Q1 2018 Earnings Call
In the fiscal first quarter 2018 financial results conference call all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
I'd like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key.
Gregg Lampf, Vice President of Investor Relations you May begin your conference.
Alicia.
And welcome to <unk> 2018 fiscal first quarter review.
With me today is Gary Smith, President and CEO , and Jim Moylan CFO Duval.
Steve Alexander our CTO will join us for the <unk>.
And a portion of the call.
Today's prepared remarks were made available at seven a M. Eastern today, along with this morning's press release, and then an accompanying investor presentation that reflects this discussion as well as certain highlighted items from the quarter.
Our comments today include details on our fiscal first quarter results managements view of the market an update on our share repurchase program and management's guidance for the second quarter.
We will also discuss the impact of recent tax reform in the U S on our results.
Before turning the call over to Gary I'll remind you that during this call we'll be making certain forward looking statements such statements are based on current expectations forecasts and assumptions regarding the company that include risks and uncertainties that could cause actual results to differ materially from the statements discussed today.
These statements should be viewed in the context of the risk factors detailed in our most recent SEC filings.
Our 10-Q is required to be filed with the SEC by March eight and we expect to file by that date.
Ciena assumes no obligation to update the information discussed on this call whether as a result of new information future events or otherwise.
Today's discussion includes certain adjusted or non-GAAP measures of <unk> results of operations of <unk>.
Reconciliation of these non-GAAP measures to our GAAP results is included in today's press release. This call is being recorded and will be available for replay from the Investor section of website now I'd like to hand, the call over to Jim. Thanks, Greg Good morning, everyone.
Last quarter, we shared with you a set of long term financial targets and our strategy for managing the business over the next several years to hit those targets.
Our adults today demonstrates that we are off to a strong start and making solid progress toward those goals.
As we said last quarter, we're focused on profitability and taking market share given the opportunities we see within the current industry environment.
In the first quarter, we continued to grow and to diversify our business.
In the meantime, our competitors are struggling on a number of fronts, including keeping up with the pace of innovation given the level of expertise required and how high the threshold for investment is today.
This quarter, we delivered particularly strong diversification metrics non telco revenue comprised roughly 35% of total sales.
Our direct web scale business was 15% of revenue, which is roughly double the contribution from this key customer segment in Q1 of 2017, both as a percentage of revenue and in absolute dollars.
Our Asia Pacific momentum continued.
The region contributed 17% of Q1 revenue up 25% from the same quarter last year, including contributions from several customers outside of our strong India base.
And our submarine business was up 10% year over year, largely driven by the continued growth of web scale traffic.
Overall, we performed very well in Q1, including a particularly strong order flow performance for our fiscal first quarter, which is often challenging due to seasonality.
<unk> slightly exceeded revenue and our backlog grew.
And we continue to execute on our strategy of capturing new footprint around the world, primarily with global service providers and also with non telco customers.
For Q1, we posted revenue of $646 million, which is above the midpoint of our guidance.
We delivered adjusted gross margin of 42, 6%, which is within our expected range and as a result of our deliberate strategy to take share from competitors and gained footprint with new and existing customers.
Finally, we reported adjusted operating expense of $234 million.
With respect to profitability measures in the first quarter, we delivered adjusted operating margin of six 3% adjusted net income of $21 $9 million and adjusted EPS of <unk> 15.
Both EBITDA and cash flow have become more meaningful measures of our progress and performance as our business has grown and matured in.
In Q1, our adjusted EBITDA was $61 8 million.
We generated $35 $7 million in cash from operations and free cash flow was $10 million.
Finally, we ended the quarter with approximately $1 billion in cash and investments.
With that I'll turn it over to Gary.
Thanks, Ken.
As Jim outlined we have been delivering consistent and differentiated financial performance with respect to top line growth profitability and cash generation for some time now.
We've been successful and we will continue to be because of our ability to number one deliver innovations ahead of the competition.
Directly address the changing business and consumption models of our customers.
And number two leverage our exposure and investment in high growth and emerging markets to intersect the demand drivers that play a key role in our market share opportunities.
I'd like to share with you a few examples of these dimensions of success in the first quarter.
From the rapid proliferation and adoption of mobile applications to cloud based services to over the top video streaming network operators around the world are working to respond to the increased demand for capacity.
And we see NRI uniquely positioned to help them solve this challenge.
With our wave logic AI coherent modem, we lead the market across the full range of high capacity technologies, including 400, G, which is beginning to essentially change the unit of currency for capacity in our customers' networks today.
Specifically, we expect the 200 G will begin now to replace many 100 G long haul connections over time, while 300 <unk> can now be deployed over 1000 kilometer distances and 400 G for shorter reach distances.
In Q1, we had seven new wins for our 400 G capable wave logic AI, bringing us to a total of 17 to date.
We are seeing this capacity trend play out with our global tier one service providers, notably as Jim mentioned in Asia Pacific were a key contributor to our Q1 growth in region with revenue from our recent wins in Japan and Korea. In addition to sustained strength in India.
This capacity trend also encompasses the metro builds we've discussed including a strong contribution from the Verizon Metro Network project in Q1, which is rolling out exactly as expected.
And it is no surprise that Dci applications, particularly in a web scale customer base.
<unk> a need for higher capacity solutions.
Lighting, the rapid adoption of our purpose built Dci solution.
<unk> generated approximately $65 million in revenue in Q1 and to date claims more than 80 customers globally.
In subsea traffic levels continue to rise on existing cables and new cables are now being deployed with.
We signed two new deals in January alone one for a trans Pacific cable system via the FERC Trans Atlantic system.
On the emerging side of our strategic drivers is fiber densification, which is becoming a more frequent topic of conversation with our customers.
This includes the <unk> network strategies, where we recently announced <unk> solution plans. It also includes fiber deep strategies with cable operators.
In Q1, we secured our second MSR customer for this specific application.
And of course software automation is becoming increasingly critical in optimizing all of this capacity.
Q1 got us off to a very good start for the year and software with a strong contribution to our top line from our Blue Planet Network domain controller and orchestration solutions.
Overall, it is clear that our key market segments and customer verticals performed very well across the board in the first quarter.
With respect to our overall market conditions, we're seeing continued growth in network traffic increased network service and capacity requirements and the transition to more open programmable and adaptive networks.
Accordingly, the primary driver for network operators spend in our space is the need to deploy and manage capacity as demand continues to grow and fiber densification architectures are implemented.
I'd like to stress that these factors were incorporated into the long term financial targets. We laid out for you last year last year at the end of the last quarter.
Since our last quarterly report, however, theres been a lot of speculation about additional demand drivers in our industry, including the impact of U S tax reform.
We believe that tax reform is a positive for our customers. Clearly however, definitive plans are largely yet to be determined.
In any event I would stress that we view the effects of tax reform is secondary to the core industry trends that have been impacting and really continue to drive customer network spending.
We remain confident in the outlook, we provided three months ago and in our long term plans for managing the business to continue growing faster than market.
Expanding our profitability at the bottom line.
I'll turn it back over to Jim who will cover a few more topics, including our guidance for the fiscal second quarter, Jim Thanks, Gary.
First like other U S based companies, we've had to account for the impact of the new U S tax law and our financial results.
As a result in the first quarter, we experienced a GAAP loss, primarily due to a significant noncash charge for the revaluation of our deferred tax asset from the 36% rate to the new 21% rate.
This resulted in an estimated $477 million of tax expense.
And with respect to our tax rate for fiscal 2018, there may be quarterly fluctuations. However, we currently expect our blended GAAP tax rate for the year to be 29%.
And calculated calculating adjusted net income we expect to use a 26% rate for fiscal 18.
It continues to be the case that we do not expect to pay cash taxes for U S. Federal income tax for the foreseeable future primarily due to our deferred tax asset balance.
Next I'll update you on the share repurchase program that we announced with last quarter's results. We have board authority to repurchase up to $300 million of Siena common stock through the end of fiscal 2020.
We began repurchases late in our fiscal first quarter and through March 5th we have repurchased approximately 874000 shares of common stock.
For an aggregate purchase amount of about $20 million at an average price of $22 34 per share.
We intend to continue this repurchasing activity as part of the strategy, we articulated last quarter and our commitment to returning capital to shareholders. We have confidence in our long term growth as well as our strong balance sheet and cash flow generation.
Looking ahead in fiscal second quarter 2018, we expect to deliver revenue in a range of $710 million to $740 million.
Gross margin in the low to mid Forty's range, roughly equivalent to Q1 gross margin and operating expense of approximately $240 million.
On gross margin, specifically I'll remind you again that we are deliberately targeting new footprint opportunities around the world and we are winning.
As a result of the success. We currently have a large number of significant deployments in their early stages. These often carry correspondingly lower gross margins.
As we've seen in the past over time these deployments reach stages, which generally carry a more favorable product and pricing mix.
We have experienced this over many years and over many projects around the world.
As we said last quarter, we thought that this pattern would continue for the first two quarters of fiscal 2018 and that is playing out as we expected.
As highlighted by our first quarter results and our second quarter Guide our business is strong and we are executing well on our strategy. We are uniquely positioned in this industry to continue delivering a combination of top line growth profitability and cash generation with a strengthening balance.
Sheet.
Lisa we will now open the line for questions.
Yes.
At this time I would like to remind everyone that in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Our first question comes from the line of Doug Clark from Goldman Sachs. Your line is open.
Hi, Thanks for taking my question. My first one is you mentioned or reiterated confidence in your long term outlook I just wanted to be clear that that includes the 5% to 7% revenue growth CAGR.
And then wave service, specifically the doubling year on year.
Can you talk about the trends there is that a sustainable number will remain volatile on a quarterly basis.
How penetrated are you into that some of the large hyperscale guys at this point.
Yeah. Thanks, Doug I would say, we absolutely are off to a great start on all of the.
Our strategic imperatives that we set out for himself ourselves last quarter.
We're making progress across the board.
We think those numbers are still in the range of what we're going to achieve and feel.
Very good about the outlook for us not only this year, but for the next three years.
Doug specifically on the on the web scale, yes. It was a very strong performance, particularly when compared with the same period last year.
Listen I think overall, you're seeing a trend upwards in the direct business that we deal with web scale and clearly the indirect business as well.
Listen I think youre going to see it fluctuate quarter to quarter for sure, but I think generally speaking looking at the footprint. We have most of the major web scale players globally now see on our customers. So I would continue to expect good growth with web scale over over the next couple of years.
Okay and then my follow up was noticed that software and software related services was strong sequentially and on a year on year basis, you mentioned blue planet being a good contributor in the first quarter can you talk about what drove that inflection is it monetization on blue planet.
Yes, I think it's getting.
Our multi domain controller out into market for the first time, we're beginning to see revenues come come to speed with that and also I think the orchestration packages that we're getting into market now and the learning that we've had over the last couple of years.
<unk> is beginning to show up in the financial performance again still relatively nascent space early days for us, but very encouraging the traction we saw in Q1.
Thanks, great. Thanks, Thanks, a lot.
Okay.
Our next question comes from the line of Paul Silverstein from Cowen Your line is open.
Yeah.
Hey, guys can you hear me.
Hello, Paul Yes, we can.
Sure.
Jim on the gross margin outlook when you talk about this.
This quarter, how much visibility.
And for Q3 and Q4 in terms of a rebuild so any appreciable extent of gross margin.
How much is this on.
Data points on how much loan growth.
Okay.
All of our forecasts are based on hard data points. Paul we have a backlog we have expectation of what we're going to bring in in orders over the next two to three quarters. So it's it's it's not all based on orders we have in today, but it is all based on projections that our bottoms up so we feel confident about our gross margin prediction.
So just to be clear if I could pressure. So you feel confident mutual confidence from Q3 and Q4.
Youre going to see meaningful appreciation gross margin because the impact of these new deals you've won in Asia Pac and elsewhere will start to you'll start to see the shift from coverage footprints going toward expansion or are there other factors.
Our expectation is that Q3, and Q4 will be in the mid <unk> range.
For a lot of different reasons, but basically what's happening in Q1 and Q2 as we have a lot of international early stage deployments, which carry correspondingly lower gross margins.
We have played this pattern out over and over again around the world. So we're confident that those contracts will recover as we move through time and they will also be a smaller percentage of our overall revenue base. So we'll get some recovery from that as well.
Jim I apologize you did certain mid forties in Q3, Q4 was up <unk> <unk> in Q3 and Q4.
Alright.
One clarification, if I may with respect to your India business.
I heard you or Gary talked about ongoing long term strengths I'm not surprised but can you guys give us a more detailed update in terms of how many service providers what are the nature of the build outs and where they're at from a longer term perspective.
And what the revenue contribution was.
Yes.
I'd say, where we are.
We have relationships with all of the major service providers in India.
No.
The number one and I think number for a consolidating with idea Vodafone their customer. So I think youll end up with three large.
Carriers, all of which are significant sina customers in various forms.
<unk> got some of the specialist regional carriers that were also customers with Sienna the subsea carriers that come into India are also we have number one market share that too we have government contracts into India, plus the department of defense in India, which we won last year.
I think the thing to stress is this is a very broad based adoption in India. It's the fastest growing internet market in the world right now I think thats very sustainable over the next few years to be able to deliver.
That growth I think the the economic activity around digital India is also supporting this kind of framework.
Growth. So I think I think CNN is incredibly well positioned for sustained growth in India.
I appreciate it thanks guys.
Thanks, Paul.
Our next question comes from the line of <unk> Venkatesh from UBS. Your line is open.
Thanks for taking my question.
The 17 wins for wave logic AI that you alluded to in your prepared remarks I just wanted to confirm that that's for the five by seven module that youre trying to sell with your <unk>.
Partners.
Steve I was sent a notice of that.
The five by seven module is completely separate from those that was referring to I believe it was wave server wins right. So that's.
Waste over AI wins right. So that's the complete system right.
7% in the quarter 17.
Date, total and Thats, both wave server and 6500.
Got it and could you could you comment on that merchant modem business and what you've seen it's been almost a year since you sort of announced that.
So what we said was and of this let's see this is that 2018. So we said we'd be sampling parts 2017, and 2018, which we are doing right getting feedback from customers and then we bought <unk>.
In middle to end of this year, we'd start to recognize some of the revenue and shipments from the end of this year end of this year end of our fiscal year.
Yes.
Got it and just as a.
Last year, so a little bit of.
Spending pause from customer consolidation is that starting to turn.
Yes, I don't think we were we saw too much of that because we were very very diversified you look at our results for last year, we barely missed a beat.
Listen I think you're always going to have ebbs and flows of customer consolidation where at the size now.
Quite frankly, it really doesn't impact us on a quarter to quarterly basis, we're able to we're able to deal with it.
Thank you thanks stages.
Our next question comes from the line of Simon Leopold from Raymond James Your line is open.
Great. Thanks for taking my question.
A couple of things last call, you mentioned, Japan, and I think establishing a little bit of Prague.
Progress in that market and I recall, Japan, historically has been a relatively closed market too.
Non Japanese companies.
But also a big opportunity could you give us a little bit of perspective on your thinking of that opportunity and where you stand today.
Yes.
Youre classification of up market I think is at risk.
It's pretty accurate historically, we've had continued presence there over over many many years, but generally there has been a preference for local indigenous suppliers I think.
Globally, the businesses consolidating and the ability for players to really be a global player in this space. The cost of that is increasing and you are getting fewer and fewer players own the core technology and I think what youre seeing in Japan as them looking for a.
World class other vendors to help.
Diversify their local by local base of <unk>.
Supply and so we've seen this over the last 18 months and its beginning to actually come to revenue we have pretty much most of all the major carriers now in Japan, either deploying or about to deploy sienna.
<unk> 6500.
And do you see a.
Maybe a trajectory where we could see Japan.
The 5% to 10% of CNS revenue is it have that size opportunity.
I think.
It's tough to tell but I think that.
That sounds a little high I think you'd get more consistent.
Revenues from Japan than we've had historically, but whether it'll breakthrough, 5% a quarter, where we'll have to we'll have to say, but definitely if you put that together with the other things that we're seeing in Asia.
Putting India to one side and just look at.
The other elements of Asia, we're seeing good growth in places like South Korea.
If you go further down to the Pacific We've got a Telstra in Australia very strong as well. So I think that region clearly is spending on infrastructure over over the next few years.
Great and I wanted to pivot to your comments around cable TV.
And the fiber deep initiatives.
A lot of our work suggests that the spending on these projects should.
Likely inflect in the second half of calendar 18.
And I just wanted to get a better understanding of whether CNN.
It would be a leading or lagging participant in that market opportunity. So you start to see it in your your April quarter or is it more of something that is 2019 opportunity for Sienna. Thank you.
I think overall the sort of fiber deep this year I'd characterize it as people are putting early deployments and testing the architecture et cetera, I do think we will see some revenue in the second half and that is encompassed in our in our thinking.
The year, but I think you won't see those sort of larger ramp until until 2019 in North America.
Great. Thanks for taking my questions. Thanks Aman.
Our next question comes from the line of Stanley Kofler from Citi Research. Your line is open.
Hi, Good morning, guys. Thanks for taking my question.
I just wanted to ask you about the <unk>.
Market drivers, Gary you mentioned that.
Tax reform was regarded as a driver I would also say maybe you know more optimism around <unk> spending and deployments do you have any more detail for us about front haul or other type of.
The spending that you can identify.
Okay purely five G related.
Follow up thanks.
Yeah, certainly Steve Alexander so.
You saw the news coming out of mobile World Congress right lots of attention to <unk> and we've said for quite a while it was going to show up in <unk>.
Kind of three places right cell phones get faster point to point microwave shows up and then over long term, it's going to be the kind of the infrastructure for the internet of things. So we view it as a very long term driver of capacity back onto the network, they're certainly going to be.
Early trials and deployments kind of point of view spot use of higher capacity.
We view at the edge of the network was at one gig 10 gig. If it was a 10 gig is going to go to 100 gig, but thats going to take.
Many many quarters, if not years to get them.
Really widescale deployment.
But I would say that it's Tim we are seeing and have seen for a few quarters now some of the larger carriers begin to encompass theyre thinking and getting basically very high degrees of fiber connectivity into the metro to support this so.
Steve characterized but sort of direct impact of some of the applications that we're talking about internet of things over over five Jay pushed one thing is it is a little a little ways off in terms of major deployments, but I do think we are seeing already the benefits of greater planning around getting higher capacity.
Closer to the customer for <unk>.
And just to remind everybody, we do have relationships and big.
Contractual commitments with all of the Big North American Metro companies.
And we're beginning to grow around the world and Metro So it's going to be a plus for us. It's just a question of timing.
Thanks, and just a follow up on the point about large customers.
How would you characterize.
AT&T business in Q1.
And then as we look out into fiscal 2018.
Pacifically guided there.
Ending up.
Significantly if you look at it on a nominal basis number for the.
Firstly, VAT refund potentially and then lots of initiatives around.
Fiber deployments business services other things.
What's the outlook there for 18.
Listen I mean, I think they're a good solid customer for us in Q1 or about 14% of total obviously as that business grows they've become less of an overall percentage, even though that business has grown which which I think is healthy and we're we're favorably exposed to all of these kind of.
Dynamics with AT&T across the board, we have multiple applications and engagements with them.
Including some of the.
The software element, so listen I think we're going to have a good couple of years with most of the major carriers in North America, given these kinds of dynamics.
Thanks, Dan.
Thank you.
Our next question comes from the line of Michael Genova from MTM Partners. Your line is open.
Okay, great. Thanks, and congratulations on the good results guys.
When you talk about competitors, having a hard time keeping up with the innovation can you just give us a little bit more granularity specifically some of the technology areas, where you are differentiating and where they are having trouble keeping up.
Sure Mike So clearly what we've done with wave logic I think.
Set the standard in terms of the rates and the performance that we're able to drive out the DSP. So that's a key piece to it but.
I would point you to the way that the basic systems operate right. What happens is the transport system auto discover and determined how they operate and such we've made them very programmable very flexible right.
As you come up the stack, we've done the convergence of the packet and optical features so we have basically one box doesn't work too.
Other vendors they may have to put two or three boxes to get the same kind of functionality.
And then we're adding to that all the software intelligence the analytics the orchestration the automation software.
Initial if you will that allows the operators to make the network operate the way they want so it's not just one thing.
We've invested heavily at the physical layer, we've invested heavily at the packet layer. The convergence of those two and then the software intelligence and automation that goes around at all.
<unk>.
The other thing I would say just if you wanted to sort of simple soundbite.
Two it is we are the only viable 400 G player out there right now there is actually truly shipping and deploy them where are they.
The only viable player.
Great and then just my follow up guys.
There was some unconfirmed chatter out there I think someone put it out there that at one of your larger or maybe your largest dci customers that may be a competitor has signed a contract and will be coming into that account in the second half of the year.
Obviously, you did really really well in Dci in this quarter and it doesn't seem to be impacting you.
But but but can you can you talk about whether that's actually true and whether there could be any impact in the future.
I think you should.
Look at our results I think our results stand by themselves is testament to the fact that we're doing extremely well in the ECS business I think we're going to continue to do very well in Dci business Theyre, all sorts of rumors and chatter around all the time about all sorts of things, we feel really good about our DCF position.
Great keep up the good work guys. Thank.
Thank you Mike.
Our next question comes from the line of meta Marshall from Morgan Stanley . Your line is open.
Great. Thanks.
Alright, and would you just as a follow up question on that like do you envision kind of the business moving towards kind of you know two thirds.
<unk> Court Taco and kind of you know one third non-core or do you kind of see those business, but.
Different over time.
Well, we certainly have.
Overtime increase the percentage of our business, which is non telco driven in large part by the fact that GCN have come into the market is purchases of capacity as far as the future. It's hard to predict the GCN today is the fastest growing segment of the market. They do however still by.
<unk> some of their capacity through service providers, particularly internationally. So it's hard to predict I'm, just confident that we're gonna do well with GCN.
U S around the world and with their service provider customers when they use them. So feel good about it around the world.
That's not that's not.
Again, if you'd like to ask a question that scar and the number one on your telephone keypad. Our next question comes from the line of Jeff Canal from Nebraska, Your line or something.
Yes, thanks, very much I I'd like to begin with a clarification. Jim you spoke earlier about orders being ahead of a seasonal pattern could you talk a little bit about what the baseline might might be typically for orders in the January quarter, and then any color you could provide are aware of that.
Or relative order strengths is coming from would do would be great.
Yeah, well as we all know our first quarter encompasses a holiday season in the first months of the year in many cases budgets aren't set and so we always have a.
Lower percentage of those revenue in orders in Q1 as compared to other quarters of the year.
And that we actually expect that to happen this year as well, but we had a particularly strong order in Q1, we did as I say slightly grew our our backlog in the quarter, which is a very good sign it's strength really across the board. It's a lot of GCN business a lot of business in Asia, particularly India.
So it's really across the board.
Okay, Great and then secondly, you for a couple of quarters now has been talking about more aggressively about being able to gain share from competitors, particularly those that are struggling with with scale.
And you've also got a bit of a technology migration that is underway.
Two what do what extent [laughter] excuse me a little Barcelona flew here.
Two should we think that.
That the pricing environment is it has changed at all since the pricing environment, reflecting any of these developments.
I would say the pricing environment overall has been pretty pretty stable. It hasn't really really changed I think.
What we are seeing is a number particularly a tier one carriers internationally.
Consistent with our expansion in Japan, I think a number of these customers are looking long to them around who do they want a partner with as their strategic.
Network infrastructure player, we're increasingly basically winning Tijuana that we haven't had before then new customers to Sienna.
And I think you know we.
Have such a large share of the global market anyway, and then you've got these other large tijuana carry is coming to us both in Europe Middle East and in in Asia.
That's not unusual but what is unusual is that we've got a number of them at the same time. So you know.
The conclusion is I think people are thinking very long and hard about who they want to put their infrastructure partnership with.
Okay, Let's go back.
Five or six years, the market's grown in mid single digits. We've grown 8%. We grew 8% last year in a market that was flat to downing and so we feel great about our ability to continuing to take market share.
Thank you both.
Thanks, Jeff for better.
Our next question comes from the line of VJ packet back from Deutsche Bank Your line or something.
Hi, This is Brian noon on for D. J. Thanks for squeezing me in.
In regards to Wavelogic and can you give us your view on.
A potential time frame for when you think 200, Gs sort of starts to replace 100, Jim and one 400 G starts to become a meaningful driver of revenue sure. You guys are just more of a 2019 story or can we see something.
The back half of 18.
So, let's see 22, obviously 200 gig is kind of in our rearview mirror, we've been there done that 400 gig.
I don't know, it's becoming more and more important I don't have a breakdown of it in terms of contribution to revenue because what we're shipping are effectively.
Programmable. So you can run them at various rates. The webscale guys generally will take them at the highest rate available some of the carriers can do it and I will also but 400 gig for us today, but when we're looking forward, we're seeing higher rates and higher performance.
200 gig is kind of yesterday's news.