Q2 2021 ADTRAN Inc Earnings Call
And then.
Ladies and gentlemen, thank you for standing by and welcome to Ed trends for second quarter earnings release conference call on.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer period.
If you would like to ask a question at that time. Please press Star then the number 1 on your telephone keypad.
During the course of the conference call and trend Representatives expect to make forward looking statements, which reflect managements best judgment based on factors currently known.
However, these statements include risks and uncertainties, including and then continued spread and extent of the impact of COVID-19 global pandemic.
This is Seth for development and market acceptance of our products competition and the market for such products the products and channel mix component costs. Thank you.
Factory efficiencies and other risks detailed in our annual report on form 10-K for the year ending December 31, 2020, these risks and uncertainties could cause actual results to differ materially from those and the forward looking statements, which might be made during the call.
It is and my pleasure to turn the call over to Tom Stanton Chief Executive Officer of Air Tread. Sir. Please go ahead.
Thank you Dmitry. Good morning, everyone. We appreciate you joining us for our second quarter 2021 conference call.
With me today is better and CFO, Mike for Liana.
Following my opening remarks, Mike will review the quarterly financial performance in detail and then we will take any questions that you may have.
We continued the momentum that we've seen over the past year with another strong quarter and Q2.
Although total revenue in the quarter was materially constrained by supply chain constraints. We grew 11, our revenue of 11% year over year and increased non-GAAP EPS by 12 and year over year to <unk> 16 per share.
Our success continues to be led by strong demand for our fiber based broadband solutions across our regional service providers and the U S and Europe.
Driving 66% year over year growth and our fiber access platforms.
Reinforcing the growth phase we were in we are in we increased our product bookings by 43% year over year.
This effects that we have had and the quarter was against a backdrop of growing investments in fiber access connectivity.
And the U S market. There is a bipartisan support for a proposed infrastructure Bill that includes 65 billion and funding for high speed broadband connectivity.
In addition to this federal funding for increasing commitments from state level funding to improve broadband connectivity to underserved households.
Similar initiatives are moving forward and the UK and the EU to provide universal coverage for high speed broadband.
A recent article cited pledges of over $30 billion to be spent and building out fiber access infrastructure and the UK alone over the next 5 years.
As for the market activity, we continue to see increased vendor selection initiatives and our key growth areas of 10 gig fiber access and cloud managed Wi Fi 6 as operators look to modernize their networks diversify their supply base and transition away from high risk vendors.
Given our strong presence in key growth markets, particularly in the U S and Europe, we remain well positioned to take advantage of this major investment cycle that is still in the early growth phases.
Taking a closer look at our key investments and fiber access and software and you will see several highlights that reinforce our optimistic view of our positioning in these markets.
We added 33 service provider customers and Q2 and as of the end of Q2, we have over 100 of our fiber to the Prem customers deploying our latest 10 gig fiber solutions, just and the last past year.
This has been 1 of the most successful product launches and our company history.
On the software side, our customer base for SaaS applications increased 57% year over year, while revenue increased 46% year over year.
We also secured our first tier 1 service provider deploying our managed Wi Fi SaaS offering.
The SaaS segment of our business is poised for substantial growth as we scale the number of subscribers under multi year agreements.
As we look at the Q2 financials revenue for the quarter was $143.2 million with 43, 8% gross margin.
Network solutions accounted for 88% of total revenue at $125 for about global services contributed $17.8 million.
We had 10, 3% customers during the quarter to distribution partners and 1 European tier 1 service provider.
As noted in previous quarters. These distribution partners serve hundreds of regional service providers and the U S market within mix for broadband access connected home and enterprise solutions.
This continues to reinforce the success, we are having and both customer and portfolio diversification.
Much like the past few quarters the growth that we saw in Q2 was led by our success with regional broadband operators and both the U S and Europe.
And the U S market revenue from tier 3 operators was up a combined 51% year over year.
While European regional offers were up a combined at 91% year over year.
For the previously announced tier 1 fiber access projects, we remain on track and have a lab exit from 1 of these and expect exit for the other 2 and the near future.
2 of these have already begun to place orders with us for deliveries later on this year and next year.
In addition to these previously announced awards, we've achieved lab certification from our latest fiber access platform with a tier 1 and <unk> on our and contract negotiations with multiple tier 1 fiber operators.
Inventory levels remain higher than normal due to the increased lead times, resulting from the global chip shortage and COVID-19 related logistics issues.
We continue to see component lead times being extended and becoming more unpredictable. We expect that this will continue into next year and we are taking the necessary steps to mitigate these challenges to the best of our ability.
But supply chain issue constraints do present risk to revenue and gross margins over the near term.
From an organizational perspective, we continue to maintain a disciplined approach to operational expenses as we secure additional tier 1 customer wins, we expect to see targeted increases and increases in those operating expenses.
Looking ahead, we expect to continue to see growth on our core areas of fiber access platforms and home service delivery platforms and software.
Our fiber access platforms for fiber access platforms, we are gearing up for a ramp and tier 1 business and the upcoming quarters. In addition to the continued growth we are seeing and fiber deployment from regional service providers.
For in home service delivery platforms bookings for our cloud managed gateways are at an all time high and we are working through supply chain constraints fulfill the demand.
On the software side.
We are enhanced SaaS platform mosaic, 1 where they set of tools, we have increased enhance our SaaS platform and what I said.
Net of tools, automate and improve marketing operations and customer care for broadband service providers.
Continuing our investment and these high growth segments of our portfolio coupled with the success, we are having and new customer adoption has us well positioned for additional success throughout the year and will enable us to continue to meet our customer and portfolio diversification objectives.
Finally, I want to thank all of our employees for their continued flexibility and resilience as we navigate the challenges of COVID-19.
And their ability to continue to execute well being faced with these ongoing challenges has allowed us to continually meet the needs of our customers.
With that background.
Mike will now provide a review of our financials and following his remarks, we will open the call up for questions Mike.
Thanks, Tom and good morning to all.
I'll review, our second quarter results and provide our expectations for the third quarter of 2021.
I'll be referencing both GAAP and non-GAAP results with reconciliation as presented in our press release and supplemental financial schedules on our Investor Relations webpage, and investors don't add Tran Dot com.
The supplemental financial schedules on our webpage also present certain revenue information by segment and category, which I will be discussing today.
<unk> second quarter 2021 revenue.
And at $143.2 million compared to 127.5 million and the prior quarter and $128.7 million for the second quarter of 2020.
Subdividing this across our operating segments, our network solutions revenue for the second quarter was $125.4 million versus $113.8 million reported for Q1 of 2021, and $111.3 million and Q2 of 2020.
Our services and support revenue in Q2 was $17.8 million compared to $13.7 million reported for the first quarter of 2021, and $17.4 million and the second quarter of 2020.
Across our revenue categories access and aggregation revenue for the second quarter of 2021 was $91 million.
Compared to $69.1 million and the prior quarter and $82.8 million and quarter 2 of 2020.
Revenue for our subscriber solutions and experience category was.
And was $47.8 million for the quarter versus $54.6 million and quarter, 1 of 2021 and $44 million for quarter 2 of 2020.
Traditional and other products revenue for the quarter was $4.5 million compared to $3, 9 and Q1 and $5.5 million for quarter, 2 and 2020.
Looking at our revenues geographically.
U S revenue for Q2, 2021 was $94.7 million versus 86, 5 million and reported in Q1 and.
And $84.5 million in Q2 of 2020.
And our international revenue for Q2, and 2021 was $48.6 million.
Compared to 41 million for the prior quarter, and $44.3 million and quarter 2 of 2020.
And the second quarter, we had 310% of revenue customers, 2 where domestic and 1 was international.
Our GAAP gross margin for the second quarter was at 43, 8%.
As compared to 42% in the prior quarter and 41, 5% and the second quarter of 2020.
Non-GAAP gross margin for the quarter was 43, 8%.
Which compares to 42, 1% and the prior quarter and 41, 6% and the second quarter of 2020.
The quarter over quarter and year over year improvement and both GAAP and non-GAAP gross margins were attributable to international product and customer mix as well as improvement and our services gross margin.
During the quarter, we continued to experience extreme constraints and the electronic component market, which worsened. During Q2, we expect this to continue to tighten further during Q3 and for the remainder of the year potentially affecting product availability and component and legit.
Fixed costs.
Total operating expenses on a GAAP basis for $58.7 million for Q2.2021.
<unk> to $54.9 million reported and the prior quarter and 50.
$9.5 million for Q2 of 2020 day quarter over quarter increase was a result of market driven increases and our deferred compensation plans and higher professional services costs.
The year over year decrease and operating expenses was a result of lower market driven gains and our deferred comp plans.
<unk> restructuring charges and reduced legal related expenses, partially offset by higher professional services costs.
On a non-GAAP basis on our second quarter operating expenses were $52.7 million compared to 51.4 million and the prior quarter and $52.3 million in Q2 of 2022.
The increase quarter over quarter and year over year and non-GAAP operating expenses were primarily due to increases and contract services costs.
Partially offset by decreases in legal expenses.
Operating income on a GAAP basis for the second quarter of 2021 was $3.9 million compared to an operating loss of $1.3 million from the prior quarter and a loss of $6 million reported and Q2 of 2020.
Non-GAAP operating income for quarter, 2 of 2021 was $10.1 million compared to $2.4 million and the prior quarter and $1.3 million and Q2 for 2020.
The quarter over quarter improvement and profitability on a GAAP basis was attributable to increased sales volume and a more favorable gross margin mix, partially offset by higher operating expenses.
The year over year increase and GAAP operating profitability was driven by increased sales volume stronger gross margins and lower operating expenses and.
For non-GAAP quarter over quarter and year over year increases and operating income for driven by increased sales volume and improving gross margins.
Other income on a GAAP basis for the second quarter of 2021 was $2.3 million.
Compared to other income of $3.3 million and the prior quarter and $8.4 million for Q2 of 2020.
Our non-GAAP other income for the quarter was $1.1 million compared to non-GAAP. Other income of $3.3 million and Q1 of 2021 and $5.7 million for quarter 2 of 2022.
For quarter over quarter decreases from both the GAAP and non-GAAP. Other income were related to realized foreign currency exchange fluctuations offset by favorable market driven fair value changes and our investment portfolio.
The decreases in both the GAAP and non-GAAP other income on a year over year basis for related to lower gains and the market driven fair value of our investment portfolio offset by lower realized foreign currency exchange losses.
The company's tax provision for the second quarter of 2021 was an expense of $1.1 million.
And as compared to 1 million and the prior quarter, and 1.6 million and the second quarter of 2020.
The current quarter's tax expense was primarily driven from profits and our international operations as the deferred tax expense generated by our domestic operations continued to be offset by additional changes and the valuation allowance.
GAAP net income for quarter, 2 of 2021 was $5.1 million compared to $900000 from the prior quarter and 800000 for the second quarter of 2020.
Non-GAAP net income for the second quarter was $8.1 million as compared to $6.3 million and the prior quarter and $1.6 million from quarter 2 of 2020.
For the quarter that just ended earnings per share assuming dilution on a GAAP basis were <unk> 10 per share as compared to <unk> <unk> per share and both the prior quarter and and the second quarter of 2020.
Non-GAAP earnings per share assuming dilution for the second quarter of 2021 was <unk> 16.
Compared to 13 per share and the prior quarter and <unk> <unk> per share and Q2 of 2020.
On the balance sheet unrestricted cash and marketable securities.
Total was $128.2 million at quarter, and after paying for $4 million and dividends during the quarter.
For the quarter, we generated $7.5 million of cash from operations.
Net trade accounts receivable was $122.7 million at quarter, and resulting in Dsos of 78 days compared to 73 days and the prior quarter and 67 days at the end of the second quarter of 2020.
The variability and dsos quarter over quarter and year over year is mainly attributable to timing of shipments during the quarter customer mix of those orders and sales volumes net.
Net inventories were $119 million at the end of the second quarter compared to $122.9 million and the first quarter of this year and $106.1 million at the end of second quarter 2020.
While our inventories were down quarter over quarter, we continue to carry higher inventory levels and preparation for new product ramp ups and strategic buffer inventory purchases that are designed to assist us with supply continuity and the currently challenging electronic component market.
Looking ahead to the next quarter.
Continuing effects of the COVID-19 pandemic the ability of component supplies to align with customer demand for book and ship nature of our business the timing of revenue associated with large projects, the variability and order patterns from which the customer base and to which we sell as well as the fluctuation.
And currency exchange rates and our international markets may cause material differences between our expectations and the actual results.
With that in mind, we expect our third quarter 2021 revenue will be and the range of $138 million to $158 million.
Note that this wider than usual range better reflects both the strength, we're seeing and demand and the current issues with the component supply.
After considering the projected sales mix.
And we expected our third quarter gross margin on a non-GAAP basis will be and the range of 41% to 43%.
We also expect non-GAAP operating expenses for the third quarter of 2021 will be between 53 and $54 million.
And finally, we anticipate the consolidated tax rate for the third quarter on a non-GAAP basis will be at a low to mid twenties percentage rate.
We believe the significant factors impacting revenue and earnings realized in 2021 will be component availability and costs and macro spending environment for carriers and enterprises. The ongoing effects of the COVID-19 pandemic, the variability of mix and revenue associated with.
<unk> rollouts the proportion of international relative revenue relative to our total revenue professional services activity levels, both domestically and internationally.
The adoption rate of our broadband access platforms potential changes and corporate tax laws currency exchange rate movements and inventory fluctuations and our distribution channels.
Once again additional financial information is available at AD trends Investor Relations webpage at investors Dot and <unk> Dot com.
Now I'll turn it back over to Tom and we will take your questions.
Alright, Thanks, Mike.
And interest at this point, we're ready to open it up for any questions people may have.
As a reminder to ask a question you and Isa Press Star 1 again to follow up on to withdraw your question press the pound or hash key please standby, while we compile the Q&A roster.
Your first question comes from the line of Rod Hall with Goldman Sachs.
Hey, guys. Thanks for taking my question. This is Bala entourage.
So.
Okay.
Thank you, Tom Hi, Ana and wanted to touch on the lighter revenue guidance, which is not surprising given the uptake on St.
And that everybody in the industry.
Maybe to view for the kind of on and seeing more kind of change from the.
On <unk> and <unk> side on the business moving.
On the access aggregation products business.
Both.
<unk>.
Malware.
Yes.
For both so there's not there's not really a single material products set that we have that doesn't have some constraints.
And on.
And sometimes they are different chips that are causing those constraints I would say, there's really no difference between the 2.
Got it and on the.
The larger projects Rfps et cetera, So you mentioned from <unk> and taxes.
Do you expect for many of future net.
It looks like.
From customer phenomenon and gauge non does.
Arent, there kind of pan on there.
Just some color on.
How do we expect the second half and commodity contracts at the next hear from look like on box and from.
Update on stream.
With this because.
And we're expecting good things mixture. So the lab exits. So I mentioned, we exited 1 lab at this point.
Theyre still doing we're still going through early field kind of deployments.
That will pick up.
Through this year and debt.
We expect it to be going.
And.
And at a strong clip next year with the other 2 theyre not far behind.
And like I said of 1 on 1 of those 2 that we've and I still have lab exits there that are kind of accelerating order placement just to make sure. They are in good stead for next year. So.
Feel very good about those.
Got it and 1 more question on for Matt on the gross margin from <unk>.
Looking good margin obviously despite.
Constancia, so given that given the cost inflation and that Youre seeing and also on the other hand.
Increasing fiber.
Pushing on that are announced.
And when it's being carried higher margins and also TNT, which is ongoing strong. So how should we think about gross margins as you go through next year and also.
Let me modify your backdrop, just a little bit because I think there are several things that are affecting gross margins 1 is.
Like you said just strong fiber demand.
Sure.
And the customer base that we're selling into both in Europe, and and the U S.
And then we've also had some pickup and our.
Software platform, so our SaaS offering which has got a fairly strong gross margins really strong gross margins. So I think those are all positives to it on and all that Mike and kind of take Quebec into that question.
And I think the backend and what we've.
And saying and I think we're still on the same plan that we're expecting our gross margins to trend toward the mid Forty's and came in the past, we've said low to mid forty's, but as we start to transition and over 2.
For our new products and make additional efficiency changes and our business for our expected and that will over time, we'll be able to work our way through the mid Forty's, but let me just add 1 other thing on gross margin.
Who knows exactly when this thing is.
Supply constraints will work themselves out, but we have been seeing and this quarter was no different.
We've been seeing material.
Impacts for our gross margins.
Throughout this year. So the fact that they've held up as well as they have and have actually picked up is actually very good towards us getting to our targets.
And it's driven by both expedite costs price pressures and also freight and logistics costs is a pretty tight market out there for moving things.
Okay.
And then.
1 follow up and what's the impact from this.
And we'll take on change higher.
Non stick cost et cetera, Mike for the <unk>.
<unk> gross margin impact.
I would say is more than a full point and less than.
And <unk>.
Got it very helpful. Thanks, so much.
Yeah.
Your next question comes from the line of George Notter with Jefferies.
Hi, guys. Thanks, very much did you did you mentioned how much revenue impact for you are seeing and the quarter.
Are you unable to ship products, how much might that be just out of curiosity and and I have a follow up.
Yes.
And that's.
And if I look at request day.
Can you hear me and I can still hear you Becca.
Yes, I can hear you alright.
Alright.
If you look at this request dates where people want to see.
Product it was tens of millions of dollars.
And if I look at just like this quarter.
I have enough orders right now where people want the product where I wouldn't have to sell and another thing and I can take this quarter.
So it's all about supply it's not about demand.
Got it okay.
Makes sense and then.
The tier 1 progress that you are talking to I assume we're talking about European tier ones is that correct.
Plus we have 1 here and the U S.
Okay.
So I guess I'm not sure, which 1 you're talking about so we have some that we've already secure that we're going through lab exit with.
2 of those are in Europe, 1 of those are and the U S and we have other ones that were and contract negotiations with.
1 MSR that we talked about where we have finished that contract negotiation and then.
And then 2 others that are ongoing.
For those are in Europe.
Got it okay.
And then.
I guess on <unk>.
Referencing the situations, where you guys had left for labs, and our and field trials and then.
I think you mentioned 2 other cases, where you're starting to get orders that you are still kind of working through the labs.
I guess my question for you.
Those projects being driven by.
Huawei replacement exercises are they driven by.
More organic testing infrastructure.
And the infrastructure stimulus type of activity I guess I'm trying to understand.
For the motivations are there and then to these turn into really significant revenue opportunities for the company or these.
Situations that will kind of trickle in over time like how do you think about the potential ramp.
Okay. So let me just kind of clarify the first part of that so where we are as we've exited the lab with 1 of the 3 that we were talking about.
And although we have received orders for 2 of the 3 which means lab exit is.
Pretty pretty certain.
And and.
And let's say the cases, where huawei.
And as entrenched or has been selling.
There is a component and I don't want to speak for the customer but.
We have their carriers are wanting.
On to replace the equipment that's in there.
That is 1 driver and that's all through Europe does not a single major carrier that we're talking to because ours is very well entrenched where they don't have some type of mitigation plan for the equipment. That's there.
Secondarily and Europe.
And most probably specifically because they've been very clear about it and certainly in the UK and in Germany.
They have very much accelerated their fiber deployment plans.
And are expecting to deploy roughly and let's say 20 million a piece of new homes passed within the next 3 to 4 years. So you have both for those things going on.
Got it great Okay.
Those numbers by the way a very public I mean, there and the companies themselves.
Themselves for carriers and speak about what their targets are.
Right, Yes, and we've seen those numbers.
Got it and then how quickly does that turn into for more significant revenue stream for AD trends does that is that a 2022 and then is that 2023 of that like how do you think about.
Materiality liter business, we expect those awards will be impact for next year.
And definitely okay.
Okay. Thank you.
Yes.
Your next question comes from the line of Michael Genovese with West Park capital.
Great. Thanks, a lot.
A few things.
I think you said it was and the forties and 44% total order growth.
Year over year for the quarter and I, just wanted more color and context on that and particularly the 2 tier ones, placing orders were they a major piece of that or was it more broad based.
Way more broad based on that it was way more broad based on that we're just getting kind of initial orders right now for those 2 that we have forecast that go farther but order placement is just starting with those 2.
So it's much more broad based on net.
Yes.
Hi.
Right, Okay and then.
What about the 44% I mean is that have you seen that and previous product cycles, I mean, obviously thats and thats.
What's really strong number but is that something net.
And we launched launch new products and the past you've seen that and kind of growth rate or or is this something extraordinary.
Yes.
I would say the booking.
So you can so first of all and yes, it's extraordinary.
And we're seeing.
Orders growth of that magnitude other than it being maybe 1 project.
But Tom Mexico drop and a big order or whatever that's not the case here, it's very much broad it's broader than that.
The other mitigating thing that you could maybe throw a little water on that as well are they ordering ahead, because the supply chain issues.
There is some of that going on but as I mentioned earlier on 1 other question.
Backlog for this quarter is incredibly strong.
We could we could literally hit our guidance numbers today, we can beat our guidance numbers today with just the backlog we have right now in place with request dates for this quarter. Unfortunately, I'm not going to the ship all of that.
Great.
And then a couple of other things.
And I noticed in the quarter that sequential growth.
More than 100% of it was access and aggregation, which was which was very strong. So it seems like were you able to debt.
Pretty good supply.
And that product growth.
Gross products in the quarter, I mean items and sequential growth like that it was up double digits year over year and up more than 30% sequentially. So it was pretty strong performance.
So just more color on that and then and then related.
Somewhat related my last question on gross margins.
And I guess I just want to understand more why you did well.
Second quarter, even though there are supply constraints and youre being conservative for the third quarter and the out.
Look I understand and supply constraints are our debt.
Worse, right, but why the upside and the second quarter, and and why wouldn't that repeat and the third quarter and.
I think I think and the second quarter as you would have to say mix had an impact on it.
And that mix being both the <unk>.
Product mix as well as.
Target for segment mix, and we're just seeing really strong growth out of the tier threes.
And both in Europe, and in the U S and that plays apart from that and our services business and improved service business improvement and materiality of that was probably over its mix, it's mixes what's driving it.
Okay.
And as far as.
And points.
It is.
100% supply availability, which from month to month can change right. So.
And then it feels like there is always a big.
And truckload of chips that supposed to arrive a week after the end of the quarter.
And then and sometimes they slip those out so.
It's all it's all about supply.
Yes.
Last question on that and does that does that just imply looking at numbers that just chip for.
And just reasons of the supply chain debt, there was more availability of access and aggregation and this quarter than there was.
Yes.
Yes.
Okay.
Present that and honestly I can tell you exactly which chip. It was that we got more than we were hoping for and which ship. We got less so yes, it's absolutely that and a lot of times and Panda 1 specific chip.
And you wanted to say on this.
On the balance.
Good stuff.
Okay.
Great. Thanks, a lot of free cash.
And.
Your next question comes from the line of policy and <unk> with Cowen.
Scott first of all I recognize you've addressed this on previous quarters, but given the very strong growth and your groups and hoping that Tom and Mike you all can update us on.
And on what percent of total revenue. That's now account for obviously going up for can you give us the number.
Okay.
And as CFO.
And that's because I can give you some.
Perfect.
On a global.
And so.
Okay.
I'm trying to think of it the way that we have paraphrased it before I don't want to particularly broadened.
So as we've given ourselves.
I think we need to be consistent on the way that we think about it.
And we promised that helps them and get out due to standard question every quarter.
[laughter].
Since the majority of the business, yes, that's a good way to SaaS.
So tier threes for now over 50% and.
Mike how long is that going on.
But what level and let me make sure we say that I mean, sometimes tier twos versus tier threes, but I think even if we were just to say tier threes.
Tier twos, a little Lumpier, but I would say just if you say tier 3 and my guess would be we're over 50%.
And Tom and I.
And look back a quarter ago, 2 quarters ago, where they're meaningful.
50%.
I think we first started talking about it being a third of the business are over a third of the business as the way we characterized it before and it was continuing to grow at a 30% to 40% clip.
So.
I mean, we have a lot of times just explicitly lay out the tier 2 and tier 3 growth.
I think you could really you can really hone in on that number.
On.
But it's been it's been growing at a fast clip.
Okay, and pretty much every quarter and if I look back at the tier 3 business here and the U S. This has been growing solidly.
For almost 2 years now.
And are solidly by being in the 30% to 40% range.
Okay, Tom I know that it's lucky 10% of your revenue are present and I know.
The announcement was oil and made this morning, so is hot off the presses and Im hoping you could share with us and initial thoughts on.
And given that Lumen, Inc.
As 1 of those 3 customers that you've already secured that you've been talking about for the past year in terms of incremental business any thoughts on what sell through Apollo will mean <unk> have they given you any heads up and insight in terms of loop that change your expectations for whatever revenue growth.
And you were expecting from them over the next 12 to 18 months and beyond.
No explicit guidance from them I can just go by historical what has happened whenever we've seen we've seen this happen.
I think the last big ones were like Verizon and <unk>.
Some time ago divesting properties and every single case, where we've seen that divestiture happened, we've seen and increased focus on improving their network.
And sometimes it's regulatory driven many times and that's just market share driven and so my hope and key that we would see actually and increased focus on what it is for doing with them. There is no change and the product approval cycles or anything like that.
Alright, and not surprisingly, you're indicating you have and they havent communicated to 1 way or the other.
Relative to aluminum that haven't given us numbers and where we are we are and communication with them, but they haven't been on December 7.
All right last question, but with respect from European opportunities historically, you've started around half a dozen incremental opportunities that have not been awarded some of which you were expecting to be awarded around the mid point. This year I assume with cable and that's so European opportunities 1 of those 6 any insight you can provide and broaden the others and just to be clear.
And I assume also that for carriers you referenced.
That 1.2 which are and labs, 1 of which and place orders from all assumed that youre still on the labs and those are truly <unk>, you've referenced historically on a balloon DT and DC I assume.
With respect to the other 6 and find that right.
Can you give us any incremental insight on where those Rfps awards.
Yes, I mentioned 1.
MSR, which some people count on some people don't and.
And we've.
Finalized contract negotiations with that and I also mentioned we are in contract negotiations with 2 others.
So those are 2 of the other 6 year on contract negotiations with 1 of the 6 you've secured the contract the other 3 during and visibility as to when those awards will be made.
I don't have that at this point now.
And then with respect and Tom.
And Tom with respect to the 3 you just referenced.
Are you expecting those to be meaningful and calendar 'twenty 2 on top of you.
<unk> been talking about for the last year.
Hi.
I think the.
Sure.
Cable, 1 and I feel.
Yes.
Really good about I think the other 2 are too early to understand their lab cycle to be able to give you kind of sometimes these things take forever, because the cable and I'm already through the lab, let's say 90.
99, 9% through the lag going into the field trial right now so I'm clearly and I feel good about that and because I know the timing and the other 2 we have not.
And really entered we've done some lab testing, but we haven't really gone through the cycle.
Revenue for difficult to say on those too.
I appreciate the responses on personal thanks, Tom Okay.
Your next question comes from the line of Bill debt alone.
And capital.
And thank you and I'd like to dive further into the supply issues that you're dealing with and did you earlier say its specific we IAC.
And.
And if that is the case.
Are these specific too.
On to.
Yesterday, ASX that yours or is a more and.
General Commoditize products.
It is by far predominantly Ics I would say everything other than Ics.
Is <unk>.
Manageable and like normal course.
Everyone's while you've run into something Thats kind of strange, but not that often and when we ran into problems with.
RASM that was used and plastics to make our housings for some reason there was a run on that for a while.
But you run into those so thats.
Typical.
So it's predominantly Ics and <unk>.
Did not have an issue if it wasn't IC issues.
And as far as the type of IC. It is now down to the most the non component and that velocity that you can think of.
It's everything.
Great. Thank you for net perspective, and do you have a timeframe that you are hearing where is it.
And your insights would be.
Let me say that day.
And then on issues ought to loosen by a certain time.
No.
And that regard I'm kind of held for the same kind of and knowledge to <unk>, because it's really more about fab capacity and it is the chip supplier themselves.
And we do know that capacity is coming online we are mapping.
<unk> capacity by.
Process.
The size of the process itself and where that capacity is coming in line for online.
So that we can do a couple of things 1 better steer where we'll see some relief if will see relief and.
For everybody just builds.
I don't know, but the processing 7 nanometer.
Really really super high and chips and that doesn't solve some of these.
General component issues so.
It's harder to forecast when you get down to the actual type of chip that we're talking about but we do have the ability over time to steer our designs as well to some of these.
Areas, where we think capacity will come more on online and that's what we're trying to do now we have redesigned several products already on order to keep customers happy and we're going to continue to do that but I don't have and will endpoint.
Great. Thank you and good luck with the process.
Alright, thank you.
Your next question comes from the line of <unk> with Northland Capital management.
Hi, good morning.
Morning.
Capital markets, we haven't changed our business model.
A couple of things.
Tom you mentioned tier twos and.
And.
It seems like.
For new financial backers and coming out of bankruptcy that investment bear generally at least among a couple of them just started to pick up.
Yes.
Are you seeing that is that becoming was that a material contributor and <unk>.
And to tier 3 and strength in the quarter and the outlook for maybe still in front of us.
I would say I would say.
Expecting more like next year than this year, but I would also say that this year.
And.
And was good it was actually and we did see that pick up.
It's just a little lumpier.
We're in the tier 3 such as tight and.
Every quarter, you will see just more variability and the and the tier 2 things because theres less and less of them.
Very project oriented and it's just it's just not as consistent but there is no doubt that they've gotten stronger over the last year.
And they are talking about kind of material deployments going forward, so I would expect them to be and areas of strength.
Right and then you mentioned, some excuse me and Mitchell orders and the tier 1 side.
Is that on.
Meaning for part of your Q3 guidance at all and some of these new tier 1 engagements.
No no okay, well no it's not.
I mean, it's only because there is just.
Share gain on that case. It is just now starting to ramp up for I don't.
And on unexpected has to be material.
Maybe at the end and it's all going to be about supply constraints at the end of the year.
Yes, understood on supply and Thats actually where I was headed for follow up piece of that question was could we be.
Could we be seeing a scenario, where some combination of continued rural broadband strength and and initial tier 1 deployments and serve to offset normal key for seasonality.
It's all about supply and have no doubt that the order flow would allow us to do that.
And which is all going to be what we can what we can ship.
Great and then last question for me you mentioned, the bookings up over 40% year over year.
And with with revenues up 11% and I don't know if those type of where it should look at those 2 and try and back into a book to Bill metric for you might want to share with you on us.
Uh huh.
Actually I don't have the book to Bill in front of me anyway, So that makes it a little easier but.
It has been.
Constantly above 1.
And the entire year.
Okay. Thanks very much.
Okay.
Alright with that.
I'd like to end the call. So thank you very much for joining us and we look forward to talking to you next quarter.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
And.
Good day.
And then.
Okay.
Okay.