Aviat Networks Inc. Q3 2023 Earnings Call
Good afternoon, and welcome to the <unk> networks third quarter physical 20th twenty-three earnings call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation. Please note. This conference is being recorded I'll now turn the conference over to your House Mister Andrew Andrew Fredericksen Director of Investor Relations. Thank you you may begin.
Thank you and welcome to the Avia networks third quarter of fiscal 2023 results conference call and White Cat.
You can find our Form 10-Q, perhaps release, an updated investor presentation, and the Investor Relations section of our website at Www Dot Avi out networks dotcom, along with a replay today's call in approximately two hours.
With me today are <unk> C.
C E O who will begin with opening remarks on the company's fiscal third quarter, followed by David Gray R. C F L.
Who will review the financial results for the quarter.
People, then by closing remarks, and I'll be out strategy in outlook followed by Q&A.
As a reminder.
Call and webcast.
Management may make forward looking statements regarding I'll be out of business.
<unk>, but not limited to statements relating to financial projections.
Drivers new products and expansion the impact of COVID-19, and economic activity in different regions.
These and other forward looking statements reflect the company's opinion only as of the date of this call and webcast and involve assumption risks and uncertainty that could cause the actual results to differ materially from those statements.
No information on factors that could cause actual results to differ materially from the statements made on this call can be found in our annual report on Form 10-K filed with the <unk> on September 14th 2022.
The company undertake no obligation for advisor make public any revision of these forward looking statements in light of new information of our future events.
Additionally, today's calling webcast.
Oh reference both gap and non-GAAP financial measures.
Please refer to our press release, which is available on the Investor Relations section of our website at Www Dot ASEAN networks, Dotcom and financial tables, Barron, which include a gap to non-GAAP reconciliation and other supplemental financial information at this time I'd like to turn the call over a job yet C O P E.
Thanks to Andrew and good afternoon, everyone.
Thank you for joining us to review Aviano works results for the third quarter of fiscal year 2023.
<unk> executed against this plan this quarter and we continue to position ourselves to grow from our business drivers of five G raw broadband and private networks as well as improving bottom line results in.
In the third quarter of fiscal year 2023, I Hope you are delivered revenue of $83.5 million, which represents growth of 12.0% versus Q3 of last year non-GAAP operating income of 11.0%.
Justin EBITDA 10.8 million, a 14% increase versus the same period prior year, let's discuss some key highlights from the third quarter.
R. G are.
<unk> business, he's healthy demand related to five G opportunities.
And the U S wireless backhaul spin for network Buildouts continues to be strong and we believe that this is poised to continue.
Nationally we are still in the early innings of the five G upgrade cycle, we see increased planning a tier ones and tier twos. The lead us to believe there will be healthy demand for years to come.
To be specific we are optimistic about several projects on the horizon.
C N group in addition to our party Airtel business. We're also working request for proposals for several other international tier one and tier two operators.
Some of these opportunities are a result of the decisions made by operators to replace our largest global competitor are sure gave tunnel against this competitor remained strong with over 36 million and year to date bookings and over $14 million year to date revenue. We will continue to execute on these opportunities to take care of demand.
We remain confident in <unk> ability to compete and with an attractive set of international tier one and tier two business with our leading solutions and our commitment to providing customers compelling products customers continue to increase their attention to energy consumption in their network.
Product roadmap as well positioned to meet this customer need reduce power consumption compared to competitive offers.
<unk> broadband.
Moving on to Royal broadband this quarter.
Steady from a demand perspective, we remain confident that rural broadband segment will continue to be a growth driver for obvious and R. E. Commerce platform is government funding begins to flow in the back half a discount a year and his customers accelerates build out of their networks. This quarter, we saw progress on several.
Projects that are moving through the planning and beginning implementation.
We've had engagement an initial project related orders from for art off recipients.
And private networks, we continue to be the market leader in North America and are encouraged by the business potential from international opportunities. There are several new developments in our private network business first routers since the beginning of Q3, one five major router deals in North America with utilities in public.
Safety agencies, we win because we have the high availability router products for mission critical networks that allows the network operators to scale their network easily and cost effectively while maintaining the reliability needed for these networks.
Second private algae at the time of the Red line acquisition, we justify the investment based on cost synergies. We also highlighted the possibility of revenue synergy in private LTE by leveraging redline access products and obvious channels and Q3, we've achieved our first private LTE win.
In North America.
We are excited about this market opportunity and believe it will be a growth driver for obvious moving forward.
Thirdly outside of our core private network public safety and utility applications. We are seeing increased potential and enterprise private networks is businesses systems, such as ERP and others move to the cloud enterprise connectivity becomes more critical connectivity downtime means business downtime.
The reliability delivered from traditional service providers with fiber connectivity is no longer sufficient enterprises are starting to understand that microwave transport offers diversified connectivity with higher reliability, when compared to fiber improving business uptime and reducing costs of yachts product portfolio in service.
Offering are ideally suited to address this issue and capture the growth opportunity.
We have several new products to discuss in the third quarter, we announced an update to our frequency assurance software or Fas to support third party radios. This allows operators to use the Fas.
Application with not only hobby out microloan wavelengths, but also the microwave links from other vendors.
It's designed to help customers monitor detect and track interference from new Wi Fi succeeded appointments and any other sources of interference. We are currently in trials with customers, including a north American tier one mobile operator.
And expect with Fas for third party products to be broadly available in June 2023, We also anticipate expanding the third party capability to our health insurance software.
A few days ago, we announced the integration of our access products and the prohibition, plus and health insurance software or H I S software tools. This marks a further integration of the acquired Redline communications product base.
It gives customers using access products. The most advanced management software for single and solution for wireless transport and access and add passes proactive and predictive network monitoring to minimize disruption. This improves the customer experience and provide new features not previously available.
On the legacy management platform, we have an installed base of over 200000 access radios that can benefit from the software, which will be shipping for revenue in Q4.
Additionally, we've <unk> successfully implemented our vendor agnostic multiband M B dash B, a software and a large customer in APAC wherever we have overlaid R. E band on top of microwave radios from two separate incumbent microwave vendors. This is a great proof point of the opt.
<unk> M B B a <unk>.
Product creates for obvious which helps us to overcome I switching cost and networks. The product is compelling for the customer because it allows them to add capacity in their networks with lower incremental investments. We expect continued success in the market with this product.
Moving on to supply chain, we continue to see improvements.
<unk> 98.5 per cent of our supply we've returned to pre crisis performance. Currently we have 27 components. The remaining allocation also we're seeing component lead times turned down towards 12 months note that it takes approximately 2000 components to deliver on microwave system, we've come a long.
[noise] way or not done the riskiness supply chain. Fortunately <unk> has been able to avoid significant supply chain interruptions throughout the crisis period. This quarter. We saw no missed revenue opportunity due to supply chain shortages, we would also say that inflationary costs.
An expedite fees are moderate.
Demand environment, given the economic headlines and spending projections and pier one telecom, we would like to comment on the demand environment.
Wireless backhaul approximately two thirds of our demand is in private networks, driven by public safety and utilities backlog has grown steadily over this fiscal year that our book to Bill remains above one with respect to mobile network operators typically the fiber buildout precedes the wireless filled out of networks also.
Much of the financial press this focused on U S tier one capex spending.
Given our limited exposure to use peer one and the build out sequence spitz.
Specifically microwave deployments typically follow fibre deployment, we do not see a problem <unk>.
Lastly rural broadband has received some press due to build up a fiber in inventory in the channel on the wireless side, we do not have data to support this.
In the US this quarter, we were challenged field services, several large projects because of that record snow and rainfall in the west.
This affected both our mobile service providers in private network projects and impacted an estimated $1.5 billion in revenue going forward, we will update the seasonality profile for business to better account for this contingency overall, we see a favorable demand environment bookings are ahead of plan in the current quarter further ever.
<unk> of a continued strong environment.
I will now turn the call over to David to review, our financials before coming back for some final comments David.
Thank you and good afternoon, everyone.
During my remarks today I'll review some of the key third quarter of fiscal 2023 financial highlights, noting our detailed financials can be found in our press release and 10-Q filed this afternoon.
As a reminder, all comparisons discussed today are between third quarter of fiscal 2023, and third quarter fiscal 2022 unless noted otherwise.
For the third quarter, we reported total revenues of $83.5 million as compared to $74.5 million for the same period last year, an increase at $9 million or 12%.
Driven by strong growth in APAC Europe .
Latin America as well as the contribution from the Redline acquisition.
North America revenue, which comprise 55 per cent of total revenue for the third quarter was $46.1 million.
International revenue was $37.4 million.
We continue our trend trailing four quarter book to Bill ratio above one started in fiscal 2018.
Gross margins for the quarter for 35.7% and $35 nine per cent when a gap non-GAAP basis.
Imperative prior year margins of 37.0% and 37.1% for gap in non-GAAP .
Current board of margins were impacted by Rachel mix from slower sales in the highest margin region of North America.
Third quarter gap operating expenses for $22.3 million, an increase of $2.3 million in the prior year.
Driven by the inclusion of Redline operating expenses.
Third quarter, non-GAAP operating expenses, which excludes the impact of restructuring charges sure based compensation and deal comes with $27 million. This is an increase of $1.4 million and the prior year Holy due to redline acquisition.
Like for like basis, we continued to manage costs aggressively.
Third quarter tax provision was $2.2 million, an increase of 0.9 million to last year. We continue to report or non-GAAP tax expense is zero point $3 million per quarter based on a reasonable estimate of cash taxes, we expect to incur.
The company has over 500 million nol's manifested at the almost $90 million deferred casts assets on our balance sheet and will continue to generate shareholder value the minimal cash tax payments for the foreseeable future.
Third quarter, non-GAAP , net income, which excludes restructuring charges.
And backs sure based compensation and any related costs and non-cash tax provision was $8.9 million compared to $8.1 million for the same period last year.
Third quarter non-GAAP EPS came in and 75 cents per share on a fully diluted basis compared to 69 cents per share. The same period last year, an increase of 8.7 per cent.
Adjusted EBITDA for the third quarter was $10.8 million, an increase of $1.4 million or 14.7 per cent in the prior year.
Adjusted EBITDA margins, where 13 per cent.
For the quarter.
Moving onto the balance sheet.
Our net cash at the end of the third quarter was $16.3 million from 21.6 million the prior quarter.
The sudden collapse of Silicon Valley Bank for says to temporarily suspend and reroute incoming customer deposits, reducing collections Richard quarter.
Despite the disruption we made progress reducing our accounts receivable.
Unbilled receivables continue to increase as a result of the cash flow dynamics inherent in a growing project based business.
We continue to leverage our balance sheet to mitigate supply chain risks b, a buffer stock and supplier deposits and it's P.
Mentioned, the improving supply chain environment.
Allow us to begin unwinding these investments in the future quarters.
Other assets grew during the quarter as we made investments in our next Gen Tech.
A strong balance sheet enable us to navigate the banking disruption, while continuing to invest in the business, we expect to generate positive cash in the coming quarters and had been working capital investment moderates, leaving us well positioned to execute our longterm.
<unk> with that I'll turn it back to base person final countenance eight thanks.
Thanks, David before opening up for Q&A I'd like to add a few comments and summarize our performance thus far in fiscal year 2023, we've been focused on capitalizing on our long term growth drivers of five G Rural broadband and private networks. We are encouraged by the progress of the team is made from taking market share.
Capturing additional share of wallet around the world, which 10 minutes straight.
The value of obvious differentiated products software and services.
This will help to increase profitability and shareholder value over the long term based on this strong demand environment at our execution date. We are raised in the bottom end of our revenue guidance affirming or profit guidance for fiscal year 2023, which is now as follows revenue for fiscal year 2023 to be in the <unk>.
Range of $341 million to $347 million and adjusted EBITDA for fiscal year 2023 to be in the range of $45 million to $47.5 million with that operator, let's open the call for questions.
Thank you.
Time will conduct a question and answer session in order to ask a question you'll need to press star one one on your telephone and wait for your name to be a nurse.
Tie your question. Please press star one one again.
Please stay in five already compile our Q&A Vice chair.
Our first question comes just kind of line of Scott Carole with Ralph M. K M. Your line is now hoping Scott.
Hey, good afternoon, nice job on the quarter guys and thanks for taking my questions.
Thanks Scott.
Hey, maybe just to quickly dive in on the services front revenues were high this quarter and so are the gross margins I was wondering if you give me the address that a little bit in terms of makes issues or otherwise and how sustainable that level is both from a sales perspective, and a gross margin perspective, as we're going into the June quarter.
Yeah.
Scott how are you doing Dave Yeah. So we had a nice bounce back in the quarter for our service margins.
A little depressed.
Spell out that last quarter due to some.
The vagaries of the air.
606 revenue recognition.
Standards, but.
This quarter I think.
We would like to say that.
But I think I'm more realistic level longterm horizon is really kind of closer to the 35%.
Range.
And then as far as the size of the revenue.
It was just as a function of the mix it projects that we had in the quarter.
Driving that.
Gotcha.
If I could on the yard or front, it's nice to see that it sounds like some of that activity is finally percolating. It sounds like it's in design and planning phases now so I guess it skews towards the second half of this calendar year. When we start to see some revenues could you clarify a little bit about.
And maybe the magnitude as well you said there are four art off our customers that you're working with maybe there's some idea to think about the magnitude of that opportunity and maybe throw on top of that as well to defend our networks Act, which is basically recent legislation. That's been introduced in Congress to try and fund the gap or plug the gap or the ripping replace broke.
I know that wasn't a big opportunity necessarily for you guys, but I'm wondering if you're seeing any derivative opportunities coming out of that for you guys.
Okay. So only R. Dot funding right. We've we've said once you get started it'll take three to four years.
And it'll run.
Tell off over the next six or seven so.
That's we still believe that to be true. We do think we will have some revenue impact in the back half of the year, but how we have the space out.
So did I.
Activity that we've had.
<unk> is a little bit difficult I think we need to see how those projects shakeout.
At least to be truly customers were in the top 10 of the R Dot Hall.
Recipients. So we're we're pretty happy with the the prospects of the customers.
Sure.
We have engaged and we think we are 35% to 40% sure.
Ralph broadband.
So we're in good shape and I think to give us another couple of quarters as we go from the design phase into the RAF base and then we can be more specific with respect to the.
The impact on our on our overall program, but we're we're super excited about this because.
You rolled out at the Costco last couple of years.
What is art off we respond.
We think it's come away tickets cover we don't have it in our guidance.
A little bit of revenue this quarter, we wanted to give it another quarter or two and then we can be more certain with respect.
What what what the investment community should expect them to.
Hurting too.
The legislation you.
And so.
Little impact I believe this is the <unk>.
<unk> way Repin replace legislation.
There there is less than 50.
Stock tracking there about two years ago. When there were 50 remaining microwave Huawei radios. So it's not material for for the U S market.
But.
While we can say about that competitive.
You know we.
We are booked $35 million.
Either share gainer networks that were competing with them or rip and replace so we feel that legislation that you highlighted is not so.
Material to the North American market, but the overall trend is favouring favoring us.
Great.
And lastly, if I could maybe some updated thoughts on India, you got the big order from Erato going back into late 2022, I'm wondering if there are some fees to phase III opportunities that you are seeing percolating in any thoughts in terms of inorganic opportunities where you're going forward. Thanks.
So with respect to India.
It's still.
Still.
Very good position with our customer as they are filled out there.
Their network and it's a project with so.
Sometimes there is a server, sometimes there's a lull and they've been digesting, our our shipments and we think that that'll pick.
Pick up again in the back half of this calendar.
Calendar year and the feedback we've gotten on our performance there is favorable so we.
We think we will have a chance for share gain and what I would also say.
In the script, we highlighted.
Multi band.
Vendor agnostic multiband.
What's really critical we have the only.
The only.
Single box Multiband and now we've made that set up to be vendor ignostic. So when we're in a network, where we're not sole source.
Facilitated share gains so we're hopeful there and then the army.
Mmk front, we would say.
We closed the redline transaction on July 1st last year.
Integration is gone better than we anticipated and that's helped.
Are would be sellers engage us and we continue to be continue to be active in evaluating it.
Hopefully in the next six to 12 months, we're announcing.
Getting another deal across the globe.
The a P. One last wonder if I could on the private networks front, specifically with redline.
How is that track in terms of from a revenue perspective is that in line with plans ahead of plans how's the pipeline on that front. Thanks.
So.
We we did not justify that transaction with any revenue synergies and we we had our first.
First when this quarter. So we think that there is upside and the final four for the.
The rebels.
Let's call it the revenue synergy funnel is now over.
$10 million, so we need to see our converting.
Until quarter I wouldn't know.
Talked about that because we didn't get anything across the goal line now we have and I think going forward, we'd like to see a few more get across the goal line and then factor that into our guidance.
Great. Thank you.
Thank you.
Our next question comes in the line is Eric temperature with J M. P. Your line is now open you're right.
Yeah, Yeah, thanks for taking the question.
On the on the wall way front.
I think you said 36 million is is backlog in $14 million in revenue.
I wanted to just be clear those are those are separate amounts those are incremental to each other and then do you have any update on I think you talked last quarter about there being a final of about $60 million.
Have you and I think that was deals that you had identified is there any update on on deals that you've identified in the market that that could be replacement <unk>.
Yeah, I would say our deal tunnel right.
About $65 million, so it's grown a little bit.
And.
Yeah, I did say that it's about $36 million that has now entered backlog and you cited another number or extradite and didn't pick up so.
If you could ask it again, so so funnel of 65.
Backlog 36 as of outright and did.
Did you did you want did you say did you say.
Did you say you had $14 million in revenue from those good idea that Ralph Scott.
Okay.
Is the $14 million.
Here's the 14 million incremental their separate from the 36.
It's it's.
Not in the backlog because we've already shifted okay. So I just want to be clear.
In terms of the Red line are you seeing competitors players like ubiquity or can be M or or who are you competing with in some of that business.
So.
Redline is.
Significantly engineered mission critical.
Access points.
We don't compete at all.
Your equity or not at all to my knowledge, So let's say that.
So.
Maybe 1% of the opportunities compete with ubiquity.
I think that they are in a different segment.
On occasion, we do compete with Cambria.
Cambria.
But.
Yeah, that's what I would say.
Who who who are you seeing as if the likes of Ericsson that you would see more frequently.
Got a little bit of our exit and a little bit of notes here.
Okay and did you say you had mentioned the deal earlier, you had talked about a a deal with Red line was that selling redline into an existing customer or was that would that new deal a.
A completely new customer to to <unk>.
Redline inter.
Historical Aviano customer.
Okay very good okay. Thank you.
[noise]. Thank you.
Our next question.
What comes on the line.
One moment please.
Our next question comes from the line is Tim Savage out.
No I find capital markets. Your line is now open to him.
Hey, good afternoon.
I knew it was new I heard that pause back next job with the man.
Great.
I just want to.
Oh.
[noise] okay.
We're unable to hear you.
<unk>.
Okay.
What about.
That's great.
Okay.
Can you hear me now.
Yes, yes.
Sorry about that new headphones.
We'll all dispense with my cheek reintroduction and go straight to the question. So it sounds like for the Y way replacement, that's 50 million in bookings.
14 million ships and 36 million in backlog is that right.
So we said.
We have about $65 million funnel.
$36 million backlog in about $14 million shift.
Adding the revenue plus the backlog, okay getcha taken.
$50 million.
Okay, Alright favorite et cetera, I only I only go through that just say that that's a pretty good.
Spoke to bill.
Generally speaking.
And so you mentioned you're you're <unk>.
In your discussion on the private networks business at that.
Backlog continues to build in the book to Bill remains above one.
On the carrier side, let me think here.
Seemed to kind of address some of these high level capex concerns and note that they really didn't apply to you on the one hand.
But on the other with that type of book.
Booking dynamic Huawei replacement is it safe to assume that the bookings on the carrier side, which is described as one third or.
Book to Bill is much higher than what you're seeing on the private network sign in any color order of magnitude there would be appreciated.
Yeah, I think with what you said that that is probably reasonably accurate, although we don't typically disaggregate or polka bill between carriers and private networks.
So I think if we did the work your estimate is is.
Directionally correct.
Great and.
You know it.
Let's let's dig into some of the tier one commentary that you made obviously MTM was a 10% customer in the quarter.
Does that reflect some of the wins that you talked about or or those still in front of this or.
Can you discuss kind of the overall.
Kind of profile with ATM MTM, they're given theirs.
Current customer, but there it seems like there's some new business opportunities there.
I think I would say.
More wins in front of US we had we had a great meeting with them and mobile World Congress and I think part of it is the the the Huawei issue and that's part of it.
Multi band.
Our multiband offering has got their attention and.
So to some of the share gains that we have are.
And in Africa, and we think that there's more to come.
Great and last question for me I guess, you mentioned kind of a push on the weather related issue, which I've certainly seen a lot of here in southern California.
But in addition, and probably some plain old fashioned positive seasonality into June .
But.
But I want to kind of circle back to India.
And obviously aside APAC come down pretty substantially sequentially in the quarter.
It can be very lumpy.
But it is.
Sort of <unk> hi.
A high level of activity in India is that does that part of your.
Kind of implicit fiscal Q4 guide for pretty significant bounce up and revenue or are there any other drivers to note there.
I actually think our next locked in a pack is probably.
In the back half of the calendar year. So not R. Q4, we think we think.
North America is.
Poised to have a great end of the year.
Then.
Continued growth across the the international regions I I don't anticipate at the end of the year that it will be driven by.
By India, just given the the site.
Cycle.
Stifle or the sequence of the.
Of that network filled out.
Okay, and let me just follow up on send me just said, they're real last question here, but given that expectation for strength in North America should we assume.
Gross margins pick up sequentially from a mixed perspective on that.
Yes.
Okay.
Squeezed a little more good news out of a test [laughter]. Thank you very much.
[laughter].
Thank you.
One moment for our next question.
Comes from the line in Spain.
With being finally gave your line is now open.
Hi, Good afternoon first question is Pete backlog I think I missed it what was the number I think you said last quarter was Oh for 245, what was the <unk>.
It remains over 245, alright, so so we always put a backlog number.
Once a year a year and but here just to give a qualitative.
Perspective on this.
We started at 245 every quarter through the year we are.
I'll talk to Bill has been.
All the greater than one so we think when we are at the end of next quarter will for our backlog and expect it to be over 245.
Got it and then cause I'm wondering about your the times I mean, you're you're.
Your product lead times.
Has it gone up or down or in your color on that.
Our lead times are stable.
So.
Are we.
We had our.
Operating review.
Last week and are on time deliveries.
Never been better so.
I'd actually don't have our lead time, sandy, but I think.
Sorry can rattle them off but we hit our operating review, we look at our on time delivery. They they haven't been.
As good as they are.
And for three years and when we do.
Hi.
We do our competitive benchmarking our latest.
We think we have an advantage over our competition.
[laughter] [laughter] some of your peers have reported that their lead time is are shrinking.
Drinking so that.
That's one of the reasons why backlogs are starting to go down I mean, it was the pud that'd be kind of a.
Similar with with your situation if your lead time start to shrink your backlog tries to go down.
So.
Many times.
So.
We did some.
Let me go back to the beginning of the <unk>.
Supply chain crisis. So we we bought a lot of inventory that we need to work out, but we bought it.
Starting in.
February March of.
<unk> 2020, and the reason we did that was because.
We were worried about our suppliers getting sick and missing shipment well actually didn't happen, but then shortly thereafter incentive to supply chain crisis. So through the last three years, we've carried more inventory, we've largely kept our pre supply chain crisis lead times. The same so we're not.
We're not we didn't have extended lead times so we.
If you look at our lead times and I can get back to you.
What our lead times were pre crisis and now but there are the same so so so we're not going to have.
Demand gap, which is what.
A lot of the supply chain questions that we're not going to have a demand gap because we can shrink our lead times. We we there are comments in the script about the demand environment, where you think the demand environment.
Is pretty good.
First good and we we do not see any change in the demand profile.
To lead times, our ability to supply or any of that let me go one step further if you rolled back the last 12 quarters of earnings announcements. The most revenue we missed in any one quarter was $2 million and typically.
Between zero and $2 million, so we do not have a.
Very much.
Historically over the price of Sweden.
Very much pent up demand.
Missing supply and this quarter, we didn't have any so so we don't have any catch up demand our our ability over the last three years to to serve demand.
Has been steady and it's largely about it because we were worried about.
Covid and Dakota didn't make our suppliers gets sick and miss shipments, but then.
Positioned as well to go into the supply chain crisis.
One other point.
Our backlog is largely premised on the timing of projects and our ability.
Execute and install out in the field more so than any kind of.
Supply constraints.
So.
Okay got it and my last question is on on the Red line revenues are still on track for 20 million cause fiscal year and then how should we think about what does that 20th Gotta go too full for next fiscal year.
Yeah.
We are on track for $20 million, we're on track to deliver a little bit more.
<unk> online and I would like to just get a little bit more traction.
And the.
The synergy sales before we.
Put that number out, but it's a training in the right direction days, So I'll wait one quarter and we'll give you an update.
Got it thank you.
Thank you.
One moment.
Our next question comes from the line of Theodore O'neill <unk> Research. Your line is hoping theater.
Thank you very much.
Two questions first is.
North American revenue was down year over year with strength and services, partially offsetting product sales.
And service strength was strong overall for the quarter is their dynamic there between the service and it.
Products or does that just reflects the <unk>.
Project nature of building out our systems.
It's definitely the project nature of building out systems.
If we link back.
Tim This question about our last quarter of the year right. The project nature. It put some lumpiness in the business and we see a lot of the projects.
In North America, hitting and that's why when I was asked if we expect margins to go up.
And our fourthquarter cancers.
So it's really the lumpy nature of project based business field.
Okay, and and and so unbilled receivables are up $10 million in the quarter does that have any implication for NEC for the upcoming quarter sales.
No I mean.
What is an unbilled has been recognized as sales, but it's it's based on the dynamics of the contract. It is salesman recognized but do not have the ability to invoice the customer for yet because of the the contract structure of milestone payments or.
One voice at the end of the projector and things of that nature.
Okay. Thanks very much.
Thank you.
One moment please.
Our next question comes from the lineup Paul Etsy with William Cable address your line is now open pong.
Thank you for taking my questions.
First question, if you could maybe share a little bit of information on this new.
Mastic frequent frequency assurance product.
What do you think the.
Total addressable market is right now and where would you see that your best guess, maybe a year or two out.
How much.
You guys reasonably capture of that market and along the same lines, what what's the timing.
Agnostic Haf's product if you can show that.
There was a lot of questions. So.
So.
We are in trials with a.
America tier one.
Gov.
Hopeful that that translates where.
We we will.
<unk>, we will release.
That Ah.
Yes, we have a.
Private network trial underway and I think what this does is I'd, rather not comment on the the software chair, but what it does.
Similar to the multi band.
Vendor agnostic it helps us compete and multi vendor.
[noise] works.
Do you think you know the microwave market is.
Three $3 billion in size and were less than 10%.
Sure of the the microwave peace, while we think it's going to help us win more radio business at a higher margins because our software, we'll we'll work on competitive.
Radio and then the other part of your question in June we will release fee.
H I S.
Peace and so we think the back half of the calendar year that.
We should start to have ER.
Revenue there.
Okay great.
One last question labor.
Issues you see you are your customers are you seeing any labor constraints trying to get these these technicians to deploy the product and also along those lines you expect.
Maybe in the next six to 12 months Aziz. This some of the stimulus starts to roll out that the market tightens and there'll be some shortages labor.
We we have great relationships, we have some of our own install folks and we have great relationships with third parties, we have not.
Run into any.
Labour install issues this quarter, we have labor that couldn't pie.
<unk> mountains due to the Snowpack, but we.
We have not seen any labor issues and we we are not factoring in any labor issues going forward.
I think a lot of our installers I'll wear their preferred vendor and.
There is no capacity issues on that front.
Okay, great. Thank you that's all I had.
Thank you.
One moment.
Awesome.
Yeah, just a quick follow up.
What is the timing of the backlog of orders for the Huawei replacement Uhm are those orders were they extend out when we're huawei contracts are expiring or is that something that's that's gonna get replaced relatively near term.
I would.
For me.
The backlog will play out over the next six six to 12 months.
With respect to.
The contract situation with Huawei that's.
That's difficult to answer.
Because it's not bend typically that is not disclosed to us right. So.
What we think we think there's two things that are driving it is the.
Network security and the interruption in while ways.
Supply chain.
Look I don't think our customer.
Anyone is dependent on Huawei is going to.
Sure sure their contractual situations.
Probably give us.
A little bit too much.
Leverage into negotiations.
Very good okay. Thank you.
Thank you.
Our next question comes from the law.
Lying is.
Aaron Martin.
T H capital management your line is open Erin.
Hi, Thank you very much Pete and David Great quarter.
On the our Duffs wins that you got.
Said that you haven't really appropriate for the guy because you have to get a sense of the schedule.
Imply from that that these were multi year booking wins that you're not sure where you're going to.
Schedule the rollout.
You know.
They're basically network.
Design and planning at this stage.
And.
So what do you think the funding is multiyear.
But we think that there's.
We think that there is multiyear demand.
<unk>.
Okay.
And on the on the software side I think you said that you would expect to see wrestler recognizing revenue.
The existing you mentioned 200000 radios that could benefit from this I think you said.
<unk> two four was that calendar two four or.
Fiscal queue for next year.
So let me be clear that Fas as in trials.
The vendor Ignostic Fas is on trial and trials. So I don't think we'll see we'll see let's say the back half of this year, we will see revenue for that as those trials mature into to orders and then on the ajs where are we.
Yeah, the Haf's that we have on the Red line products.
An order on that but we would certainly say in the back half of the calendar year, we will expect pass on Red lines products sales.
Okay, great. Thank you congratulations on the progress.
Thanks.
Thank you.
I mean now like to turn it back to Pete Smith for closing remarks.
Thanks, everyone for joining in your continued interest in <unk>.
We look forward to to our next.
And.
Keeping you informed progress thanks for the sport have a good evening.
Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.
[noise].
Yeah.
Okay.
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