Q1 2022 Aviat Networks Inc Earnings Call

November 3, 2021

Good afternoon, welcome to ever got networks first quarter fiscal 2022 earnings call. At this time, all participants are in a listen only mode.

A question and answer session will follow the formal presentation. Please note. This conference is being recorded.

These and other forward looking statements reflect the company's opinion only as of the date of this call and webcast in involve assumptions risks and uncertainties that could cause actual results to differ material from those statements additional information on factors that could cause actual results to differ material from the statements made on this call.

Can be found in our annual report on Form 10-K filed with the SEC on August 25th 2021. The company undertakes no obligation to revise our make public any revision of these forward looking statements in light of new information or future events.

Additionally, during today's call and webcast management will reference both gap and non-GAAP financial measures. Please refer to our press release, which is available in the IR section of our website at Www Dot IVF networks Dot com and financial tables, there in which include a gap to non-GAAP reconciliation and other.

Mental financial information.

At this time I'd like to turn the call over to avionics, President and CEO Peak Smith Pete.

Thanks Keith.

Good afternoon, everyone.

Thanks for joining us to review a successful quarter accommodated continue to execute on our key long term focus areas of growth margin expansion.

And meaningful bottom line improvements.

<unk> our team commitment resulted in first quarter revenue of 73.2 million.

A 10.4% from the first quarter of fiscal year 2021.

First quarter, adjusted EBITDA margins of 13.0% compared to 12.7% for the first quarter of fiscal year 2021.

A solid balance sheet and liquidity position with net cash at $47.3 million.

North American first quarter revenue increased 12.0% or 5.4 million year over year International first quarter revenue increased 6.9% or $1.4 million a year over year.

Adjusted EBITDA was nine 6 million for the first quarter, representing an improvement of 1.2 million versus the same period last year the.

The improvement in revenue and adjusted EBITDA for the first quarter was primarily due to a higher volume of private network business increased sales through our obvious store, which serves primarily rural broadband space improved international business, driven by Multiband winds and an increase in software and license sale.

<unk>.

To achieve these results, we must recognize our suppliers and the obvious supply chain team. The current supply environment is incredibly challenging and we thank our suppliers and our team for continued performance.

On our last call I outlined the differentiation in our radio products, specifically, the WGM 4000 platform, which has played a significant role in our recent growth and five G in rural broadband.

And today's call I will reiterate some of the key points and subsequently highlighted some of the wins that this platform as delivered this quarter.

The obvious Wotm 4000 leads the industry in system game, enabling radio links to go further in distance have greater ability to overcome weather effects like rain and use smaller antennas, which is an important element in obvious total cost of ownership value proposition.

And our Wotm 4000 portfolio includes the industry's all week.

Single box multi band radio for 10 gigabytes per second capacity.

Along with our software and E Commerce differentiation. This product has led to some positive developments in the market this quarter.

We have seen strong growth in our North American Rural broadband segment, we know supply to 15 of the top 30 rural digital opportunity fund or are not winters and earn advanced discussions with five others of the top 30. This business is based.

On our Wotm 4000 platform and is going strong for us dinner.

Internationally Aviano has had one of the best quarters in our history with regards to winning new accounts, many our share gains impacting revenue and future quarters, including.

A large ministry of Defense network, and Northern Africa to new tier two operator wins in Africa, one in Chad and another in Angola, which included a hosted frequency assurance software recurring revenue when our first fast when in Africa to new operator wins and.

Southeastern Europe and in APAC. This quarter, we penetrated one of the largest mobile operators a tier one operator, achieving first ever sales for <unk> obvious based on our Multiband solution. We are extremely excited about this development as well as all the other new accounts mentioned here on.

Top of all these market successes in the quarter Aviano announced a significant new product for operators high availability routing software running on our Ctr 80, 740 router platform.

This new high availability routing software is a compelling choice for operators seeking an affordable routing solution that is reliable scalable and secure.

<unk> is now one of only a few router vendors on the market to support high availability software. While the software was designed for North American mission critical private networks, we're starting to see demand and five G networks worldwide as the <unk>.

To meet the needs of critical use cases, such as connected cars industrial Iot machine to machine communications and public safety applications as.

Is five G transport networks work to become more reliable this offering along with our proven portfolio of highly reliable high system gain radios.

Gives avi a strong value proposition with that let me introduce David Gray CFO, and then turn the call over to him to review our financials before coming back for some final comments, David came to obvious from superior ethics, where he was CFO of the approximately two.

2.6 billion dollar.

National Company with a significant telecom equipment presence prior to his seven plus years with superior ethics, David held financial leadership positions of increasing responsibility on a number of prominent in companies, including Cupreine.

Newell brands and Phillips electronics, we're thrilled to have him on board as.

As we continue to focus on corporate growth and margin expansion.

Thank you and good afternoon, everyone.

Turning my remarks today overview review some of the key first quarter financial highlights. Please note that are detailed financials can be found in our Form 10-Q and earnings release, both of which were filed this afternoon.

For the first quarter, we reported total revenues of $73.2 million as compared to $71.7 million for the prior fiscal quarter.

Sequential increase of $1.5 million or 2.1% and as compared to $66.3 million for the first quarter of fiscal 2021.

Year on year increase six $9 million or 10.4%.

The North American team continued to focus on expanding sales and seizing upon audience unique product and service differentiation.

North American revenue, which comprise approximately 70% of total revenue for the first quarter was $15.9 million, an increase of 5.4 million or 12% from the first quarter of fiscal 2021.

The increase was driven primarily by our private networks business rural broadband and software.

International revenue for the first quarter came in at $22 $2 million compared to 28 million for the first quarter of fiscal 2021, an increase of 1.4 million or 6.9%.

Our foot the bill ratio for the last 12 months was above one in our backlog remains above $200 million.

First quarter gross margin was 35, 7% on both and gap and non-GAAP basis, as compared to 36.1% gap, 36.2% non-GAAP for the fourth quarter.

And $36, 6% gap, 36.7% non-GAAP for the first quarter of fiscal 2021.

Our margins in the current quarter were negatively impacted by inflationary pressures significant expedite fees incurred overcome supply chain and logistical bottlenecks.

These were partially offset by price increases surcharges and favorable mix.

The net impact of these factors was approximately 100 basis points.

First quarter GAAP operating expenses, which include restructuring charges and share based compensation for $19.3 million compared to $22 1 million for the fourth quarter of fiscal 2021, and $17 7 million for the first quarter of fiscal 2021.

First quarter of non-GAAP operating expenses, which excludes the impact restructuring charges and chair based compensation for $17 $9 million compared to $24 million for the prior fiscal quarter and $17 2 million for the first quarter of fiscal 2021.

We continued to make R&D investments with savings from previously announced G&A restructure.

First quarter GAAP net income, which includes restructuring charges and chair based compensation was four $7 million compared to $2.8 million for the prior fiscal quarter and five 9 million for the first fiscal quarter of 2021.

The year over year decline was due to.

Zero point $7 million of restructuring charges in the current quarter and $1.5 million higher tax expense, resulting from release.

U S deferred tax asset valuation allowance as reported in our physical Q3 2021 results.

As a reminder, the company has over $500 million or anyone else that will continue to generate shareholder value for the foreseeable future.

First quarter non-GAAP net income was $8.0 million compared to five $3 million for the prior fiscal quarter and.

Six 9 million for the first quarter of fiscal 2021.

First quarter non-GAAP EPS came in at 67 per share compared to 45 cents per share the prior quarter and 62 cents per share for the first fiscal quarter of 2021.

Adjusted EBITDA for the first quarter was nine $6 million compared to $7.0 million for the prior fiscal quarter, an increase of $2.5 million with 38%.

Compared to Q1 in fiscal 2021, adjusted EBITDA increased by $1.2 million or 14%.

Our adjusted EBITDA margins came in at 13% for the quarter compared to nine 7% for the prior fiscal quarter and 12.7% for the first fiscal quarter of 2021.

In terms of profitability. This was the second highest adjusted EBITDA percentage in the history of the company.

Impressive accomplishments given the inflationary environment, they're all operating in.

Moving on to the balance sheet.

Our cash and cash equivalents at the end of the fourth quarter 47, $3 million compared to 47 $9 million at the end of the fourth quarter of fiscal 2021, and $36 $2 million at the end of the first quarter of 2021.

We have no debt.

During Q1, we repurchased.

Zero point $7 million of our common stock.

Our balance sheet remains very solid, leaving us well positioned to execute our long term plans.

With that I turned it back to Pete for some final comments.

Thanks, David just a few additional comments before opening up for Q&A I'm extremely proud of the entire obvious team for their significant contributions.

Our results for the first quarter of fiscal year 2022.

We are executing well documented constrained supplied situation and the inflationary environment.

Despite the environmental challenges, we affirm our previously announced annual guidance of $283 million to $293 million in revenue and 35% to 38 million and adjusted EBITDA, We anticipate achieving the high end of the range, providing our customers with the most advanced.

Reliable and best total cost of ownership systems for mission critical work that our shareholders with profitable growth remains our goal with that operator, let's open it up for questions.

At this time I would like to remind everyone in order to ask a question. Please start then the number one and your telephone.

Okay telephone keypad.

We will pass with just a moment to compounded Q&A roster.

Your first question comes from the line of Theodore O'neill Litchfield Hills.

Thanks, very much congratulations on the good quarter and welcome aboard David.

Thank you yes.

Yet so.

<unk> first question is about margin and my second question is about SG&A. So in the queue and then your prepared remarks, you mentioned margins this quarter compared to previous here were impacted by inflationary pressures supply chain logistic bottleneck. You just mentioned that it was expedite fees was initially to get around the supply chain.

Stick bottlenecks.

And I know that last quarter, you talked about.

Having trying to keep a higher level of inventory on hand to avoid running into some of these issues. So can you talk a little more specifically about where you are seeing both.

Both the inflationary issues and the logistic bottleneck.

Yeah. So.

Yep, Thanks to you Susan.

Inflationary last night, so the logistics of I'm sorry.

Coming from the same place.

The semi semiconductor.

Suppliance right so sometimes.

Our suppliers decided to increase price another time.

<unk>, so you need to.

You need to pay an expedited.

You know what I want to do is talk a little bit about moving about that too.

<unk>, we have what we call call completion of 140 bibs.

David.

Last quarter about whether or not we were going after price.

Surcharges of recovery and we are doing that.

We were able to execute on 110.

So please recovery and then we have favorable mix of 240, and Natalie does not 100.

Well, we would say about the environment is that inflation.

Moderating.

Hopefully the purses.

And Ah recovery as we move forward.

Improve right and I'll talk a little bit about the recovery in a second and now it lines up with our business right. Some of these expedite charges or these cost increase.

<unk>.

Nearly instantaneous so the recovery takes a little bit of time, So we think will.

With the environment given no change in inflation.

Will be will.

Will be net positive by you argue for fiscal year, 22, and a little more color on the recovery.

Our business cycle, we kinda have three different business cycles are short cycle business, which is really tied already commerce and all of our price plus surcharge elections are in our.

Mid cycle business, which is our international mobile network operators that takes up about a quarter or so.

To get.

Progress in place for that backlog to work its way out and we have that in place and will start to get some lift from that going forward and then our private nowhere business in the long cycle business and that's.

That'll take a little bit longer.

Two two playoff so those kind of highlights are we did have significant cost inflation.

The quarter, we have started to execute on our price surcharge recoveries, we thank our customers.

Incredible cooperation in the difficult environment, and we take over the next couple of quarters will be able to fully offset.

The inflationary pressures as long as the inflationary environment does not deteriorate.

Okay, So unhelpful deal.

Oh, that's good.

So the next question I have is about SG&A, which was below year ago went down sequentially.

I know you're not you don't give out guidance for SG&A, but can you you do since you talked about it coming down as a result of some of restructuring.

Can you give us an idea at least.

Qualitatively about about whether this should rise through the rest of the year stay the same or continue to go down.

We expect there to be a little bit of seasonality of those.

Historically.

Six.

So Q1 should be the low point.

For the year.

Having said then.

We continue to to.

Yeah.

Savings from much of the restructuring.

<unk>.

Greenway so.

That there should be.

Reasonable.

Lift from from what we currently have but it shouldn't be.

Yeah.

Okay. Thank you very much.

Okay. Thanks.

Your next question is from Scott Cyril with Ralph capital.

Hey, good afternoon, Thanks for taking my questions nice quarter and David welcome more congratulations.

Just to to dive and quickly follow up to the prior questions.

Looking at the favorable mixing the quarter I was wondering if you could provide a little bit more color I'm, assuming that's more private networks, but wondering if there was something else that was going on that front also given the supply constraints I'm wondering if there were any sales were left on the table and the September quarter and kind of how you are feeling sequentially as we go into the December quarter give.

Given the backlog in the book to Bill over one but also those supply constraints you have pretty good visibility in terms of your ability to deliver in the near term and kind of what are the concerns there and also directionally. How are you thinking about gross margin sounds like there are a lot of moving parts of the get you.

Higher by the June quarter, but kind of wondering what you're seeing in the near term.

Start off with Nixon.

But.

Macy's driven primarily your rights nice my private networks as evidenced by the.

The larger increase in North American volume.

Than anywhere else, we're both networks nominee.

So that that was certainly the big drivers as well as.

Yeah.

Software Lady.

Licensing.

As well.

So in terms of revenue that we didn't get out too.

I would say it would be two two to 3 million though.

We have a better is performing supply chain, though we would have been able to achieve.

So Scott.

What did we not at not answered.

And looking forward to the December quarter, how you're feeling Directionally then given.

Given the supply chain your inventory levels seem like they're okay, I think they're flattish with with the June quarter. So are there any are there any concerns how do you think things progressed directionally from there and was there anything in particular that you're worried about from a supply standpoint.

Yeah. So.

No.

Good.

Managing the supply.

Better than a lot of.

Both in the us.

Three wood.

With that said.

Thousands of components go into a microwave radio and have one of them.

Doesn't come that will get her we're we're starting to feel that.

Alright, So let's review give me the exception.

I might get impacted by a single supplier.

At the end of the quarter were feeling neutral to positive on our ability to navigate the supply team, but I also.

Because of uncertainty overall.

If we don't have.

One off event, we feel that the supply achieve will be the same if not.

The better.

The next quarter.

That's great I'll take neutral positive all day long.

He did get it a little bit on some of the geographic mix. It sounds like you start to get some wins in Europe.

Historically that just hasn't been.

A big revenue base for you guys. So I.

I'm wondering if you could elaborate on that a little bit in terms of what's going on in the pipeline is that a bigger opportunity for Ya and maybe we've wildly into the conversation. There. What are you seeing what are they showing up or are they not showing up.

So so the European win that's in our shareholder letter that was.

Airwaves in the UK.

Our leadership, we changed leadership about.

A little over a year ago, and EMEA region Bill.

Building.

Will be the tunnel.

Europe is on the.

The upswing so so we feel.

Very good about Europe with respect.

To private networks.

Tier two operator, so Steve doing a good job there and then with respect to while we share gains we see that those opportunities.

Eastern Europe Africa, and Asia pack and a little bit.

Latin America, and we think that.

Well, we know that our funnel and we don't know what the conversion rate is going to be analysis cycle is going to be but we have $60 million of opportunity in our funnel.

This is this opportunity is new.

Awesome.

Other posts. So we don't know how the competitive dynamics.

Are going to play play out.

What the time, he is going to be but.

$60 million.

While we.

Normally.

While we had a lock hold up and.

Where stranglehold in now.

We were getting up to bat. So we're we're encouraged about that and we hope over the next couple of quarters, we can talk about some sure Gainesville.

Great very helpful and lastly, if I could just to dig in on your your commentary related to art off funding, you've got 15 to the top 30.

I believe a lot of that funding has not really been released yet so I'm wondering if you've actually seen the benefit of that or we should expect old the benefit of that to start to come in and calendar twenty-two timeframe. Thanks.

Right.

I think you've got that right.

Would be a positive catalyst.

Calendar year 22 of us.

Funding hits.

Great. Thanks, so much nice quarter.

Alright.

Thank you.

Your next question comes from David Kang, we'd be Riley.

Thank you good afternoon, I guess my first question is regarding a chick.

Hips.

So last quarter U thought that.

Pressure inflationary pressure of was stabilizing because you mentioned that <unk> Don.

Stabilising.

Hesitant catch tag the last couple of months is that still the case or things.

Things changed since then.

I think.

Neutral neutral or positive.

Same as last quarter right in.

Some folks have asked me when do I think this gets better.

I listen to all the.

C E o's of semiconductor companies and read all the literature.

My guess and this is a guest.

You can take it for whatever it's worth is.

I think the environment.

Starts to improve.

After.

In April after we get through this.

The.

The Christmas season, and Chinese new year.

But that's my guess I would say, though just the environment that obvious.

It's exposed.

Neutral.

Where the where the positive comes from is we were not getting worse lead times are are stable and.

We have Ah.

A couple of months and stability, so we think that.

There should be we should.

Start to get get better.

But we've got set of one of our suppliers and.

An exceptional event, we will get.

So.

Okay.

I'd like to be more precise.

For so.

So that we could run our business better, but that's the best information I can give you.

Let's not help got it.

Yes very helpful. Just.

Gross margin.

Regarding your.

For the year I know you didn't talk about next quarter, but.

Assuming sort of a neutral as far as the supply chain situation is concerned so should we expect gross margin it was down a little bit sequentially in first quarter, what about second quarter should we be thinking kind of flattish or maybe even further step down how should we think about December quota gross margin.

In terms of.

<unk> trajectory recently, so good yeah.

So so we think it should be incrementally up <unk>.

Provided we don't have any.

Additional inflation excursions right. So so we.

We got.

I'm ready for inflation starting last January.

To start to put our processes and figure out how we were going to pass on price and surcharges, but the problem with that is we didn't know how much was gonna come and how how old is going to be delivered so so we're working through that shall we think.

We should get more price recovery.

In the next quarter and.

On.

Mix was was flattish.

Then our margins should.

Pick up and I don't want to be specific on that because I can.

I can't tell you what makes them is going to be.

Yeah, I can't tell Ya.

The full uptake of our price auctions.

But.

What I would like our investors to know as we recognize inflation. We think we have enough differentiation in our our products and our customers are.

Cooperating as we work to offset this difficult.

Got it my last question is you said you raised prices on your products when was that.

When was that done and when was the communicated to your customers and did that cause.

A surge in orders as they try to take advantage of.

Prices before they go up.

Yeah. So so.

This environment is.

Everybody likes to throw around the word unprecedented that is unprecedented.

So four.

For our short cycle E. Commerce that was done instantaneously and then pour on a bigger customers, who was a negotiation and effective but we.

I'm pretty familiar with.

Bringing in demand ahead of a price increase.

I would have to say that that was.

De Minimis.

Certainly not.

Material.

To be honest in my in my past roles I'd sooner.

Point to a single example, where we.

We saw demand pulling ahead of.

A price increase.

Got it thank you.

Okay.

Your next question comes from Kim Savada with Norseman.

Good afternoon, and congrats on the quarter.

Let's talk a little bit about rural broadband.

Peter Thank you are going to guess my first question.

Whether.

What sort of proximity we are to that magic, 10% of revenue number with regard to a rural broadband or any update.

As to when we might get there and I guess, all our couches.

In with the following premise switches when you're at our rural broadband Forum.

Think you'd mentions an additional.

For art off wins to get you to 13, apparently you've been busy in the last month and picked up two more.

So as you look at that and considering the the addressable market out there I guess.

In addition to that achieving a milestone you talked about kind of a 40% or so market share.

In rural broadband do you think you're in a position to run about that now.

And I'll follow up in a second here.

So.

We put in.

An investor presentation.

Our estimate is pretty close to 40% sure.

Look with these new wins.

It's possible that we could could.

<unk>.

Funding.

<unk> and <unk>.

Think.

A couple more quarters of performance and.

The flow of the art of funding shoot.

Bouncer silver, 10% hurdle so.

So we got it right.

You know.

I think.

Said that we'd be with.

<unk> get dinner by the end of this fiscal year.

More confident.

This is not by the end of this fiscal year and might be soon.

Got it okay. It sure is and.

And just to follow up on the art upfront and I'll have one more after that but so you talked about now 15 of the top 30 Overall award recipients I guess and then he'd asked two questions on that which is.

Can you estimate the total funding received by those 15 that you've won from art off.

Question number one.

Question number two are those only wireless guys I mean to the extent, you've got 15, and you're working on five or it seems like there could be.

Some fiber guys in there too or is this all fixed wireless in terms of access.

We well we can't get these so we should tell you let me go back and figure out how many of the guys that we can never get because they're fiber, but there are some of the.

30, and your question.

Question above.

Estimate the funding received.

We haven't done that but we will take that as an action.

Those are both.

Questions Yeah.

I think that's worth doing.

And shifting over internationally.

You mentioned, a pretty strong order quarter.

If you want to throw out any kind of international book to Bill metrics, but if you did that would be great.

But I think.

Okay.

The interesting thing is that [noise].

Just on some of the locations that you've called out.

These are not locations that are legendary for booting out Huawei.

And so when you when you talk about not all of them talked about a very large tier one maybe that's it so when you.

I wanted to dig into that dynamic a bit more when you talk about share gain.

Can you be more granular about that given that again, it's not like.

We're talking about.

UK or the western Western Europe, or Japan or areas that have been explicitly kind of moving huawei out, but some of the locales, where they'll probably be areas that they're hanging on the best.

So are those competitive wins and not political wins I guess I'd say on the one hand and on the other if there's another share gain dynamic outside of Huawei I'd love to hear more about that.

Yeah. So so.

You ask a hard question so the dynamics.

It's difficult for us to decipher and in our voice of the customer causes we ask whether.

The engagements are due to.

Politics or supply chain and the answers are are both.

Or mixed sometimes it's supply chain sometimes.

Politics and.

We want to know so that we understand the dynamics. So we can try and replicated but we're getting both.

Both both the answers and.

At the end of the day, we're kind of indifferent as long as we get up to that and then a little more color.

They are coming forward from.

Our value proposition internationally is strongest.

With our Multiband and with our.

In regions that have the highest spectrum costs, because our total cost of ownership.

Is strongest so we're seeing.

Operators that are having difficulty with.

With either Huawei supply chain or the political environment, the geopolitical environment is changing and the.

The highest spectrum cause that's where we are seeing the biggest opportunities.

How about you.

Been fully responsive to your question.

Absolutely.

Thanks very much.

Sure.

Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad that Star. One. Your next question comes from and Martin with.

<unk> investment partners.

Hi, It's Aaron Margaret Hgh, a lot of my questions, an asteroid, particularly by Scott but.

Relations on a nice quarter preceding breaking out your revenue buckets and those three.

E Commerce.

The market and.

The teams too.

Passing through the price increases if I were to look at those three buckets and sort of how much of your revenue.

How much of your revenues and each one of those buckets.

So.

And comment goes through.

The smallest is the shortest cycle.

The biggest the longest cycle.

So so look for for passing on price, our our longest cycle.

This is our biggest so that's why.

Mixes flood and.

And.

There is no additional.

Fixing inflation, we feel good about.

Expanding our gross margins going forward.

Got it.

It is but it's going to be more gradual as we get into open the mix.

Eight to 12 months because of the long lead on the.

On the vast majority of the business.

That's fair.

Alright.

And just a clarification on the book to Bill, which is the book to Bill above one for the past 12 months or for the quarter itself.

Yeah, we typically only talk about 12 months trailing due to the project nature.

The project nature and the fluctuation. So we we look at our book to Bill over 12 months, and that's where we are comfortable disclosing.

But I'll, let me give a little more color.

When we were writing the script.

Talk more about supply chain and the difficulties and how come.

Comfortable.

We are with the demand environments, we're pretty comfortable with.

With demand and a.

A lot of our management teams focuses going towards delivery. So we we feel good about the demand environment.

Okay. Thanks, congratulations on that last quarter.

Was it continued progress of one more thing I want to congratulate you on actually buying back stock this quarter.

[laughter] well.

Thank you that's all I'll say average.

I wish it was trading at a higher than our triggers.

Depressed you get to keep buying back more.

Very good.

Thank you.

Your next question comes from Orange Hirschman with AIG H investment partners.

Okay.

How are ya.

You have to increase the <unk> you have to increase the trigger you know.

But.

Rugs as a creative that what is that.

My personal opinion.

In terms of the overall.

Business, if they would not have been constrained supply.

You have any clue, how much more you to sit in the corner.

I think we said two to 3 million.

Okay and.

And in terms of the overall momentum on the private network side.

Keeping in mind.

Five the competition aspect of it.

Or would you characterize that momentum compared to six months ago or a year ago.

I'd say, it's the same.

Yeah I think.

<unk> is the same.

Private nowhere teams are doing.

Great job opportunities are.

The same.

And there is potential positive catalyst around.

Our funding builds up better so let's see it's the same with some possibility for improving.

Isn't drivers the customer is the same.

You know being led by security or.

Has anything changed their truck in the driveway.

No so.

Probably nowhere customers are principally.

911 first responder networks.

Secondly would be.

Utilities.

I think long term utility market is improving.

Further focus on security more sensors and utility yards.

Water waste water.

Would be third fourth would be we only gas and I would say that which is a really small part of our business but.

Demand drivers are about the same as they were six to 12 months ago.

With the.

The one caveat the utilities.

The macro trend would be favorable for private network demand.

Okay and left without peace.

Hum.

Software inside the notes tiny pizza whoever the pale today.

Can you just kind of update how that's going particularly on the staff.

And I know you are developing at this whole application how's that going.

It for me for now.

Yeah. So the additional applications we expected in the next.

12 months to launch.

Follow on offering.

So fast that would.

We're not ready to.

To talk about her detail, but would be additives.

Fast and would smell.

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