Q4 2021 Viavi Solutions Inc Earnings Call
Good day, and thank you for standing by and welcome to the VIP solutions fourth quarter and fiscal year end 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone if we acquire any further assistance. Please press star zero.
Thank you I would now like to hand, the countries over to Bill <unk> head of Investor Relations. Please go ahead.
Thank you Ashley welcome to V Avi solutions fourth quarter and fiscal year 2021 earnings call. My name is belong head of Investor Relations.
Joining me on today's call all the Clayton, President and CEO and Henk Derksen CFO.
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 from our current expectations estimations. We encourage you to review our most recent annual report and SEC filings, particularly the risk factors described in those filings the forward looking statements, including guidance. We provide during this call are valid only as of today.
Undertakes no obligation to update these statements.
Also note that unless we state otherwise all results except revenue are non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitations in today's earnings release, the release plus our supplemental earnings slides, which includes historical financial tables are available on V. Obviously website.
Finally, we have appointed as calling will make the recording available by 430 P. M. Pacific time. This evening on our website I would now like to turn the call over the Hank.
Thank you Bill.
Q4, 2021 reflects a strong quarter with record revenue non-GAAP profitability and operating cash flow for a given June quarter.
Fourth quarter revenue came in at $10.9 million.
Which exceeded our.
Our guidance range of 292 C and a $10 million.
Revenues grew 16, 6% from a year ago level and set an all time via IV Q4 record.
System with the prior quarter the year over year performance continues to reflect all of the recovery from last year's pandemic impact as well as continued strength in wireless and fiber and solid demand for anti counterfeiting products.
Operating profit margin at 28% expanded 120 basis points year over year, and 60 basis points sequentially and exceeded the guidance range of 19, 5% to 25%.
EPS at <unk> 22 cents per share exceeded the high end of the 18 to 20 guidance range and increased four cents from the year ago periods.
In addition to strong operating performance, we benefited from a lower than anticipated tax rate of 17%.
The share count of 241.9 million shares includes the dilutive impact of the convertible notes of 10 million shares.
Now moving to our reported Q4 results by business segment, starting with NSE.
And as he revenue at $236.5 million increased 13, 5% year over year exceeding our guidance range of $219 million to $235 million.
Within and this E N E revenue increased 17, 6% from a year ago to an all time record high of <unk>.
$212.7 million.
<unk> strength fiber wireless and cable products.
S revenue at $23.8 million.
Decreased 13, 5% year over year and increased 17, 2% sequentially. A result of the lag in recovery for our assurance and data center products.
And as he gross profit margin at 63, 4% decreased 120 basis points year over year.
Within N S E N E gross profit margin at 63, 1% decreased 60 basis points from last year.
Italy due to unfavorable product mix.
S E gross profit margin at 55, 5% decreased 500 basis points year over year due to lower revenue.
Nse's operating profit margin at 15, 1% exceeded the high end of our guidance range of 13, five to 14, 5%.
Italy as a result of operating leverage on higher revenue.
Year over year operating profit margins decreased 180 basis points, mainly a result of lower gross profit margins.
Sequentially operating profit margins improved by 520 basis points as a result of leverage on higher revenue.
Now turning to OSP.
Fourth quarter revenue at $74.4 million up 27.
8% year over year was at the high end of our guided range of $71 million to $75 million. The strength was driven by robust anti counterfeiting demand offset by a modest seasonal decline in that three D sensing products.
Gross profit margin at 57, 5% increased 650 basis points year over year, driven by higher volume and favorable product mix.
Operating profit margin of 38, 8% was within our guided range of 38% to 40% and increased 940 basis points from last year's levels. As a result of the aforementioned higher gross profit margin.
Now moving to our fiscal 2021 performance wild.
While the COVID-19 pandemic impacted the start of fiscal 2021, yeah, we experienced a sharp recovery beginning in late last calendar year with a strong finish to a record revenue at $1.2 billion up five five.
5% for fiscal year 2020.
OSP reached a record revenue of.
<unk> hundred $61 million up 25, 8% year over year, while N S E at $837.9 million.
So a modest decline of one 4% and revenue.
<unk> full year 2021 gross profit margin at 62, 7% increased 70 basis points from a year ago level.
<unk> leverage on volume, resulting in improved gross profit margins within our OSP segment.
Operating profit margin at 21, 1% expanded 250 basis points, reflecting gross profit margin expansion combined with operating expense control.
Operating profit at $253.5 million grew 22%, increasing $42.6 million year over year.
EPS at <unk> 83 cents per share grew 13, 7% or 10 from last year.
Stronger volume in our Asia Pacific region resulted in a shift in jurisdictional mix of income contributing to an increased tax rate of 19, 4% in fiscal 2021 compared to 17, 5% in <unk>.
2020.
The share count used includes the dilution of the convertible notes and as calculated bolt on a full year basis and on a quarterly basis, hence the resulting full year EPS of ADC.
Is one central war than the summation of the individual quarters.
Now turning to the balance sheet.
The ending balance of our total cash and short term investments was $703.7 million.
Increase of $25.6 million.
Sequentially from the prior quarter and up 159.7 million compared.
Compared to the prior fiscal year.
Operating cash flow for the quarter was $63 million, a fourth quarter record and an increase of 35.8 million.
Compared to $27.2 million in the year ago period.
We invested $25.4 million in capital expenditures during the quarter compared to $8.3 million in the prior year.
The increased Capex reflects a new production facility in support of increased future demand build in Arizona.
On a full year basis, we generated record operating cash flow of $243.7 million.
Up 79, 7% and reflecting an increase of $108.1 million.
Compared to fiscal year 2020 at $135.6 million.
On July one 2021, 1% convertible notes due in 2024 with a face value of $460 million met D. On the 30% pricing trigger resulting in the notes becoming more available.
The option of holders until September 30th 2021.
As a result, we have reclassified the $414.2 million book value of the notes to short term debt and reported the difference in the book value and the face value of 45.8 million.
As temporary equity on the face of the balance sheet.
This change has no impact to reported interest expense.
Or the diluted share calculation.
In addition, we are not aware at this time of any note holders electing conversion.
In Q4, we repurchased $10.9 million of Yahoo stock at an average cost of $16.77.
Per share including commissions.
In total.
As of the end of the fourth quarter, we repurchased $87.1 million of the 200 million authorized under the share buyback plan announced in September 2019 at an average price of <unk>.
<unk> dollars 98 per share.
We will continue to be opportunistic in share repurchases and we continue to develop and intent to execute on our capital allocation and debt management strategy.
Now onto our guidance, we expect fiscal first quarter 2022 revenue to be approximately $310 million plus or minus $7 million operating profit margin is expected to be between 21 five.
5% to 22, 5% and earnings per share to be in the range of 20.
'twenty two.
We expect <unk> revenue to be approximately $250 million, plus or -5 million with operating profit margin at 12, 5%.
Plus or -50 basis points.
OSP revenue is expected to be approximately $95 million.
Plus or minus $2 million with operating profit margin at 43, 5% plus or minus on the basis points.
Our tax expense rate is expected to be approximately 20%.
We expect other income and expenses to reflect a net expense of approximately $3.5 million.
The estimated fully diluted share count used in our calculation is 244 million shares.
This includes an increase of approximately 12 million shares to reflect the estimated dilutive impact from the 2023 and 2024 convertible notes.
The share count without the convert dilution is approximately 232 million shares.
With that.
I will now turn the call over to Colette.
Thank you Henk.
I am pleased with the August performance in our fiscal second half with both Q3 and Q4, achieving record revenue and profitability.
The <unk> segment achieved new revenue highest benefiting from the continued service providers business recovery and upgrades to the fiber and wireless networks. The demand for fiber wireless equipment reached a record high with strength across all geographic regions.
Five do you feel deployment remains on track for the balance of calendar 2021.
The fiber revenues were driven by fiber to the home deployment 400 gig in network and data center upgrades and early 800 gig adoption NFC.
NSE bookings came in at record levels, resulting in record backlog and providing us with greater near term demand visibility.
One challenge for our <unk> segment is the continued shortage of advanced semiconductor devices dampening our ability to meet an otherwise very strong customer demand. These supply chain constraints have been factored into our fiscal Q1 guidance should these supply constraints resolve in near term.
We would expect to see some revenue upside in the.
Business segment.
The CE business segment continues to recover with revenue increasing 17, 2% sequentially as we rebuild the customer business funnel, we expect <unk> to continue to improve as enterprise customers reevaluate their project needs and five G assurance opportunities start to materialize late.
In calendar 2022.
Now turning to OSP.
The OSP business segment delivered a record June quarter revenue and profitability led by strong demand for anti counterfeiting products.
The counterfeiting demand continues to be driven by a combination of global fiscal stimulus inventory replenishment and banknote redesign.
Three D. Sensing finished strong in fiscal year 2021 up 18% from last year's levels, driven by broader technology adoption and new applications.
Despite strong pandemic driven headwinds early in the fiscal year. We successfully recovered then manage that very strong finish hitting multiple financial performance records, including record non-GAAP EPS and cash flow from operations.
Record OSP fiscal year revenue non-GAAP gross margins and operating profit all up double digit percentages year on year and the record and year revenue in Q4, driven by strong wireless and fiber demand.
As we look ahead into fiscal year 2022, it is off to a strong start with improved NSE demand visibility driven by fiber wireless and new fiber deployment, we expect strong demand for our anti counterfeiting products to continue driven by global monetary policies and banknote redesign.
And three D sensing, while we expect a relatively flat demand in fiscal year 2022, we continue to see it as a major growth driver longer term.
Overall, we expect our principal growth drivers five G fiber and <unk> sensing to continue driving growth and profitability for the IV in fiscal year 2022.
In conclusion I'd like to express my appreciation to the IV team for its continued strong execution in delivering another record quarter and record fiscal year I wish all of our employees supply chain partners customers and our shareholders to remain safe and healthy I will now turn the call over to Bill.
This quarter will be participating at the Jefferies 2021, semiconductor hardware and communications infrastructure Investor Summit on August 31st.
Actually let's begin the question and answer session. We ask everyone to limit discussion to one question and one follow up.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
Good job of your question.
Yeah.
Your first question comes from the line of <unk> with J P. Morgan Your line is open.
Hi, good afternoon, Thanks for taking my question.
I think previously.
Previously you've mentioned that.
Between the two drivers being fiber and fiber deployment do you think fiber is the more near term upside on visibility and then two deployments of it.
Can you just kind of share your updated thoughts on that.
Is that how you're still thinking about it you mentioned increased visibility for any.
What is contributing to that somehow a bit more color. There would have been I have a follow up thank you.
Sure well I think our fiber is still very much the biggest driver and it's across every segment its not only field instruments, but it's also a data center. It's a lab. It's also fiber applications for the wireless networks because before you can provision five.
Five G or other wireless services, you've got to run the fiber.
To the tower or the antenna. So fiber continues to be extremely strong and we are seeing you know.
Significant.
Government infrastructure drive in Europe, and now also increasingly in North America.
In getting fiber deeper into the tier two tier three cities and into the a rural customer base. So in that respect I mean, it's a very very strong demand.
Power outpacing our ability.
To.
Supply embodies all the needs of that.
There are are there today due to the severe semiconductor shortage.
As you know when I say, it's improved we have improved visibility. It means you have a growing backlog.
You cannot meet in the short term so it rolls over into the future quarters, which on one hand, it's the best of times, because now you have visibility of a big backlog, but it's also the worst of times because you cannot get all the product you need when you need it we continue to manage but I think it's fair to say.
There's a meaningful chunk of revenue that we could have realized in this quarter was that we've put in a push out into the future quarters, and we only seeing that trend accelerating and continuing to get stronger as various European countries embark on a running fiber to a practically every home and we see more and more.
Programs being rolled out and increasing number of requests coming in so fiber continues to be very strong that said. We also are starting to see a lot more activity around a five <unk> wireless deployment.
The plans are starting to come to fruition and a major operators starting to move to start doing initial deployment, it's clearly still not as big as.
We expect it to be within the next six months, it's the early stage, but we are seeing.
The progress being made in that area as well.
Okay, that's great.
If I can follow up if you can give us an update on where the processes with takes full.
To the different actions you've taken there.
Or do you think kind of next steps.
As a side note.
Like you have been building cash you're generating quite a substantial amount of cash now on a yearly base.
Outside of the export side of things.
Is kind of in the.
Hard process or alternatives that you can explore the use the cash that you're generating.
Well I mean, you know the cash is not burning hole in our pocket.
We remain.
Very disciplined I mean, the case of Expo.
Devaluation put forward by the.
Chairman and founder of the company.
It was a no brainer for us and we knew a fool I had that fundamentally there.
There is no deal unless as your main lamond decides to sell but we fared felt it was compelling and are necessary for us to.
Put a strong offer on the table.
Choose signal the value of the business, because it's factually tower business as well and the book.
<unk>, which we view that environment and you know, we'll see tomorrow. I think is the are the day when are their shareholders get to vote. If they vote to majority of the minority shareholders vote to decline the offer and then you know maybe there'll be further discussions if they vote to occur.
<unk> then they get what they deserve which is selling.
Selling their shares sub par so I mean, there's really not much more to it in the end.
It's really very much up to the chairman and founder what she wants to do with the company, but we felt Toyota to our shareholders to signal that we're not afraid to be aggressive.
And put an offer on the table and there are other targets are potentially out there and you know in due time will bring them up to the forefront as well.
Okay.
Thanks for taking my question.
Your next question comes from the line of Alex Henderson with Needham Your line is open.
All of them.
Thanks.
I was hoping you could talk a little bit about the magnitude of the.
Impact.
The supply chain challenges.
To what degree your order rate.
It was above one point.
And how much of that you might have been able to ship had you had the product.
And any granularity around which particular products were the most impacted.
So thank you Alex so well I mean, the order rate in the fourth quarter was significantly above one point I mean and by significant I mean by big large and write a big margin that which you know we.
We always caution people about book to Bill ratio, because remember a lot of our products are shipped within the same quarter. So clearly when you have a very big book.
Book to Bill Index. It just basically tells you you have a pretty good start in the first month of the next quarter and usually especially in NSE most of our product in and <unk> in particular are shipped within three to four months. So it's all kind of ship it I'll, let big chunk of it is a book ship.
The shortages that we see I mean, whereas we were able to pretty much manage most things pretty well increasingly the area of the most acute shortage is the advanced Ics in the.
14 to 28 nanometer range. So it's really you can make your own deductions what it is it's the more complex type Asics and.
Processor type product.
And that is at the core of our devices and even though we're fairly good at getting all of the other auxiliary parts.
And be able to put the kids together that is the area that remains a very short I think we've done a really good coal.
Call in the fall of lost share to load up on the parts. Unfortunately, and now that inventory is running.
Pretty pretty low and Ah.
Now we are also starting to see some of the shortages so.
We continue to manage but I mean, it's not a very small number but it's also obviously not a very big number but.
Let's put it this way it's it's a it's a tool it will be meaningful enough.
To drive a significant EPS growth had we been able to meet argument for this quarter.
If you look at it from the cost side of the equation how much have you.
Your costs are.
Are being impacted by.
Expediting and higher airfreight tire container costs.
Like that.
That are the side effects of all of us.
Well I'll tell you I think the freight court.
Our costs are up significantly the components are costs are up I mean on the extreme hum.
Only parts of it are in the extreme shortage.
We're seeing brokers charging us toady accident, I mean, three zero X.
Premium on the normal price so it's a it's a complete.
A sellers' market out there in some of these things right. So.
Those are individual isolated devices, but you know unfortunately.
Without that last piece, you cannot build and shape a multi thousand dollar product so.
That said you know we did have some pressure to our gross margins, but fortunately for US we are in a very kind of high end products were even higher you know of course for some devices expedite fees logistics.
Logistics fees, we're able to.
Absorb it and with a higher volume of.
The better absorption of manufacturing overhead.
That's some of the higher cost at the same time, we are proactively going out there and increasing prices on our products as well so we're not.
We are passing some of those increases to our end customers and.
We are being selective about where we are doing it with where we are not but.
But I can see down the road, you're going to see some of the ISP appreciation on across the board on all the products and we're seeing the same I think our competitors are facing even more severe shortage in higher cost so.
That's an opportunity to actually.
To.
Provide some ASP appreciation.
Can you quantify the impact or no.
I'm not it's not material, it's within a couple of percentage points.
Thanks.
Sure.
Your next question comes from John Marchetti with Stifel. Your line is open.
Thanks, very much maybe just following on with that on the supply chain side for a moment can you just talk about maybe over the last quarter or last several months, how that's trended or are things relatively stable do you still feel like it's getting worse.
Where your outlook is I guess in terms of how you think this plays out over the next quarter or two.
So I mean, I think you really it's I really bimodal distribution I mean on the basic.
Basic parts.
The discrete.
Passives.
<unk> plastics I mean, while there is some challenges here and there it's fairly manageable and you can handle with expedites the area that where the situation is getting worse and I think the.
The December quarter is going to be probably more acute than even September quarter is as I said in that.
Kind of high performance Fortune to 28 nanometer advanced Ice's. So it's.
Microcontrollers FPGA Asics are you name it because that's kind of the sweet spot for high volume production products that are out there today.
Since we don't use anything in a seven or five nanometer range I'm not privy to shortages, there, but I think in the kind of mainstream fortunate to 28 is really where we're seeing the biggest shortages.
And it's not only silicon there is also obviously challenges with some of the substrates from what we understand from our vendors.
Got it and then silicon is by far the biggest.
Okay. Okay, and then if I move just as some of the geographic commentary in the quarter Asia Pac had a couple of strong quarters here in a row I'm just curious.
That skewed towards either the anti counterfeiting or anything going on there and how maybe we think about.
What's going on I guess from a geographic basis as we're looking out over the next several quarters.
Well, it's a combination I mean, clearly anti counterfeiting is one thing, but we don't comment on specific countries, but also five G. Wireless I mean, our wireless business has been doing very well in.
In Asia, there's a lot of vendors and operators.
<unk> five <unk> and we're also seeing some continued to see healthy demand for fiber product.
Thank you.
Mhm.
Your next question comes from Tim <unk> with Northland Capital. Your line is open.
Great. Thanks, sorry about that.
I am going to go back on the supply side, a little bit here before.
Before asking a higher level question, but.
To the extent that you're talking about strong bookings it looks like that's continuing into the current quarter.
Across.
The network enablement business in I guess across all three pieces, if you will fiber or wireless and cable.
Should we assume that given that.
You had the potential to grow or at least keep them.
And he flat sequentially.
Absent any supply constraints.
And then I'll follow up.
Yeah, Oh absent of the supply constraints, you probably would've had an all time record quarter in September.
So I mean, the answer is yes to your question about growth.
Fantastic.
And then zooming.
A little higher level here, you know last quarter, you mentioned the kind of.
Super cycle dynamic underway across your various communications test businesses.
It sounds like that continues to develop favorably, but I just wonder if you might provide us with an update on weather.
Any particular piece of that equation has.
Accelerated or changed in a in a meaningful way.
Sure Ross I mean.
That's actually one area, that's very exciting for us. So you know for the number of a number of years you know we've seen very strong growth in Europe in Asia, even in south.
Awesome, Latin America, and the kind of sick man of the network enablement was always North America with the major players obviously doing everything bought network build out our management, but we have seen in the last I'd say six months is a significant and I mean really M T.
Tectonic shift in the in North America, among operators with a lot of the media focus and our content going right out of the window and refocusing on the core business in building and operating networks and you know there is a lot of catching up that needs to be.
It's kind of like Carnival, if you have a house that you've neglected for years and years and now all of a sudden you realize that this is really the place you want to live in and we are seeing significant level of investment pouring in the upgrading capabilities upgrading networks of rebuilding networks and that is going to be in my view a multiyear.
Trend and with all of the latest.
We hear about the infrastructure build out I mean that really extending broadband infrastructure to rural area and you know pushing fiber to all the way to the home, we actually think North America will be a shining star in the coming year. So now we have all three.
Major cylinders are firing.
Ah full speed the Europe Asia and now finally in North America, just North America reversing trend is actually good and I think going to drive our any segment pretty strongly.
Thanks very much.
Sure.
Your next question comes from the line of Michael Genovese with West Park Capital. Your line is open.
Okay. Thanks.
I wanted to check in on some parts of the segment data on the OSP. So did.
Something coming up.
So about 15% year over year I think is about what you are targeting is that where it ended up.
Yeah, that's about right, yeah, and it's mainly Ah that's in the absence of anything in Android, which we already talked to earlier in the year about.
Okay. So as we think about that.
Should we also think about that.
Absence of Android and sort of model it awesome.
Flat to slightly up units.
The main customer.
We said we are kind of looking flattish.
In the year, because I mean, I think there may be an upside.
Some of the Android players in the second half started deploying three D can thing, but Oh, we're not factoring that in and while we will probably see higher unit volume, but theres also a roadmap.
Pricing that kicks in so theres, some ASP reductions coming in place. So I'd say net net between the higher unit volume from them.
Volume growth and a greater penetration of various applications and the ASP reductions.
We expect in the absence of Android that business to be roughly flat in this fiscal year.
Okay, great and.
I guess for the core OSP is the sort of the low sixties right.
When you think about it going forward.
All right.
Well I think we're starting to think about it going forward.
Yeah, I think we said for the foreseeable future to take $60 million is the kind of base.
Business you know remember we used to say 15 now 60 is the new 50, so that's going to continue you know.
For quite some time in my view.
Alright, alright, thanks I appreciate it.
Congrats on the strong bookings.
Thank you.
Your next question comes from meta Marshall with Morgan Stanley. Your line is open.
Great. Thanks.
First question, obviously, AT&T kind of announced earlier in the week or a slowdown in some of their fiber builds and you know I know obviously you were talking about a very strong fiber environment.
You know what it would be sold out of capacity, but just.
How should we think about.
Is there any kind of lull, we would see before some of these broadband plans take off or you feel like kind of a demand environment that we're seeing combined with your ability to supply believe you in a sold out position for <unk>.
And then I have a follow up question.
So AT&T is clearly a very aggressive has been really it's like as a new religion fiber as a new religion within AT&T and they're moving very aggressively and I mean, clearly they are facing a lot of shortages from various suppliers at least and then you're interim.
And but they're by no means the only player are you could pretty much take all the discussions they're having and multiply it for every other fiber.
Our network operator in North America, and in Europe, and they are all looking to do exactly the same thing so.
Yeah, I think it will be I'll say are capacity constrained.
Environment for several quarters until the supply chain catches up.
Got it.
And then maybe just following up on Mike's question on OSP.
You know clearly you guys have had three drivers over time.
Our increase in kind of monetary volumes reprints and inventory.
You noted kind of the first two being the biggest driver.
Do we think by the end of this fiscal year, we're even getting back towards that.
Tori build position or is this kind of a multiyear kind of this 60 million baseline well.
I'll tell you when you have very limited capacity. It is very difficult to replenish inventories quickly. So you spread it over a period of time. So I would say, we probably have quite a few quarters of running.
We're running our lines flat out to just kind of catch up and rebuild them all the inventories and you continue to see.
Increasing demand from various.
Our printers.
Various fiscal policies tried to various countries tried to stimulate their economies.
And there is still actually quite a few print shops are working intermittently because the COVID-19 situation in many of these countries or a lot worse than U S. So they're actually just creates even more latent demand.
Demand down the road in my view, but you know.
It's not by no means just like a straight line I mean, it's a bit spiky. Some you can see out of nowhere significant orders and something goes down but net net if you aggregate and average it out over a period of months, it's a very strong upward trend.
Great. Thank you.
Sure.
Your next question comes from Dave Kang with B Riley Your line is open.
Thank you. Good afternoon. My first question is regarding.
The supply chain impact I think you said, 2%.
I believe you were talking about a revenue impact of 2% just wanted to clarify that and what was that.
Margin impact was it like 50 bps or 100 bps any color there.
So I did not give you any numbers I think I don't know if you heard the 2%.
When I said, 2% it might've been the impact of higher.
<unk> logistics expedite costs, it's maybe 2% impact on gross margin, but at the same time with higher volumes, we have a greater manufacturing overhead absorption that more or less kind of offset that but in the absence of all things normal I mean, we would obviously have seen higher gross.
Margin on our product.
And probably.
Higher revenue growth as well.
Got it and my follow up is so you talked about the high end chips.
That could get worse in December how should we think about seasonality since December quarter is seasonally strong.
Well I think the seasonality is no longer the issue I think it's all about what share of allocation, you're going to get and I've been as you can imagine I've been dialing for dollars with all the leading vendors too.
To make sure that we at least get at least our fair share and hopefully a bit more than that tender my our supply chain team has been scouring the earth.
For our various supply and the good news for US is we don't need that many units.
To make a meaningful impact on revenue I mean, we don't sell the low end consumer parts. I mean every one of these devices drives thousands if not tens of thousands of revenue. So in that respect if he can find several hundred units. It makes a big difference and on the margin for us in terms of revenue upside.
Good.
Got it thank you.
Sure.
Your next question comes from the line of Fahad Nanchang with MTN partners. Your line is open.
Thank you for taking my question. So I wanted kind of need to learn on your prepared.
Remark about expecting growth next year.
If you could help us a little bit more on that.
If I understand in terms of the secular drivers.
Most prominently the seamless.
Uh huh.
Spending here in North America.
The rural digital opportunity fund.
I think the con.
One is just thinking to get release to your end customers.
Oh.
Let me see.
Our golf spending coming online.
No.
Hopefully starting in the fourth quarter of this year coming towards you guys.
Players.
They've got sucked a spending bill.
Got it.
And then you have the Atlanta conversion all of those funds that are yet to come through so it looks like.
Calendar 'twenty two maybe.
Ordinary.
Strong growth.
Obviously.
Oh I see.
But can you help us sort of sense on you now.
Is it supply chain getting work, maybe I'll leave it.
At the bottom of the supply chain tightness.
Cover from now on and then how does that fit your and I'll live with it.
And I have a couple of follow ups.
So I.
I would say first of all I think.
This quarter is bad in terms of supply tightness I think December quarter will be worse.
And you know as I say hope is a terminal we always hope that at least first half of next year. It starts getting better and it's only because we don't think that's far or our customers don't even look that far but I do expect.
Some new capacity coming online and things starting to rebalance. So I do think sometime first half of next year, we should see things improving in terms of what's driving demand you know we're not counting on any of these.
Rural broadband or any of the stimulus things.
For driving our current sales I mean, our current sales of drilling just purely by upgrading your existing networks and really playing catch up in many cases, especially in North America to what should have been done in the last five years. So that is just the first tranche.
The second driver is the Europe, I mean U K started.
Driving fiber to every home about a year and a half ago and it's in full swing of it and now we are seeing other countries like Germany, Italy, France, and Netherlands are following this trade and that's obviously driving the next level of demand.
Now on top of it you overlay all of these government infrastructure stimulus programs, which I think is before you see the money for it would probably be one or two years, just as you'll be in a full swing on all of these other things that is going to start kicking in and then we're going to see that kind of will create the second wave or extend them.
The wave of demand that we're seeing today that's GAAP.
Kind of how we see things playing out.
Okay appreciate the answer.
On a follow up on the OSP.
If I'm not really saying I think I heard you said that three D sensing was up 18% year over year.
Can you remind us.
That comp had any huawei revenue from last year or so.
While the.
Revenue growth.
So that is a nice increase and we did have a wildly in the prior year. So it's obviously been zeroed out in.
All things being equal.
I appreciate the answer thank you.
Sure.
Yeah.
There are no further questions at this time I will now turn.
Turn the call back over to Bill for closing remarks.
Thank you Ashley This concludes our earnings call for today. Thank you everyone.
This concludes today's conference call you may now disconnect.
Yes.
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