demand is driven by capex. So when they start building these towers and certifying and releasing them into operation.
That should have the first wave of.
On equipment and it will be followed by subsequent waves as they didn't see vacation and maintenance starts taking hold.
If I could follow up.
Sure.
And argument that was made that being much further on earlier and the test and measurement and cycle being able to get into the pre deploy lab, helping to write the manuals.
That you've built in a competitive advantage that.
And <unk>.
And it's good.
Can't meet and to that extent you've got a.
And inside track on the field test and measurement because you've helped design the manuals.
Playing out.
Is that something that you've got any visibility on that share benefit from.
Well I think listen I think the incumbents always have an advantage because they are already there. So they are also obviously influencing installation now being a complete new calmer in the absence of being in the lab and and the early deployments, we wouldn't get a time of day, however, being seen as the <unk>.
<unk>.
And coming in with the all the names and everybody else has given us and equal seat at the table and we do believe we're going to have an advantage having.
<unk> been intimately involved and specifying installation protocols certification criteria and things like that and through that we also fine tuned our product definition and at this point, we have released pretty much the full suite of products, so and the way.
Our assumption on the timing worked very well it has the <unk> started deploying a year ago, we would have very thin.
Instrument portfolio today, I'd say, we have pretty much round it off all the corners and I think.
We have products that are better than the incumbents products and that space. So we do believe it and that should result in us picking up some share and carving out a chunk of the market for ourselves and that's.
Great. Thank you very much for your answers.
Thanks, Alex.
Thank you and next up is John Marchetti from Stifel. Your line is open.
Thanks very much.
And like I, just wanted to talk a little bit on the OSP business. Looking forward you went through on the anti counterfeiting side, how you expect that to kind of play out over the next 12 months or so and looking at the three D sensing and filter and diffuser business.
I'm just curious to get your updated timing is and as you think maybe Android starts to get a little bit more involved here as we go through the calendar year.
And if there's any concerns around some of the notch changes that are rumored to happen with some of the new phones and things like that just to get your sense maybe that three.
And <unk> sensing business will be helpful within that OSP business as well.
Okay, Yeah, and I was a good question so and.
First I'll say notch no not really no matter, we really don't care, where there is a natural notch I mean, we know which modules where and then.
It's all within our guidance. So it's just a different way of designing things and im not going to further opine on that.
There's a lot of.
What I've seen and the news.
And im not entirely accurate understanding of what different things I mean.
The way I would kind of make it easier there as the world facing and rear facing rear facing has a high resolution kind of facial recognition and security world facing is more camera and a related.
And I do expect the day market.
Technology innovator in that space, we'll see more world facing cameras or more firms as well as having a ubiquitous.
Facial recognition.
Well, so that business will continue to grow with their market share and the continuous adoption of three D sensing technologies.
I think it could be and exciting upsides to the whole forecast is the Android because we are seeing.
And much more animation around a three D sensing for the world facing camera from various Android Oems, and depending which modules and which models go into production, we're going to see.
A combination of Diffusers and filters playing into that space and I mean, we.
We do believe that the.
And having a world facing camera on higher end phones is now must have to kind of tie the camera performance and we do I do think the Android.
After several false starts is about to start adopting <unk> sensing.
Got it and then if I can just also go back to your comment on them over and looking out.
And it's maybe a next leg of investment within that wireless lab.
I guess, where are we in that cycle from a test perspective is it still early days are you seeing you know.
Widespread and interest is it maybe more geographically.
Concentrated in one area and other any color you can just sort of share on that one and side would be appreciated as well. Thanks.
Sure sure.
It's a very early stages. So operators I mean, you can talk all you on right now they need five working so they are tailing for the initial deployment to their respective and Ams just put whatever you want I don't care. If its proprietary solutions just gets me something that works in parallel.
And in their labs they are all.
Looking deeper at the Oran has the kind of the next thing for themselves and on top of it.
Even leading dams are aggressively ensuring that they are or and compliant.
Down the road and what also or and brings it brings a lot of new players into the market. So it's no longer just a stop three for Nims now you have about a dozen smaller companies.
Who are all looking to play at various horizontal or vertical layers of the network and they are all buying Lubbock and so at this point I would say Oran is heavily a lab and experimentation and.
What is kind of think focused activity.
And in terms of the actual deployment, it's just get me something to the works and I don't care, how you make it work so that's.
And I hope that gives you a bit more color, how we see already happening.
It does thanks, so much.
Alright.
Yeah.
Thank you and your next question comes from the line of maybe Hassan from Susquehanna. Your line is open.
Thank you two follow ups or like can you. Please help me understand how much of this strength and your three D. Sensing is driven by the new models, especially the U.
U S OEM that introduced and appears to be successful and how much of your success is driven by increased content. So.
And smartphone units versus increased content for you and I have a follow up well. So I think clearly the market leader is driving.
Most all of our three D sensing business and.
There's really been no change to the.
And what we've seen there is a couple of things first of all I think.
You guys can make your own assessment on their market share, we believe that they've picked up some market share. So as a result, and I was talking about higher volume of.
Phones, and then within those phones I think almost universally now everything has.
Rear facing camera for facial recognition and it's proved proliferating into other products like tablets and Pcs and then of course the world facing camera on the higher and models are really got a lot of interest. So I think it probably came in stronger than we would've expected. So I think if you would.
Take all of these things three things together I would say the bigger driver in terms of the increased volume is just surely more volume and.
And the second biggest one is the introduction of world facing cameras.
And between the two of that and those it's more than enough to offset any ASP erosion.
Okay.
But would you agree that.
Do you have higher content and not to me. It seems like you may have to.
Different filters are products versus one and the past, yes, so in the in the phone.
Has both world facing and a rear facing camera our content is greater.
It's a little different so I, just I mean people and let me just give you a little clarification when people think about lasers.
The world facing laser is actually higher power than the rear facing laser and in some cases may be more expensive for us that's not how we look at it and we look at it by the sensor area and the world are facing camera sensor is much smaller it's the lower resolution than the.
Rear facing which is a facial recognition sensor so in terms of the Isps and the asp's for world facing cameras, they're much smaller.
And the Asps are for the rear facing cameras are bigger because the ore and speaker, but the mere fact that before we had zero world facing filters and now we have some and it's growing and that's obviously driving upside.
I would say good good rule of thumb is two to one.
In terms of content.
And you think about the total area, it's one and a half.
Sure no.
And the C part of your business seems to be more clear today.
And three six months ago at some point is going to turn and you have new products that hopefully will scale.
So I wanted to stay focus on OSP.
It is interesting that recently one of the key.
Players and three D sensing they may the bolt acquisition of getting into lasers, which was very surprising to me to me Lidar suddenly has become a huge growth driver in that context.
Would would you actually shift your focus is six months ago, you were looking into M&A for NSC application now youre looking more and strengthening your portfolio with the eyes on lighter as end market application on my thinking about this the right way.
We will look at acquisitions for both OSP and NSE, we're not really we have a clear.
Our roadmap and strategy for each.
I think the.
You're talking about aluminum I think.
And my view on it is it's more of a diversification play for them.
And the industrial and.
Okay.
Industrial laser processing and things like that so I mean, they have their own strategy for that and I don't know I know even from the days of Jds. They were always looking at fiber lasers for industrial applications. So I think I think it's a good deal for them on a longer term and make them a more diversified more resilient company and not depending on any one particular.
<unk> model of the phone so I think thats that was a good opportunity for them and I think it works out quite well.
For us and what we're looking as we are looking combination of both I think going deeper still makes more sense for us.
Gives us much bigger.
Leverage here and any kind of acquisition.
Going wider is probably a bit too premature for us.
And we need to continue to drive scale and our existing markets.
Just a quick follow up given the changes and a market would you.
Would you say the priority and in optical sensing now and it seems to be higher than NFC in the context of M&A opportunities.
And I wouldn't say higher or lower I mean, the bolt on priorities, we have our kind of target list and each business and it's really matter of which one becomes more actionable sooner or later.
And in both cases.
We get tremendous operating leverage so it's.
I mean, we are we are equal and we don't need to choose either or we can do and here. It's really comes down to more worthy action ability now the only differences and optical space. There is a very handful of companies and most of them are fairly small and I respect they don't really move the needle so and in case of NFC. There are some bigger players.
And as well so I mean, we do look at.
And the area on Lidar I mean, that's a very interesting product for us.
Okay. Thank you.
Sure. Thanks.
Thank you and your next question comes from the line of Richard Shannon from Craig Hallum and your line is open.
Oh, hi, Thanks for taking my questions I think I'll follow up on the and he business, particularly and five G field test Oleg you talked about some confidence and seeing a second.
And second half on your calendar year being robust how would you describe the kind of inputs to that both geographically and then and then how long and kind of see this cycle four for five G field test are lasting.
Well I think really and.
<unk> field test I think it's going to be a super cycle kind of seven to eight year run initially you're going to have an initial deployment followed by Densification and then more and more geometry geographies are going on a rollout is similar to what we saw with the <unk> and things like that so.
How aggressively things start I think it's already happening in countries like Japan, and we are seeing.
Some pretty good traction and even though we are in the home turf on one of our major competitors, we are doing pretty well and that market.
Which gives me confidence that our products are quite good.
In terms of the U S. I think U S will be the next thing I mean, clearly there is China and that's already.
<unk> been going on for quite a while in terms of the next big deployment markets will be.
U S and.
And.
And in the U S. We have an interesting situation of three players now.
Vying for the five day Crown and that's why I think we will probably see things happening sooner rather than later because there is now a competition, it's no longer a duopoly with two major players kind of moving at a kind of wink Wink nod nod type.
Pace, where they take their time right now with three players.
It's very difficult to sustain a collusion or anything like that so I think things are going to happen much quicker and U S.
Maybe starting sometime next year and later this year.
I think that the next one would be Europe, and I think Europe has really brought a year behind.
U S and so some deployments and.
And we probably should start seeing some things happening in Europe sometime next year.
Okay, great for that color and Oh like my follow on question is and your fiber business here and you've talked to I think for at least a couple of quarters about a fairly robust.
Cycle at 400 gig and if you can give us a sense of when that turns into it turns into a robust cycle in terms of fiber and then how do you see the 400 gig generation versus the last two generations is at least as positive or even better how do you how do you view that.
Well I think the.
If anything.
And then.
And we went from one gig to 10 gig 10 gig to 100 gig.
And I've seen with each one as generation the amount of time between the start of deployment of one and started deployment of another technology that time has been getting shorter and shorter I mean, we only one to 100 gig and in earnest.
A couple of years ago, and now we're already seeing 400 gig and we already and our customers want to see at 800 gig.
And it's.
I think the fiber is really.
My perspective, I think the the.
Time of each node deployment is shortening and we may see multiple technologies coexist.
We see data centers moving to higher bill rates sooner and metro areas kind of transitioning from 10 gig to 100 gig slower, but we will be seeing all of these nodes coexisting and parallel rather them.
With one ramping on the other one on ramping down.
And and then just.
And just completely new customer segments. It is no longer the traditional telecom transport I mean, we see the back plane of all the datacenter boxes is becoming optical and that's really driving a lot of the fiber demand.
Okay, Great. That's a great perspective also and I think thanks for that.
Sure.
Okay.
Next up we have <unk> salvaged Joe from lights on capital Your line is open.
Hi, good afternoon, and congrats on the results.
Couple of questions here.
First over on the OSP side or three D sensing in particular.
You had mentioned and you know we've heard a little bit on this before today.
About an increasing level of activity.
Owned world facing and the Android universe, and you'd also mentioned that.
That is a potential source of upside and I think your Android contribution to three D. Sensing to date has been pretty pretty low if not minimal.
And so my question is basically on upside to what baseline.
When you say that.
Wishes to share that a robust and.
Android rollout and the second half of calendar 'twenty, one your fiscal 'twenty to.
Drive the same sort of double digit growth youre seeing and <unk> sensing next year, even with some of your top customer sort of flattish yes.
So I would make a little correction actually our contribution to Android universe.
And <unk> sales. He has been huge it's just universe has been piddly and its kind of started and just physical the way. So in that respect the Android market just didn't happen, but we've been engaged with all the major players.
And I think this time around I think later this year, we are going to see on droid, and it's mainly world facing cameras and four assets.
Double opportunity, it's not only filters. It's also diffusers, so depending on which model is going to production and which modules get designed in we will get.
Either one or two of our products designed in and.
And given that Android is so big and.
And in <unk>.
Players if they introduced into more than one high end models.
Can see that volume to be quite meaningful.
Got it.
And it was mentioned and your revenue contribution not your technology contribution.
Distribution is Kevin.
And very small base.
Yes, I mean this is I think this is I think Android is going to happen to share and.
And I mean, otherwise they will really.
Lose out big on customer acceptance, so I think I mean, we do.
We haven't put any of it and our forecast and we.
Still treat.
Treating it as a and upside so we clearly as it if it would probably start seeing.
Over the next three to four months.
As customers start placing orders on how many models and how many modules will go into production.
Got it and.
Just a quick one on OSB I, just want to make sure I heard the number right the kind of baseline currency run rate youre looking at $65 million a quarter.
And the only started in terms of the we always say our kind of base business. It went on and 50, and we say I'd say 55 to maybe <unk>. So.
And I'd say.
Higher.
<unk> type range.
Got it thanks and last one for me.
To the extent that.
You saw strength and sort of your traditional fiber cable field test here in the December quarters.
And to what extent.
Is it possible to characterize that versus pent up demand releasing or.
Would that be the same as a more traditional budget flush and.
And as you look for the to the declines and March do you see that as being you know prints.
Principally seasonal in nature or any other drivers there.
Actually it's all driven and what I call it the best kind of demand.
A lot of customers are seeing significant increase on.
Bandwidth for consumer bandwidth and increased demand for quality of the network.
For example, I'm doing my call from the office because they cannot rely on my local cable provider for not shut me off during the day day.
During my call so.
And I think.
And what we're seeing is actually a response by cable companies and telecom companies took on the card consumers demanding more bandwidth and higher quality of service and Thats to me is the best kind of demand you can have because it.
Manifest itself into a longer term.
Investment with a more sustainable demand over multiple quarters. So it took them with several quarters to figure out what needs to be done and I think many of them are still redesigning their networks and they are starting to roll it out and I think the next wave will be and.
And I won't say, a wave, but kind of and incremental spend in the U S. This hold on order broadband.
We're seeing already a lot of.
Customers are starting to plan and compete for the government money for these projects and that put via also and additional spend down the road for us.
Great. Thanks very much.
Sure.
Okay.
Thank you and your next question comes from the line of meta Marshall from Morgan Stanley. Your line is open.
Okay, great. Thanks.
And then maybe expanding on the three D sensing opportunity and it's been a while.
And kind of talked about how you are thinking about timing of the auto opportunity and just with your supply chain partner seem to think that day.
And maybe 'twenty and 'twenty, two and just wanted to get your latest thoughts and then and then.
And maybe as a second question Bill.
Europe was relatively strong despite maybe stricter accessibility issues and Europe then.
In North America, and Q4 just.
Anything to read into that pick up that we saw in Q4 out of Europe.
So I would say and first on our three D I think.
Listen, we always said the offshore law.
And like Lidar and the kind of a ton on what is driving our assisted driving.
That will take longer and it's really not a function of lasers or filters, it's really the area around the whole cost miniaturization minimization, and miniaturization and thats needs to take place and I mean.
Today, we're pretty much working with every lidar.
Company out there and I think 90% of and will be out of business or will get acquired and the next few years and we still view on automotive is a 'twenty three 'twenty four <unk>.
<unk> at the earliest for that however.
There are segments for three D sensing already and out or that are being active today, mainly the high and which is the gesture recognition in cabin monitoring and things like that and we have a pretty good share and that market. Its not a big market is very much on limited to high end market, but it's.
Getting giving us engagement with the customers and positions us as the kind of go to company and for three D sensing and automotive and so that's how I see automotive to us.
Really more I'd say a longer term play for us and scale I'd say consumer devices and industrial three D vision.
And is our call as the.
Near term drivers of the growth and business for us in terms of Europe actually the whole EMEA region has been very robust for us even during the.
The worst downturn during the.
Pandemic and it continues to be very strong and it continues to grow so we've seen very strong.
And demand and growth in Europe, and a lot of a lot of fiber.
Fiber initiatives going on in Europe, with the mandates from governments to rollout fiber too.
Practically every household in Europe and Europe. As you know is very different from U S. We have cable putting much connect them almost every house and North America and Europe has predominantly been DSL and the DSL has run out of steam in terms of delivering broadband. So we are seeing wholesale I would say call. It.
Fabrication and Europe with fiber being pushed out of it and the network with a lot of national.
On push behind it.
Great. Thanks.
Sure.
Thank you and our last question comes from the line as Bill had me Jim from and Cam Partners. Your line is open.
Okay.
Once again on your next question and your final question comes from the line of mahogany, Jim from MK and partners. Your line is open.
Thank you. Thank you for taking my question most of my questions have been answered, but if I could ask you to help us understand a little bit about more.
More of your opportunity and five G.
Maybe if you can feel that on a little bit more.
From what I understand there are two aspects of the other opportunity and one is on the order side and on the other is on the <unk>.
Fiber optic the PON side, given all these different spectrums that are going to be coming on line.
Carriers are especially looking at WD of Opex or.
Or densify and upon so to speak to drug called carry the.
Video traffic could you speak to US where you are in terms of the opportunity Youre seeing is it more on the optical side or do you think the optical side policy on that side, maybe a little bit of the dynamics that you can help us understand the opportunity.
And how you see this dynamic play out.
The optical and Drs.
Sure.
And I'd say, if you bring up very good point and in fact, we're seeing fiber and RF converging because you cannot talk about our Ralph without talking about fiber and wireless network and vice versa, because everything in the wireless infrastructure is interconnected today with fiber so you need to test your timing.
Transmission and all these things you have to test fiber as well as the RF.
So.
Where we feel is we have a unique.
Our opportunity here is all our instruments come with two and one we have and RF instruments and fiber in a single box. So you only need to bring one instrument to do all of everything that you need to do it and the mark in the field and.
Installation of qualification, but in terms of what are we seeing in terms of five years are clearly the phase one for US was really winning big with Nims in the lab and engineering development and it is going to continue as the new <unk> standards are rolled out and you in share instantiation.
The next big wave for us will be.
Really the field deployment, so which plays to our traditional strength and field instrumentation, we see that the growth.
And the next wave after that is what I would call Oran and its combination of traditional players like <unk> and service providers, but also a lot of the new entrants into the markets were coming in.
<unk>.
Service or a particular per.
Part of the network and they are buying our products to help them to be compliant and testing and.
And the.
In the same I'll say and then the other big element I think emerging and therefore five day as the private <unk> networks, because I think in many cases.
Five <unk> and the enterprise network is going to become synonymous.
More and more companies view five geos, there effectively their enterprise network and Thats, a completely new market for us and where we haven't really played we haven't played and enterprise networks and other large enterprises start deploying <unk> for their private purposes. It plays very well to our.
Sure.
Toolkit across the entire VR, we saw at the test equipment simulation equipment monitoring equipment as well as the assurance software that goes into the enterprise network. So.
I look at <unk> and it's not any one technology, there's a lot of opportunities, it's really where we focus on is where do you want to put more money first second and third and how these things are going on.
Rollout, but the number of opportunities and <unk> is huge for us.
Thank you.
And then if I should ask you.
A question on the optical side.
And maybe if you can share with us some data points, where youre seeing.
The 800 gig and.
Higher speeds.
Beginning to become Inc.
And increasing portion of your revenue mix and how should we be thinking about.
Okay Alright.
On a margin from day.
So the 800 gig today is very much a bleeding edge of development and it's very much a and engineering lab.
And demand so it's a leading optical equipment.
<unk>.
And their suppliers for various optical modules.
That's where we play and the semiconductor company sets, that's who is really doing.
800 gig so to US 800 gig today is really the kind of advanced development and I think we will probably start seeing.
And next year 800 gig being rolled out into the field.
Some early adopters.
Thank you very much and and lastly, if I could.
And are the large chip makers broadcom talked about on <unk>.
Co packaged optics chips.
Yes.
22, so it doesn't ship to co packaged optics can get and cut metal revenue opportunity for you.
And customers.
Sure.
It's actually.
As.
Semiconductor companies kind of trying to do more vertical integration with the co packaging optics and things like that.
And they start buying the same equipment that the module.
And manufacturers and I used to do or the and Ams. It works. So it's actually semiconductor business for us is.
A very active space and selling high end.
On optical testing systems.
Thank you very much appreciate your answers.
Sure. Thanks.
Thank you there are no further question at this time I will turn the call over back to Bill for any closing remarks.
Thank you Greg.
On these calls a day thank you everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you all for joining you may now disconnect.
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