Q1 2022 Viavi Solutions Inc Earnings Call
Please standby were about to begin.
Ladies and gentlemen, thank you so much for standing by and welcome to the Avi solutions first quarter 2022 earnings Conference call. Just a quick reminder, today's call is being recorded and at this time I will turn things over to the head of Investor Relations. Mr. Bill. Please go ahead Sir.
Thank you Bo and welcome to V. Avi solutions first quarter fiscal year 2022 earnings call. My name is belong head of Investor Relations. Joining me on today's call I'll look hiking, 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 could cause.
Actual results could differ materially from current expectations. The 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.
Takes no obligation to update these statements.
He's 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 include historical financial tables are available on the August website. Finally, we are recording today's call and we'll make the recording available by four.
30 P M Pacific time. This evening on our website I would now like to turn the call over to Hank.
Thank you Bill fiscal Q1, 2022 reflects a record in revenue non-GAAP profitability and earnings per share.
First quarter revenue came in at $326 8 million up 14, 8% year over year exceeding our guidance range of $303 million to $317 million, mainly a result of better than anticipated supply chain management within our.
<unk> E business as well as favorable timing of shipments in our OSP business segment.
Since the outbreak of the pandemic quarterly revenues have consistently improved sequentially.
Exceeding our prior record of $313 $7 million in revenue ended December quarter, 2019 by $13 $1 million.
Vib's does that growth operating profit margin at 22, 7% expanded 140 basis points year over year, and 190 basis points sequentially and exceeded the guidance range of $21 five to 22, 5%.
EPS at a quarterly record of 24 cents per share exceeded the 'twenty to 'twenty two cents guidance range and increased <unk> <unk> or up 14, 3% from the year ago period.
Share count of 242 3 million shares includes the dilutive impact of the convertible notes of approximately 8 million shares.
Now moving to our reported Q1 results by business segment, starting with NSE E.
Let's see revenue at 227 $9 million increased 24, 2% year over year.
Ceded.
The range of $210 million to $220 million within NSE any revenues increased 26, 4% from a year ago to $204 $9 million, reflecting strength for our fiber wireless and cable products.
S revenue at $23 million increased seven 5% year over year, a result of the godly former assurance and data center products.
NSE gross profit margin at 64.7% increased 50 basis points year over year within NSE and <unk> gross profit margin at 64, 8% increased 100 basis points from last year, primarily a result of leverage on higher.
The new volume.
<unk> gross profit margin at 63, 9% decreased 90 basis points year over year due to product mix.
Nse's operating profit margin at 13, 5% exceeded our guidance range of 12% to 13%, primarily a result of operating leverage on higher revenue.
Operating profit more than doubled as margins increased 630 basis points from a year ago.
The leverage them Gulf in combination with the aforementioned higher gross margin and disciplined Opex control.
Now turning to OSP first quarter revenue at $98 $9 million is down two 3% from last year's revenue record of $101 2 million and reflects OSP second highest revenue quarter.
Revenue exceeded our guidance range of 93 million to $97 million mainly.
Mainly a result of strong customer demand and timing of shipments.
Gross profit margin at 57, 7% decreased 260 basis points year over year.
The impact of product mix and slightly higher manufacturing variances compared to last year's records.
Operating profit margin of 44, 1% is near the high end of our guidance range of $42 five to 44, 5%.
Decrease of 260 basis points from a year ago as a result of the aforementioned production and gross profit margin.
Now turning to the balance sheet the balance of our total cash and short term investments was 921 $7 million, an increase of $218 million sequentially from the prior quarter and up $326 2 million compared.
Compared to the prior fiscal year.
In addition to free cash flow generation the increase cash position reflects the recent $400 million high yield bond offering we completed at the end of September offset by the partial impact of deeming $275 million in principal value of convertible notes in early September.
Operating cash flow for the quarter was $53 4 million.
A decrease of $10 5 million compared to $63 9 million in the year ago period, reflecting increased investments in inventory to ensure we continue to meet our long time commitment to our customer.
We invested $15 7 million in capital expenditures during the quarter compared to $8 million in the prior year. The Yankees Capex reflects a new production facility in support of increased future demand built in Arizona.
Early September we entered into a separate privately negotiated exchange agreements with certain holders of the 175% senior convertible 2023 notes and a 1% senior convertible 2024 notes.
This transaction reduced the principal value of our 2023 convertible notes from $225 million to $131 $2 million and our 2024 convertible note from $460 million to $278 $8 million, resulting in a.
$85 9 million GAAP only loss included in interest expense and other income.
The remaining outstanding balance of our combined convertible notes is $410 million in principal value at the end of the quarter, a reduction of $275 million compared to the prior quarter and prior year.
We settled the combined retirement of $275 million in principal value of convertible notes and part in cash for a total of $197 million as well as by issuing 10 6 million shares of <unk> common stock.
Subsequently the board authorized the repurchase of up to $190 million of shares which commenced at start of the second quarter and is expected to be completed no later than by the end of the third quarter.
As of yesterday November 3rd we repurchased two 4 million shares under this program at an average price of $15 48 per share including commissions.
In addition, and under the already existing stock buyback program, we repurchased $8 5 million of.
<unk> stock at an average cost of $16 52 per share including commissions during the first quarter in total as of the end of the first quarter, we repurchased 95.
$5 million out of the 200 million authorized share buyback plan. This program has now extended until the end of September 2022.
In late September we completed a $400 million high yield note offering at an effective rate of 375% interest due in 2029 with net proceeds of approximately $393 million.
<unk> will be used for general corporate purposes, including replenished the funds used to retire indebtedness.
Please see our earnings supplemental deck posted on the VIP website for more details.
We are pleased with the successful issuance of our first high yield notes as well as to the timing of approximately 40% of our convertible notes. This completes an important step in optimizing our capital structure and we expect will create the financial flexibility to allow us to execute our growth objectives.
Now onto our guidance.
The current macroeconomic environment remains uncertain with significant supply chain challenges as well as the ongoing pandemic as a result, we expect the fiscal second quarter 2022 revenue to be approximately $308 million plus.
Plus or minus $7 million.
Operating profit margin is expected to be 25%, plus or minus 50 basis points and EPS to be in the range of 18 to 20 per share.
We expect NSE revenue to be approximately $235 million, plus or minus $5 million with operating profit margin at 16, 2% plus or minus 50 basis points.
OSP revenue is expected to be approximately $68 million, plus or minus $2 million with operating profit margins at 35, 5% plus or minus 100 basis points.
Tax rate is expected to be approximately 17%, we expect other income and expense to reflect a net expense of approximately $6 million, which includes the full impact of the change in interest expense as a result of the high yield note issuance net of our convertible notes attainment.
Absent of any changes to the principal notes.
We can expect the net expense of approximately $6 million also for fiscal Q3 and Q4.
At current stock price levels and as we complete the aforementioned share repurchase program. The estimated fully diluted share count used in our calculation is 248 million shares for the second quarter. We also expect the fully diluted share count to reduce to approximate.
<unk> 239 million shares starting at the end of the third quarter and two approximately 237 million shares at the end of the fourth quarter with that I will turn the call over to Alec.
Henk our fiscal year 2022 is off to a strong start with record revenue and non-GAAP profitability in Q1, I'm pleased with both NSE and OSP performance in delivering strong results despite supply chain challenges.
And the East segment demand strength was driven by fiber wireless and cable.
Service providers continue to upgrade and expand their networks with fiber, resulting in a record revenue quarter for our fiber field instruments.
Wireless demand continues to be strong up double digits percentage from a year ago levels <unk> field deployment is accelerating with five gene networks being overlaid on top of existing <unk> infrastructure.
With five <unk> technology and are widely used in our lab. We are now starting to see initial deployment of Oran in the field as well.
Cable was also strong and was up from a year ago levels much of the recent cable demand was in support of Msos bandwidth expansion in <unk> deployment.
Sam is in data center demand for 400 gig E continues to be very strong with early 800 gig product adoption expected sometime in late calendar 2022.
While continued shortages of high performance semi as have challenged our industry, we have been able to successfully mitigate for the most part these supply constraints in Q1 and exceeded our revenue guidance.
We continue to see supply challenges persisting into Q2, and Q3 and reflect them in our guidance accordingly.
Lastly, we expect to see the supply constraints to start alleviating by mid calendar 2022.
The <unk> business segment continues to recover with the revenue end customer business funnel growing nicely, we expect <unk> to continue to improve and grow as enterprise customers reevaluate their it project needs and five year assurance opportunities start to materialize in late calendar 2022.
Now turning to OSP.
The OSP business segment delivered strong revenue and profitability led by robust demand for anti counterfeiting products.
During the past five quarters. So we have seen significantly stronger demand for anti counterfeiting products. As we look ahead to 2022, we expect the demand to moderate down from the current run rate a central banks digest their inventories and adjust monetary policies.
That said, we expect the anti counterfeiting revenue run rate during the calendar 2022 to remain above the pre COVID-19 levels.
<unk> sensing revenue was up slightly from a year ago levels with higher unit volumes due to broader adoption of world facing applications.
In the coming quarter. However, we expect the demand to be moderated downward due to supply chain constraints not related to the IV.
We expect the demand to partially recover in calendar 2022 as component bottlenecks get resolved.
Longer term, we expect our principal growth drivers <unk> fiber and <unk> sensing to continue driving growth and profitability for VR.
In conclusion, I would like to express my appreciation to the avid team for its continued strong execution and delivering another record quarter 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.
Thank you.
We will be holding our 2021 annual shareholder and proxy meeting next week on November 10, we will also be participating at the J P. Morgan CES Tech form on January five 2022, and the Needham growth conference on January 10th 2022.
So lets begin the question answer session, we ask everyone to limit discussion to one question and one follow up.
Thank you Mr. Jiang, ladies and gentlemen at this time. So do you have a question or comment simply press star. One if you are joining us using a speaker phone today. Please make sure to mute Lithia ink jet before pressing star one after you can remove yourself from the TNT find your question answered by pressing star one again, so again star one to ask a question.
Take our first question today from Alex Henderson at Needham and company.
Thanks, Paul.
I appreciate it nice.
Nice quarter and thank.
Thank you guys are doing the right thing on me with the bond offering so I'm glad to see that.
In terms of my question.
Hoping you could talk a little bit about.
The.
Outlook in <unk> and <unk>.
To what extent.
Broadly you have been seeing supply constraints, if you could give us some quantification on how much the supply constraints impacted.
The overall business, but in particular, the <unk> side of it whether that that was a factor or not.
Sure Hi, Alex so.
Well <unk> some of our newer instruments and obviously they are using more.
Advanced chips in some ways.
Given that the volumes are just starting we had some inventory already prebuilt.
But it's actually one of the areas, where we are probably seeing some of the more insurmountable.
Shortages at least in the very short term and this is one area, where we still haven't been able to get all the components in house.
It's still early in the game and the ramp so it's not as bad and where we've been able at least in Q1, we have had enough material to start initial shipments Q2, we are a bit more constrained and we continue to work on it and you know when we provide guidance we base it on the chipset and all of the material that we have in house.
And we know we can built when we guided at Q1, we obviously provided a lower number and we said hey, we have a go.
Greater opportunity, but we don't know if were going to get components or not and that Fortunately I know my team has done a great job and we were able to secure the supply and.
Thus significantly exceeded our.
Our guidance and it's pretty much the same thing this quarter I mean, there is a lot of demand we cannot needed at all.
With everything that we have today right now we go off of the assumption that we have material in hand, or coming that and thats kind of drives our revenue.
The good news is the products that we cannot meet they just basically get pushed out into the next quarter and the customers are not canceling.
With a few exceptions, they're not canceling the orders they just.
Pushing out the orders into the future quarters.
Specifically to <unk>.
What we have been seeing.
Our lab and production side.
But we have not.
Been having any issues, we've been able to get our allocation of servers to deliver the product.
Although there were some challenges on the instrumentation side is really the area on the RF instruments, where we have a bit of a tighter supply, but then a lot of the adjacent instruments, especially with fiber related to <unk>.
We have been able to close the gap on supply and ship all of those instruments as well and.
The nice thing I would say is.
Our wireless instruments are receiving very good adoption.
And a very strong interest coming from leasing companies as well as multiple contractors. So as the <unk> gets access accelerated we feel pretty good about.
Strong demand for our products I think at this point, we are really focused on closing the gap.
On the.
Some of the chipsets that we require for volume scaling and we probably will be I'd say February of next year that we should be able to close the gap on the supply.
So the question really was how much.
Impacting have on revenues.
Third quarter that was just reported and in your forecast.
The 10.
$10 million to $15 million worth of product that you could ship.
And what are your assumptions for the third and fourth quarter I like the color is great. Thank you very much but that really wasn't the question Sir.
So well you're talking about the September <unk> September quarter, we largely closed the gap and we I think we had upside of about $12 million to $13 million and what we needed to ship there was no impact.
On the September quarter, I think this quarter, there's probably I'd say $5 million to $10 million.
GAAP that is outstanding and Q3, it's probably still too early to spec.
Speculate because we don't know what the deliveries will be.
And then one last question just follow up question.
So did the return to pre Covid levels.
Just so that everybody's on the same page what kind of revenue streams for OSP does that.
At present.
Or what's in my model, but I'm, not sure which period, you're specifically referring to.
So when I talk pre covered I'll talk about anti counterfeiting right that specifically so remember our base rate was around 50.
And maybe slightly higher.
In the past five quarters, we were running closer to 60 or even in a low sixties I think when we go we say go.
Uh huh.
The new level.
Are things kind of work themselves out it.
It will be obviously running above the 50, probably below 60, <unk> say, taking mid <unk> probably.
A reasonable number.
Thanks, So the time to taper to that is a couple to three quarters or so I.
I would say I would say starting in the December quarter.
Okay tapers starting now.
At that level immediately in the <unk>.
Remember quarter, Yes, I'd say immediately and probably for next several quarters at least but then again it could.
Come in just as they took number down that could come back and picking up, especially some of these really big user economies of.
Counterfeiting a lot of there are printing plants are running at.
Counterfeiting a lot of there are printing plants are running at.
Lower utilization because of the COVID-19 restrictions, so theyre consuming inventory a bit slower as.
Problem is alleviate and they pick up more shifts I imagine a lot of it will work out and we'll probably see some increased demand, but net net I'd say the now the new kind of with what we call a steady state demand is a higher level than it was pre COVID-19.
Okay I appreciate the answers thank you.
Sure.
And gentlemen, your next question will come from Selman <unk> of Jpmorgan.
Okay great.
Hi, Thanks for taking my question I guess, just a couple.
You mentioned in the press release, and you talked about it to be.
400 million note offering gives you a lot of flexibility in terms of investments both in the business organically and Inorganically. So just wanted to get your thoughts about force organically, how youre thinking about areas of investment and what can you review that you need to add and then how does the M&A pipeline look and I have a follow up after that.
Sure, we actually have a number of we're making quite a few investments we haven't really talked about some of the product lines and now they're starting to materialize. So clearly fiber I mean wireless has been a big recipient of a lot of our new R&D internal R&D and.
With a slew of our new products coming out.
The reception there getting we feel pretty confident about success.
Success of these products in the market.
We also have a number of other programs, we are probably a bit too early to talk about.
But we.
It's a whole new set of revenue streams for reality that we haven't.
They are not in our current.
Mainstream and we continue to spend about I'd say, probably I'd say, 10% to 15% of R&D in that area.
And we will be.
Getting more vocal about it in the next calendar year as many of these products are now approaching.
Let's call a prime time and.
The other element last one is our FC So as you know I've been always very cautious about it we're now starting to feel more and more bullish about our service enablement business.
Been thoroughly restructured we have our new architecture, and we are getting a lot of good traction from the market and <unk> space.
Space as well as the.
A lot of the.
Various.
Our enterprise and service provider applications. So we are cautiously optimistic that our.
E business.
<unk> is starting to grow again and.
With every quarter, we will develop a stronger and stronger conviction.
Okay.
Are there any comments on the M&A pipeline I'm, sorry, well before I ask my follow up so M&A clearly.
We have our funnel I mean, both.
We always like to look at that the private company opportunities I mean, theres always obviously, some public opportunities we continue to explore and clearly that $400 million gives us tremendous flexibility.
To go do deals, especially from the carve outs and private company acquisitions.
Okay.
For my follow up and this is modal Lehman question here, which is <unk>.
You mentioned the supply constraints that you're seeing cost youre seeing strong demand, but you're not able to ship to your customers.
If your customers be it cable provider rural telco, if they are looking at.
Deploy equipment, what how are they responding to that.
Shortly.
Still pushing ahead with the deployment and then once we get a couple of quarters. The supply eases is that demand for test equipment and permanently lost or two day, Mr. Li just slow down the deployment activity and we just catch up to this pent up demand and a couple of quarters on supply eases.
Borders and many of them are entering into like things like material responsibility agreements, where they will.
Guarantee.
Kicking the product because we have to go and source material and buy all the components. So if they are later change.
Their requirements that they have to compensate us for that so it just shows you the robustness and strength of their conviction and that did you meant Israel.
Thank you.
My questions.
Sure.
And next will move to <unk>, that's I G.
Yes, Thanks for taking my question when I'm looking at your reported September revenue on your guys for December on aggregate is pretty much in line with what I was expecting mm mm.
And if I were to take you come in that there's a five to 10 million off the gap and supply and demand to meet that's rather upsides. So perhaps in the context you can tell us what are the key and market segments that are driving this up site.
Well, so Mary I think you're way too kind I am actually I I think we're about 10 million lower than I would've expected cause I know, you're you're you're right. You got your model I mean, the area, where we've been a bit surprised as you've heard about a major mobile phone.
One supplier was a major customer of ours has.
His face uhm shortage of components. Unfortunately for US we were one we were one supplier who delivered to our fair share, but as a resolved by delivering strong September quarter. We now have to take a pause in the December quarter to allow them to burn off the product that we shift because of the shortage of the.
Components, they're not going to be able to consumers at the same rate. So now we we do believe our demand will rebound in the March and June quarter, and actually our second fiscal half will be stronger and three dissenting as a result, because of the inability for them to prebuild everything earlier on so there we've seen.
Quite a bit of demand.
Push out.
Because of the shortages and I would say we were expecting the anti counterfeiting to start pulling back in the March quarter some of it.
Got pushed in a bit earlier, so I would say between that on OSP side I think on the NSC side, I think we're probably leaving about $10 million on the table because of a shortage of components. So there, which would have been around 245, or so a million dollars revenue range.
On the OSP.
There's probably about good let's say 10 million dollar drag in the opposite direction because of the reduction and take counterfeiting and uhm a rebalancing of inventories on three dissenting so between the two of them I mean, I actually thought like a couple of months ago or December will get all new or.
Patrick.
Four <unk>.
But.
But <unk>.
Got it okay uhm.
I also want to follow up my second question that has to do with the Big picture last time, we got an update on the model was in another.
I'm Gonna stay back in September of 2019.
And so far you've actually tried to the model looked at 1.3 billion of revenue opportunity in 90, and 95 cents of Ernie.
So what are we going to get the next update, especially <unk> restart stinking off if I twenty-three does that <unk> and then help with your attitude that you're working on you Wanna you Wanna wait till you close one a couple of these toxins or or is it more related with just.
Isn't it your arms around the core business combination of the two.
Yeah, So where do we give a model we're really base. It on the business that we own any acquisition will be an upside to that model and as you know we are approaching next September we're going to do the the next analyst day, where we provide kind of visibility ahead that we certainly are pleased that even we did count on some of the recession or pull back.
We did not foresee the once in a century pandemic, but even with that we are actually a spot on what we were looking to be in terms of both revenue and profitability. We may even do a little better, but we will start I'd say beginning of next calendar year talking about what's next.
<unk> in terms of growth and there remain the talk about organic all the inorganic opportunities.
Discuss how does that matter of our policy they will be all on top of the hour a guidance and so by the time. The September calm I think you'll have a pretty good idea of where we're going and we'll just formalize our strategy guidance and the projections by then.
Yeah. Thank you.
Sure.
Next we'll go to Michael Genevieve southwest on Capitol.
Oh, Thanks, you know I appreciate all the detail on the call so far and I'm I really just have a few clarification of things that I I missed because I'm slow on the on the corner O S. T. I I didn't quite understand on two Q are we going to the mid fifties level in two Q it was that the guns.
The regular on race.
Yeah, I I understand that but I guess, if if if two Q is just roughly order of magnitude down.
Year over year and sequentially, it's not the same number of roughly 50%.
Down year over year and sequentially, but do you expect the bad you make comments on the back half that you expect that to be.
Sort of flattish year over year. So on the comparison, we're basically just down.
Half of the December quarter, I mean does that is that a good way to think about it. We're we're down year over year half of last year's December quarter, and that's where we should model the year does that do it.
Does that make sense are you talking about three dissenting, yes, three censoring gifts.
So so so basically flat year over year, except that the December quarter is basically half of what it was so yeah. So I guess so yeah.
Right. We were planning we are looking beginning of the year kind of anticipation how many units our customer was gonna build the mix of to filter in a world facing in rear facing camera or just only one camera we had.
Just kind of looking at the forecast of units and with the ASB a reduction we fell through be roughly flat year over here right.
With the reduction in unit volume.
We now think would probably be for the year would be about 10% down right because they're just fundamentally gonna be cure units consumed because of shortages over the other components.
Bill figure of units great.
Great I appreciate that answer and I'm, sorry, I made you clarify the other things so many times, but I appreciate it thank you <unk>.
Oh sure sure no problem.
[noise] [noise]. Thank you gentlemen, your next question will come from Kim <unk> Northland capital markets.
Okay.
Good afternoon.
And congrats on a great.
First fiscal quarter, let me try this OSP thing one more time, and then I'll follow up.
On on the test side.
So just to your guarding briefly down 30 million Bucks sequentially.
It sounds like.
No more than 50.
Percent.
Three D sensing in terms of the impact maybe.
Maybe.
I don't know maybe two thirds of that is that is that fair to say can you characterize it in that fashion because if you look at the total sequential decline, what's coming out of three D and what's coming on our currency and also well so we don't break down but.
It is substantially less than half is do three D. We had a very strong September quarter anti counterfeiting.
Or receding their field.
Staff with new equipment, so we actually seeing a big change in the mindset for a lotta operators and the way they approach maintenance of their networking.
I think.
I'm meta Marshall at Morgan Stanley.
Great. Thanks, a couple of questions for me maybe on the first question just on supply chain, you know understanding yeah, some impact but relatively minor for you guys. Just wondering if customer demand like you're seeing kind of your customer demand.
<unk> come down any just because they can't put all of the pieces of the project together. So they don't need kind of a test and measurement just kind of a derivative of supply chain impacts on customer demand and then maybe just a second question.
Are any of the limitations that are seen something that would you know you're having to pay more for that equipment or are there any price changes that you think you'll need to pass on or you know relative to our ability that you think you'll have to pass on some of those price changes things.
Sure.
So I think the first question.
About the how.
How they spend I mean, its fundamentally they have plans you know.
A lot of what drives our Spanish fiber plant expansion and deployment and the AR five G Department and all of that is you can build out turn on optimized troubleshoot without these from Sydney to equip yours.
Conditions or construction crews with all the instruments. So that's part of the demand and the other one is improving the reliability of the network and performance of a network that one is a kind of more I would say were heavier demand on the.
Equipment that sits inside the network right. So I think on there. It's just part of there just general strategy build out plans that they've been talking to us for multiple quarters and now it's materializing. So it's not a flash in a pan sort of say right.
In terms of the components.
I'll tell you I think we've been probably better than most of our competitors.
Being able to get components, but also to be fair. It's a.
A lot easier to pay up to get we don't need that much volume to meet our demand because our gross margins on our products are fairly high so even if when we pay a significant premium on our components. The net impact is not that great on the margins or the pricing.
And we have been passing on.
Increased costs like cost of logistics and various surcharges, but more importantly, we have also been systemically implementing over the last several quarters, our price increases which in some cases already started going into effect very early.
But really will kick in beginning of.
The calendar year and its very closely matches, what we are seeing on the semiconductor space I mean, youre seeing across the board 10% to 20%.
Price increases on the semi components.
On cable TV, it's a new area that you are for the most part of last years, having highlighted that much. So I think there's a second quarter in a row that you have.
I guess, maybe you can give us some color within the IC business, how big of a contributor that is and how sustainable do you see the upswing here in cable T D.
So the cable you know so it's not a you know we still are obviously selling some of the handheld instruments, but it's significantly down because DOCSIS three one was deployed already for quite a while and it's really more of a replacement and maybe some additional things we're providing them. The next I'll say big.
Wave will be with DOCSIS four point at all but it's probably a couple of years out.
But you know, we're still selling quite a bit of a equivalent but what's really driving cable for us.
It's not really copper per se its fiber, okay. Because increasingly you know cable companies are no longer cable fiber operators.
And more and more we are shifting towards is they're buying a lot of our fiber equipment.
Pretty much in line with the telcos and wireless carriers and what's even more interesting.
They push fiber deeper and deeper into the network.
They are losing visibility.
Of all the different segments of their network because before he had copper and you had these amplifiers and they provided feedback and visibility now as you replace it all with fiber.
Multiple node splits you need to start monitor our fiber plans. So we actually seen cable companies, becoming big buyers of I R.
Fiber monitoring equipment, where you monitor hundreds of lines of fiber over a large area and you put these things sell all over their network to provide visibility and.
Monitoring of their fiber performance. So I think very quickly the distinguishing factor between telcos wireless carriers in fiber and cable are becoming more and more diminished and they're becoming a predominantly fiber customers, but different flavor of fiber test.
The platform is very very similar across all three.
Okay. That's great perspective, thanks, that's all for me.
And one thing I would add also many cable companies are also getting into the five G. Theyre provisioning five G.
Kind of infrastructure. So they are also buying a <unk> equivalent from us which is very counterintuitive obviously.
Yeah.
Thank you and gentlemen, it appears we have no further questions today, Mr. <unk> I'll turn the call back over to you for any closing comments.
Thank you Bo This concludes our earnings call for today. Thank you everyone.
And again, thank you all for joining US we wish you all a great afternoon, you may now disconnect.
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