Q4 2022 DZS Inc Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
[music].
Good day, ladies and gentlemen, and thank you for standing by welcome to the D. C. S fourth quarter 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one.
One one on your telephone keypad at this time I would like to turn the conference over to Mr. Ted Moreau Vice President of Investor Relations. Sir Please begin.
Thank you Howard.
Welcome to the D C as fourth quarter of 2022 earnings Conference call.
Joining me today to discuss our results are <unk>, president and CEO , Charlie vote, and CFO mistake wacky.
[noise] Chief product Officer Miguel Alonso is also on the call to participate in the Q&A session.
After market closed today, we published fourth quarter and full year 2022 earnings.
With a new investor presentation to provide a shareholders perspective shareholders and analysts with market insights product business and financial update as well as forward looking information.
Our fourth quarter Investor presentation will be referenced throughout todays earnings call, which you can follow along with me Charlie Amnesties commentary.
On this call, we will provide projections and other forward looking statements regarding future events or the future financial performance of the company.
The company cautions you that such statements are only current expectations and actual events or results may differ materially.
Please refer to documents that the company files with the SEC, including its most recent 10-Q and 10-K reports.
As well as being available in the Investor Relations section of our website.
These documents identify important risk factors that could cause actual results to differ materially from those contained in the company's projections or forward looking statements.
Please note that unless otherwise indicated the financial metrics being provided to you on this call are determined on a non-GAAP basis. These items together with corresponding GAAP numbers and a reconciliation to GAAP are contained in today's earnings press release.
We will be attending the OFC trade show in San Diego in March and look forward to meeting with investors at that about.
Additionally.
He's saying Wednesday may 10th on your calendar for our 2023 Investor day at our headquarters in Dallas.
I now have the pleasure to turn the call over to Charlie.
Thank you Chad and good afternoon, everyone.
As an inspiring start to 2023, Dcs recently hosted our inaugural Horizons innovation and technology summit.
A subset of horizons guests and speakers included luminary leaders from Broadcom Deutsche Telecom, Telus Lumen Windstream Liberty high three.
Broadband Herbie N C. T C. Dell may have an ear and fibernet.
Horizon is reflected strong validation of our vision and go to market strategy and technology roadmap align with our market defining access optical and cloud controlled software solutions.
Also attending a horizon summit, where financial analyst for Stifel Cowen Needham North mine and Woodruff.
Horizon has enabled several key customers and partners to share their vision insights in alignment with Tcs.
During horizons, we unveiled several new technology milestones and product launches, including two new software platforms extreme access and experience cloud.
Extreme access as a multi vendor orchestration software platform designed to automate network functions and accelerate the onboarding of new network elements and new services.
Experience cloud delivers end to end network and subscriber visibility in analytics, including actionable insights from subscriber and network data through our service assurance and Wi Fi management software solutions.
Tcs has taken a platform approach to designing our next generation access edge royalties.
By service providers can uniquely design deploy and support G. PON <unk> 25, and 50 gig PON from the same universal system.
Our velocity O L T portfolio, including our new velocity V. Six is gaining momentum with many tier one and tier two service providers around the world.
Our next generation velocity V. Six is a future proof O L T system.
Featuring a non blocking architecture 800 gigabit per second of capacity per slot and support a 50 and eventually 100 gigabit PON for last mile fiber to the home access networks.
Market research firms estimate that fiber based upon for the Telecom segment alone will reach $12 billion, not including China of annual Capex spend by 2027.
Horizon has also highlighted the enhancements of our optical edge and mobile transport portfolio.
We recently announced the availability of our Sabre 4400, which delivers up to 400 gigabits per second per wavelength overextended distances of up to 100 kilowatts kilometers without amplification in an environmentally hardened modular compact form factor that can also support wrote them capabilities.
We also announced enhancements to our <unk> and M 4000, mobile transport as well as our in building.
Plus Ethernet switches.
While we have secured many new customers over the past two years, most of which are emerging fiber over builders and utility cooperatives municipalities.
We remain committed and focused on securing large scale multinational service providers.
We are making good progress with many service providers around the world and especially in North America, and Western Europe , reminding investors that service providers, especially those of scale and complexity of a rigorous engagement process that could take 12 to 18 months before full scale deployment.
We remain committed to this journey because of long term value and return on investment potential in the form of recurring and reoccurring revenue revenue and profitability.
I am pleased to share the Dcs has been awarded two new marquee service provider design wins.
Validating the innovative investments we have made across our access edge, specifically, our velocity O L T portfolio.
Europe's largest service provider recently selected Dcfs's velocity V six to be part of their large scale multiyear fiber to the home project, which will also be including the replacement of their existing Huawei O L. Ts.
This is an important milestone for Dcs as this multinational service provider will be leveraging our end to end access edge and our cloud controlled service assurance and in home Wi Fi software management.
In addition, Korea telecom, a longtime valued partner of Dcs and South Korea's largest fixed wireline network. Operator also selected our velocity O L. T portfolio for their next phase PON rollout.
We are equally encouraged with the momentum and progress we are making with our next generation optical edge Sabre 4400, which has received numerous technology accolades and has been validated by recent design wins.
While we're optimistic about our 2023 sales prospects and financial outlook, our Q4 and full year 2022 financial results were not indicative of the innovation customer alignment design wins, nor the company's overall execution and operational progress.
As such our 2022 financial performance was limited in our ability to maximize revenue conversion.
Q4 revenue of $100 million would have been $7 million higher.
Our 10% growth year over year on a constant currency basis, and full year 2022 revenue of $376 million would have been $31 million higher or 16% growth year over year on a constant currency basis.
Additionally, COVID-19 lockdown spanning some of our manufacturing partners and the transition from our Seminole, Florida, Florida facility to fabric as well as revenue acceptance timing represented the revenue and gross margin shortfall compared to fourth quarter guidance.
I am pleased to report that during the fourth quarter. We did successfully complete the transfer of our Seminole, Florida facility to <unk>.
This partnership is expected to reduce cost and improve our global reach scalability and product margins.
Our investments in people product and systems over the past two and a half years has enabled us to build a sustainable foundation for future revenue growth and profitability.
Since Q3, 2020, we have booked orders exceeding $1 billion recorded revenue of $909 million increased our remaining performance obligations, including backlog and deferred revenue.
By over three times to $321 million.
We are confident that the technology sales and marketing investments made in 2022 will result in new access optical and cloud software project wins in 2023.
Appreciating that we exited 2022 with the most active POC and trial environment since I joined the company in mid 2020.
2022 also represented the most stable employee retention rates since I joined Dcs validated that we have locked in the team aligned with our vision strategy and culture, giving us the best opportunity to secure strategic projects with more key customers and to elevate our growth and profitability.
As service providers continue to upgrade their legacy DSL and sub one gigabit broadband networks. Many operators are being architecturally thoughtful with their network design, ensuring that the technology investments. They are making today will allow them to future proof their network for tomorrow, enabling them to compete with a lower total cost of ownership.
And with a network that is automated and software defined.
Dcs is among a small number of companies with the access optical and cloud software technology customer footprint and the resources required to grow and take share in the current fiber based upon investment cycle.
With an installed base of approximately 60000, <unk> systems 20 million subscriber devices, 35000, mobile and optical transport platforms, and 70 million cloud software subscribers spanning more than 400 active customers, we enter 2023 better position than ever before.
Over the next five years, our access and subscriber edge installed base will continue to undergo an upgrade cycle from DSL and G. PON <unk> pod as.
As part of our technology investment thesis, we expect that by 2025 large and medium sized service providers will begin upgrading their <unk> PON network to 50 gigabit PON.
Our next generation velocity OLED portfolio is uniquely designed to support 50.
And up to a 100 gigabit PON, enabling service providers to upgrade from <unk> to 50 gigabit PON without an O T systems replacement seamlessly upgrading just upon modules.
We also expect that our DSL Express software customers will continue to upgrade to PON express as their subscribers migrate from DSL to fiber.
In addition, our in home Wifi management software platform cloud check will add layers of new functionality in 2023, including cyber security protection.
And with expanding support for Wi Fi and Iot devices.
Our sales pipeline for our cloud software portfolio continues to expand and we believe our collective software platforms will deliver incremental and favorable results. During the second half of 2023 and in the 2024.
Despite the macroeconomic recessionary fears broadband has become a utility like service that we believe requires service providers with scale and the financial resiliency to continue to invest in their fixed and mobile networks over the next decade, ensuring they remain competitively positioned to pursue the lucrative in home and on the go.
Broadband market.
We continue to systematically balanced quarterly performance with the operational and financial requirements designed to deliver top line revenue growth margin expansion and net operating income aligned with the service providers that have the scale and the financial means to deliver reoccurring.
And reoccurring.
Sustainability for Dcs.
In closing we remain focused on our five growth pillars.
First the 10 gigabit <unk> PON and <unk> upgrade cycle second.
Market share capture in North America, and Western Europe third the pursuit of numerous Chinese cap and replacement opportunities appreciating that approximately 50% of the access networking installed base and associated subscriber devices outside of China had been historically controlled by Huawei and other China based vendors.
Fourth our cloud software expansion opportunity with our existing and prospective customers and finally, the emergence of Oran, which continues to gain acceptance and momentum around the world.
With that I'll turn the call over to you Mr. <unk>.
Thank you Charlie and good afternoon, everyone. If you are following along on the Investor deck I will start on slide 34.
As Charlie indicated we conclude 2022, well positioned to capitalize on several opportunities throughout the past year, we navigated several headwinds that inhibited our recognition of the revenue. We expected. These headwinds include Covid lockdown supply chain component availability and foreign currency volatility.
We reported fourth quarter orders of $90 million, resulting in a book to bill of <unk> nine for the quarter that we still exited 2022 with $321 million in Rps and increase of 37% from the $234 million at the end of 2021.
For the past two years, we have experienced elevated book to bill ratios relative to historical levels as many customers placed orders further into the future to ensure delivery dates in response to the challenging supply chain landscape as a result, combined with the strong demand environment. Our full year 2022 book to Bill was <unk>.
Then one.
As a broader supply chain conditions gradually improve we are seeing customers begin to revert to a more normalized ordering patterns and we anticipate this normalization dynamic to continue throughout 2023.
For the fourth quarter of 2022, we reported revenue of $100 million, an increase of 2% year over year or 10% on a constant currency basis.
We were below our guidance range. This was our second consecutive quarter exceeding $100 million in revenue revenue was negatively impacted by Covid related lockdowns in the Asia region, our manufacturing transition to <unk> and by shipment timing in North America, limiting our ability to deliver products as expected.
Turning to revenue by product technology, our access and optical networking revenue represented 88% of total Q4 revenue or $88 million and our software and services revenue was 12% of total revenue or $12 million.
Software and services revenue declined sequentially due to project timing.
By geographic mix during the fourth quarter revenue from the Americas region increased 3% year over year to $28 million over the past two years, we benefited from increased customer capture in the region, while supply chain shipment disruption impacted Q4 revenue.
Revenue from EMEA increased 44% year over year to $21 million due to success with new customer capture in the region along with the contribution from our expanded software portfolio.
Revenue from Asia decreased 9% year over year to $51 million as revenue from the region was impacted by foreign currency exchange rates and by Covid Lockdowns are disrupted deliveries later in the quarter one customer from the Asia Geographic region represented 10% or more of total revenue for the quarter and for the full year.
Our Q4 adjusted gross margin of 31% was impacted year over year by foreign currency and elevated supply chain costs, partially offset by product mix improvement.
Excluding foreign currency changes in supply chain costs. Our Q4, adjusted gross margin would have been over 700 basis points higher and significantly closer to our near term target gross margin model.
Q4 gross margin also reflects the costs associated with both our internal manufacturing operations in Florida, and the new outsourcing relationship with Fibernet.
By the end of the fourth quarter, we completed phase one of our fabric manufacturing transition of products that ship into the North America and EMEA regions. As a reminder, the expected savings from this initial scope with Fibernet falls within the operational execution margin improvement category of our target gross margin model that we initially shared.
During our Q2 2021 earnings report.
This category has been expected to provide $450 to 600 basis points in gross margin improvement and we see opportunity to begin recognizing a portion of the fabry net savings in the second half of 2023.
Fourth quarter, adjusted operating expenses were $34 million compared with $30 million in Q4 of 2021 the year over year increase reflects our recently acquired assets from Austria and continued investments in sales and marketing to fuel growth.
Our adjusted EBITDA was a loss of $3 million during Q4 of 2022 compared to an EBITDA gain of $3 million in Q4, 2021, and our non-GAAP EPS was a loss of 10 cents compared to an EPS of eight <unk> in Q4 2021.
The year over year decline was the result of lower gross margins related to elevated supply chain costs and foreign currency headwinds.
For the full year 2022, we had record revenue was $376 million, increasing 7% year over year.
Full year revenue would have been $31 million higher on a constant currency basis or 16% growth year over year.
Annual revenue growth was led by the Americas and EMEA regions, what's your strategic growth areas for Gcs revenue from Asia, which was 50% of 2022 revenue also increased 6%.
We strengthened our software portfolio via the austere asset acquisition, which increased the percentage of revenue from software and services to 11% in 2022 from 6% in 2021.
Full year adjusted gross margin of 32% was impacted by foreign currency headwinds elevated freight and logistics costs and expedite fees. Excluding these factors and adjusting for constant currency. Our 2022 adjusted gross margin would have been over 700 basis points higher.
We believe these headwinds are temporary in nature.
Turning to slide 38 in the Investor presentation, we anticipate a meaningful improvement in our gross margin profile weighted towards the second half. We expect we will recognize a more favorable product and customer mix the benefit of new product introductions that recognize a more favorable margin.
And the benefits of our manufacturing transfer to <unk>.
2022, operating expenses increased by $12 million to $123 million, reflecting half of the year of Ostia expenses and increased investments in sales and marketing.
We reported an adjusted EBITDA loss of $3 million compared with EBITDA of $11 million in 2021.
non-GAAP EPS was a loss of 15 cents per share compared with 32 cents in 2021.
Turning to the balance sheet, we ended the quarter with $38 million in cash we had $4 million drawn on our revolving credit facility, along with $23 million of debt as part of the five year term loan to fund the Asti acquisition.
As a result of foreign currency impacts to our financial results in 2022, we amended the covenants associated with our JP Morgan loan.
While we have confidence in executing our plan to ensure loan covenant compliance as you may understand with recent foreign currency volatility there is a risk of noncompliance in the next 12 months, which requires us to reclassify the long term debt in the current liabilities for the year in 2022 balance sheet.
The amendment to our loan agreement is being filed in an 8-K today.
Days sales outstanding was 139 days in Q4, compared with 81 days in the year ago period current Dsos were skewed by a large tier one customer with milestone payments and our current DSO levels should be viewed as temporary while we revert back to more normal collection levels as 2023 progressed.
Yes.
Inventory increased $22 million year over year to $79 million with the increase associated with challenging sub component availability over the past year combined with rising customer demand annualized inventory turns were three four times during the fourth quarter compared with four five times a year ago.
Our Q1 guidance reflects the anticipated challenges and some component availability and the timing of customer deployment schedules we.
We are also applying an average foreign currency rate from the month of December .
For the first quarter, we are guiding revenue to a range of $90 million to $100 million, which equates to 23% growth year over year at the midpoint.
Adjusted gross margin in a range from 33% to 35% adjusted operating expenses between 33 and $35 million and our adjusted EBITDA between a loss of $3 million and breakeven.
Our full year 2023 guidance is revenue in a range of $428 million to $450 million, which equates to 16% growth at the mid point we.
We expect revenue in the second half of 2023 to ramp compared to the first half due to project deployment timing and product availability.
Adjusted gross margins of 36% to 38%, while continuing to target 40% exiting the year.
Adjusted operating expenses between $125 million and $135 million as we focus on operational discipline in 2023.
An increase in our 2023 operating expenses relative to 2020 to reflect the full year of former Aasiya employees and related costs, essentially keeping our pro forma operating expenses flat.
And our full year adjusted EBITDA guidance is between $25 million and $40 million.
Our financial assumptions take into account our backlog full year software revenue from our <unk> acquisition and anticipated supply chain in foreign currency exchange dynamics.
I'd also like to emphasize how well Dcs is positioned to capture share and disrupt the competitive landscape is there is strong enthusiasm and excitement internally and across our customer base.
I'd now like to hand, the call over to Howard to facilitate the Q&A session.
Ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.
If your question has been answered or you wish to remove yourself from the queue simply press star one one again.
Once again, if you have a question or comment at this time. Please press star one one on your telephone keypad.
Please standby, while we compile the Q&A roster.
Our first question or comment comes from the line of Jeremy Kwan from Stifel.
Mr. Mr. Quan Your line is open.
Thank you.
And good afternoon. This is Jeremy calling for Tori.
I guess first Charlie given the.
Calendar 'twenty three outlook that you gave us here.
Can you just help us understand what's giving you that confidence in that outlook.
It sounds like there's a lot of new programs being launched.
And different deployments.
We also expect maybe the book to Bill to kind of inflect at some point during the year just help us understand that a little bit more thank you.
Thank you.
As we as we highlighted we exited the year with 320 million $21 million of.
Backlog, so thats certainly layers into the year.
I also mentioned that we are.
We exited the year with the most POC and trial activity that the company has ever endured at least during my 10 year. So there is a tremendous amount of project activity.
The activity in North America, and Western Europe , not giving up what we have going on in middle East, which is really exciting.
It has.
As elevated our pipeline and certainly has given us a significant confidence for the for the full year.
I think those are the main attributes.
We obviously have launched three new product platforms, which the industry as a whole is really excited about the V six which complements our <unk> two and <unk> 14 is.
Is gaining a lot of traction I mentioned in my opening comments that the largest service provider in Western Europe has selected the V. Six as part of their seven year Bill.
Build out of their fiber based network, including replacing a portion of their.
Huawei Lts.
And the new Sabre 44, hundreds really exciting I mean, if you look at the the bid mile projects just here in the United States and the alignment of the Sabre 40, 402, a lot of those existing customers.
It certainly has as the team excited and the visibility that we have.
Today is much greater than what we had a year ago as it relates to your question about bookings and book to Bill.
We're certainly doing everything we can to take as much business off the street whenever we can and so theres nothing magic about that I think what's unique about Dcs is.
We are viewed as a disruptor in the space. We were entering this space with the least amount of market share and so our ability to disrupt and take share as a percentage.
Should we view greater.
And then us managing in farming and an existing installed base. So I expect that.
As we progress in 2003 and into 2024 that our ability to increase our.
Our revenue conversion should be greater than than what the market is pacing it.
Great. Thank you that's very helpful.
As my follow up.
Mr. <unk>, if you could.
Give us some more insight into what's driving the gross margin expansion.
Towards the back half of next year I'm, sorry, the back end of this year.
At 40%.
And maybe you can rank order some of the contributions there by this fab Burnett, whether it's increased software sales.
And as a slate.
Add on and that what kind of <unk>.
Software expectations do you expect.
As part of that $4 20 to 450 number thank you.
So great question. Thank you.
I think it's fair to say I shouldn't probably set the stage that we did not assume that there would be any improvements in some of our recent headwinds and so we've remained neutral on those particular categories. We do expect some uplift from the new products that Charlie mentioned earlier today that we have seen a lot of momentum in the market.
And a lot of demand from those recently announced products, where we expect those to ship in the second half of the year.
We are also expecting to see some software expansion as we have acquired <unk> now just over six months ago, and a significant amount of training with our sales teams and so we expect to see software as a percentage of revenue too.
Slightly increase year over year, I think we're at 11%.
In 2022.
Oh, sorry, 14%.
As a percentage and as we grow it'll be fairly steady on a percentage basis, but it will obviously increase in pure dollars and then of course, our fabric that transition we will contribute to improved margins as we look to scale and leverage.
They are buying power.
Thank you sorry, I just wanted to correct that software as a percentage of service.
Software and services. It was 11% in 2022, we expect it to increase to closer to 14% in 2023.
Great. Thank you very much.
Thank you.
Our next question or comment comes from the line of Ryan Koontz from Needham <unk> Company. Mr. <unk>. Your line is now open.
Your next question I wanted to clarification, there you mentioned first.
There was some timing issues around software and services.
Can you tell me if that was around like install services or delivery of product can you any color there would be helpful around timing of that some of that revenue recognition from customer acceptance maybe.
It would be helpful. Thanks.
Yes, the customer acceptance wasn't around software and services. It was just the timing of.
Our ability to recognize revenue I mean, we had we had one customer that literally Ryan we had product on the dock and based on the acceptance criteria in that country and with that customer we weren't able to get acceptance. We had some products that were stuck on the water. So the revenue recognition timing had a lot to do.
With that as well as.
Just timing that occurred from some of the Covid Lockdowns in November that really began to.
Impact us.
In Middle of December and then of course, we.
We completely lifted and shifted the entire seminal manufacturing facility in the quarter I mean, we had to pick a quarter. We chose Q4, we did get it done but there was certainly some logistical challenges.
That had some impact on our ability to get things out the door.
Especially at the end of at the end of December .
Got it thanks, Thanks, Charlie and on the this new European win.
Can you tell me how many other vendors are there areas.
I mean, maybe your euro third player in this large account.
There is only going to be too.
So I can't speak to the other supplier, but theres, probably going to be too and Dcs is one of the two.
Great to hear that that's all good afternoon, thanks, I'll get back in queue.
Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.
Our next question or comment comes from the line of Paul Silverstein from Cowen and company. Mr. Silverstein. Your line is now open.
Thank you Charlie.
Good near term weakness.
Waves and carrier projects.
Related to macro weather and ability to access capital markets debt or equity.
Thinking about nature and more importantly is there any signs.
The impact as you look farther longer term.
Yes, so there was nothing in the quarter from macroeconomics that had any impact on the revenue conversion.
For us today.
We're not seeing any of our existing customers or our perspective customers that we're in final let's call. It POC and trials that are giving us any indication that the macro broader macro conditions are going to impact their buying patterns in 'twenty three I mean.
I mentioned in my in my opening remarks, and I hope everybody appreciates. It I mean, there are certainly things that we don't have full visibility to I mean, there are service providers that are in boardrooms and meetings just like we are deciding on what their capital expenditure is going to be for 'twenty three we have not.
To any large extent received any any feedback that would counter what we're profiling for the year.
Joe So deals and what youre involved with not necessarily deals that had been awarded deals that are up for award.
Those that have been awarded you haven't been notified of any cancellations of those I. Appreciate that you don't see all the deals that are out there throughout the world.
Once you've been involved with doing both awards.
Prior to award you haven't seen any cancellations of appreciable cancellations.
We have not received any and we have had no indication that any of the awards that we.
We're in process of being awarded that is going to be slowed or canceled. So we've been we've been pretty fortunate in that regard.
I think one of the things I will I will add one of the things that we're being cautious about.
And I think as we sort of designed our our outlook for this year is just looking at any slippage in the current backlog that we have so if there is any concern that I'd say I would offer up is okay. We've got $320 million of backlog, we have a firm schedule today on that.
Independent of US did do customers elect to push any of that out into a further quarter. I mean, that's something we haven't received today, but it is something that we're keeping a close eye on.
Sure Charlie the language you used you are talking about slippage of a quarter or two not slippage of yours.
Correct.
Okay.
Just a clarification im sure I must have misheard, but with respect to the expected benefit from Fibernet.
What I heard you quantify it.
I think I misheard. The number can you just repeat what that was if in fact Youtube quantified.
I did not quantify fabric, specifically I said that it fell within the hour.
Within our margin improvement model. It was 450 to 600 basis points for the overall category, which which does include.
Got it sorry go ahead I'm sorry.
No no.
Sure.
Yeah that includes <unk> as well as some of the other manufacturing transitions that have occurred previously and other operational improvements, but <unk> is certainly a contributing factor to that overall improvement category.
Got it.
I think it was the full $4 50, but I heard the first producer accelerated through the rest of it got it okay. I appreciate that clarification.
Charlie when you look out.
Over the next.
One to three years.
What are the opportunities for growth sub side.
What are the greatest risks on the downside.
Well I think the greatest upside for US is taking share in North America, and Western Europe , I mean, we've got a really solid footing in the markets. We want to participate in Asia. I mean, we have one two pretty substantial projects in India with relatively.
Good margins. So we're encouraged with the opportunity that we have in a country thats pretty anti China, and we are leaning in there, but where I think we have the most upside.
As with the large tier one.
And tier two operators in North America, Western Europe , which.
We are aggressively pursuing and I think we're we have the best opportunity to be rewarded.
Just because we have a very differentiated <unk> and mid mile Metro optical portfolio that I think is disrupting the space I mean, I think one of the things that it is important for analysts and shareholders to really appreciate is what we've done over the last let's call. It 15 to 18 months is bring them.
Market.
<unk> portfolio.
Outside of Nokia.
Our traditional peers simply don't have.
And what I mean by that is it's a true systems architecture that not only accommodate today's cheap on an extra is fine, but we were very thoughtful in launching a product that you know.
Can support 25, and 50 gig without those operators having to completely replace those those royalties where in a lot of cases, what's being deployed.
By some of our peers in order for them to move beyond <unk> PON, they've got to completely replace those systems and I think thats, where the upside is for US I think that's where a lot of the large tier one of tier twos are seeing an opportunity to start deploying us today for <unk> PON and not have to worry about a forklift update upgrade.
Good for let's call. It the next 15 years.
One last one for me.
Large carrier you referenced the large win.
Are you expecting revenue this year and what is potential peak annual revenue and related on a different topic with the launch of the 4000 I think thats mid year are you expecting revenue whats the potential revenue within the next year or two from that product.
So we're expecting to get.
We're expecting to receive orders in the first half.
The new Western European operator for the next 12 months of revenue conversion.
We don't have anything today baked into our 2023 plan there is an opportunity for us to potentially recognize some revenue in Q4, just based on the time, it's going to take for us to get through the integration phase and get through the pilot phase, which being realistic that's at least <unk>.
Six six to nine months. So there is there is a window in Q4, but for US we're really counting on that particular opportunity to scale in 2024.
And as it relates to the Sabre 4400, youre right that product.
We'll start shipping.
In Q1, but most of the projects that we're really leaning in on our second half of this year.
And Charlie and I wont answer and I wont answer I won't answer the question on how big it is.
On the revenue it is for us.
Okay understood I appreciate the responses first of all thanks, Kevin.
Thank you.
I'm showing no additional questions in the queue at this time, ladies and gentlemen, I would like to thank you for participating in today's conference call. This concludes the program you may now disconnect everyone have a wonderful day.
The conference will begin shortly two reasons lower Johan during Q&A, you can dial star one one.
[music].
Okay.